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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X]Preliminary Proxy Statement [_]Confidential, For Use of the
[_]Definitive Proxy Statement Commission Only (as permitted by
[_]Definitive Additional Rule 14a-6(e)(2))
Materials
[_]Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
EarthWeb Inc.
(Name of Registrant as Specified in Its Charter)
----------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X]No fee required.
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
--------------------------------------------------
2) Aggregate number of securities to which transaction applies:
--------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
--------------------------------------------------
4) Proposed maximum aggregate value of transaction:
--------------------------------------------------
5) Total fee paid:
--------------------------------------------------
[_]Fee paid previously with preliminary materials.
--------------------------------------------------
[_]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
--------------------------------------------------
2) Form, Schedule or Registration Statement no.:
--------------------------------------------------
3) Filing Party:
--------------------------------------------------
4) Date Filed:
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[LOGO OF EARTHWEB INC.]
EARTHWEB INC.
3 Park Avenue
New York, New York 10016
April , 1999
Dear Shareholder:
You are cordially invited to attend the 2000 Annual Meeting of Shareholders
of EarthWeb Inc., to be held on Wednesday, May 31, 2000, at the Inter-
Continental Hotel of New York, The Sutton II Room / Third Floor, 111 East 48th
Street, New York, NY 10017, beginning at 10:30 a.m. local time.
The business to be conducted at the meeting includes the following: (1)
election of two directors, (2) approval of an amendment to the Restated
Certificate of Incorporation of EarthWeb to increase the number of authorized
shares of common stock and to eliminate certain classes of preferred stock, (3)
approval of certain amendments to the EarthWeb 1998 Stock Incentive Plan to
increase the number of shares of common stock reserved for issuance under the
plan, (4) ratification of the selection of independent auditors and (5)
consideration of any other matter that may properly come before the meeting and
any adjournment thereof. These matters are discussed in more detail in the
Notice of Annual Meeting of Shareholders and Proxy Statement that follow.
It is important that your shares be represented. Even if you presently plan
to attend the meeting, please complete, sign, date and promptly return the
enclosed proxy card. Alternately, registered shareholders (i.e., shareholders
who own their stock in their own names) may vote through the internet or by
telephone by following the instructions set forth on the proxy card. If you do
attend the meeting and wish to vote in person, you may withdraw your proxy at
that time.
Sincerely,
/s/ Jack D. Hidary
Jack D. Hidary
President and Chief Executive Officer
EARTHWEB INC.
3 Park Avenue
New York, New York 10016
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on May 31, 2000
The Annual Meeting of Shareholders of EarthWeb Inc., a Delaware corporation,
will be held at the Inter-Continental Hotel of New York, The Sutton II
Room/Third Floor, 111 East 48th Street, New York, NY 10017, on Wednesday, May
31, 2000, at 10:30 a.m., local time, for the following purposes:
(1) The election of two directors;
(2) The approval of an increase in the number of shares of common stock
authorized for issuance and the elimination of certain classes of
preferred stock under the Restated Certificate of Incorporation of
EarthWeb;
(3) The approval of an increase in the number of shares of common stock
authorized for issuance under the EarthWeb 1998 Stock Incentive Plan
and certain other amendments to the plan;
(4) The ratification of the selection of EarthWeb's independent auditors;
and
(5) The transaction of such other business as may properly come before the
meeting.
These items are more fully described in the accompanying Proxy Statement.
A copy of EarthWeb's Annual Report for the fiscal year ended December 31,
1999, containing consolidated financial statements, is included with this
mailing.
The Board of Directors has fixed the close of business on April 27, 2000, as
the record date for determining shareholders entitled to receive notice of and
to vote at the Annual Meeting and at any adjournment thereof. A list of such
shareholders will be available for examination by any shareholder at the
Annual Meeting and, for any purpose relevant to the Annual Meeting, at the New
York City office of EarthWeb, during ordinary business hours, for a period of
ten days prior to the Annual Meeting. The officers and directors of EarthWeb
cordially invite you to attend the Annual Meeting.
By Order of the Board of Directors
/s/ Brian P. Campbell
Brian P. Campbell
Vice President, General Counsel and
Secretary
New York, New York
April , 2000
- -------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT.
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE,
SIGN AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR YOUR
CONVENIENCE AND NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES.
ALTERNATIVELY, REGISTERED VOTERS MAY VOTE THROUGH THE INTERNET OR BY TELEPHONE
BY FOLLOWING THE INSTRUCTIONS SET FORTH ON THEIR PROXY CARD. IN ORDER TO AVOID
THE ADDITIONAL EXPENSE TO EARTHWEB OF FURTHER SOLICITATION, WE ASK FOR YOUR
COOPERATION IN PROMPTLY MAILING IN YOUR PROXY CARD OR VOTING THROUGH THE
INTERNET OR BY TELEPHONE.
- -------------------------------------------------------------------------------
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of EarthWeb Inc., a Delaware corporation,
for use at EarthWeb's Annual Meeting of Shareholders to be held on Wednesday,
May 31, 2000, at 10:30 a.m., local time, at the Inter-Continental Hotel of New
York, The Sutton II Room/Third Floor, 111 East 48th Street, New York, New York
10017 and at any adjournment thereof. This Proxy Statement and the
accompanying proxy are first being sent to shareholders entitled to vote at
the Annual Meeting on or about April 27, 2000. The mailing address of
EarthWeb's principal executive offices is EarthWeb Inc., 3 Park Avenue, New
York, New York 10016.
The Proxy
Jack D. Hidary and Murray Hidary have been selected by the Board of
Directors to be the proxyholders, and are executive officers, directors and
shareholders of EarthWeb.
Shares represented by a properly executed, unrevoked proxy or properly voted
via the internet or telephonically and received in time for the Annual Meeting
will be voted in the manner specified therein. If no specification is made on
the proxy as to any one or more of the proposals, the shares represented by
the proxy will be voted FOR the election of two directors named in this Proxy
Statement, FOR the approval of the amendment to the Restated Certificate of
Incorporation to increase the number of authorized shares of common stock and
eliminate certain classes of preferred stock, FOR the approval of the
amendment to EarthWeb's 1998 Stock Incentive Plan to increase the number of
shares of Common Stock reserved for issuance under the plan, FOR the
ratification of the selection of PricewaterhouseCoopers LLP as EarthWeb's
independent auditors for the 2000 fiscal year, and, with respect to any other
matters that may come before the Annual Meeting, at the discretion of the
proxyholders. EarthWeb does not presently know of any other such business. An
executed proxy may be revoked at any time before its exercise by delivering to
the Secretary of EarthWeb a written instrument of revocation or a duly
executed proxy bearing a later date. The execution of the enclosed proxy will
not affect a shareholder's right to vote in person should such shareholder
find it convenient to attend the Annual Meeting and desire to vote in person.
Voting at the Annual Meeting
The only issued and outstanding voting securities of EarthWeb are its shares
of Common Stock, $.01 par value of which 10,236,457 shares were outstanding at
the close of business on March 31, 2000, not including shares issuable upon
exercise of options. Only holders of record at the close of business on April
27, 2000 are entitled to receive notice of and to vote at the Annual Meeting
and any adjournment thereof. The holders of the Common Stock of EarthWeb are
entitled to one vote per share on each matter submitted to a vote of the
shareholders, including the election of directors. EarthWeb's Bylaws do not
provide for cumulative voting by shareholders.
The holders of a majority of EarthWeb's outstanding common stock, present in
person or by proxy, will constitute a quorum for the transaction of business
at the Annual Meeting or any adjournment thereof. EarthWeb believes that
abstentions should be counted for purposes of determining if a quorum is
present at the Annual Meeting for the transaction of business. With respect to
broker nominee votes, broker nominee votes may be counted as present or
represented for purposes of determining the presence of a quorum. Abstentions
are included in determining the number of shares voted on the proposals
submitted to shareholders (other than the election of directors) and will have
the same effect as a no vote on such proposals, whereas broker non-votes are
not counted. Directors are elected by plurality of the votes of the shares of
common stock represented and voted at the meeting and abstentions and broker
non-votes will have no effect on the outcome of the election of directors. The
affirmative vote of 66.66% of the total voting power of all outstanding
securities of EarthWeb entitled to vote generally in the election of
directors, voting as a single class, is required for approval of Proposal
Two--the amendment to EarthWeb's Restated Certificate of Incorporation. The
affirmative vote of a majority of the shares of common stock represented and
voted at the Annual Meeting is required for approval of Proposal Three--the
amendment to EarthWeb's 1998 Stock Incentive Plan--and Proposal Four--the
ratification of the selection of EarthWeb's independent auditors.
Solicitation
The expense of soliciting proxies will be borne by EarthWeb. Proxies will be
solicited principally through the use of the mail. Directors, officers and
regular employees of EarthWeb may also solicit proxies personally or by
telephone or special letter without any additional compensation. EarthWeb also
will reimburse banks, brokerage houses and other custodians, nominees and
fiduciaries for any reasonable expenses incurred in forwarding proxy materials
to beneficial owners.
2
PRINCIPAL SECURITY HOLDERS
The following table sets forth certain information regarding the beneficial
ownership of shares of Common Stock as of March 1, 2000 by (i) each person
known by EarthWeb to own more than 5% of such shares, (ii) each of EarthWeb's
directors, including the nominees for director, (iii) EarthWeb's Chief
Executive Officer and each of its executive officers listed in the "Summary of
Executive Compensation" table herein, and (iv) all directors and executive
officers as a group. As of March 1, 2000, there were 10,096,029 issued and
outstanding shares of Common Stock of EarthWeb, not including treasury shares
or shares issuable upon exercise of options. Unless otherwise noted, ownership
information has been supplied by the person concerned.
Beneficial Ownership
of shares(2)
--------------------
Name and Address of Beneficial Owners(1)(2) Number Percentage
- ------------------------------------------- --------- ----------
Warburg, Pincus Ventures, L.P.(3)........................ 1,817,093 18.00%
Jack D. Hidary(4)........................................ 827,198 8.19%
Murray Hidary(5)......................................... 817,198 8.09%
Cary Davis(6)............................................ 1,817,093 18.00%
Henry Kressel(6)......................................... 1,817,093 18.00%
Peter Derow(7)........................................... 12,763 *
Irene Math(8)............................................ 59,166 *
William Gollan(9)........................................ 54,579 *
Scott Anderson(10)....................................... 5,258 *
Paul Tudor Jones and Companies(11)....................... 899,600 8.91%
Munder Capital Management (12)........................... 723,400 7.17%
All directors and executive officers as a group (10
persons) (4)(5)(6)(7)(8(9)(10).......................... 3,593,255 35.35%
- --------
* Less than 1%
(1) Unless otherwise noted, the address of each of the persons listed is 3
Park Avenue, New York, New York 10016.
(2) As used in this table, "beneficial ownership" means the sole or shared
power to vote or direct the voting or to dispose or direct the
disposition of any security. For purposes of this table, a person is
deemed to be the beneficial owner of securities that can be acquired
within 60 days from March 1, 2000 through the exercise of any option,
warrant or right. Shares of common stock subject to options, warrants or
rights that are currently exercisable or exercisable within 60 days are
deemed outstanding for computing the ownership percentage of the person
holding such options, warrants or rights, but are not deemed outstanding
for computing the ownership percentage of any other person. The amounts
and percentages are based upon 10,096,029 shares of common stock
outstanding as of March 1, 2000.
(3) The sole general partner of Warburg, Pincus Ventures, L.P. ("Warburg")
is Warburg, Pincus & Co., a New York general partnership ("WP"). E.M.
Warburg, Pincus & Co., LLC, a New York limited liability company
("EMWP"), manages Warburg. The members of EMWP are substantially the
same as the partners of WP. Lionel I. Pincus is the managing partner of
WP and the managing member of EMWP and may be deemed to control both WP
and EMWP. WP has a 15% interest in the profits of Warburg as the general
partner and also owns approximately 1.5% of the limited partnership
interests in Warburg. Henry Kressel and Cary Davis, directors of
EarthWeb, are also Managing Directors of EMWP, and thus may be deemed to
have an indirect, pecuniary interest (within the meaning of Rule 16a-1
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) in an indeterminate portion of the shares beneficially owned by
Warburg and WP. The address for Warburg is 466 Lexington Avenue, New
York, New York 10017.
(4) Includes 2,500 shares subject to stock options that are exercisable
within 60 days of March 1, 2000.
(5) Includes 2,500 shares subject to stock options that are exercisable
within 60 days of March 1, 2000.
3
(6) All of the shares indicated as owned by Dr. Kressel and Mr. Davis are
owned directly by Warburg and are included because of Dr. Kressel's and
Mr. Davis' affiliation with Warburg. Dr. Kressel and Mr. Davis disclaim
beneficial ownership of these shares within the meaning of Rule 13d-3
under the Exchange Act except to the extent of their indirect pecuniary
interests as described in note 3.
(7) Includes 2,763 shares subject to stock options that are exercisable
within 60 days of March 1, 2000.
(8) Includes 34,088 shares subject to stock options that are exercisable
within 60 days of March 1, 2000.
(9) Includes 23,801 shares subject to stock options that are exercisable
within 60 days of March 1, 2000.
(10) Includes 3,940 shares subject to stock options that are exercisable
within 60 days of March 1, 2000.
(11) This information is based on a Schedule 13 G/A filed by Paul Tudor Jones
and Companies on February 11, 2000. The address for Paul Tudor Jones is
c/o Tudor Investment Corporation, 600 Steamboat Road, Greenwich, CT
06830.
