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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:
[_]Preliminary Proxy Statement [_]Confidential, For Use of the
[X]Definitive Proxy Statement Commission Only (as permitted by
[_]Definitive Additional Materials Rule 14a-6(e)(2))
[_]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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EARTHWEB INC.
3 Park Avenue
New York, New York 10016
April 21, 1999
Dear Shareholder:
You are cordially invited to attend the 1999 Annual Meeting of Shareholders
of EarthWeb Inc., to be held on Thursday, May 20, 1999, at the Inter-
Continental Hotel of New York, 111 East 48th Street, New York, NY 10017,
beginning at 9:00 a.m. local time.
The business to be conducted at the meeting includes the election of a
director, approval of amendments to EarthWeb Inc.'s 1998 Stock Incentive Plan
to increase the number of shares of Common Stock reserved for issuance
thereunder and to limit the maximum number of options and stock appreciation
rights that may be awarded to an employee in any one fiscal year, ratification
of the selection of independent auditors, and consideration of any other matter
that may properly come before the meeting and any adjournment thereof.
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. If you do attend the meeting and wish to vote in person,
you may withdraw your proxy at that time.
Sincerely,
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 20, 1999
The Annual Meeting of Shareholders of EarthWeb Inc., a Delaware corporation
("EarthWeb"), will be held at the Inter-Continental Hotel of New York, 111
East 48th Street, New York, NY 10017, on Thursday, May 20, 1999, at 9:00 a.m.,
local time, for the following purposes:
(1) To elect one member of the Board of Directors to serve for a term of three
years or until his successor is elected and qualified;
(2) To approve amendments to EarthWeb's 1998 Stock Incentive Plan to (i)
increase the number of shares of Common Stock reserved for issuance
thereunder by 1,700,000 shares, from 375,000 shares to 2,075,000 shares,
and (ii) limit the maximum number of options and stock appreciation rights
that may be awarded to an employee in any one fiscal year of EarthWeb in
order to ensure compliance with the requirements of Section 162(m) of the
Internal Revenue Code of 1986, as amended;
(3) To consider and act upon the ratification of the selection of
PricewaterhouseCoopers LLP as EarthWeb's independent auditors for fiscal
year 1999; and
(4) To transact any such other business as may properly come before the Annual
Meeting or any adjournment thereof.
A copy of EarthWeb's Annual Report for the fiscal year ended December 31,
1998, containing consolidated financial statements, is included with this
mailing.
The Board of Directors has fixed the close of business on April 9, 1999, 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
office of Morrison & Foerster LLP, 1290 Avenue of the Americas, New York, New
York, 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
Murray Hidary
Executive Vice President--Business
Development, Treasurer and Secretary
New York, New York
April 21, 1999
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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. IN ORDER TO
AVOID THE ADDITIONAL EXPENSE TO EARTHWEB OF FURTHER SOLICITATION, WE ASK YOUR
COOPERATION IN PROMPTLY MAILING IN YOUR PROXY CARD.
- -------------------------------------------------------------------------------
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of EarthWeb Inc. ("EarthWeb") for use at
EarthWeb's Annual Meeting of Shareholders to be held on Thursday, May 20,
1999, at 9:00 a.m., local time, at the Inter-Continental Hotel of New York,
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 21,
1999. 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 of EarthWeb.
Shares represented by a properly executed, unrevoked proxy 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 the director
named in this Proxy Statement, FOR the approval of the amendments to
EarthWeb's 1998 Stock Incentive Plan to increase the number of shares of
Common Stock reserved for issuance thereunder and to limit the maximum number
of options and stock appreciation rights that may be awarded to an employee in
any one fiscal year, FOR the ratification of the selection of
PricewaterhouseCoopers LLP as EarthWeb's independent auditors for the 1999
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 filing with the Secretary of EarthWeb a
written notice 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 (the "Common Stock"), of which 8,580,407
shares were outstanding at the close of business on April 9, 1999, not
including treasury shares or shares issuable upon exercise of options or
warrants. Only holders of record at the close of business on April 9, 1999 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 Amended and Restated 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. While there is no definitive
statutory or case law authority in Delaware as to the proper treatment of
abstentions (also referred to as withheld votes), 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, the Delaware Supreme Court has held that 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 a majority of
the shares of Common Stock represented and voted at the Annual Meeting is
required for approval of Proposals Two (the amendments to EarthWeb's 1998
Stock Incentive Plan) and Three (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 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, 1999 by (i) each person
known by EarthWeb to own more than 5% of such shares, (ii) each of EarthWeb's
directors, including the nominee for director, (iii) EarthWeb's Chief
Executive Officer and each of its executive officers listed in the "Summary of
Executive Compensation" section herein, and (iv) all directors and executive
officers as a group. As of March 1, 1999, there were 8,509,862 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.
