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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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 Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant under Section 240.14a-12
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INKTOMI CORPORATION
(Name of Registrant as Specified In Its Charter)
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(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:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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[INKTOMI CORPORATION LOGO]
INKTOMI CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 20, 2002
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Inktomi
Corporation, a Delaware corporation, will be held on Wednesday, March 20, 2002
at 9:00 a.m., local time, at the San Mateo Marriott Hotel, 1770 South Amphlett
Blvd, San Mateo, California, 94402, for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected;
2. To amend Inktomi's 1998 Employee Stock Purchase Plan to increase the
number of shares available for annual issuance by an aggregate of
800,000 shares to 2,000,000 shares;
3. To ratify the selection of PricewaterhouseCoopers LLP as the
independent auditors of Inktomi for the fiscal year ending September
30, 2002; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on January 23, 2002
are entitled to notice of and to vote at this meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to sign and
return the enclosed proxy card as promptly as possible in the enclosed
self-addressed envelope, or vote electronically through the internet or by
telephone. Any stockholder attending the meeting may vote in person even if he
or she returned a proxy. However, if a stockholder's shares are held of record
by a broker, bank or other nominee and the stockholder wishes to vote at the
meeting, the stockholder must obtain from the record holder a proxy issued in
his or her name.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ TIM STEVENS
------------------------------------------
Tim Stevens
Senior Vice President of Business Affairs,
General Counsel and Assistant Secretary
Foster City, California
February 5, 2002
2
INKTOMI CORPORATION
4100 E. THIRD AVENUE
FOSTER CITY, CALIFORNIA 94404
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PROXY STATEMENT
2002 ANNUAL MEETING OF STOCKHOLDERS
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The enclosed Proxy is solicited on behalf of the Board of Directors of
Inktomi Corporation, a Delaware corporation, for use at the Annual Meeting of
Stockholders to be held on Wednesday, March 20, 2002 at 9:00 a.m., local time,
at the San Mateo Marriott Hotel, 1770 South Amphlett Blvd, San Mateo,
California, 94402, or at any adjournment thereof, for the purposes set forth
herein and in the accompanying Notice of Annual Meeting of Stockholders.
Inktomi's principal executive offices are located at 4100 E. Third Avenue,
Foster City, California, 94404. Inktomi's telephone number at that location is
(650) 653-2800.
Inktomi intends to mail this proxy statement and accompanying proxy card
on or about February 8, 2002 to all stockholders entitled to vote at the
meeting.
INFORMATION CONCERNING SOLICITATION AND VOTING
RECORD DATE AND SHARE OWNERSHIP
Only stockholders of record at the close of business on January 23, 2002
are entitled to notice of and to vote at the Annual Meeting. At the record date,
143,449,520 shares of Inktomi's Common Stock were issued and outstanding and
held of record by approximately 1,304 stockholders.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to Inktomi (attention:
Tim Stevens, Senior Vice President of Business Affairs, General Counsel and
Assistant Secretary) a written notice of revocation or a duly executed proxy
bearing a later date or by attending the meeting of stockholders and voting in
person.
VOTING
When proxies are properly dated, executed and returned, the shares of
Inktomi Common Stock they represent will be voted at the Annual Meeting in
accordance with the instructions of the stockholder. If no specific instructions
are given, the shares represented by the proxies will be voted as follows:
- "FOR" the election of the nominees for directors set forth
herein;
- "FOR" the amendment of Inktomi's 1998 Employee Stock Purchase
Plan to increase the number of shares available for annual
issuance by an aggregate of 800,000 shares to 2,000,000 shares;
and
- "FOR" the ratification of appointment of PricewaterhouseCoopers
LLP as the independent auditors of Inktomi for the fiscal year
ending September 30, 2002.
In addition, if other matters come before the Annual Meeting, the
persons named in the accompanying form of proxy will vote in accordance with
their best judgment with respect to such matters.