(12) This information is based on a Schedule 13 G/A filed by Munder Capital
Management on February 14, 2000. The address for Munder Capital
Management is 480 Pierce Street, Suite 300, P.O. Box 3043, Birmingham,
MI 48012-3043.
4
MANAGEMENT
Directors and Executive Officers
The following table sets forth the names, ages and positions of all
directors and executive officers of EarthWeb, including the nominees, as of
March 31, 2000. A summary of the background and experience of each of these
individuals is set forth after the table.
Name Age Position(s)
---- --- -----------
President, Chief Executive Officer and
Jack D. Hidary(1)................... 31 Director
Executive Vice President, Treasurer and
Murray Hidary....................... 28 Director
William Gollan...................... 52 Senior Vice President
Irene Math.......................... 38 Senior Vice President, Finance
Norman E. Lorentz................... 52 Chief Technology Officer
Scott Anderson...................... 46 Vice President, Worldwide Marketing
Vice President, General Counsel and
Brian Campbell...................... 35 Secretary
Cary Davis(1)(2).................... 33 Director
Henry Kressel(1)(2)................. 66 Director
Peter Derow......................... 59 Director
- --------
(1) Member of the Compensation Committee of the Board of Directors
(2) Member of the Audit Committee of the Board of Directors
Messrs. Jack D. Hidary and Murray Hidary are brothers. There are no other
family relationships among the directors, director nominee or executive
officers of EarthWeb.
EarthWeb's Bylaws and Restated Certificate of Incorporation provide for the
Board of Directors to be divided into three classes, with each class to be as
nearly equal in the number of directors as possible. At each annual meeting of
shareholders, the successors to the class of directors whose term expires at
that time are elected to hold office for a term of three years until their
respective successors are elected and qualified, so that the term of one class
of directors expires at each such annual meeting. Under the terms of
EarthWeb's Restated Certificate of Incorporation and Bylaws, the terms of
office expire as follows: Mr. Murray Hidary, 2000; Mr. Davis, 2000; Mr. Jack
D. Hidary, 2001; Dr. Kressel, 2001; and Mr. Derow, 2002.
Jack D. Hidary has served as the President, Chief Executive Officer and a
director of EarthWeb since April 1996 and has co-managed its predecessors
since January 1995. Mr. Hidary is a co-founder of EarthWeb. From November 1991
to July 1994, Mr. Hidary served as a Stanley Fellow in Clinical Neuroscience
at the National Institutes of Health, where he helped establish a digital
brain imaging laboratory making use of Internet, neural network and other
advanced technologies. Prior to this fellowship, Mr. Hidary helped build
ColumbiaNet, the online service of Columbia University, where he also studied
Philosophy and Neuroscience.
Murray Hidary has been the Executive Vice President, Treasurer and a
director of EarthWeb since April 1996 and has co-managed its predecessors
since January 1995. Mr. Hidary is a co-founder of EarthWeb. Mr. Hidary studied
Music and Composition at New York University.
William Gollan has been the Senior Vice President of EarthWeb since November
1997. Prior to joining EarthWeb, Mr. Gollan was a Senior Vice President of
LitleNet beginning in February 1996 focusing on electronic software
distribution. From March 1994 to April 1996, Mr. Gollan was a Vice President,
Sales and Marketing for Kurzweil Applied Intelligence. From December 1987 to
March 1994, Mr. Gollan was a Managing Director of Weathervane Management
Consultants. In 1990, Mr. Gollan co-founded Computer Buying World Magazine, an
IDG monthly trade magazine focused on the computer distribution channel. Mr.
Gollan attended Northeastern University.
Irene Math has been the Senior Vice President, Finance of EarthWeb since
April 1999, and was the Vice President, Finance from November 1996 to March
1999. From June 1995 to May 1996, Ms. Math served as
5
Corporate Controller for MCI/News Corp.'s Internet Ventures. From July 1992 to
May 1995, she was a Vice President in Banking and Corporate Finance at
Chemical Bank. From September 1984 to June 1992, Ms. Math held various
positions at Arthur Andersen & Co. Ms. Math graduated from Lehigh University
with a B.S. in Accounting and is a Certified Public Accountant.
Norman E. Lorentz has been the Chief Technology Officer of EarthWeb since
January 2000. Prior to EarthWeb, Mr. Lorentz was a Senior Vice President and
Chief Technology Officer with the Unites States Postal Service from August
1998 to December 1999 and the Vice President of Quality from July 1994 to
August 1998. From December 1976 to July 1994, Mr. Lorentz was a Director of
Quality for U S West. Mr. Lorentz holds an M.B.A. degree from Arizona State
University.
Scott Anderson has been the Vice President, Worldwide Marketing of EarthWeb
since August 1998. From 1994 to July 1998, Mr. Anderson served as a Partner
and Worldwide Management Supervisor at Ogilvy & Mather where he ran the global
IBM Software Group account. In 1994, Mr. Anderson worked at the west coast
advertising agency, Suissa Miller, where he launched Crayola's software
family. Prior to that, he worked at Drew Advertising where, among other
accomplishments, he built the Peter Norton software brand franchise. He won
the American Marketing Association's Effie award for marketing effectiveness
for both the Crayola and IBM software launches. Mr. Anderson received a B.S.
from Rutgers University.
Brian P. Campbell has been the Vice President, General Counsel and Secretary
of EarthWeb since January 2000. Prior to joining EarthWeb, Mr. Campbell was
Vice President, General Counsel and Secretary of CMP Media Inc. and Miller
Freeman, Inc. Prior to joining CMP in 1995, Mr. Campbell was an attorney in
the corporate department of Mudge Rose Guthrie Alexander & Ferdon since 1988.
Mr. Campbell received a J.D. from St. John's University School of Law and a
B.A. from the University of Virginia.
Cary Davis has been a director of EarthWeb since February 1998. Mr. Davis
has served with E.M. Warburg, Pincus & Co., LLC, an investment firm, since
October 1994 and has been a Managing Director since January 1999. From August
1992 to September 1994, Mr. Davis was employed by Dell Computer Corporation,
where his last position was Manager of Worldwide Desktop Marketing. Mr. Davis
also serves as a director of BEA Systems, Inc. Mr. Davis holds a B.A. from
Yale University and an M.B.A. from Harvard University's Graduate School of
Business Administration.
Henry Kressel has been a director of EarthWeb since October 1996. Dr.Kressel
has served with E.M. Warburg, Pincus & Co., LLC since 1983 and has been a
Managing Director since 1985. Prior to 1983, Dr. Kressel was Staff Vice
President for research and development in solid state technology at the RCA
Corporation. Dr. Kressel also serves as a director of Alysis Tecnologies,
Inc., a software development company, Nova Corporation, a credit card
processing company, and Covad Communications, an XDSL service provider.
Dr. Kressel received a B.A. from Yeshiva University, a Masters in Applied
Physics from Harvard University, a Ph.D. in Engineering from the University of
Pennsylvania and an M.B.A. from The Wharton School of Business at the
University of Pennsylvania.
Peter Derow has been a director of EarthWeb since May 1999. Mr. Derow served
as President and Chief Executive Officer of Institutional Investor, Inc. from
1988 until his retirement in 1997. Earlier, Mr. Derow served as Chairman and
President of Newsweek, Director of The Washington Post Company, President of
CBS Publishing Group, and Senior Vice President and Director of CBS, Inc. Mr.
Derow holds a B.A. degree from Harvard College and an M.B.A. from Harvard
University's Graduate School of Business Administration.
6
PROPOSAL ONE
RE-ELECTION OF DIRECTORS
At the Annual Meeting, two individuals will be elected as directors for a
three-year term and until their successors are elected and qualified. The
Board of Directors has nominated Murray Hidary and Cary Davis for re-election
at the Annual Meeting.
The proxies given to the proxyholders will be voted or not voted as
indicated in accordance with the terms of the proxy card, and if no direction
is given, will be voted FOR approval of the nominees. Directors are elected by
plurality of the votes of the shares of common stock represented and voted at
the meeting and abstentions and broker non-votes will have no effect on the
outcome of the election of directors. The Board of Directors knows of no
reason why any of the nominees should be unable or unwilling to serve, but if
one or more of the nominees should, for any reason, be unable or unwilling to
serve, the proxies will be voted for the election of such other nominee or
nominees to the office of director as the Board of Directors may recommend.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR ELECTION AS
MEMBERS OF THE BOARD OF DIRECTORS.
Compensation of Directors
EarthWeb does not currently pay any director's fees. Although EarthWeb does
not have any formal program to grant options to its directors, Peter Derow was
granted options to purchase 20,000 shares of common stock under the 1998 Stock
Incentive Plan. Directors who are also employees of Earthweb receive no
compensation for their service as directors of EarthWeb.
Indemnification
The General Corporation Law of the State of Delaware provides that a
corporation may indemnify its directors and officers for certain liabilities.
EarthWeb's Restated Certificate of Incorporation and Bylaws provide for the
indemnification of its directors and officers. The effect of such provisions
is to indemnify to the fullest extent permitted by law the directors and
officers of EarthWeb against all costs, expenses and liabilities incurred by
them in connection with any action, suit or proceeding in which they are
involved by reason of their affiliation with EarthWeb. EarthWeb maintains
directors and officers liability insurance.
Committees of the Board
The Board of Directors has established an Audit Committee, the members of
which are Henry Kressel and Cary Davis, who are nonemployee directors, and a
Compensation Committee, the members of which are Dr. Kressel and Mr. Davis,
who are nonemployee directors, and Jack D. Hidary. EarthWeb does not have a
nominating committee or a committee performing similar functions.
The Audit Committee is responsible for recommending to the Board of
Directors the engagement of the independent auditors of EarthWeb and reviewing
with the independent auditors the scope and results of the audits, the
internal accounting controls of EarthWeb, the financial reporting process,
audit practices and the professional services furnished by the independent
auditors.
The Compensation Committee is responsible for overseeing administration of
the company's compensation policies and practices, including reviewing and
approving all compensation arrangements for officers of EarthWeb, and is also
responsible for administering, or making recommendations with respect to,
EarthWeb's stock plans. A subcommittee of the Compensation Committee
consisting of Dr. Kressel and Mr. Davis administers the 1998 Stock Incentive
Plan with respect to EarthWeb's officers subject to Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code").
7
Attendance at Board and Committee Meetings
During the fiscal year ended December 31, 1999, the Board of Directors met 6
times and acted by unanimous written consent 21 times, with each director
attending each meeting and executing each consent. The Audit Committee met
once and the Compensation Committee met twice during the fiscal year ended
December 31, 1999 and all members of such committees attended each meeting of
the respective committees.
COMPENSATION OF EXECUTIVE OFFICERS
Summary of Executive Compensation
The table below sets forth information concerning the annual and long-term
compensation for services rendered in all capacities to EarthWeb during the
years ended December 31, 1999 and 1998 for: (1) the Chief Executive Officer of
EarthWeb and (2) the four other most highly compensated executive officers of
EarthWeb who were serving as executive officers at December 31, 1999
(collectively, the "Named Executive Officers"):
Long Term
Compensation
Awards
------------
Annual
Compensation
----------------- Securities
Name and Principal Other Annual Underlying
Position Year Salary($) Bonus Compensation($) Options(#)
------------------ ---- --------- ------- --------------- ------------
Jack D. Hidary.......... 1999 $175,000 $99,000(1) -- 260,000
President and Chief 1998 160,000 41,000(2) -- --
Executive Officer
Murray Hidary........... 1999 164,000 96,000(1) -- 260,000
Executive Vice 1998 130,000 36,000(2) -- --
President and Treasurer
William Gollan.......... 1999 174,000 65,000(1) $65,000(3)(4) 120,000
Senior Vice President 1998 151,000 37,000(2) 53,000(3) 74,750
Irene Math.............. 1999 173,000 48,000(1) 18,000(4) 60,000
Senior Vice President, 1998 132,000 38,000(2) -- 46,150
Finance
Scott Anderson.......... 1999 139,000 27,000(1) 1,000(4) 30,250
Vice President, 1998(5) 52,000 18,400(2) -- 9,750
Worldwide Marketing
- --------
(1) Represents bonuses earned in 1999, a portion of which were paid in 2000.
(2) Represents bonuses earned in 1998, a portion of which were paid in 1999.
(3) Includes relocation expenses and corporate apartment rental paid in 1998
and 1999.
(4) Represents reimbursement for certain underwriting discounts incurred in
connection with the sale of shares in EarthWeb's secondary offering in
May 1999.
(5) Scott Anderson joined EarthWeb in August 1998.
8
Summary of Option Grants
The following table sets forth information regarding stock options granted
by EarthWeb pursuant to the EarthWeb Inc. 1998 Stock Incentive Plan (the "1998
Stock Incentive Plan") during the fiscal year ended December 31, 1999 to each
of the Named Executive Officers. EarthWeb has never granted stock appreciation
rights.