Security Ownership Table
Beneficial
Ownership of
Shares(2)
Name and Address of Beneficial Owners(1)(2) Number Percent
- ------------------------------------------- --------- -------
Warburg, Pincus Ventures, L.P.(3)............................ 2,250,833 26.45%
Jack D. Hidary(4)(5)......................................... 1,056,240 12.12%
Murray Hidary(4)(5).......................................... 1,056,240 12.12%
Nova Spivack................................................. 523,809 6.16%
Cary Davis(6)................................................ 2,250,833 26.45%
Henry Kressel(6)............................................. 2,250,833 26.45%
Irene Math(7)................................................ 34,751 *
William Gollan(8)............................................ 50,974 *
John Kleine (9).............................................. 8,103 *
All directors and executive officers as a group (10
persons)(4)(5)(6)(7)(8)(9).................................. 5,042,135 58.64%
- --------
* 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, 1999 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 8,509,862 shares of Common Stock outstanding as of March 1,
1999.
(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) Jack D. Hidary and Murray Hidary equally own Global Network Partners LLC
("GNP"). GNP is the managing member of EarthWeb LLC and, as a result, is a
controlling member of EarthWeb LLC and thus may be deemed to beneficially
own the 110,994 shares of Common Stock owned by EarthWeb LLC. Jack D.
Hidary and Murray Hidary, the sole owners of GNP, each disclaim beneficial
ownership of these shares except to the extent of their pecuniary interest
therein.
3
(5) Includes (a) 162,274 shares subject to stock options that are exercisable
within 60 days of March 1, 1999 and shares issued upon the exercise of
certain stock options that are the subject of certain voting trust
agreements between EarthWeb, GNP and certain optionholders of EarthWeb,
and (b) the 2,200 and 7,068 shares beneficially owned by Ms. Math and Mr.
Kleine, respectively. Pursuant to such agreements, GNP has the right to
vote shares received upon the exercise of such options, and thus may be
deemed to beneficially own the shares of Common Stock subject to such
options. Jack D. Hidary and Murray Hidary, the sole owners of GNP, each
disclaim beneficial ownership of such shares.
(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.
(7) Includes 32,551 shares subject to stock options that are exercisable
within 60 days of March 1, 1999 of a total of 85,400 options granted to
Ms. Math.
(8) Includes 50,974 shares subject to stock options that are exercisable
within 60 days of March 1, 1999 of a total of 132,525 options granted to
Mr. Gollan.
(9) Includes 1,035 shares subject to stock options that are exercisable within
60 days of March 1, 1999.
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 nominee, as of
March 1, 1999. A summary of the background and experience of each of these
individuals is set forth after the table.
Directors and Executive Officers
Name Age Position(s)
---- --- -------------------------------------------
Jack D. Hidary (1) 30 President, Chief Executive Officer and
Director
Executive Vice President, Business
Development, Secretary, Treasurer and
Murray Hidary 27 Director
Nova Spivack 29 Strategic Planning Advisor and Director
William Gollan 51 Senior Vice President
Vice President and President of EW Career
Lloyd Linn 42 Solutions, Inc., a subsidiary of EarthWeb
Irene Math 37 Vice President, Finance
Kevin McPherson 40 Vice President, Worldwide Advertising Sales
John Kleine 44 Vice President, Systems and Operations
Scott Anderson 44 Vice President, Worldwide Marketing
Mark Schlack 46 Vice President, Content
Cary Davis (1)(2) 32 Director
Henry Kressel (1)(2) 65 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 has five directors serving on its Board of Directors. Each of the
current members of the Board of Directors was elected pursuant to the terms of
the Amended and Restated Shareholders Agreement (the "Shareholders Agreement")
entered into in June 1997 by and among Global Network Partners LLC ("GNP"),
EarthWeb LLC and Warburg, Pincus Ventures, L.P. ("Warburg"), which provisions
terminated upon the consummation of EarthWeb's initial public offering in
November 1998 (the "IPO").