Each share of Common Stock outstanding on the record date of January
23, 2002 will be entitled to one vote. The required quorum for the transaction
of business at the Annual Meeting is a majority of the votes eligible to be cast
by holders of shares of Common Stock issued and outstanding on the record date.
For purposes of determining the presence of a quorum, abstentions and broker
non-votes will be counted by Inktomi as present at the meeting. Abstentions will
also be counted by Inktomi in determining the total number of votes cast with
respect to a proposal
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other than the election of directors. Broker non-votes will not be counted in
determining the number of votes cast with respect to a proposal. All votes will
be tabulated by the inspector of elections appointed for the Annual Meeting, who
will separately tabulate affirmative and negative votes, abstentions and broker
non-votes.
VOTING ELECTRONICALLY VIA THE INTERNET OR BY TELEPHONE
Stockholders whose shares are registered directly with Wells Fargo may
vote either via the Internet or by calling Wells Fargo. Specific instructions
for voting via Internet or by telephone are set forth on the enclosed proxy
card. The Internet and telephone voting procedures are designed to authenticate
the stockholder's identity and to allow stockholders to vote their shares and
confirm that their instructions have been properly recorded.
If your shares are registered in the name of a bank or brokerage, you may
be eligible to vote your shares electronically via the Internet or by telephone.
A large number of banks and brokerage firms are participating in the ADP
Investor Communication Services online program. This program provides eligible
stockholders who receive a paper copy of the Annual Report and Proxy Statement
the opportunity to vote via the Internet or by telephone. If your bank or
brokerage firm is participating in ADP's program, your voting form will provide
instructions. If your voting form does not reference Internet or telephone
information, please complete and return the paper proxy card in the
self-addressed, postage paid envelope provided.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by Inktomi. Proxies may be
solicited by certain of Inktomi's directors, officers and regular employees,
without additional compensation, in person or by telephone, email or facsimile.
In addition, Inktomi may retain the services of one or more firms to assist in
the solicitation of proxies, for an estimated fee of $6,000 plus reimbursement
of expenses. In addition, Inktomi may reimburse brokerage firms and other
persons representing beneficial owners of shares for their expenses in
forwarding solicitation materials to such beneficial owners.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of January 7, 2002 of (i) each
person known to Inktomi to beneficially own more than 5% of the Common Stock,
(ii) each current director and each director nominee of Inktomi, (iii) each
executive officer and each former executive of Inktomi for whom information is
given in the Summary Compensation Table in this Proxy Statement, and (iv) all
current directors, director nominees, and current and former executive officers
of Inktomi for whom information is given in the Summary Compensation Table in
this Proxy Statement as a group.
COMMON STOCK
---------------------------------
NUMBER OF SHARES
BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER HELD(1) CLASS
------------------------ ---------------- ----------
Eric A. Brewer(2)......................................................... 4,483,667 3.1
David C. Peterschmidt(3).................................................. 4,332,368 2.9
Frank C. Gill(4).......................................................... 253,600 *
Fredric W. Harman(5)...................................................... 176,850 *
Greg Myers................................................................ -- *
Alan F. Shugart(6)........................................................ 170,000 *
Timothy J. Burch(7)....................................................... 350,151 *
Edward A. Hally (8)....................................................... 642,944 *
Jerry M. Kennelly(9)...................................................... 1,447,102 *
Timothy J. Stevens(10).................................................... 641,098 *
Kirk Bowman(11)........................................................... -- *
Richard B. Pierce(12)..................................................... 830,504 *
All directors and executive officers as a group (13 persons)(13).......... 14,028,284 9.2
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* Less than one percent of the outstanding Common Stock.