Option Grants in Last
Fiscal Year Individual Grants
------------------------------------------------
Potential Realizable
Value at Assumed
Number of Percent of Total Options Annual Rates of Stock
Securities Granted to Employees Exercise or Price Appreciation
Underlying (net of forfeitures) Base Price for Option Term(4)
Options in Fiscal Year Ended Per Share Expiration ----------------------
Name Granted(1) December 31, 1999(2) ($/Share)(3) Date 5% 10%
---- ---------- ------------------------ ------------ ---------- ---------- -----------
Jack D. Hidary.......... 10,000 0.55% $36.13 2/21/09 $ 227,188 $ 575,739
250,000 13.77% $26.19 6/14/09 $4,117,295 $10,434,033
Murray Hidary........... 10,000 0.55% $36.13 2/21/09 $ 227,188 $ 575,739
250,000 13.77% $26.19 6/14/09 $4,117,295 $10,434,033
William F. Gollan....... 10,000 0.55% $36.13 2/21/09 $ 227,188 $ 575,739
110,000 6.06% $26.19 6/14/09 $1,811,609 $ 4,590,974
Irene Math.............. 10,000 0.55% $36.13 2/21/09 $ 227,188 $ 575,739
50,000 2.75% $26.19 6/14/09 $ 823,459 $ 2,086,807
Scott Anderson.......... 5,000 0.28% $36.13 2/21/09 $ 113,594 $ 287,870
10,000 0.55% $26.19 6/14/09 $ 164,692 $ 417,361
12,250 0.84% $30.75 11/2/09 $ 294,912 $ 747,366
- --------
(1) The options were granted under the 1998 Stock Incentive Plan.
(2) Based on an aggregate of 1,816,076 options granted (net of forfeitures)
to employees in the year ended December 31, 1999, including options
granted to Named Executive Officers.
(3) The exercise price per share of each option was equal to the fair market
value of the common stock on the preceding date of the grant, based on
the closing sales price for the Common Stock as reported on the Nasdaq
National Market.
(4) The dollar amounts under these columns are the result of calculations at
the 5% and 10% rates required by applicable regulations of the Securities
and Exchange Commission and, therefore, are not intended to forecast
possible future appreciation, if any, of the Common Stock price. Assumes
all options are exercised at the end of their respective terms. Actual
gains, if any, on stock option exercises depend on the future performance
of the Common Stock and overall market conditions, as well as the
optionee's continued employment through the vesting period. The amounts
reflected in this table may not be achieved.
9
Summary of Options Exercised
The following table sets forth information concerning options exercised by
any Named Executive Officer during the fiscal year ended December 31, 1999 and
unexercised options held by the Named Executive Officers as of December 31,
1999. The values of unexercised in-the-money options represent the positive
spread between the respective exercise prices of outstanding stock options and
the last reported sale price of the Common Stock on December 31, 1999 of
$50.31.
Aggregate Option Exercises in Last Fiscal Year
And Fiscal Year-End Option Values
-----------------------------------------------------
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal Year In-the-Money
Shares End Options at Fiscal Year End
Acquired Value ------------------------- ---------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ---------- ----------- ------------- ---------------------------
Jack D. Hidary.......... -- $ -- -- 260,000 $ -- $ 6,173,125
Murray Hidary........... -- $ -- -- 260,000 $ -- $ 6,173,125
William Gollan.......... 52,444 $1,808,246 18,559 171,522 $ 876,645 $ 5,229,296
Irene Math.............. 27,165 $ 930,944 29,952 76,083 $ 1,068,141 $ 2,461,626
Scott Anderson.......... 3,606 $ 91,846 1,345 35,049 $ 52,151 $ 796,592
Employment and Consulting Agreements
Jack D. Hidary and Murray Hidary (the "Managers") entered into employment
agreements (individually, an "Employment Agreement" and, collectively, the
"Employment Agreements") with Global Network Partners LLC ("GNP") effective
January 1, 1995. Each Employment Agreement provided for an initial two year
term, which will extend automatically for additional one-year terms unless
terminated by 60 days prior notice from the respective Manager. Through an
Intercompany Services Agreement dated as of October 25, 1996 among the
Managers, a former officer, EarthWeb, GNP and EarthWeb LLC (the "Intercompany
Services Agreement"), which amends certain provisions of each of the
Employment Agreements (and for purposes of the following discussion, all
references to the Employment Agreements shall be to the Employment Agreements
as amended by the Intercompany Services Agreement), each of the Managers
agreed to serve as an officer and employee of EarthWeb as if EarthWeb were
"the Company" under his respective Employment Agreement. In connection
therewith, EarthWeb agreed to assume all of the obligations of GNP under the
Employment Agreements, including payments of salary and other compensation.
For the first and last six months of 1999, Jack D. Hidary received an annual
base salary of approximately $160,000 and $180,000, respectively. Mr. Jack D.
Hidary currently receives an annual base salary of $215,000 per annum. In
1999, Mr. Murray Hidary received an annual base salary of approximately
$164,000 and currently receives an annual base salary of $215,000 per annum.
Each Manager is also entitled to receive bonuses as may from time to time be
awarded by the Board of Directors to such Manager.
In the event either Mr. Jack D. Hidary or Mr. Murray Hidary is terminated
without "cause" (as such term is defined in his respective Employment
Agreement), each may continue to receive their respective base salary for a
period of up to two years following such termination. The continued payment of
such Manager's base salary is contingent upon such Manager's not disclosing
EarthWeb's confidential information or competing with the business of
EarthWeb.
EarthWeb has entered into employment agreements with William Gollan, Senior
Vice President, Irene Math, Senior Vice President, Finance, Norman Lorentz,
Chief Technology Officer, Scott Anderson, Vice President, Worldwide Marketing,
and Brian Campbell, Vice President, General Counsel and Secretary. These
employment contracts currently provide for base salaries ranging from $145,000
to $215,000 and bonuses based on both individual and overall EarthWeb
performance measures. The material terms of these employment agreements are:
(1) if any executive is terminated without cause, she/he will receive
severance pay between three and twelve months; and (2) during the term of the
agreement and for a period of between three months to three years thereafter,
the executive is prohibited from competing with EarthWeb.
10
Compensation Committee Interlocks and Insider Participation
On August 1, 1998, Messrs. Jack D. Hidary, Cary Davis and Henry Kressel were
appointed as members of the Compensation Committee. A subcommittee of the
Compensation Committee consisting of Dr. Kressel and Mr. Davis will administer
the 1998 Stock Incentive Plan with respect to EarthWeb's officers subject to
Section 162(m) of the Code. Mr. Hidary has served as President and Chief
Executive Officer of EarthWeb since April 1996. Mr. Hidary will abstain from
Compensation Committee decisions regarding his own compensation. Mr. Davis has
served with E.M. Warburg, Pincus & Co., LLC since October 1994 and has been a
Managing Director since January 1999. Dr. Kressel has served with E.M.
Warburg, Pincus & Co., LLC since 1983 and has been a Managing Director since
1985.
Certain Relationships and Related Transactions
In October 1996, EarthWeb issued 2,925,000 shares of Common Stock to
EarthWeb LLC and assumed substantially all of the liabilities of EarthWeb LLC
in exchange for substantially all of the assets of EarthWeb LLC. At the time
of such transaction, EarthWeb LLC was the sole owner of Common Stock then
outstanding and, consequently, the members of EarthWeb LLC (which included
GNP, of which Messrs. Jack D. Hidary, Murray Hidary and Nova Spivack were the
members at such time) retained their proportionate interests in EarthWeb
through the ownership by EarthWeb LLC of such Common Stock.
In October 1996, EarthWeb issued 653,111 shares of Series A Convertible
Preferred Stock to Warburg in a private placement for an aggregate purchase
price of approximately $6.7 million, of which $4.9 million was received by
EarthWeb and the remainder was used to repay certain investors and cover the
transaction costs. In June 1997, EarthWeb issued 598,086 shares of Series B
Convertible Preferred Stock to Warburg for an aggregate purchase price of
$10.0 million. All of the Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock were converted into an aggregate of 2,439,833
shares of Common Stock upon the consummation of EarthWeb's IPO.
In June 1998, EarthWeb issued 433,965 shares of Common Stock to EarthWeb LLC
for an aggregate purchase price of $3.7 million.
The controlling member of EarthWeb LLC is GNP, the members of which are Jack
D. Hidary and Murray Hidary, directors and officers of EarthWeb. Warburg,
EarthWeb LLC, GNP and the GNP members are entitled to demand and piggyback
registration rights with respect to their respective shares of Common Stock,
which, with respect to EarthWeb LLC, includes the former members.
Pursuant to certain provisions of the Shareholders Agreement, Warburg
granted GNP an option to purchase up to 10% of the shares that Warburg
received upon conversion of its preferred stock, subject to Warburg realizing
a return of at least five times on its investment. The rights become
conditionally exercisable after the expiration of any restrictions on resale
of such shares.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires that EarthWeb's executive
officers and directors, and any persons holding more than 10 percent of the
Common Stock, file reports of beneficial ownership on Form 3 and changes in
beneficial ownership on Forms 4 and 5 with the Securities and Exchange
Commission ("SEC"). Such reporting persons are also required by the SEC rules
to furnish EarthWeb with copies of all Section 16(a) reports they file. Based
solely on its review of the Forms 3, 4 and 5 and any amendments thereto filed
by such reporting persons, as well as written representations from certain
reporting persons that no Forms 5 are required, EarthWeb believes that, during
the fiscal year ended December 31, 1999, all Section 16(a) filing requirements
applicable to such reporting persons were complied with pursuant to the SEC
rules, with the following exceptions: (a) Mr. Jack D. Hidary filed a late Form
4 in November 1999 reflecting a sale of stock; (b) Mr. Murray Hidary filed a
late Form 4 in November 1999 reflecting a sale of stock; (c) Mr. John Kleine
filed a late Form 4 in September 1999 reflecting a sale of stock; and (d) Ms.
Irene Math filed an amendment to a Form 4 in October 1999.
11
1996 Amended and Restated Stock Plan
The 1996 Amended and Restated Stock Plan (as amended to date, the "1996
Stock Plan") was adopted by the Board of Directors of EarthWeb in October 1996
and was subsequently ratified by the shareholders of EarthWeb. The 1996 Stock
Plan provides for the grant of incentive stock options and non-qualified stock
options. The 1996 Stock Plan also provides for the issuance of stock
appreciation rights and restricted stock. Directors, employees and consultants
of EarthWeb are eligible to receive grants under the 1996 Stock Plan. The 1996
Stock Plan authorized 525,000 shares of Common Stock for issuance, subject to
adjustment as set forth in the 1996 Stock Plan. As of March 1, 2000, options
relating to 194,167 shares of Common Stock were outstanding. EarthWeb has
ceased granting additional options pursuant to the 1996 Stock Plan.
1998 Stock Incentive Plan
EarthWeb's 1998 Stock Incentive Plan is described in Proposal No. 3 below.
1998 Employee Stock Purchase Plan
EarthWeb's 1998 Employee Stock Purchase Plan (the "Stock Purchase Plan") was
approved by the Board of Directors in November 1998 and has been approved by
EarthWeb's shareholders. The Stock Purchase Plan is intended to qualify as an
"employee stock purchase plan" under Section 423 of the Code, in order to
provide employees of EarthWeb with an opportunity to purchase Common Stock
through payroll deductions. An aggregate of 159,000 shares of Common Stock was
initially reserved for issuance under the Stock Purchase Plan and available
for purchase thereunder, which amount is increased annually on the first day
of EarthWeb's fiscal year, beginning in 2000, equal to the least of (1)
400,000 shares, (2) two percent of the outstanding shares on such date or (3)
a lesser number of shares determined by the Compensation Committee, subject to
adjustment in the event of a stock split, stock dividend or other similar
change in the Common Stock or the capital structure of EarthWeb. Except for
any employees (a) who, after giving effect to the grant under the Stock
Purchase Plan, would own shares and options equal to 5% or more of the total
voting power of EarthWeb's outstanding Common Stock, (b) whose rights under
all of EarthWeb's stock purchase plans accrue at a rate exceeding $25,000 per
year, (c) whose customary employment is 20 or fewer hours per week or five or
fewer months per year or (d) who are subject to laws of a foreign jurisdiction
that prohibit or make impracticable such employee's participation in the Stock
Purchase Plan, all employees of EarthWeb are eligible to participate in the
Stock Purchase Plan.
Offer periods under the Stock Purchase Plan ("Offer Periods") are generally
overlapping periods of 24 months. The initial Offer Period commenced on the
closing date of the IPO. Additional Offer Periods commence each February 1 and
August 1. Purchase periods under the Stock Purchase Plan ("Purchase Periods")
are generally six month periods. The initial Purchase Period commenced on the
closing date of the IPO. Additional Purchase Periods commence each August 1
and February 1. Exercise dates under the Stock Purchase Plan ("Exercise
Dates") are the last day of each Purchase Period. An Offer Period may be
shortened in the event of a merger of EarthWeb with or into another
corporation, the sale of all or substantially all of the assets of EarthWeb,
or certain other transactions.
On the first day of each Offer Period, a participating employee is granted a
purchase right that is a form of option to be automatically exercised on the
forthcoming Exercise Dates within the Offer Period. During the Offer Period
deductions are made from the pay of participants (in accordance with their
authorizations) and credited to their accounts under the Stock Purchase Plan.
When the purchase right is exercised, the participant's withheld salary is
used to purchase shares of Common Stock of EarthWeb. The price per share at
which shares are to be purchased under the Stock Purchase Plan during any
Purchase Period is the lesser of an amount equal to eighty five percent (85%)
of the fair market value of the Common Stock (as defined in the Stock Purchase
Plan) on (a) the date of the grant of the option (the commencement of the
Offer Period) or (b) the Exercise Date (the last day of a Purchase Period).
The participant's purchase right is exercised in this manner on both Exercise
Dates arising in the Offer Period unless, on the first day of any Purchase
Period, the fair market value of the Common Stock is lower than the fair
market value of the Common Stock on the first day of the Offer Period. If so,
the participant's participation in the original Offer Period is terminated,
and the participant is automatically enrolled in the new Offer Period
effective the same date.