EarthWeb's Amended and Restated Bylaws 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
Amended and Restated Certificate of Incorporation and Amended and Restated
Bylaws, the terms of office expire as follows: Mr. Spivack, 1999; Mr. Murray
Hidary, 2000; Mr. Davis, 2000; Mr. Jack D. Hidary, 2001; and Dr. Kressel,
2001.
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.
5
Murray Hidary has been the Executive Vice President, Business Development,
Secretary, 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.
Nova Spivack has been the Strategic Planning Adviser of EarthWeb since
August 1998 and has been a director of EarthWeb since April 1996. From April
1996 until July 1998, Mr. Spivack served as Executive Vice President,
Strategic Planning of EarthWeb and since January 1995 has co-managed its
predecessors. Mr. Spivack is a co-founder of EarthWeb. Prior to 1994, Mr.
Spivack was the Editor/Reviewer of Interactive and Multimedia News at
Individual, Inc. Mr. Spivack received his B.A. in Philosophy from Oberlin
College and a C.S.S. degree from the International Space 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.
Lloyd Linn has been the Vice President of EarthWeb and President of EW Career
Solutions, Inc., a subsidiary of EarthWeb formerly known as EW Acquisition
Corporation which operates the dice.com business, since February 1999. Mr.
Linn was the co-founder of dice.com and co-managed dice.com since its
inception in 1990. Mr. Linn has worked as a contract programmer and consultant
at various technical consulting companies including Cap Gemini Group. Mr. Linn
studied Computer Sciences at Des Moines Area Community College.
Irene Math is the Senior Vice President, Finance of EarthWeb, and was the
Vice President, Finance from November 1996 to March 1999. From June 1995 to
May 1996, Ms. Math served as 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.
Kevin McPherson has been the Vice President, Worldwide Advertising Sales of
EarthWeb since July 1998. From 1997 through June 1998, Mr. McPherson served as
Vice President and Publisher of BYTE Magazine. From September 1996 to January
1997, Mr. McPherson served as Senior Vice President of Network Sales for IDG.
From 1981 through September 1996, Mr. McPherson served in various capacities
at Computerworld including Senior Vice President and Publisher. Mr. McPherson
received a B.A. from the University of Richmond and an M.B.A. from the
University of Connecticut.
John Kleine has been the Vice President, Systems and Operations of EarthWeb
since January 1998. Prior to joining EarthWeb, Mr. Kleine served as Vice
President, Director of Business Systems from 1983 to 1997 at True North
Communications where he was responsible for all desktop systems, voice and
data networking, data center operations and graphics design computing. Prior
to 1983, Mr. Kleine held various financial positions at Warner Communications,
Inc. and Viacom International, Inc. Mr. Kleine received his B.A. in Accounting
and Mathematics from Queens College.
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.
6
Mark Schlack has been the Vice President, Content for EarthWeb since
November 1998. From December 1995 to May 1998, Mr. Schlack served as Editor
and later as Editor-in-Chief of BYTE Magazine, published by McGraw Hill. From
June 1990 to November 1995, he held various positions at Cahners Publishing
including Editor of Datamation and Editor In Chief of Systems Integration
Business. Mr. Schlack graduated from the University of Michigan with a B.A. in
Creative Writing.
Cary Davis has been a director of EarthWeb since February 1998. Mr. Davis
has served with E.M. Warburg, Pincus & Co., LLC, 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.
Henry Kressel has been a director of EarthWeb since October 1996. Dr.
Kressel has served with E.M. Warburg, Pincus & Co., LLC, an investment firm,
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
Level One Communications, Inc., a semi-conductor company, IA Corporation, 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.
7
PROPOSAL ONE -- ELECTION OF DIRECTOR
At the Annual Meeting, one individual will be elected as director for a
three-year term and until his successor is elected and qualified. The Board of
Directors has nominated Nova Spivack for re-election at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEE FOR ELECTION AS A
MEMBER OF THE BOARD OF DIRECTORS.