1. This table is based on information supplied by executive officers,
directors and principal stockholders of Inktomi and on any Schedules 13D
or 13G filed with the Securities and Exchange Commission. Beneficial
ownership is determined in accordance with the rules of the Securities
and Exchange Commission. In computing the number of shares beneficially
owned by a person and the percentage ownership of that person, shares of
Common Stock subject to options or warrants held by that person that are
currently exercisable or
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will become exercisable within 60 days after January 7, 2002 are deemed
outstanding, while such shares are not deemed outstanding for purposes of
computing percentage ownership of any other person. Percentage of
beneficial ownership is based on 143,422,291 shares of Common Stock
outstanding as of January 7, 2002. Unless otherwise indicated in the
footnotes below, the persons and entities named in the table have sole
voting and investment power with respect to all shares beneficially
owned, subject to community property laws where applicable.
(2) Includes 3,256,931 shares held by Dr. Brewer. Also includes Dr. Brewer's
pro rata interest in a warrant held by Inktomi LLC, which his pro rata
interest equals 701,736 shares. All such shares and warrants are fully
vested and are not subject to repurchase by Inktomi. Also includes
options held by Dr. Brewer to purchase 525,000 shares of Common Stock.
The options are fully exercisable although as of January 7, 2002, 379,333
shares issuable upon exercise of the options were subject to a right of
repurchase at cost in the event Dr. Brewer ceases to be an employee of
Inktomi.
(3) Includes 215,178 shares held by David C. Peterschmidt and Roxanne N.
Peterschmidt, Trustees of the Peterschmidt Family Trust U/D/T Dtd
12/30/91, and 16,390 shares held by Mr. Peterschmidt. Also includes
options held by Mr. Peterschmidt to purchase 4,100,800 shares of Common
Stock. The options are fully exercisable although as of January 7, 2002,
1,754,119 shares issuable upon exercise of the options were subject to a
right of repurchase at cost in the event Mr. Peterschmidt ceases to be an
employee of Inktomi.
(4) Consists of options held by Mr. Gill to purchase 253,600 shares of Common
Stock. The options are fully exercisable although as of January 7, 2002,
69,130 shares issuable upon exercise of the options were subject to a
right of repurchase at cost in the event Mr. Gill ceases to be a director
of Inktomi.
(5) Mr. Harman shall serve on the Board of Directors until the conclusion of
his term on the date on the 2002 Annual Meeting. Mr. Harman is not
seeking re-election at the Annual Meeting. Includes 18,730 shares held by
Oak Investment Partners VII, LP and 470 shares held by Oak VII Affiliates
Fund, LP. Mr. Harman is a managing member of Oak Associates VII, LLC, the
General Partner of Oak Investment Partners VII, LP and Mr. Harman is a
managing member of Oak VII Affiliates, LLC, the General Partner of Oak
VII Affiliates Fund, LP. Mr. Harman is a director of Inktomi. He
disclaims beneficial ownership of the shares held by the Oak Partners
entities except to the extent of his proportionate partnership interest
therein. Also includes options held by Mr. Harman to purchase 100,800
shares of Common Stock. The options are fully exercisable although as of
January 7, 2002, 66,200 shares issuable upon exercise of the options were
subject to a right of repurchase at cost in the event Mr. Harman ceases
to be a director of Inktomi.
(6) Includes 50,000 shares held by Mr. Shugart. Also includes options held by
Mr. Shugart to purchase 120,000 shares of Common Stock. The options are
fully exercisable although as of January 7, 2002, 60,200 of the shares
issuable upon exercise of the options were subject to a right of
repurchase by Inktomi at cost in the event Mr. Shugart ceases to be a
director of Inktomi.
(7) Includes 151 shares held by Mr. Burch. Also includes options held by Mr.
Burch to purchase 350,000 shares of Common Stock. The options are fully
exercisable although as of January 7, 2002, 253,511 of the shares
issuable upon exercise of the options were subject to a right of
repurchase by Inktomi at cost in the event Mr. Burch ceases to be an
employee of Inktomi.
(8) Includes 2,944 shares held by Mr. Hally. Also includes options held by
Mr. Hally to purchase 640,000 shares of Common Stock. The options are
fully exercisable although as of January 7, 2002, 550,000 of the shares
issuable upon exercise of the options were subject to a right of
repurchase by Inktomi at cost in the event Mr. Hally ceases to be an
employee of Inktomi.