12
Payroll deductions may range from 1% to 15% (in whole percentage increments)
of a participant's regular base pay plus commissions, exclusive of overtime,
bonuses or shift-premiums, but not more than $21,250 per year. Participants
may not make additional payments to their accounts. The maximum number of
shares of Common Stock that any employee may purchase under the Stock Purchase
Plan during a Purchase Period is determined by dividing 15% of the employee's
regular base pay by the applicable purchase price. Certain additional
limitations on the amount of Common Stock that may be purchased during any
calendar year are imposed by the Code.
The Stock Purchase Plan is administered by the Compensation Committee, which
has the authority to terminate or amend the Stock Purchase Plan (subject to
specified restrictions) and otherwise to administer the Stock Purchase Plan
and to resolve all questions relating to the administration of the Stock
Purchase Plan.
401(k) Plan
EarthWeb maintains a 401(k) retirement savings plan (the "401(k) Plan"). All
employees of EarthWeb, meeting certain minimum eligibility requirements are
eligible to participate in the 401(k) Plan. The 401(k) Plan provides that the
employee may contribute up to 20% of his or her pre-tax gross compensation
(but not greater than a statutorily prescribed annual limit). The 401(k) Plan
permits, but does not require, additional contributions to the 401(k) Plan by
EarthWeb. All amounts contributed by the employee participants in conformity
with plan requirements and earnings on such contributions are fully vested at
all times. For the year ended December 31, 1999, EarthWeb did not contribute
to the 401(k) Plan.
EarthWeb's wholly-owned subsidiaries, EarthWeb Career Solutions, Inc. and
EarthWeb Knowledge Products, Inc., also maintain 401(k) retirement savings
plans.
13
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
EarthWeb's executive compensation program has been administered by the
Compensation Committee of the Board of Directors since August 1, 1998. Prior to
August 1, 1998, compensation decisions and grants of stock options were made by
the Board of Directors. The current members of the Compensation Committee are
Dr. Kressel and Mr. Davis, each of whom is a non-employee director within the
meaning of Section 16 of the Exchange Act and an "outside director" within the
meaning of Section 162(m) of the Code, and Mr. Jack D. Hidary. A subcommittee
of the Compensation Committee consisting of Dr. Kressel and Mr. Davis
administer the 1998 Stock Incentive Plan with respect to EarthWeb's officers
subject to Section 162(m) of the Code. Mr. Hidary abstains from Compensation
Committee decisions regarding his own compensation.
General Compensation Philosophy
The role of the Compensation Committee is to review and administer all
compensation arrangements for officers of EarthWeb (including all of the Named
Executive Officers), and to be responsible for administering or making
recommendations with respect to EarthWeb's stock plans. EarthWeb's compensation
philosophy for officers is to relate compensation to corporate performance and
increases in shareholder value, while providing a total compensation package
that is competitive and enables EarthWeb to attract, motivate, reward and
retain key executives and employees. EarthWeb uses salaries, bonuses and stock
options to meet these goals.
Executive Compensation
Base Salary. Salaries for executive officers for 1999 were generally
determined by the Board of Directors or Compensation Committee on an individual
basis. The majority of EarthWeb's executives were hired prior to the formation
of the Compensation Committee. For 2000, the Compensation Committee reviewed
the base salaries of the executive officers by evaluating each executive's
scope of responsibility, performance, prior experience and salary history, as
well as the salaries for similar positions at comparable companies.
Annual Incentive Awards. EarthWeb's executive officers are eligible for cash
bonus awards. Awards under this program are based on individual performance
objectives and on the attainment of specific company performance measures
established by the Compensation Committee each year. Awards under this program
for 1999 were determined by the Compensation Committee of the Board of
Directors.
Long-Term Incentive Awards. The Compensation Committee believes that equity-
based compensation in the form of stock options links the interests of
executives with the long-term interests of EarthWeb's shareholders and
encourages executives to remain in EarthWeb's employ. EarthWeb grants stock
options in accordance with the 1998 Stock Incentive Plan and previously granted
stock options in accordance with the 1996 Stock Plan. Grants are awarded based
on a number of factors, including the individual's level of responsibility, the
amount and term of options already held by the individual, the individual's
contributions to the achievement of EarthWeb's financial and strategic
objectives, and industry practices and norms.
Chief Executive Officer Compensation
Mr. Jack D. Hidary's base salary and bonus for 1999 was determined by the
Compensation Committee. During 1999 the Compensation Committee authorized an
increase in Mr. Jack D. Hidary's base salary to $180,000 and a grant of options
to purchase 260,000 shares of common stock pursuant to the terms of the 1998
Stock Incentive Plan. For 2000, the Compensation Committee authorized an
increase in Mr. Jack D. Hidary's base salary to $215,000. Such adjustments were
made by the Compensation Committee after evaluating Mr. Jack Hidary's
compensation consistent with the factors described above for all executive
officers.
14
Internal Revenue Code Section 162(m) Limitation
Section 162(m) of the Code limits the tax deduction to $1.0 million for
compensation paid to certain executives of public companies. Having considered
the requirements of Section 162(m), the Compensation Committee believes that
grants made pursuant to the Stock Plan and the 1998 Stock Incentive Plan meet
the requirements that such grants be "performance based" and are, therefore,
exempt from the limitations on deductibility. Historically, the combined
salary and bonus of each executive officer has been below the $1.0 million
limit. The Compensation Committee's present intention is to comply with
Section 162(m) unless the Compensation Committee feels that required changes
would not be in the best interest of EarthWeb or its shareholders.
COMPENSATION COMMITTEE
Jack D. Hidary
Henry Kressel
Cary Davis
15
EARTHWEB STOCK PRICE PERFORMANCE
The following performance graph assumes an investment of $100 on November
11, 1998 (the date EarthWeb's Common Stock began trading on the Nasdaq
National Market) and compares the change to December 31, 1999 in the market
prices of the Common Stock with a broad market index (Nasdaq Stock Market--
U.S.) and an industry index (Hambrecht & Quist Internet Index). EarthWeb paid
no dividends during the periods shown; the performance of the indexes is shown
on a total return (dividend reinvestment) basis. The graph lines merely
connect the prices on the dates indicated and do not reflect fluctuations
between those dates. The comparisons provided in this graph are not intended
to be indicative of possible future performance of EarthWeb's Common Stock.
COMPARISON OF 14 MONTH CUMULATIVE TOTAL RETURN*
AMONG EARTHWEB INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE HAMBRECHT & QUIST INTERNET INDEX
[CHART]
11/11/98 12/31/98 12/31/99
-------- -------- --------
EarthWeb............................................. 100 278 359
Nasdaq Stock Market (US) Index....................... 100 105 214
Hambrecht & Quist Internet Index..................... 100 140 486
The foregoing report of the Compensation Committee of the Board of Directors
on executive compensation and the performance graph that appears immediately
above shall not be deemed to be soliciting material or to be filed with the
SEC under the Securities Act of 1933 or the Exchange Act, or incorporated by
reference in any document so filed.
16
PROPOSAL TWO
AMENDMENT TO EARTHWEB'S RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK AND ELIMINATE CERTAIN CLASSES OF
PREFERRED STOCK.
The Board of Directors has adopted, subject to shareholder approval, an
amendment to (1) Article VI of the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock to
75,000,000 shares from 21,750,000 shares and to eliminate three classes of
preferred stock, the Series A, Series B and Series C preferred stock, thus
decreasing the number of authorized shares of Preferred Stock from 4,750,000
to 2,000,000 shares and (2) Article VIII of EarthWeb's Restated Certificate of
Incorporation to eliminate references to the three classes of preferred stock
eliminated.
The text of the amendment is attached hereto as Exhibit A.
The following sections from the Restated Certificate of Incorporation, as
proposed to be amended, would be deleted in their entirety: the second
sentence of Section 6.1(a) and all of sections 6.1(c), 6.2, 6.3, 6.4, 6.5, 6.6
and 6.7.
Restated Certificate of Incorporation
Under the existing Restated Certificate of Incorporation, EarthWeb has the
authority to issue 21,750,000 shares of Common Stock and 4,750,000 shares of
Preferred Stock, of which 2,750,000 shares of Preferred Stock were designated
Series A, Series B or Series C and 2,000,000 shares of Preferred Stock were
undesignated. As of March 31, 2000, 10,236,457 shares of Common Stock were
issued and outstanding and no shares of Preferred Stock were outstanding.
Accordingly, as of March 1, 2000, after taking into account the shares
reserved for issuance (i) upon the exercise of Company stock options, (ii)
upon the conversion of the Company's 7% Convertible Subordinated Notes due
2005 and (iii) pursuant to the Company's acquisition shelf registration
statement on Form S-4, approximately 4,551,234 shares of Common Stock were
available for issuance. The proposed amendment would provide for an additional
53,250,000 shares of Common Stock available for issuance. The additional
Common Stock to be authorized by adoption of the proposed amendment would have
rights identical to the currently outstanding Common Stock of the Company.
Amendments to Restated Certificate of Incorporation
Adoption of the proposed amendment and issuance of additional shares of
Common Stock would not affect the rights of the holders of currently
outstanding Common Stock, except for effects incidental to increasing the
number of shares of Common Stock outstanding, such as dilution of the earnings
per share and voting rights of current holders of Common Stock. Issuance of
shares of Preferred Stock could affect the rights of the holders of Common
Stock if the Preferred Stock, when issued, has rights and preferences senior
to the Common Stock. The holders of Common Stock do not presently have
preemptive rights to subscribe for the additional shares of Common Stock and
Preferred Stock proposed to be authorized. The proposed amendment would not
change the par value of the Common Stock or the Preferred Stock. If the
amendment is adopted, it will become effective upon filing a Certificate of
Amendment to the Company's Restated Certificate of Incorporation with the
Secretary of State of the State of Delaware. However, pursuant to Delaware
law, the Board of Directors retains the discretion to abandon and not
implement the proposed amendment.
The purpose of the increase in authorized shares is to provide additional
shares of Common Stock and to retain as authorized the undesignated shares of
Preferred Stock that could be issued for corporate purposes without further
stockholder approval unless required by applicable law or regulation. The
Company currently expects that reasons for issuing additional shares of either
Common Stock or Preferred Stock will include effecting acquisitions of other
businesses or properties, establishing strategic relationships with other
companies and securing additional financing for the operation of the Company
through the issuance of additional shares or other equity-based securities.
Reasons for issuing additional shares of Common Stock also include paying
stock
17
dividends or subdividing outstanding shares through stock splits and providing
equity incentives to employees, officers or directors. The Board of Directors
believes that it is in the best interests of the Company to have additional
shares of Common Stock and the Preferred Stock authorized at this time to
alleviate the expense and delay of holding a special meeting of stockholders
to authorize additional shares of Common Stock or Preferred Stock when the
need arises. EarthWeb could also use the additional shares of Common Stock and
the Preferred Stock to oppose a hostile takeover attempt or delay or prevent
changes of control (whether by merger, tender offer, proxy contest or
assumption of control by a holder of a large block of the Company's
securities) or changes in or removal of management of EarthWeb. For example,
without further shareholder approval, the Board of Directors could
strategically sell shares of Common Stock or Preferred Stock in a private
transaction to purchasers who would oppose a takeover or favor the current
Board of Directors.
Although the Board of Directors is motivated by business and financial
considerations in proposing this amendment, and not by the threat of any
attempt to accumulate shares or otherwise gain control of the Company (and the
Board of Directors is not currently aware of any such attempts), shareholders
nevertheless should be aware that approval of the amendment could facilitate
efforts by the Company to deter or prevent changes of control of EarthWeb in
the future, including transactions in which the shareholders might otherwise
receive a premium for their shares over then-current market prices or benefit
in some other manner. The proposal to increase the number of authorized shares
of Common Stock, however, is not part of any present plan to adopt a series of
amendments having an antitakeover effect, and EarthWeb's management presently
does not intend to propose antitakeover measures in future proxy
solicitations. EarthWeb's Bylaws contain certain provisions that could have an
antitakeover effect. In addition, the authority granted by EarthWeb's Restated
Certificate of Incorporation to the Board of Directors to fix the
designations, powers, preferences, rights, qualifications, limitations and
restrictions of any class or series of the Preferred Stock could be used for
antitakeover purposes.
The amendment would also result in 2,750,000 authorized shares of Series A,
Series B and Series C Preferred Stock no longer being authorized and the
elimination of the references to such series of preferred stock being
eliminated from Article VIII. Shares of the Series A and Series B Convertible
Preferred Stock were originally issued prior to the IPO, were converted upon
completion of the IPO and returned to the status of authorized and unissued
shares. Shares of the Series C Preferred Stock were never issued. These
classes of preferred stock are no longer necessary for EarthWeb's business
purposes, and, therefore, EarthWeb seeks to eliminate them from its Restated
Certificate of Incorporation. The 2,000,000 shares of undesignated Preferred
Stock will remain authorized under the amendment and may be issued by the
Board of Directors in one or more series with such designations, powers,
preferences and relative, participating, optional and other rights, including,
without limitation, dividend rights, conversion rights, voting rights,
redemption terms and liquidation preferences, and such qualifications and
limitations as the Board of Directors may determine. No additional shareholder
approval would be required to set the terms of or for issuance of the
undesignated Preferred Stock.
The affirmative vote of 66.66% of the total voting power of all outstanding
securities of EarthWeb entitled to vote generally in the election of
directors, voting as a single class is required for approval of Proposal Two.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT TO
EARTHWEB'S RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK AND ELIMINATE CERTAIN CLASSES OF PREFERRED
STOCK.
The persons designated in the enclosed proxy will vote your shares FOR
adoption of this proposal unless instructions to the contrary are indicated in
accordance with the terms of the proxy card.