The proxies given to the proxyholders will be voted or not voted as directed
thereon, and if no direction is given, will be voted FOR approval of the
nominee. The Board of Directors knows of no reason why the nominee should be
unable or unwilling to serve, but if the nominee should, for any reason, be
unable or unwilling to serve, the proxies will be voted for the election of
such other person to the office of director as the Board of Directors may
recommend in the place of such nominee.
Compensation of Directors
EarthWeb does not currently pay any director's fees.
Indemnification
The Delaware General Corporation Law provides that a corporation may
indemnify its directors and officers for certain liabilities. EarthWeb's
Amended and Restated Certificate of Incorporation and Amended and Restated
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.
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, audit practices and the professional
services furnished by the independent auditors.
The Compensation Committee is responsible for 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").
Attendance at Board and Committee Meetings
During the fiscal year ended December 31, 1998, the Board of Directors met 4
times and acted by unanimous written consent 14 times, with each director
attending each meeting and executing each consent. The Audit Committee and
Compensation Committee, which were each formed in August 1998, did not meet
during the fiscal year ended December 31, 1998.
8
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, 1998 and 1997 for: (1) the Chief Executive Officer of
EarthWeb and (2) the four other highest paid executive officers of EarthWeb in
1998 (collectively, the "Named Executive Officers"):
Long Term
Compensation
Annual Compensation Awards
-------------------------------------- ------------
Securities
Name and Other Annual Underlying
Principal Position Year Salary($) Bonus($) Compensation($) Options(#)
- ------------------------ ---- --------- -------- --------------- ------------
Jack D. Hidary.......... 1998 $160,000 $41,000 (2) -- --
President, Chief
Executive Officer 1997 160,000 10,000 (1) -- --
Murray Hidary........... 1998 130,000 36,000 (2) -- --
Executive Vice
President, 1997 130,000 10,000 (1) -- --
Business Development,
Secretary and Treasurer
William Gollan.......... 1998 151,000 37,000 (2) $53,000(3) 74,750
Senior Vice President
Irene Math.............. 1998 132,000 38,000 (2) -- 46,150
Vice President, Finance 1997 118,000 10,000 (1) -- 29,249
John Kleine............. 1998 128,292 19,600 (2) -- 19,500
Vice President, Systems
and Operations
- --------
(1) Represents bonuses earned in 1997, one-half of which were paid in 1998.
(2) Represents bonuses earned in 1998, a portion of which were paid in 1999.
(3) Represents corporate apartment rental paid in 1998.
9
Summary of Option Grants
The following table sets forth information regarding stock options granted
by EarthWeb pursuant to the 1996 Amended and Restated Stock Plan (as amended
to date, the "Stock Plan") during the fiscal year ended December 31, 1998 to
each of the Named Executive Officers. EarthWeb has never granted stock
appreciation rights.
Option Grants in Last Fiscal Year
Individual Grants
-------------------------------------------------
Percent of
Total Options
Granted to Potential Realizable
Employees (net Value at Assumed
of Annual Rates
forfeitures) of
Number of in Exercise or Stock Price
Securities Fiscal Year Base Appreciation for
Underlying Ended Price Option Term(4)
Options December 31, Per Share Expiration ---------------------
Name Granted(1) 1998(2) ($/Share)(3) Date 10%
- ------------------------ ---------- -------------- ------------ ---------- 5% ----------
Jack D. Hidary.......... -- -- -- -- -- --
Murray Hidary........... -- -- -- -- -- --
William Gollan.......... 74,750 21.44% $3.08 1/29/05 $1,172,180 $1,623,709
Irene Math.............. 46,150 13.24% $3.08 1/29/05 $ 723,694 $1,002,464
John Kleine............. 19,500 5.59% $3.08 1/29/05 $ 305,786 $ 423,576
- --------
(1) The options were granted under the Stock Plan. See "1996 Amended and
Restated Stock Plan."