(9) Includes 23,336 shares held by Kennelly Partners, LP, a limited
partnership of which Jerry Kennelly and Janis Kennelly are the sole
general partners and of which Mr. Kennelly's sons are the sole limited
partners. Also includes 398,222 shares held by Jerry Kennelly and Janis
Kennelly, Trustees of the Kennelly Family Trust U/D/T Dtd 1/3/01 and
5,544 shares held by Mr. Kennelly. Also includes options held by Mr.
Kennelly to purchase 1,020,000 shares of Common Stock. The options are
fully exercisable although as of January 7, 2002, 674,667 shares issuable
upon exercise of the options were subject to a right of repurchase at
cost in the event Mr. Kennelly ceases to be an employee of Inktomi.
(10) Includes 131,098 shares held by Mr. Stevens. Also includes options held
by Mr. Stevens to purchase 510,000 shares of Common Stock. The options
are fully exercisable although as of January 7, 2002, 341,869 shares
issuable upon exercise of the options were subject to a right of
repurchase at cost in the event Mr. Stevens ceases to be an employee of
Inktomi.
(11) Mr. Bowman terminated employment with the Company on June 30, 2001.
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(12) Includes 354,504 shares held by certain family trusts and partnerships
controlled by Mr. Pierce and/or his wife, including trusts for minor
children. Includes options to purchase 476,000 shares of Common Stock.
The options are fully exercisable although as of January 7, 2002, 459,333
shares issuable upon exercise of the options were subject to a right of
repurchase at cost in the event Mr. Pierce ceases to be a consultant of
Inktomi.
(13) Includes 701,736 shares issuable upon exercise of warrants and options to
purchase 8,796,200 shares, which warrants and options are fully
exercisable as of January 7, 2002.
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
GENERAL
The Bylaws of Inktomi provide that the authorized number of directors
shall be fixed by resolution of the Board of Directors. The authorized number of
directors is currently fixed at five. Frederic W. Harman, who is currently a
member of the Board of Directors, is not seeking re-election and his term will
end the date of the 2002 Annual Meeting. The Board of Directors has nominated
Greg Myers to fill the position being vacated by Frederic W. Harman. The
Nominating Committee, along with the full Board of Directors, has been actively
recruiting additional qualified individuals to serve as members of the Board of
Directors. Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the nominees named below. If any nominee is unable or
declines to serve as a director at the time of the Annual Meeting, the proxies
will be voted for any nominee designated by the present Board of Directors to
fill the vacancy. It is not expected that any nominee will be unable or will
decline to serve as a director. If stockholders properly nominate persons other
than Inktomi's nominees for election as directors, the proxy holders will vote
all proxies received by them to assure the election of as many of Inktomi's
nominees as possible, with the proxy holder making any required selection of
specific nominees to be voted for. The term of office of each person elected as
a director will continue until the next annual meeting of stockholders or until
his earlier death, resignation or removal. There is no family relationship
between any director and any other director or executive officer of Inktomi.
Certain information regarding the nominees is set forth below:
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
--------------- --- -------------------- --------
David C. Peterschmidt................ 54 Chairman of the Board, President and Chief Executive 1996
Officer of Inktomi
Dr. Eric A. Brewer................... 35 Chief Scientist of Inktomi and Professor in the 1996
Computer Sciences Division at U.C. Berkeley
Frank C. Gill........................ 58 Retired Executive Vice President of Intel Corporation 1998
Greg Myers........................... 51 Senior Vice President and Chief Financial Officer of N/A
Symantec Corporation
Alan F. Shugart...................... 71 Chief Executive Officer of Al Shugart International 1997
David C. Peterschmidt has served as President, Chief Executive Officer
and a director of Inktomi since July 1996. He was appointed Chairman of the
Board in December 1997. From 1991 until joining Inktomi, he served as Chief
Operating Officer and Executive Vice President of Sybase, Inc., a database
company. From 1988 to 1991, Mr. Peterschmidt was a consultant with The Kappa
Group, a management consulting firm, where he provided senior level sales and
marketing training to a variety of companies. He currently serves as a director
of Portal Software, Inc. and one other privately held company. Mr. Peterschmidt
holds a Bachelor of Arts degree in Political Science from the University of
Missouri and a Masters of Business Administration from Chapman College.