18
PROPOSAL THREE
AMENDMENT TO EARTHWEB'S 1998 STOCK INCENTIVE PLAN TO INCREASE THE NUMBER OF
SHARES OF COMMON STOCK AUTHORIZED FOR ISSUANCE UNDER THE PLAN AND TO INCREASE
THE NUMBER OF SHARES AVAILABLE UNDER THE ANNUAL RENEWAL MECHANISM
The Board of Directors has adopted, subject to shareholder approval,
amendments to EarthWeb's 1998 Stock Incentive Plan (the "1998 Stock Incentive
Plan"). The proposed amendments to the 1998 Stock Incentive Plan will increase
the number of shares of Common Stock reserved for issuance thereunder by an
additional 1,500,000 shares and provide for an increase in the number of shares
available under the annual renewal mechanism.
The purpose of the amendments to EarthWeb's 1998 Stock Incentive Plan is to
enhance EarthWeb's ability to provide key individuals with awards and
incentives commensurate with their contributions and competitive with those
offered by other employers, and to increase shareholder value by further
aligning the interests of key individuals with the interests of EarthWeb's
shareholders by providing an opportunity to benefit from stock price
appreciation that generally accompanies improved financial performance. The
Board of Directors believes that EarthWeb's long term success is dependent upon
the ability of EarthWeb to attract and retain highly qualified individuals who,
by virtue of their ability and qualifications, make important contributions to
EarthWeb.
1998 Stock Incentive Plan
The following summary of the 1998 Stock Incentive Plan is subject in its
entirety to the specific language of the 1998 Stock Incentive Plan, a copy of
which is attached as Exhibit B hereto.
EarthWeb's 1998 Stock Incentive Plan was adopted by the Board of Directors in
November 1998 and has been approved by EarthWeb's shareholders. As of December
31, 1999 the total number of shares of common stock reserved for issuance under
the plan was 2,075,000. In accordance with the terms of the 1998 Stock
Incentive Plan, starting in 2000, the number of shares of Common Stock reserved
for issuance increases annually by a number equal to two percent (2%) of the
total number of shares of Common Stock then outstanding or a lesser number of
shares as determined by the plan administrator. Accordingly, as of January
2000, an additional 196,354 shares of Common Stock were reserved for issuance
under the 1998 Stock Incentive Plan, bringing the total reserved shares up to
2,271,354.
Amendments to the 1998 Stock Incentive Plan
The proposed amendment would increase the number of shares of Common Stock
reserved for issuance under the 1998 Stock Incentive Plan by an additional
1,500,000 shares. The proposed amendment would also provide for an increase in
the amount by which the number of shares of Common Stock reserved for issuance
under the 1998 Stock Incentive Plan automatically increases annually from two
percent (2%) of the total number of shares of Common Stock then outstanding or
a lesser number of shares as determined by the Administrator to four percent
(4%) of the total number of shares of Common Stock then outstanding or a lesser
number of shares as determined by the Administrator.
General Description
The purposes of the 1998 Stock Incentive Plan are to give EarthWeb's
employees and others who perform substantial services for EarthWeb an
incentive, through ownership of EarthWeb's Common Stock, to continue in service
to EarthWeb, and to help EarthWeb compete effectively with other enterprises
for the services of qualified individuals. The 1998 Stock Incentive Plan
permits the grant of "incentive stock options" ("Incentive Stock Options")
within the meaning of Code Section 422 only to employees of EarthWeb or any
parent or subsidiary of EarthWeb.
Awards other than Incentive Stock Options, such as non-qualified stock
options, stock appreciation rights ("SARs"), dividend equivalent rights,
restricted stock, performance units, performance shares, and other equity
19
based rights (including Incentive Stock Options, the "Awards"), may be granted
to employees, directors and consultants of EarthWeb and its parents,
subsidiaries, and other businesses in which EarthWeb, a subsidiary or a parent
holds a substantial interest ("Related Entities"). As of March 1, 2000,
options to purchase a total of 1,558,614 shares held by 228 optionees were
outstanding as of such date at a weighted average exercise price of $28.48 per
share, and 698,707 shares remained available for future grants under the 1998
Stock Incentive Plan. As of that same date, the number of employees, directors
and consultants eligible to receive grants under the 1998 Stock Incentive Plan
was approximately 322 persons. The closing price of EarthWeb's Common Stock as
reported on the Nasdaq National Market on March 31, 2000 was $26.75.
Administration
The 1998 Stock Incentive Plan is administered, with respect to grants to
directors, officers, consultants, and other employees, by the Board of
Directors, which shall determine the provisions, terms and conditions of each
Award, including, but not limited to, the Award vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, form of payment
upon exercise of the Award, payment contingencies and satisfaction of any
performance criteria. The Compensation Committee may make recommendations to
the Board of Directors with respect to Awards under the 1998 Stock Incentive
Plan. The Board of Directors is constituted in such a manner as to satisfy
applicable laws, including Rule 16b-3 promulgated under the Exchange Act
("Rule 16b-3"). With respect to Awards subject to Code Section 162(m), a
subcommittee of the Compensation Committee administers the 1998 Stock
Incentive Plan with respect to EarthWeb's officers subject to Code Section
162(m) and the subcommittee is comprised solely of two or more "outside
directors" as defined under Code Section 162(m) and applicable tax
regulations. The Board and this subcommittee of the Compensation Committee are
referred to as the "Administrator" in the 1998 Stock Incentive Plan.
Amendment and Termination
The Board may at any time amend, suspend or terminate the 1998 Stock
Incentive Plan. To the extent necessary to comply with applicable provisions
of federal securities laws, state corporate and securities laws, the Code, the
rules of any applicable stock exchange or national market system, and the
rules of any foreign jurisdiction applicable to Awards granted to residents
therein, EarthWeb will obtain shareholder approval of any amendment to the
1998 Stock Incentive Plan in such a manner and to such a degree as required.
The 1998 Stock Incentive Plan will terminate in November 2008 unless
previously terminated by the Board of Directors.
Other Terms of the 1998 Stock Incentive Plan
Stock options granted under the 1998 Stock Incentive Plan may be either
Incentive Stock Options under the provisions of Section 422 of the Code, or
non-qualified stock options. Incentive Stock Options may be granted only to
employees of EarthWeb or any parent or subsidiary of EarthWeb. Awards other
than Incentive Stock Options may be granted to employees, directors and
consultants of EarthWeb or a Related Entity.
The 1998 Stock Incentive Plan authorizes the Administrator to select the
employees, directors and consultants of EarthWeb to whom Awards may be granted
and to determine the terms and conditions of any Award; however, the term of
an Incentive Stock Option may not be for more than 10 years (or five years in
the case of Incentive Stock Options granted to any grantee who owns stock
representing more than 10% of the combined voting power of EarthWeb or any
parent or subsidiary corporation of EarthWeb). The 1998 Stock Incentive Plan
authorizes the Administrator to grant Awards at an exercise price determined
by the Administrator. In the case of Incentive Stock Options, such price
cannot be less than 100% (or 110%, in the case of Incentive Stock Options
granted to any grantee who owns stock representing more than 10% of the
combined voting power of EarthWeb or any parent or subsidiary corporation of
EarthWeb) of the fair market value of the Common Stock on the date the option
is granted. In the case of non-qualified stock options, the exercise price
cannot be less than 100% of the fair market value of the Common Stock on the
date of grant unless otherwise determined by the Administrator. The exercise
price of Awards intended to qualify as performance-based compensation for
purposes of Code Section 162(m) shall not be less than 100% of the fair market
value. The consideration to be
20
paid for the shares of Common Stock upon exercise or purchase of an Award will
be determined by the Administrator and may include cash, check, promissory
note, shares of Common Stock, or assignment of part of the proceeds from the
sale of shares acquired upon exercise or purchase of the Award. The aggregate
fair market value of the Common Stock with respect to any Incentive Stock
Options that are exercisable for the first time by an eligible employee in any
calendar year may not exceed $100,000. If the aggregate fair market value of
such options exceeds $100,000, such options will be treated as non-qualified
stock options to the extent of such excess.
The Awards may be granted subject to vesting schedules and restrictions on
transfer and repurchase or forfeiture rights in favor of EarthWeb as specified
in the agreements to be issued under the 1998 Stock Incentive Plan. The
Administrator has the authority to accelerate the vesting schedule of Awards
so that they become fully vested, exercisable, and released from any
restrictions on transfer and repurchase or forfeiture rights in the event of a
Corporate Transaction, a Change in Control or a Related Entity Disposition,
each as defined in the 1998 Stock Incentive Plan. Effective upon the
consummation of a Corporate Transaction, all outstanding Awards under the 1998
Stock Incentive Plan will terminate unless assumed by the successor company or
its parent. In the event of a Change in Control or a Related Entity
Disposition, each Award shall remain exercisable until the expiration or
sooner termination of the Award term. The 1998 Stock Incentive Plan also
permits the Administrator to include a provision whereby the grantee may elect
at any time while an employee, director or consultant to exercise any part or
all of the Award prior to full vesting of the Award.
Under the 1998 Stock Incentive Plan, Incentive Stock Options may not be
sold, pledged, assigned, hypothecated, transferred or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised during the lifetime of the grantee only by the grantee. However, the
1998 Stock Incentive Plan permits the designation of beneficiaries by holders
of Incentive Stock Options. Other Awards shall be transferable to the extent
provided in the Award agreement.
Under the 1998 Stock Incentive Plan, the Administrator may establish one or
more programs under the 1998 Stock Incentive Plan to permit selected grantees
the opportunity to elect to defer receipt of consideration payable under an
Award. The Administrator also may establish under the 1998 Stock Incentive
Plan separate programs for the grant of particular forms of Awards to one or
more classes of grantees.
Certain Federal Tax Consequences
The grant of a non-qualified stock option under the 1998 Stock Incentive
Plan will not result in any federal income tax consequences to the optionee or
to EarthWeb. Upon exercise of a non-qualified stock option, the optionee is
subject to income taxes at the rate applicable to ordinary compensation income
on the difference between the option exercise price and the fair market value
of the shares on the date of exercise. This income is subject to withholding
for federal income and employment tax purposes. EarthWeb is entitled to an
income tax deduction in the amount of the income recognized by the optionee.
Any gain or loss on the optionee's subsequent disposition of the shares of
Common Stock will receive long or short-term capital gain or loss treatment,
depending on whether the shares are held for more than one year following
exercise. EarthWeb does not receive a tax deduction for any such gain. Capital
gains currently are taxed at the same rates as ordinary income, except that
the maximum marginal rate at which ordinary income is taxed to individuals is
currently 39.6% and the maximum rate at which long-term capital gains are
taxed is 20% for most types of property held for more than one year.
The grant of an Incentive Stock Option under the 1998 Stock Incentive Plan
will not result in any federal income tax consequences to the optionee or to
EarthWeb. An optionee recognizes no federal taxable income upon exercising an
Incentive Stock Option (subject to the alternative minimum tax rules discussed
below), and EarthWeb receives no deduction at the time of exercise. In the
event of a disposition of stock acquired upon exercise of an Incentive Stock
Option, the tax consequences depend upon how long the optionee has held the
shares of Common Stock. If the optionee does not dispose of the shares within
two years after the Incentive Stock Option was granted, nor within one year
after the Incentive Stock Option was exercised, the optionee will recognize a
long-term capital gain (or loss) equal to the difference between the sale
price of the shares and the exercise price. EarthWeb is not entitled to any
deduction under these circumstances.
21
If the optionee fails to satisfy either of the foregoing holding periods, he
or she must recognize ordinary income in the year of the disposition (referred
to as a "disqualifying disposition"). The amount of such ordinary income
generally is the lesser of (i) the difference between the amount realized on
the disposition and the exercise price, or (ii) the difference between the
fair market value of the stock on the exercise date and the exercise price.
Any gain in excess of the amount taxed as ordinary income will be treated as a
long or short-term capital gain, depending on whether the stock was held for
more than one year. EarthWeb, in the year of the disqualifying disposition, is
entitled to a deduction equal to the amount of ordinary income recognized by
the optionee.
The "spread" under an Incentive Stock Option--i.e., the difference between
the fair market value of the shares at exercise and the exercise price--is
classified as an item of adjustment in the year of exercise for purposes of
the alternative minimum tax.
The grant of restricted stock will subject the recipient to ordinary
compensation income on the difference between the amount paid for such stock
and the fair market value of the shares on the date that the restrictions
lapse. This income is subject to withholding for federal income and employment
tax purposes. EarthWeb is entitled to an income tax deduction in the amount of
the ordinary income recognized by the recipient. Any gain or loss on the
recipient's subsequent disposition of the shares will receive long or short-
term capital gain or loss treatment depending on whether the shares are held
for more than one year and depending on how long the stock has been held since
the restrictions lapsed. EarthWeb does not receive a tax deduction for any
such gain.
Recipients of restricted stock may make an election under Code Section 83(b)
("Section 83(b) Election") to recognize as ordinary compensation income in the
year that such restricted stock is granted the amount equal to the spread
between the amount paid for such stock and the fair market value on the date
of the issuance of the stock. If such an election is made, the recipient
recognizes no further amounts of compensation income upon the lapse of any
restrictions and any gain or loss on subsequent disposition will be long or
short-term capital gain to the recipient. The Section 83(b) Election must be
made within thirty days from the time the restricted stock is issued.
The foregoing is only a summary of the current effect of federal income
taxation upon the grantee and EarthWeb with respect to the shares purchased
under the 1998 Stock Incentive Plan. Reference should be made to the
applicable provisions of the Code. In addition, the summary does not discuss
the tax consequences of a grantee's death or the income tax laws of any
municipality, state or foreign country to which the grantee may be subject.