(2) Based on an aggregate of 348,650 options granted (net of forfeitures) to
employees in the year ended December 31, 1998, 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 date of the grant as determined by the
Board of Directors. EarthWeb determined the fair market value of the
Common Stock on the date of the grant based upon the most recent price
paid by a third party for EarthWeb's then outstanding convertible
preferred stock with an appropriate discount as a result of the
convertible preferred stock having a liquidation preference, the right to
board representation and a cumulative preferred dividend.
(4) Potential realizable values are computed by (a) multiplying the number of
shares of Common Stock subject to a given option by the initial public
offering price of $14.00 per share which represents the price per share
offered in EarthWeb's initial public offering on November 11, 1998, (b)
assuming that the aggregate stock value derived from that calculation
compounds at the annual 5% or 10% rate shown in the table for the
remaining six-year term of the option and (c) subtracting from that result
the aggregate option exercise price. The 5% and 10% assumed annual rates
of stock price appreciation are mandated by the rules of the Securities
and Exchange Commission and do not represent EarthWeb's estimate or
projection of future Common Stock prices. Actual gains, if any, resulting
from stock option exercises and Common Stock holdings are dependent on the
future performance of the Common Stock, overall stock market conditions
and the option holder's continued employment with EarthWeb through the
vesting period. There can be no assurance that the amounts reflected in
this table will be achieved.
10
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, 1998 and
unexercised options held by the Named Executive Officers as of December 31,
1998. 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, 1998 of
$38.88.
Aggregate Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
---------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
Fiscal Year End Fiscal Year End
------------------------- -------------------------
Shares
Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------------ ----------- -------- ----------- ------------- ----------- -------------
Jack D. Hidary.......... -- -- -- -- -- --
Murray Hidary........... -- -- -- -- -- --
William Gollan.......... -- -- 28,530 93,995 $1,021,319 $3,364,840
Irene Math.............. 2,200 $13,865 15,324 57,876 $ 554,948 $2,089,015
John Kleine............. -- -- 2,925 16,575 $ 104,709 $ 593,353
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 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, Nova Spivack, 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 their 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. Mr. Jack D. Hidary receives an annual base salary of $160,000
per annum, subject to cost of living increases, and Mr. Murray Hidary receives
an annual base salary of $160,000 per annum, subject to cost of living
increases. 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 the 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 entered into a consulting agreement with Nova Spivack, effective
August 1, 1998, pursuant to which Mr. Spivack provides advisory services to
the Chief Executive Officer and senior management. Under this agreement, Mr.
Spivack receives compensation in the amount of $6,000 per month, subject to
cost of living increases. The term of the agreement is 18 months. If EarthWeb
terminates the agreement for "cause", as defined in the agreement, Mr. Spivack
will be entitled to up to 12 months compensation plus bonuses. If EarthWeb
terminates the agreement without "cause", Mr. Spivack will be entitled to up
to 18 months compensation plus bonuses. If Mr. Spivack terminates the
agreement for "cause", as defined in the agreement, he may be entitled to up
to 15 months compensation plus bonuses. If Mr. Spivack terminates the
agreement without "cause", he may be entitled to up to 12 months compensation
plus bonuses. The agreement prohibits
11
Mr. Spivack from competing with EarthWeb during the term of the agreement and
for two years thereafter, subject to an additional two-year extension.
EarthWeb has entered into employment agreements with William Gollan, Senior
Vice President, Lloyd Linn, Vice President and President of EW Career
Solutions, Inc., Irene Math, Senior Vice President, Finance, Kevin McPherson,
Vice President, Worldwide Advertising Sales, John Kleine, Vice President,
Systems and Operations, Scott Anderson, Vice President, Worldwide Marketing
and Mark Schlack, Vice President of Content. These employment contracts
provide for base salaries ranging from $125,000 to $175,000 and commissions
and bonuses based on both individual and overall EarthWeb performance
measures.
The material terms of these employment agreements are: (1) any dispute or
controversy arising under or in connection with the employment agreement
(other than injunctive relief) shall be settled exclusively by arbitration;
(2) if any executive is terminated without cause, she/he will receive
severance pay between 3 and 12 months; and (3) during the agreement and
between 3 months to 3 years thereafter, the executive is prohibited from
competing with EarthWeb.
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. 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 June 1998,
EarthWeb issued 433,965 shares of Common Stock to EarthWeb LLC for an
aggregate purchase price of $3.7 million. Immediately prior to the IPO,
EarthWeb LLC distributed substantially all shares of EarthWeb Common Stock
that it held to its members. 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 completion of EarthWeb's
IPO.