Dr. Eric A. Brewer has served as a director of Inktomi since its
inception in February 1996. From February 1996 to December 1997, Dr. Brewer was
Chief Technology Officer of Inktomi and was appointed Chief Scientist in
December 1997. From May 1996 to July 1996, he served as interim President and
Chief Executive Officer of Inktomi. Dr. Brewer has been a professor in the
Computer Science Division at the University of California, Berkeley since July
1994. Dr. Brewer served as a research assistant at the Massachusetts Institute
of Technology from September 1989 to August 1994. Dr. Brewer is also a director
of a privately-held company. Dr. Brewer holds a Bachelor of Science degree in
Computer Science from the University of California, Berkeley and a doctorate
degree in Computer Science from the Massachusetts Institute of Technology.
Frank C. Gill joined Inktomi as a director in December 1998. Mr. Gill is
a 23-year veteran of Intel Corporation where he held a variety of positions in
sales and marketing, product development, and manufacturing operations. At the
time of his retirement in June 1998, he was Executive Vice President of Intel.
In addition to
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serving as a director of Inktomi, Mr. Gill is a director of McAfee.com Corp,
Tektronix, Inc., ITXC Corp., Logitech International S.A. and Pixelworks, Inc.
Mr. Gill holds a Bachelor of Science degree in Electrical Engineering from the
University of California at Davis.
Greg Myers currently serves as Senior Vice President of Finance and Chief
Financial Officer of Symantec Corporation where he is responsible for worldwide
finance, information technology and worldwide logistics and facilities
functions. Mr. Myers has served in a variety of finance positions at Symantec
Corporation since 1993. Before joining Symantec in 1993, Mr. Myers was with
Novell Corporation for five years as their director of financial planning and
analysis. Prior to Novell, Mr. Myers held various financial management
positions for a number of companies within Silicon Valley since 1975. Mr. Myers
holds an undergraduate degree from Cal-State University, Hayward and holds a
Masters in Business Administration from Santa Clara University.
Alan F. Shugart joined Inktomi as a director in December 1997. Mr.
Shugart has been President, Chairman and Chief Executive Officer of Al Shugart
International since September 1998. From 1979 to 1998, Mr. Shugart was Chief
Executive Officer of Seagate Technology, Inc., a manufacturer of hard disk
drives and related components. From 1979 until September 1991 and from October
1992 to September 1998, Mr. Shugart also served as Chairman of the Board of
Seagate. He held the position of President of Seagate from September 1991 until
September 1997 and Chief Operating Officer of Seagate from September 1991 until
March 1995. Mr. Shugart is currently a Director of Valence Technology, Inc.,
SanDisk Corporation, Cypress Semiconductor Corp and several privately held
companies.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held four regular meetings and eight special
meetings during the fiscal year ended September 30, 2001, and acted twice by
unanimous written consent. The Board of Directors has an Audit Committee, an
Employee Stock Option Committee, a Compensation Committee and a Nominating
Committee. From time to time, the Board has created various ad hoc committees
for special purposes. No such committee is currently functioning.
The Audit Committee currently consists of directors Gill, Harman and
Shugart. Mr. Harman's position on this committee will end on the date of the
Annual Meeting. The Audit Committee held four meetings during the last fiscal
year. The Audit Committee reviews the internal accounting procedures of Inktomi
and consults with and reviews the services provided by Inktomi's independent
accountants. Each of the Audit Committee members is independent as that term is
defined in Rule 4200(a)(14) of the National Association of Securities Dealers'
listing standards. The Board of Directors has adopted a written charter for the
Audit Committee.