Amended 1998 Stock Incentive Plan Benefits
As of the date of this Proxy Statement, no executive officer, director and
no associates of any executive office or director, has been granted any
options subject to shareholder approval of the proposed amendments. The
benefits to be received pursuant to the 1998 Stock Incentive Plan amendments
by EarthWeb's executive officers, directors and employees are not determinable
at this time.
Submission to Shareholder Vote
The shareholders are being requested to consider and approve amendments to
the 1998 Stock Incentive Plan to increase the number of shares of Common Stock
reserved for issuance thereunder by 1,500,000 shares, from 2,271,354 shares to
3,771,354 shares, and to increase the number of shares available under the
annual renewal mechanism.
The affirmative vote of a majority of the shares of common stock represented
and voted at the Annual Meeting is required for approval of Proposal Three.
The shareholders should consider that directors and executive officers of
EarthWeb are eligible to receive grants under the 1998 Stock Incentive Plan.
22
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENTS TO EARTHWEB'S
1998 STOCK INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK
RESERVED FOR ISSUANCE THEREUNDER BY 1,500,000 SHARES AND TO LIMIT THE MAXIMUM
NUMBER OF OPTIONS AND STOCK APPRECIATION RIGHTS THAT MAY BE AWARDED TO AN
EMPLOYEE IN ANY ONE FISCAL YEAR.
The persons designated in the enclosed proxy will vote your shares FOR
adoption of this proposal unless instructions to the contrary are indicated in
accordance with the terms of the proxy card.
PROPOSAL FOUR
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has recommended that the shareholders ratify the re-
appointment of PricewaterhouseCoopers LLP to serve as independent auditors for
EarthWeb for the fiscal year ending December 31, 2000, or until a successor is
appointed.
PricewaterhouseCoopers LLP has been the independent public accounting firm
utilized by EarthWeb since 1995. During this time, PricewaterhouseCoopers LLP
has examined EarthWeb's consolidated financial statements, made limited
reviews of the interim financial reports, reviewed filings with the SEC and
provided general advice to EarthWeb regarding related accounting matters.
The affirmative vote of a majority of the shares of common stock represented
and voted at the annual meeting is required for approval of Proposal Four.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS OF EARTHWEB
FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000.
The persons designated in the enclosed proxy will vote your shares FOR
adoption of this proposal unless instructions to the contrary are indicated in
accordance with the terms of the proxy card.
Representatives of PricewaterhouseCoopers LLP are expected to be present at
the Annual Meeting to respond to appropriate questions and to make statements
should they desire to do so.
OTHER BUSINESS
The Board of Directors is not aware of any other matters to come before the
Annual Meeting. If any matter not mentioned herein is properly brought before
the meeting, the persons named in the enclosed proxy will have discretionary
authority to vote all proxies with respect thereto in accordance with their
judgment.
COPIES OF EARTHWEB'S ANNUAL REPORT ON FORM 10-K, AS AMENDED, FOR THE YEAR
ENDED DECEMBER 31, 1999 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
WILL BE PROVIDED TO SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO
INVESTOR RELATIONS, EARTHWEB INC., 3 PARK AVENUE, NEW YORK, NEW YORK 10016.
23
SHAREHOLDER PROPOSALS FOR THE
2000 ANNUAL MEETING
In order for shareholder proposals that are submitted pursuant to Rule 14a-8
of the Exchange Act to be considered by EarthWeb for inclusion in the proxy
material for the Annual Meeting of Shareholders to be held in 2000, they must
be received by the Secretary of EarthWeb by December 23, 2000.
For proposals that shareholders intend to present at the Annual Meeting of
Shareholders to be held in 2001 outside the processes of Rule 14a-8 of the
Exchange Act, unless the shareholder notifies the Secretary of EarthWeb of such
intent by April 18, 2001, any proxy that management solicits for such Annual
Meeting will confer on the holder of the proxy discretionary authority to vote
on any such proposal properly presented at such Annual Meeting.
All such communications to the Secretary of EarthWeb must be in writing and
must be received by EarthWeb at its principal executive offices, 3 Park Avenue,
New York, New York 10016 by the applicable date.
By Order of the Board of Directors
/s/ Jack D. Hidary
Jack D. Hidary
President and Chief Executive Officer
New York, New York
April , 2000
24
EXHIBIT A
FORM OF
CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
OF
EARTHWEB INC.
EarthWeb Inc. a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify:
FIRST: That the name of the Corporation is EarthWeb Inc.
SECOND: That the Restated Certificate of Incorporation of the Corporation
was filed with the Delaware Secretary of State on November 9, 1998.
THIRD: That Article VI of the Amended and Restated Certificate of
Incorporation is hereby deleted in its entirety and is added in its place:
"ARTICLE VI
Capital Stock
6.1 Authorized Shares.
(a) The total number of shares of capital stock that the company is
authorized to issue is 77,000,000 shares, consisting of 75,000,000 shares of
common stock, $0.01 par value per share (the "Common Stock") and 2,000,000
shares of preferred stock, $0.01 par value per share (the "Preferred Stock").
The 2,000,000 shares of Preferred Stock are undesignated.
(b) Any of the 2,000,000 undesignated shares of Preferred Stock
("Undesignated Preferred Stock") may be issued from time to time in one or
more series. Subject to the limitations and restrictions set forth in this
paragraph, the Board of Directors or a Committee of the Board of Directors, to
the extent permitted by law and the Bylaws of the Corporation or a resolution
of the Board of Directors, by resolution or resolutions, is authorized to
create or provide for any such series, and to fix the designations,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, including, without
limitation, the authority to fix or alter the dividend rights, dividend rates,
conversion rights, exchange rights, voting rights, rights and terms of
redemption (including sinking and purchase fund provisions), the redemption
price or prices, the dissolution preferences and the rights in respect to any
distribution of assets of any wholly unissued series of Undesignated Preferred
Stock and the number of shares constituting any such series, and the
designation thereof, or any of them and to increase or decrease the number of
shares of any series so created, subsequent to the issue of that series but
not below the number of shares of such series then outstanding. In case the
number of shares of any series shall be so decreased, the shares constituting
such decrease shall resume the status which they had prior to the adoption of
the resolution originally fixing the number of shares of such series."
FOURTH: That Article VIII of said Amended and Restated Certificate of
Incorporation is hereby deleted in its entirety and the following is added in
its place:
A-1
"ARTICLE VIII
Amendments
The Corporation reserves the right to amend this Certificate of
Incorporation in any manner permitted by the Delaware Law and all rights and
powers conferred upon stockholders, directors and officers herein are subject
to this reservation. Notwithstanding the foregoing, the provisions set forth
in ARTICLE 6.1(a) and (b), this ARTICLE EIGHTH and ARTICLE NINTH may not be
repealed or amended in any respect, and no other provision may be adopted,
amended or repealed which would have the effect of modifying or permitting the
circumvention of the provisions set forth in ARTICLE 6.1(a) and (b), this
ARTICLE EIGHTH and ARTICLE NINTH, unless such action is approved by the
affirmative vote of the holders of not less than 66.66% of the total voting
power of all outstanding securities of the Corporation then entitled to vote
generally in the election of directors, voting together as a single class."
FIFTH: That the amendment to the Restated Certificate of Incorporation set
forth herein was authorized by the requisite majority of the Board of
Directors followed by the holders of 66.66% of all outstanding shares entitled
to vote thereon pursuant to Section 228 of the General Corporation Law of the
State of Delaware and Article VIII of the Restated Certificate of
Incorporation.
SIXTH: That the aforesaid amendment was duly adopted in accordance with the
applicable provisions of Section 228 and Section 242 of the General
Corporation Law of the State of Delaware and Article VIII of the Restated
Certificate of Incorporation.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed
by Jack D. Hidary, its President and Chief Executive Officer, and attested by
Brian P. Campbell, its Secretary, this day of , 2000.
By: _________________________________
Name: Jack D. Hidary
Title: President and Chief
Executive Officer
ATTEST:
By: _________________________________
Name: Brian P. Campbell
Title: Secretary
A-2
EXHIBIT B
EARTHWEB INC.
1998 STOCK INCENTIVE PLAN
(amended and restated as of May 20, 1999)
1) Purposes of the Plan. The purposes of this Stock Incentive Plan are to
attract and retain the best available personnel, to provide additional
incentive to Employees, Directors and Consultants and to promote the success
of the Company's business.
2) Definitions. As used herein, the following definitions shall apply:
a) "Administrator" means the Board or any of the Committees appointed to
administer the Plan.
b) "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 promulgated under the Exchange Act.
c) "Applicable Laws" means the legal requirements relating to the
administration of stock incentive plans, if any, under applicable provisions
of federal securities laws, state corporate and securities laws, the Code, the
rules of any applicable stock exchange or national market system, and the
rules of any foreign jurisdiction applicable to Awards granted to residents
therein.
d) "Award" means the grant of an Option, SAR, Dividend Equivalent Right,
Restricted Stock, Performance Unit, Performance Share, or other right or
benefit under the Plan.
e) "Award Agreement" means the written agreement evidencing the grant of an
Award executed by the Company and the Grantee, including any amendments
thereto.
f) "Board" means the Board of Directors of the Company.
g) "Cause" means, with respect to the termination by the Company or a
Related Entity of the Grantee's Continuous Service, that such termination is
for "Cause" as such term is expressly defined in a then-effective written
agreement between the Grantee and the Company or such Related Entity, or in
the absence of such then-effective written agreement and definition, is based
on, in the determination of the Administrator, the Grantee's: (i) refusal or
failure to act in accordance with any specific, lawful direction or order of
the Company or a Related Entity; (ii) unfitness or unavailability for service
or unsatisfactory performance (other than as a result of Disability); (iii)
performance of any act or failure to perform any act in bad faith and to the
detriment of the Company or a Related Entity; (iv) dishonesty, intentional
misconduct or material breach of any agreement with the Company or a Related
Entity; or (v) commission of a crime involving dishonesty, breach of trust, or
physical or emotional harm to any person. At least 30 days prior to the
termination of the Grantee's Continuous Service pursuant to (i) or (ii) above,
the Administrator shall provide the Grantee with notice of the Company's or
such Related Entity's intent to terminate, the reason therefore, and an
opportunity for the Grantee to cure such defects in his or her service to the
Company's or such Related Entity's satisfaction. During this 30 day (or
longer) period, no Award issued to the Grantee under the Plan may be exercised
or purchased.
h) "Change in Control" means a change in ownership or control of the Company
effected through either of the following transactions:
i) the direct or indirect acquisition by any person or related group of
persons (other than an acquisition from or by the Company or by a Company-
sponsored employee benefit plan or by a person that directly or indirectly
controls, is controlled by, or is under common control with, the Company)
of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange
Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities pursuant to a
tender or
B-1
exchange offer made directly to the Company's stockholders which a majority
of the Continuing Directors who are not Affiliates or Associates of the
offeror do not recommend such stockholders accept, or
ii) a change in the composition of the Board over a period of thirty-six
(36) months or less such that a majority of the Board members (rounded up
to the next whole number) ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who are
Continuing Directors.
i) "Code" means the Internal Revenue Code of 1986, as amended.
j) "Committee" means any committee appointed by the Board to administer the
Plan.
k) "Common Stock" means the common stock of the Company.
l) "Company" means EarthWeb Inc., a Delaware corporation.
m) "Consultant" means any person (other than an Employee or, solely with
respect to rendering services in such person's capacity as a Director) who is
engaged by the Company or any Related Entity to render consulting or advisory
services to the Company or such Related Entity.
n) "Continuing Directors" means members of the Board who either (i) have
been Board members continuously for a period of at least thirty-six (36)
months or (ii) have been Board members for less than thirty-six (36) months
and were elected or nominated for election as Board members by at least a
majority of the Board members described in clause (i) who were still in office
at the time such election or nomination was approved by the Board.
o) "Continuous Service" means that the provision of services to the Company
or a Related Entity in any capacity of Employee, Director or Consultant, is
not interrupted or terminated. Continuous Service shall not be considered
interrupted in the case of (i) any approved leave of absence, (ii) transfers
between locations of the Company or among the Company, any Related Entity, or
any successor, in any capacity of Employee, Director or Consultant, or (iii)
any change in status as long as the individual remains in the service of the
Company or a Related Entity in any capacity of Employee, Director or
Consultant (except as otherwise provided in the Award Agreement). An approved
leave of absence shall include sick leave, military leave, or any other
authorized personal leave. For purposes of Incentive Stock Options, no such
leave may exceed ninety (90) days, unless reemployment upon expiration of such
leave is guaranteed by statute or contract.
p) "Corporate Transaction" means any of the following transactions:
i) a merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to
change the state in which the Company is incorporated;
ii) the sale, transfer or other disposition of all or substantially all
of the assets of the Company (including the capital stock of the Company's
subsidiary corporations) in connection with the complete liquidation or
dissolution of the Company;
iii) any reverse merger in which the Company is the surviving entity but
in which securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities are
transferred to a person or persons different from those who held such
securities immediately prior to such merger; or
iv) an acquisition by any person or related group of persons (other than
the Company or by a Company-sponsored employee benefit plan) of beneficial
ownership (within the meaning of Rule 13d-3 of the Exchange Act) of
securities possessing more than fifty percent (50%) of the total combined
voting power of the Company's outstanding securities (whether or not in a
transaction also constituting a Change in Control), but excluding any such
transaction that the Administrator determines shall not be a Corporate
Transaction.