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
12
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.
Holders of stock options under the Stock Plan and stock issued upon exercise
of stock options (collectively, "Optionees") have entered into a Voting Trust
Agreement among such parties, EarthWeb and GNP (the "Voting Trust Agreement").
Under the Voting Trust Agreement, Optionees have provided GNP with voting
power with respect to all shares of Common Stock issued upon the exercise of
their options and have given EarthWeb the right to purchase such shares in
certain events. The Voting Trust Agreement terminates on May 10, 1999.
EarthWeb entered into a consulting agreement with Nova Spivack dated as of
August 1, 1998. See "Employment and Consulting Agreements." Under the
consulting agreement, various repurchase rights with respect to Mr. Spivack's
interests in GNP were waived. In December 1998, Mr. Spivack exercised the
option in the consulting agreement that gave him the right to sell 4,713
shares of Common Stock to EarthWeb at a price of $42.43 per share, for an
aggregate purchase price of approximately $200,000.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (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,
1998, all Section 16(a) filing requirements applicable to such reporting
persons, were complied with pursuant to the SEC rules.
1996 Amended and Restated Stock Plan
The Stock Plan was adopted by the Board of Directors of EarthWeb in October
1996 and was subsequently ratified by the shareholders of EarthWeb. The Stock
Plan provides for the grant of incentive stock options and non-qualified stock
options. The 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 Stock Plan. The Stock Plan authorizes
525,000 shares of Common Stock for issuance, subject to adjustment as set
forth in the Stock Plan. As of March 1, 1999, options relating to 465,984
shares of Common Stock were outstanding.
13
1998 Stock Incentive Plan
EarthWeb's 1998 Stock Incentive Plan is described in Proposal No. 2 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 has
been reserved for issuance under the Stock Purchase Plan and is available for
purchase thereunder, plus an annual increase to be added on the first day of
EarthWeb's fiscal year beginning in 2000 equal to the least of (1) 400,000
shares, (2) two percent (2%) 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 5 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 will 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 will
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 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.
Payroll deductions may range from 1% to 15% (in whole percentage increments)
of a participant's regular base pay, exclusive of overtime, bonuses, shift-
premiums or commissions, 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.
14
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 15% 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, 1998, EarthWeb did not contribute
to the 401(k) Plan.
EarthWeb's wholly-owned subsidiaries, EW Career Solutions, Inc. and
MicroHouse International, Inc., also maintain 401(k) retirement plans.
15
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 will administer the 1998 Stock Incentive Plan with respect to
EarthWeb's officers subject to Section 162(m) of the Code. Mr. Hidary will
abstain 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. 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. 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 1998 were generally
determined by the Board of Directors on an individual basis at the time of
hiring. The majority of EarthWeb's executives were hired prior to the
formation of the Compensation Committee. For 1999, the Compensation Committee
will review 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 which are paid out twice annually in January and July. 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 1998 were
determined by 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 the Stock Plan. 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. 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 1998 were determined based
upon negotiations between EarthWeb and Mr. Jack D. Hidary and were approved by
the Board of Directors prior to his hiring, as he was hired prior to the
formation of the Compensation Committee. For 1999, the Compensation Committee
will evaluate his compensation consistent with the factors described above for
all executive officers.
16
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. The proposal to amend the 1998
Stock Incentive Plan to increase the number of shares of Common Stock reserved
for issuance thereunder includes further amendments to the 1998 Stock
Incentive Plan that will continue EarthWeb's ability to make performance-based
grants that comply with the requirements of Section 162(m). 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
17
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, 1998 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.
11/11/98 11/30/98 12/31/98
-------- -------- --------
EarthWeb............................................. 100 288 278
Nasdaq Stock Market (US) Index....................... 100 105 118
Hambrecht & Quist Internet Index..................... 100 116 140
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.