The Compensation Committee currently consists of directors Gill, Harman
and Shugart. Mr. Harman's position on this committee will end on the date of the
Annual Meeting. The Compensation Committee held one formal meeting during the
last fiscal year and informally discussed compensation matters individually and
as a group on several occasions. The Compensation Committee reviews and
recommends to the Board of Directors the compensation and benefits of all
officers of Inktomi and establishes and reviews general policies relating to
compensation and benefits of employees of Inktomi.
The Employee Stock Option Committee currently consists of one director,
David Peterschmidt. The Employee Stock Option Committee did not meet as a formal
committee during the fiscal year and acted fifty times by unanimous written
consent. The Employee Stock Option Committee has the authority to approve
regular new hire and merit stock option grants to employees and consultants
under Inktomi's stock option programs, other than to executive officers. All
other stock option grants must be approved by the full Board of Directors.
The Nominating Committee currently consists of directors Harman and
Peterschmidt. Mr. Harman's position on this committee will end on the date of
the Annual Meeting. The Nominating Committee is responsible for establishing
general qualification guidelines applicable to nominees to the Board of
Directors, and for identifying, interviewing and recommending persons meeting
such guidelines to serve as members of the Board of Directors. For the past
several months the members of the Nominating Committee, in consultation with the
full Board of Directors, have been actively engaged in searching for qualified
individuals to serve as members of the Board of Directors. The Nominating
Committee expects to continue these efforts through fiscal year 2002. The
Nominating Committee will consider nominees proposed by the stockholders. Any
stockholder who wishes to recommend a prospective nominee for the Board of
Directors for the Nominating Committee's consideration may do so by giving the
candidate's name and qualifications in writing to the Secretary of Inktomi, M/S
FC 2-6, 4100 E. Third Avenue, Foster City, California, 94404.
During fiscal 2001, each director attended 75% or more of the meetings of
the Board of Directors and of the committees of the Board on which the director
served during the period for which he was director or committee member,
respectively.
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DIRECTOR COMPENSATION
Directors do not currently receive any cash compensation from Inktomi for
their service as members of the Board of Directors, although they are reimbursed
for expenses in connection with attendance at Board and Committee meetings.
Under Inktomi's 1998 Stock Plan, nonemployee directors are eligible to receive
stock option grants at the discretion of the Board of Directors or other
administrators of the plan. In September 2001, the Board of Directors granted
options to purchase 35,000 shares of Common Stock at $2.25 per share to each of
Frank C. Gill, Fredric W. Harman, and Alan F. Shugart in connection with their
continued service as members of the Board of Directors. The shares under these
options vest on a monthly basis over 50 months, subject to continued service as
a member of the Board of Directors. In February 2001, Messrs. Gill, Harman and
Shugart agreed to surrender and cancel a total of 268,800 shares in the Stock
Option Exchange Program described below. In return, in August 2001, Mr. Gill
received two option grants for a total of 218,600 shares at $4.21 per share, Mr.
Harman received one option grant for 25,000 shares at $4.21 per share and Mr.
Shugart received one option grant for 25,000 shares at $4.21 per share. Except
for the options granted in the Stock Option Exchange Program and in September
2001, no other options were granted to directors during fiscal 2001.
VOTE REQUIRED
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote.
RECOMMENDATION OF THE BOARD
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ELECTION OF EACH OF THE NOMINEES LISTED ABOVE.
PROPOSAL NO. 2
APPROVAL OF INCREASE OF SHARES OF COMMON STOCK
UNDER THE 1998 EMPLOYEE STOCK PURCHASE PLAN
We are asking Inktomi's stockholders to approve an amendment to the
1998 Employee Stock Purchase Plan that will increase the number of shares of
Common Stock authorized for issuance under the Plan by 800,000 shares in 2002
and up to 800,000 additional shares (or a lesser amount determined by the Board)
on each anniversary date of the Plan through 2008 effective and contingent upon
receipt of stockholder approval. Following approval of this amendment, the
maximum aggregate number of shares reserved for future annual issuance under the
Plan shall not exceed 2,000,000 shares. The Board of Directors approved this
amendment in January 2002.