B-2
q) "Covered Employee" means an Employee who is a "covered employee" under
Section 162(m)(3) of the Code.
r) "Director" means a member of the Board or the board of directors of any
Related Entity.
s) "Disability" means that a Grantee is permanently unable to carry out the
responsibilities and functions of the position held by the Grantee by reason
of any medically determinable physical or mental impairment. A Grantee will
not be considered to have incurred a Disability unless he or she furnishes
proof of such impairment sufficient to satisfy the Administrator in its
discretion.
t) "Dividend Equivalent Right" means a right entitling the Grantee to
compensation measured by dividends paid with respect to Common Stock.
u) "Employee" means any person, including an Officer or Director, who is an
employee of the Company or any Related Entity. The payment of a director's fee
by the Company or a Related Entity shall not be sufficient to constitute
"employment" by the Company.
v) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
w) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
i) Where there exists a public market for the Common Stock, the Fair
Market Value shall be (A) the closing price for a Share for the last market
trading day prior to the time of the determination (or, if no closing price
was reported on that date, on the last trading date on which a closing
price was reported) on the stock exchange determined by the Administrator
to be the primary market for the Common Stock or the Nasdaq National
Market, whichever is applicable or (B) if the Common Stock is not traded on
any such exchange or national market system, the average of the closing bid
and asked prices of a Share on the Nasdaq Small Cap Market for the day
prior to the time of the determination (or, if no such prices were reported
on that date, on the last date on which such prices were reported), in each
case, as reported in The Wall Street Journal or such other source as the
Administrator deems reliable; or
ii) In the absence of an established market for the Common Stock of the
type described in (i), above, the Fair Market Value thereof shall be
determined by the Administrator in good faith.
x) "Grantee" means an Employee, Director or Consultant who receives an Award
pursuant to an Award Agreement under the Plan.
y) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
z) "Non-Qualified Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
aa) "Officer" means a person who is an officer of the Company or a Related
Entity within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
bb) "Option" means an option to purchase Shares pursuant to an Award
Agreement granted under the Plan.
cc) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
dd) "Performance--Based Compensation" means compensation qualifying as
"performance-based compensation" under Section 162(m) of the Code.
ee) "Performance Shares" means Shares or an Award denominated in Shares
which may be earned in whole or in part upon attainment of performance
criteria established by the Administrator.
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ff) "Performance Units" means an Award which may be earned in whole or in
part upon attainment of performance criteria established by the Administrator
and which may be settled for cash, Shares or other securities or a combination
of cash, Shares or other securities as established by the Administrator.
gg) "Plan" means this 1998 Stock Incentive Plan.
hh) "Registration Date" means the first to occur of (i) the closing of the
first sale to the general public of (A) the Common Stock or (B) the same class
of securities of a successor corporation (or its Parent) issued pursuant to a
Corporate Transaction in exchange for or in substitution of the Common Stock,
pursuant to a registration statement filed with and declared effective by the
Securities and Exchange Commission under the Securities Act of 1933, as
amended; and (ii) in the event of a Corporate Transaction, the date of the
consummation of the Corporate Transaction if the same class of securities of
the successor corporation (or its Parent) issuable in such Corporate
Transaction shall have been sold to the general public pursuant to a
registration statement filed with and declared effective by, on or prior to
the date of consummation of such Corporate Transaction, the Securities and
Exchange Commission under the Securities Act of 1933, as amended.
ii) "Related Entity" means any Subsidiary and any business, corporation,
partnership, Limited Liability Company or other entity in which the Company or
a Subsidiary holds a substantial ownership interest, directly or indirectly.
jj) "Restricted Stock" means Shares issued under the Plan to the Grantee for
such consideration, if any, and subject to such restrictions on transfer,
rights of first refusal, repurchase provisions, forfeiture provisions, and
other terms and conditions as established by the Administrator.
kk) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or any
successor thereto.
ll) "SAR" means a stock appreciation right entitling the Grantee to Shares
or cash compensation, as established by the Administrator, measured by
appreciation in the value of Common Stock.
mm) "Share" means a share of the Common Stock.
nn) "Subsidiary" means a "subsidiary corporation," whether now or hereafter
existing, as defined in Section 424(f) of the Code.
oo) "Related Entity Disposition" means the sale, distribution or other
disposition by the Company of all or substantially all of the Company's
interests in any Related Entity effected by a sale, merger or consolidation or
other transaction involving that Related Entity or the sale of all or
substantially all of the assets of that Related Entity.
3) Stock Subject to the Plan.
a) Subject to the provisions of Section 10, below, the maximum aggregate
number of Shares which may be issued pursuant to Awards initially shall be
2,075,000 Shares, plus an annual increase to be added on the first day of the
Company's fiscal year beginning in 2000 equal to two percent (2%) of the
number of Shares outstanding as of such date or a lesser number of Shares
determined by the Administrator. Notwithstanding the foregoing, subject to the
provisions of Section 10, below, of the number of Shares specified above, the
maximum aggregate number of Shares available for grant of Incentive Stock
Options shall be 159,000 Shares, plus an annual increase to be added on the
first day of the Company's fiscal year beginning in 2000 equal to the lesser
of (x) 400,000 Shares, (y) four tenths of one percent (.4%) of the number of
Shares outstanding as of such date, or (z) a lesser number of Shares
determined by the Administrator. The Shares to be issued pursuant to Awards
may be authorized, but unissued, or reacquired shares of Common Stock.
b) Any Shares covered by an Award (or portion of an Award) which is
forfeited or canceled, expires or is settled in cash, shall be deemed not to
have been issued for purposes of determining the maximum aggregate number of
Shares which may be issued under the Plan. If any unissued Shares are retained
by the Company
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upon exercise of an Award in order to satisfy the exercise price for such
Award or any withholding taxes due with respect to such Award, such retained
Shares subject to such Award shall become available for future issuance under
the Plan (unless the Plan has terminated). Shares that actually have been
issued under the Plan pursuant to an Award shall not be returned to the Plan
and shall not become available for future issuance under the Plan, except that
if unvested Shares are forfeited, or repurchased by the Company at their
original purchase price, such Shares shall become available for future grant
under the Plan.
4) Administration of the Plan.
a) Plan Administrator.
i) Administration with Respect to Directors and Officers. With respect to
grants of Awards to Directors or Employees who are also Officers or
Directors of the Company, the Plan shall be administered by (A) the Board
or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the Applicable Laws and to
permit such grants and related transactions under the Plan to be exempt
from Section 16(b) of the Exchange Act in accordance with Rule 16b-3. Once
appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board.
ii) Administration With Respect to Consultants and Other Employees. With
respect to grants of Awards to Employees or Consultants who are neither
Directors nor Officers of the Company, the Plan shall be administered by
(A) the Board or (B) a Committee designated by the Board, which Committee
shall be constituted in such a manner as to satisfy the Applicable Laws.
Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. The Board may authorize one
or more Officers to grant such Awards and may limit such authority as the
Board determines from time to time.
iii) Administration With Respect to Covered Employees. Notwithstanding
the foregoing, grants of Awards to any Covered Employee intended to qualify
as Performance-Based Compensation shall be made only by a Committee (or
subcommittee of a Committee) which is comprised solely of two or more
Directors eligible to serve on a committee making Awards qualifying as
Performance-Based Compensation. In the case of such Awards granted to
Covered Employees, references to the "Administrator" or to a "Committee"
shall be deemed to be references to such Committee or subcommittee.
iv) Administration Errors. In the event an Award is granted in a manner
inconsistent with the provisions of this subsection (a), such Award shall
be presumptively valid as of its grant date to the extent permitted by the
Applicable Laws.
b) Powers of the Administrator. Subject to Applicable Laws and the
provisions of the Plan (including any other powers given to the Administrator
hereunder), and except as otherwise provided by the Board, the Administrator
shall have the authority, in its discretion:
i) to select the Employees, Directors and Consultants to whom Awards may
be granted from time to time hereunder;
ii) to determine whether and to what extent Awards are granted hereunder;
iii) to determine the number of Shares or the amount of other
consideration to be covered by each Award granted hereunder;
iv) to approve forms of Award Agreements for use under the Plan;
v) to determine the terms and conditions of any Award granted hereunder;
vi) to amend the terms of any outstanding Award granted under the Plan,
provided that any amendment that would adversely affect the Grantee's
rights under an outstanding Award shall not be made without the Grantee's
written consent;
vii) to construe and interpret the terms of the Plan and Awards granted
pursuant to the Plan, including without limitation, any notice of Award or
Award Agreement, granted pursuant to the Plan;
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viii) to establish additional terms, conditions, rules or procedures to
accommodate the rules or laws of applicable foreign jurisdictions and to
afford Grantees favorable treatment under such laws; provided, however,
that no Award shall be granted under any such additional terms, conditions,
rules or procedures with terms or conditions which are inconsistent with
the provisions of the Plan; and
ix) to take such other action, not inconsistent with the terms of the
Plan, as the Administrator deems appropriate.
c) Effect of Administrator's Decision. All decisions, determinations and
interpretations of the Administrator shall be conclusive and binding on all
persons.
5) Eligibility. Awards other than Incentive Stock Options may be granted to
Employees, Directors and Consultants. Incentive Stock Options may be granted
only to Employees of the Company or a Subsidiary. An Employee, Director or
Consultant who has been granted an Award may, if otherwise eligible, be
granted additional Awards. Awards may be granted to such Employees, Directors
or Consultants who are residing in foreign jurisdictions as the Administrator
may determine from time to time.
6) Terms and Conditions of Awards.
a) Type of Awards. The Administrator is authorized under the Plan to
award any type of arrangement to an Employee, Director or Consultant that
is not inconsistent with the provisions of the Plan and that by its terms
involves or might involve the issuance of (i) Shares, (ii) an Option, a SAR
or similar right with a fixed or variable price related to the Fair Market
Value of the Shares and with an exercise or conversion privilege related to
the passage of time, the occurrence of one or more events, or the
satisfaction of performance criteria or other conditions, or (iii) any
other security with the value derived from the value of the Shares. Such
awards include, without limitation, Options, SARs, sales or bonuses of
Restricted Stock, Dividend Equivalent Rights, Performance Units or
Performance Shares, and an Award may consist of one such security or
benefit, or two (2) or more of them in any combination or alternative.
b) Designation of Award. Each Award shall be designated in the Award
Agreement. In the case of an Option, the Option shall be designated as
either an Incentive Stock Option or a Non-Qualified Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair
Market Value of Shares subject to Options designated as Incentive Stock
Options which become exercisable for the first time by a Grantee during any
calendar year (under all plans of the Company or any Parent or Subsidiary)
exceeds $100,000, such excess Options, to the extent of the Shares covered
thereby in excess of the foregoing limitation, shall be treated as Non-
Qualified Stock Options. For this purpose, Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair
Market Value of the Shares shall be determined as of the date the Option
with respect to such Shares is granted.
c) Conditions of Award. Subject to the terms of the Plan, the
Administrator shall determine the provisions, terms, and conditions of each
Award including, but not limited to, the Award vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, form of payment
(cash, Shares, or other consideration) upon settlement of the Award,
payment contingencies, and satisfaction of any performance criteria. The
performance criteria established by the Administrator may be based on any
one of, or combination of, increase in share price, earnings per share,
total stockholder return, return on equity, return on assets, return on
investment, net operating income, cash flow, revenue, economic value added,
personal management objectives, or other measure of performance selected by
the Administrator. Partial achievement of the specified criteria may result
in a payment or vesting corresponding to the degree of achievement as
specified in the Award Agreement.
d) Acquisitions and Other Transactions. The Administrator may issue
Awards under the Plan in settlement, assumption or substitution for,
outstanding awards or obligations to grant future awards in connection with
the Company or a Related Entity acquiring another entity, an interest in
another entity or an additional interest in a Related Entity whether by
merger, stock purchase, asset purchase or other form of transaction.
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e) Deferral of Award Payment. The Administrator may establish one or more
programs under the Plan to permit selected Grantees the opportunity to elect
to defer receipt of consideration upon exercise of an Award, satisfaction of
performance criteria, or other event that absent the election would entitle
the Grantee to payment or receipt of Shares or other consideration under an
Award. The Administrator may establish the election procedures, the timing of
such elections, the mechanisms for payments of, and accrual of interest or
other earnings, if any, on amounts, Shares or other consideration so deferred,
and such other terms, conditions, rules and procedures that the Administrator
deems advisable for the administration of any such deferral program.
f) Award Exchange Programs. The Administrator may establish one or more
programs under the Plan to permit selected Grantees to exchange an Award under
the Plan for one or more other types of Awards under the Plan on such terms
and conditions as determined by the Administrator from time to time.
g) Separate Programs. The Administrator may establish one or more separate
programs under the Plan for the purpose of issuing particular forms of Awards
to one or more classes of Grantees on such terms and conditions as determined
by the Administrator from time to time.
h) Individual Option and SAR Limit. The maximum number of Shares with
respect to which Options and SARs may be granted to any Employee in any fiscal
year of the Company shall be Six Hundred Thousand (600,000) Shares. The
foregoing limitation shall be adjusted proportionately in connection with any
change in the Company's capitalization pursuant to Section 10, below. To the
extent required by Section 162(m) of the Code or the regulations thereunder,
in applying the foregoing limitation with respect to an Employee, if any
Option or SAR is canceled, the canceled Option or SAR shall continue to count
against the maximum number of Shares with respect to which Options and SARs
may be granted to the Employee. For this purpose, the repricing of an Option
(or in the case of a SAR, the base amount on which the stock appreciation is
calculated is reduced to reflect a reduction in the Fair Market Value of the
Common Stock) shall be treated as the cancellation of the existing Option or
SAR and the grant of a new Option or SAR.
i) Early Exercise. The Award Agreement may, but need not, include a
provision whereby the Grantee may elect at any time while an Employee,
Director or Consultant to exercise any part or all of the Award prior to full
vesting of the Award. Any unvested Shares received pursuant to such exercise
may be subject to a repurchase right in favor of the Company or a Related
Entity or to any other restriction the Administrator determines to be
appropriate.
j) Term of Award. The term of each Award shall be the term stated in the
Award Agreement, provided, however, that the term of an Incentive Stock Option
shall be no more than ten (10) years from the date of grant thereof. However,
in the case of an Incentive Stock Option granted to a Grantee who, at the time
the Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option shall be five (5) years
from the date of grant thereof or such shorter term as may be provided in the
Award Agreement.
k) Transferability of Awards. Incentive Stock Options may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Grantee, only by the Grantee; provided,
however, that the Grantee may designate a beneficiary of the Grantee's
Incentive Stock Option in the event of the Grantee's death on a beneficiary
designation form provided by the Administrator. Other Awards shall be
transferable to the extent provided in the Award Agreement.
l) Time of Granting Awards. The date of grant of an Award shall for all
purposes be the date on which the Administrator makes the determination to
grant such Award, or such other date as is determined by the Administrator.