18
PROPOSAL TWO -- AMENDMENTS TO EARTHWEB'S 1998 STOCK INCENTIVE PLAN
1998 Stock Incentive Plan
EarthWeb's shareholders are being asked to approve and adopt amendments to
EarthWeb's 1998 Stock Incentive Plan (the "1998 Stock Incentive Plan"). The
proposed amendments to the 1998 Stock Incentive Plan will (i) increase the
number of shares of Common Stock reserved for issuance thereunder by an
additional 1,700,000 shares, and (ii) limit the maximum number of options and
stock appreciation rights that may be awarded to an employee in any one fiscal
year of EarthWeb in order to ensure compliance with the requirements of
Section 162(m) of the Code.
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.
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 A hereto.
General Description
EarthWeb's 1998 Stock Incentive Plan was adopted by the Board of Directors
in November 1998 and has been approved by EarthWeb's shareholders. 375,000
shares of Common Stock were initially reserved for issuance under the 1998
Stock Incentive Plan. Starting in 2000, the number of shares reserved
increases by 2% each year or by a lesser amount determined by the Board of
Directors. Up to 159,000 shares have been reserved for issuance as Incentive
Stock Options (as defined below). Starting in 2000, the number of shares
reserved for Incentive Stock Options increases by the least of 400,000, .4% or
a lesser amount determined by the Board of Directors.
On April 8, 1999, the Board of Directors approved amendments to the 1998
Stock Incentive Plan, conditioned upon and not to take effect until approved
by EarthWeb's shareholders, to (i) increase the number of shares of Common
Stock reserved for issuance thereunder by an additional 1,700,000 shares, and
(ii) limit the maximum number of options and stock appreciation rights that
may be awarded to an employee in any one fiscal year of EarthWeb in order to
ensure compliance with the requirements of Code Section 162(m).
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 nonstatutory stock options, stock appreciation rights
("SARs"), dividend equivalent rights, restricted stock, performance units,
performance shares, and other equity 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, 1999, options to purchase a total of 279,717 shares
held by 111 optionees were outstanding as of such date at a weighted average
exercise price of $35.59 per share, and 95,283 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 129 persons. The closing
price of EarthWeb's Common Stock as reported on the Nasdaq National Market on
March 1, 1999 was $37.75.
19
Amendment to Increase the Number of Shares of Common Stock Reserved for
Issuance Under the 1998 Stock Incentive Plan by an Additional 1,700,000 Shares
Under its current provisions, the maximum number of shares of Common Stock
reserved for issuance under the 1998 Stock Incentive Plan is 375,000 shares.
The proposed amendment would increase the number of shares of Common Stock
reserved for issuance thereunder by an additional 1,700,000 shares.
Amendment to Set Code Section 162(m) Limitations
The Board of Directors, subject to shareholder approval, adopted an
amendment to the 1998 Stock Incentive Plan to limit the maximum number of
options and SARs which may be awarded to an employee in any fiscal year of
EarthWeb to 600,000 shares. The purpose of the amendment is to ensure that any
options and SARs granted under the 1998 Stock Incentive Plan after the Annual
Meeting will qualify as "performance-based compensation" under Code Section
162(m).
Under Section 162(m) no deduction is allowed in any taxable year of EarthWeb
for compensation in excess of $1 million paid to its chief executive officer
and each of its four most highly paid other executive officers who are serving
in such capacities as of the last day of such taxable year. An exception to
this rule applies to compensation that is paid pursuant to a stock incentive
plan approved by EarthWeb's shareholders and that specifies, among other
things, the maximum number of shares with respect to which options and SARs
may be granted to eligible employees under such plan during a specified
period. Compensation paid pursuant to options and SARs granted under such a
plan is deemed to be inherently performance-based, since such awards provide
value to employees only if the stock price appreciates. While Code Section
162(m) generally became effective in 1994, a special rule allows options
granted under the 1998 Stock Incentive Plan to be treated as qualifying under
Section 162(m) until this Annual Meeting without having a per-person share
limit.
If shareholders do not approve the Code Section 162(m) amendment, any
compensation expense of EarthWeb associated with the options and SARs granted
under the 1998 Stock Incentive Plan in excess of $1 million for EarthWeb's
chief executive officer and any of EarthWeb's four highest paid other
executive officers will not be deductible under the Code.
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 will administer the 1998 Stock
Incentive Plan with respect to EarthWeb's officers subject to Code Section
162(m) and the subcommittee will be 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
20
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 5 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 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.