We believe this amendment to increase the number of shares of Common
Stock authorized for issuance under the Plan is necessary to ensure that a
sufficient reserve of Common Stock is available under the Plan. We also believes
that operation of the Plan is important in attracting and retaining employees in
a competitive labor market, which is essential to our long-term growth and
success.
The essential features of the Plan as amended are summarized below.
This summary does not purport to be a complete description of all the provisions
of the Plan. Any stockholder of Inktomi who wishes to obtain a copy of the
actual Plan document may do so upon written request to the Secretary at
Inktomi's principal executive offices.
GENERAL
The Plan is intended to qualify under Section 423 of the Internal
Revenue Code. It is not a tax-qualified, deferred compensation plan under
Section 401(a) of the Code, nor is it subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA). The purpose of the Plan is to
provide employees (including officers and employee directors) of Inktomi with an
opportunity to purchase Common Stock of Inktomi at a discount to market price
through payroll deductions.
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ADMINISTRATION
The Plan is administered by the Board of Directors of Inktomi or a
committee appointed by the Board. All questions of interpretation or application
of the Plan are determined by the Board of Directors or its appointed committee,
and its decisions are final, conclusive and binding upon all participants.
ELIGIBILITY AND PARTICIPATION
Employees (including officers and employee directors) who are
customarily employed for at least 20 hours per week and more than 5 months per
calendar year with Inktomi and designated subsidiaries of Inktomi are eligible
to participate in the Plan, subject to certain limitations imposed by the
Internal Revenue Code and certain other limitations set forth in the Plan.
Eligible employees become participants in the Plan by filing with the stock
administration department of Inktomi a subscription agreement authorizing
payroll deductions prior to the applicable offering date, unless the
administrator sets a later time for filing the subscription agreement. A
participant's subscription agreement continues to be effective for each
consecutive offering period until the participant withdraws from the Plan or
ceases to be eligible to participate in the Plan.
As of December 31, 2001, approximately 700 employees, including 7
executive officers, were eligible to participate in the Plan. Members of
Inktomi's Board of Directors who are not employees and other non-employees such
as consultants are not eligible to participate. The actual benefits, if any, to
participants in the Plan are not determinable prior to the purchase of shares
thereunder as the value, if any, of such shares to their holders is represented
by the difference between the market price of a share of Inktomi's Common Stock
on the date of the purchase and the purchase price of the shares, as described
below.
OFFERING PERIODS; PURCHASE PRICE
To date, the Plan has been implemented by a series of consecutive
offering periods of twenty-four months commencing on May 1 and November 1 of
each year. Payroll deductions accumulate during six month periods and are
applied at the end of the purchase period to purchase shares of Common Stock.
The price at which shares are purchased is equal to 85% of the lesser of the
fair market value (the closing price on Nasdaq for the applicable day) of the
Common Stock on the first day of the offering period or the fair market value on
the purchase date (the last day of the purchase period).
LIMITATIONS ON PARTICIPATION
Employees are permitted to have up to 15% of their compensation
accumulated and applied toward purchases of shares under the Plan. The
administrator may change this participation rate at any time before the
beginning of an offering period. An employee may not participate in the Plan if,
immediately after he or she joined, he or she (or any other person whose stock
would be attributed to such employee under stock attribution rules of the
Internal Revenue Code) would own stock and/or hold rights to purchase stock
possessing 5% or more of the total combined voting power or value of all classes
of stock of Inktomi or of any subsidiary of Inktomi. The Plan also limits an
employee's rights to purchase stock under all employee stock purchase plans
(those subject to Section 423 of the Code) of Inktomi and its subsidiaries so
that such rights may accrue at a rate that does not exceed $25,000 of fair
market value of such stock (determined at the time the employee begins
participating in the offering period) for each calendar year in which such right
to purchase stock is outstanding at any time.