Notice of the grant determination shall be given to each Employee, Director or
Consultant to whom an Award is so granted within a reasonable time after the
date of such grant.
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7) Award Exercise or Purchase Price, Consideration, Taxes and Reload
Options.
a) Exercise or Purchase Price. The exercise or purchase price, if any, for
an Award shall be as follows:
i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be not less
than one hundred ten percent (110%) of the Fair Market Value per Share
on the date of grant; or
(B) granted to any Employee other than an Employee described in the
preceding paragraph, the per Share exercise price shall be not less
than one hundred percent (100%) of the Fair Market Value per Share on
the date of grant.
i) In the case of a Non-Qualified Stock Option, the per Share exercise
price shall be not less than one hundred percent (100%) of the Fair Market
Value per Share on the date of grant unless otherwise determined by the
Administrator.
ii) In the case of Awards intended to qualify as Performance-Based
Compensation, the exercise or purchase price, if any, shall be not less
than one hundred percent (100%) of the Fair Market Value per Share on the
date of grant.
iii) In the case of other Awards, such price as is determined by the
Administrator.
iv) Notwithstanding the foregoing provisions of this Section 7(a), in the
case of an Award issued pursuant to Section 6(d), above, the exercise or
purchase price for the Award shall be determined in accordance with the
principles of Section 424(a) of the Code.
b) Consideration. Subject to Applicable Laws, the consideration to be paid
for the Shares to be issued upon exercise or purchase of an Award including
the method of payment, shall be determined by the Administrator (and, in the
case of an Incentive Stock Option, shall be determined at the time of grant).
In addition to any other types of consideration the Administrator may
determine, the Administrator is authorized to accept as consideration for
Shares issued under the Plan the following, provided that the portion of the
consideration equal to the par value of the Shares must be paid in cash or
other legal consideration permitted by the Delaware General Corporation Law:
i) cash;
ii) check;
iii) delivery of Grantee's promissory note with such recourse, interest,
security, and redemption provisions as the Administrator determines as
appropriate;
iv) surrender of Shares or delivery of a properly executed form of
attestation of ownership of Shares as the Administrator may require
(including withholding of Shares otherwise deliverable upon exercise of the
Award) which have a Fair Market Value on the date of surrender or
attestation equal to the aggregate exercise price of the Shares as to which
said Award shall be exercised (but only to the extent that such exercise of
the Award would not result in an accounting compensation charge with
respect to the Shares used to pay the exercise price unless otherwise
determined by the Administrator);
v) with respect to Options, payment through a broker-dealer sale and
remittance procedure pursuant to which the Grantee (A) shall provide
written instructions to a Company designated brokerage firm to effect the
immediate sale of some or all of the purchased Shares and remit to the
Company, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the
purchased Shares and (B) shall provide written directives to the Company to
deliver the certificates for the purchased Shares directly to such
brokerage firm in order to complete the sale transaction; or
vi) any combination of the foregoing methods of payment.
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c) Taxes. No Shares shall be delivered under the Plan to any Grantee or
other person until such Grantee or other person has made arrangements
acceptable to the Administrator for the satisfaction of any foreign, federal,
state, or local income and employment tax withholding obligations, including,
without limitation, obligations incident to the receipt of Shares or the
disqualifying disposition of Shares received on exercise of an Incentive Stock
Option. Upon exercise of an Award, the Company shall withhold or collect from
Grantee an amount sufficient to satisfy such tax obligations.
d) Reload Options. In the event the exercise price or tax withholding of an
Option is satisfied by the Company or the Grantee's employer withholding
Shares otherwise deliverable to the Grantee, the Administrator may issue the
Grantee an additional Option, with terms identical to the Award Agreement
under which the Option was exercised, but at an exercise price as determined
by the Administrator in accordance with the Plan.
8) Exercise of Award.
a) Procedure for Exercise; Rights as a Stockholder.
i) Any Award granted hereunder shall be exercisable at such times and
under such conditions as determined by the Administrator under the terms of
the Plan and specified in the Award Agreement.
ii) An Award shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Award by the person entitled to exercise the Award and full payment for the
Shares with respect to which the Award is exercised, including, to the
extent selected, use of the broker-dealer sale and remittance procedure to
pay the purchase price as provided in Section 7(b)(v). Until the issuance
(as evidenced by the appropriate entry on the books of the Company or of a
duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a stockholder shall exist with respect to Shares subject to an
Award, notwithstanding the exercise of an Option or other Award. The
Company shall issue (or cause to be issued) such stock certificate promptly
upon exercise of the Award. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock
certificate is issued, except as provided in the Award Agreement or Section
10, below.
b) Exercise of Award Following Termination of Continuous Service.
i) An Award may not be exercised after the termination date of such Award
set forth in the Award Agreement and may be exercised following the
termination of a Grantee's Continuous Service only to the extent provided
in the Award Agreement.
ii) Where the Award Agreement permits a Grantee to exercise an Award
following the termination of the Grantee's Continuous Service for a
specified period, the Award shall terminate to the extent not exercised on
the last day of the specified period or the last day of the original term
of the Award, whichever occurs first.
iii) Any Award designated as an Incentive Stock Option to the extent not
exercised within the time permitted by law for the exercise of Incentive
Stock Options following the termination of a Grantee's Continuous Service
shall convert automatically to a Non-Qualified Stock Option and thereafter
shall be exercisable as such to the extent exercisable by its terms for the
period specified in the Award Agreement.
c) Buyout Provisions. The Administrator may at any time offer to buy out for
a payment in cash or Shares, an Award previously granted, based on such terms
and conditions as the Administrator shall establish and communicate to the
Grantee at the time that such offer is made.
9) Conditions Upon Issuance of Shares.
a) Shares shall not be issued pursuant to the exercise of an Award unless
the exercise of such Award and the issuance and delivery of such Shares
pursuant thereto shall comply with all Applicable Laws, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
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b) As a condition to the exercise of an Award, the Company may require the
person exercising such Award to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without
any present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any Applicable
Laws.
10) Adjustments Upon Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number of Shares covered by
each outstanding Award, and the number of Shares which have been authorized
for issuance under the Plan but as to which no Awards have yet been granted or
which have been returned to the Plan, the exercise or purchase price of each
such outstanding Award, as well as any other terms that the Administrator
determines require adjustment shall be proportionately adjusted for (i) any
increase or decrease in the number of issued Shares resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Shares, (ii) any other increase or decrease in the number of issued Shares
effected without receipt of consideration by the Company, or (iii) as the
Administrator may determine in its discretion, any other transaction with
respect to Common Stock to which Section 424(a) of the Code applies; provided,
however that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Administrator and its determination shall be
final, binding and conclusive. Except as the Administrator determines, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason hereof shall be made with respect to, the number or price of Shares
subject to an Award.
11) Corporate Transactions/Changes in Control/Related Entity
Dispositions. Except as may be provided in an Award Agreement:
a) The Administrator shall have the authority, exercisable either in advance
of any actual or anticipated Corporate Transaction, Change in Control or
Related Entity Disposition or at the time of an actual Corporate Transaction,
Change in Control or Related Entity Disposition and exercisable at the time of
the grant of an Award under the Plan or any time while an Award remains
outstanding, to provide for the full automatic vesting and exercisability of
one or more outstanding unvested Awards under the Plan and the release from
restrictions on transfer and repurchase or forfeiture rights of such Awards in
connection with a Corporate Transaction, Change in Control or Related Entity
Disposition, on such terms and conditions as the Administrator may specify.
The Administrator also shall have the authority to condition any such Award
vesting and exercisability or release from such limitations upon the
subsequent termination of the Continuous Service of the Grantee within a
specified period following the effective date of the Corporate Transaction,
Change in Control or Related Entity Disposition. The Administrator may provide
that any Awards so vested or released from such limitations in connection with
a Change in Control or Subsidiary Disposition, shall remain fully exercisable
until the expiration or sooner termination of the Award. Effective upon the
consummation of a Corporate Transaction, all outstanding Awards under the Plan
shall terminate unless assumed by the successor company or its Parent. The
Company will use reasonable efforts to achieve such assumption as the
Administrator deems appropriate.
b) in connection with a Corporate Transaction, Change in Control or Related
Entity Disposition shall remain exercisable as an Incentive Stock Option under
the Code only to the extent the $100,000 dollar limitation of Section 422(d)
of the Code is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated excess portion of such Option shall be exercisable as a Non-
Qualified Stock Option.
12) Effective Date and Term of Plan. The Plan shall become effective upon
the latest to occur of (i) its adoption by the Board, (ii) its approval by the
stockholders of the Company or (iii) the Registration Date. It shall continue
in effect for a term of ten (10) years unless sooner terminated. Subject to
Section 16, below, and Applicable Laws, Awards may be granted under the Plan
upon its becoming effective.
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13) Amendment, Suspension or Termination of the Plan.
a) The Board may at any time amend, suspend or terminate the Plan. To the
extent necessary to comply with Applicable Laws, the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such a
degree as required.
b) No Award may be granted during any suspension of the Plan or after
termination of the Plan.
c) Any amendment, suspension or termination of the Plan (including
termination of the Plan under Section 12, above) shall not affect Awards
already granted, and such Awards shall remain in full force and effect as if
the Plan had not been amended, suspended or terminated, unless mutually agreed
otherwise between the Grantee and the Administrator, which agreement must be
in writing and signed by the Grantee and the Company.
14) Reservation of Shares.
a) The Company, during the term of the Plan, will at all times reserve and
keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
b) The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
15) No Effect on Terms of Employment/Consulting Relationship.
The Plan shall not confer upon any Grantee any right with respect to the
Grantee's Continuous Service, nor shall it interfere in any way with his or
her right or the Company's right to terminate the Grantee's Continuous Service
at any time, with or without cause.
16) No Effect on Retirement and Other Benefit Plans.
Except as specifically provided in a retirement or other benefit plan of the
Company or a Related Entity, Awards shall not be deemed compensation for
purposes of computing benefits or contributions under any retirement plan of
the Company or a Related Entity, and shall not affect any benefits under any
other benefit plan of any kind or any benefit plan subsequently instituted
under which the availability or amount of benefits is related to level of
compensation. The Plan is not a "Retirement-Plan" or "Welfare Plan" under the
Employee Retirement Income Security Act of 1974, as amended.
17) Stockholder Approval.
The Plan became effective when adopted by the Board on November 9, 1998, and
was approved by the Company's stockholders on November 9, 1998. On April 8,
1999, the Board adopted and approved an amendment and restatement of the Plan
(a) to increase the maximum aggregate number of Shares that may be issued
pursuant to Awards under the Plan by 1,700,000 Shares and (b) to adopt a limit
on the maximum number of Shares with respect to which Options and SARs may be
granted to any Employee in any fiscal year of the Company and certain other
administrative provisions to comply with the performance-based compensation
exception to the deduction limit of Section 162(m) of the Code (collectively,
the "Amendments"), such Amendments conditioned upon and not to take effect
until stockholder approval of the Amendments is obtained.
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APPENDIX A
EARTHWEB INC.
3 PARK AVENUE
NEW YORK, NEW YORK 10016
ANNUAL MEETING OF SHAREHOLDERS
MAY 31, 2000
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Jack D. Hidary and Murray Hidary, each with
full power of substitution, to act as attorneys and proxies for the
undersigned, to vote all shares of Common Stock of EarthWeb Inc. ("EarthWeb")
which the undersigned is entitled to vote at the Annual Meeting of
Shareholders (the "Meeting") of EarthWeb, to be held at the Inter-Continental
Hotel of New York, The Sutton II Room / 3rd Floor, 111 East 48th Street, New
York, NY 10017, on Wednesday, May 31, 2000, at 10:30 a.m., local time, and at
any and all adjournments thereof, in the following manner.
THIS SIGNED PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS SIGNED PROXY WILL BE VOTED FOR THE NOMINEE LISTED AND FOR
APPROVAL OF PROPOSALS 2 AND 3. THIS SIGNED PROXY CONFERS AUTHORITY FOR THE
PERSONS NAMED HEREIN, OR ANY ONE OF THEM, TO VOTE IN HIS DISCRETION WITH
RESPECT TO ANY OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
(To be signed on the reverse side)
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
EARTHWEB INC.
May 31, 2000