21
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.
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.
22
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 (i) increase the number of shares of Common
Stock reserved for issuance thereunder by 1,700,000 shares, from 375,000
shares to 2,075,000 shares, and (ii) limit the maximum number of options and
stock appreciation rights that may be awarded to an employee in any one fiscal
year of EarthWeb in order to ensure compliance with the requirements of
Section 162(m) of the Code.
The matter is being submitted to the shareholders for approval by the
affirmative vote of the holders of record of a majority of the shares
represented and voted, in person or by proxy, at the Annual Meeting. The
shareholders should consider that directors and executive officers of EarthWeb
are eligible to receive grants under the 1998 Stock Incentive Plan.
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 1,700,000 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
the enclosed proxy.
PROPOSAL THREE -- SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has recommended that the shareholders ratify the
selection of PricewaterhouseCoopers LLP to serve as independent auditors for
EarthWeb for the fiscal year ending December 31, 1999, or until a successor is
appointed.
PricewaterhouseCoopers LLP has been the principal certified 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 regarding related accounting
matters.
The matter is being submitted to the shareholders for approval by the
affirmative vote of the holders of record of a majority of the shares
represented and voted, in person or by proxy, at the Annual Meeting.
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, 1999.
23
The persons designated in the enclosed proxy will vote your shares FOR
adoption of this proposal unless instructions to the contrary are indicated in
the enclosed proxy.
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, 1998 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.
24
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, 1999.
For proposals that shareholders intend to present at the Annual Meeting of
Shareholders to be held in 2000 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, 2000, 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 21, 1999
25
EXHIBIT A
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 therefor, 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 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
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(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.
(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
A-2
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.
(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,
A-3
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 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
A-4
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;
(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
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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.
(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.
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(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.
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.
A-7
(ii) 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.
(iii) 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.
(iv) In the case of other Awards, such price as is determined by the
Administrator.
(v) 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.
(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.
A-8
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.
(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
A-9
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) The portion of any Incentive Stock Option accelerated under this
Section 11 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.
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.
A-10
(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.
A-11
APPENDIX A
EARTHWEB INC.
3 PARK AVENUE
NEW YORK, NEW YORK 10016
ANNUAL MEETING OF SHAREHOLDERS
MAY 20, 1999
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,
111 East 48th Street, New York, NY 10017, on Thursday, May 20, 1999, at 9:00
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 20, 1999
- ----------------------------------------------------------------------------------------------------------------------------------
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
A [X] Please mark your
votes as in this
example
The Board of Directors recommends a vote FOR the following proposals, and this proxy will be
voted FOR the following proposals unless otherwise indicated.
1. To select NOMINEE: Nova Spivack 2. To approve amendments to EarthWeb's 1998 Stock FOR AGAINST ABSTAIN
as director FOR WITHHELD Incentive Plan to (i) increase the number of [_] [_] [_]
the nominee shares of Common Stock reserved for issuance
listed at [_] [_] thereunder by 1,700,000 shares, from 375,000 shares to 2,075,000 shares, and (ii)
right limit the maximum number of options and stock appreciation rights that may be awarded
to an employee in any one fiscal year of EarthWeb in order to ensure compliance with
the requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended.
3. To ratify the appointment of FOR AGAINST ABSTAIN
PricewaterhouseCoopers LLP as independent auditors [_] [_] [_]
for EarthWeb for the fiscal year ending
December 31, 1999.
The undersigned acknowledges receipt from EarthWeb prior to the execution of this
proxy of a Notice of Annual Meeting of Shareholders, a Proxy Statement dated April
21, 1999 and the 1998 Annual Report.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [_]
_____________ ________________ _______________ _______________ ___________________
PRINT NAME OF SIGNATURE OF PRINT NAME OF SIGNATURE OF Dated: _______, 1999
SHAREHOLDER SHAREHOLDER SHAREHOLDER SHAREHOLDER
NOTE: Please sign exactly as name(s) appear(s). When signing as executor, administrator, attorney, trustee or guardian, please
give your full title as such. If a corporation, please sign in full corporate name by president or other authorized officer.
If a partnership, please sign in partnership name by authorized person. If a joint tenancy, please have both tenants sign.