Inktomi may make a pro rata allocation of the shares remaining
available for option grant if the total number of shares that would otherwise be
subject to options granted at the beginning of an offering period exceeds the
number of remaining available shares in the Plan. Employees may withdraw from
the Plan, and receive back their accumulated payroll deductions, at any time
prior to a purchase date (April 30 and October 31). If any employee does not
withdraw prior to the end of an offering period, he or she will continue to
participate in the next offering period that begins following the end of that
offering period.
9
PAYROLL DEDUCTIONS
The purchase price of the shares to be acquired under the Plan is
accumulated by payroll deductions over an offering period. The deductions may
not be at a rate of more than 15% of a participant's compensation on each payday
during the offering period. The administrator may change the maximum amount that
a participant can contribute at any time before the beginning of an offering
period. A participant may change his or her rate of contribution at anytime
during the offering period. A participant may discontinue his or her
participation in the Plan by withdrawing at any time. When a participant
withdraws, he or she receives back the payroll deductions accumulated under the
Plan, but does not receive interest on such amounts. Amounts contributed to the
Plan are part of Inktomi's general funds and are not required to be segregated.
Payroll deductions for a participant begin with the first full payroll following
the date he or she joins the Plan. To the extent necessary to comply with
Internal Revenue Code provisions and certain purchase limitations of the Plan, a
participant's payroll deductions may be decreased to 0%.
TERMINATION OF EMPLOYMENT OR LOSS OF ELIGIBILITY
Termination of a participant's employment for any reason, including
retirement or death, or the failure of the participant to remain in the
continuous employment of Inktomi for at least 20 hours per week during an
offering period, causes the employee to become ineligible to participate in the
Plan. In such event, payroll deductions credited to the participant's account
will be returned to him or her or, in the case of death, to the person or
persons entitled thereto as provided in the Plan, without interest.
CAPITAL CHANGES
In the event any change is made in Inktomi's capitalization in the
middle of an offering period, such as a stock split or stock dividend, that
results in an increase or decrease in the number of shares of Common Stock
outstanding without receipt of consideration by Inktomi, appropriate adjustment
shall be made in the purchase price and in the number of shares subject to
options under the Plan and to the number of shares authorized for issuance under
the Plan.
In the event of a merger of Inktomi with or into another corporation or
a sale of substantially all of Inktomi's assets, each right to purchase stock
under the Plan will be assumed or an equivalent right substituted by the
successor corporation unless the successor corporation refuses to assume or
substitute for outstanding options, in which case the offering period shall be
shortened so that employees' rights to purchase stock under the Plan will be
automatically exercised prior to the merger or sale of assets (unless the
participant has withdrawn prior to that date). In the event of the proposed
dissolution or liquidation of Inktomi, the offering period will terminate
immediately prior to the consummation of such proposed action.
STOCK
The maximum number of shares of Inktomi's Common Stock which shall be
made available for sale under the Plan shall be 2,000,000 shares upon
stockholder approval, plus an annual increase to be added on each anniversary
date of the adoption of the Plan equal to the lesser of (i) the number of shares
needed to restore the maximum aggregate number of shares available for purchase
under the Plan to 2,000,000 shares approval or (ii) a lesser amount determined
by the Board, subject to adjustment in the case of a change in capitalization of
Inktomi as described above. If, on a given purchase date, the number of shares
with respect to which options are to be exercised exceeds the number of shares
then available under the Plan, Inktomi shall make a pro rata allocation of the
shares remaining available for purchase in as uniform a manner as shall be
practicable and as it shall determine to be equitable.
The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
10
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors may at any time amend or terminate the Plan,
except that any such termination cannot affect rights to purchase stock
previously granted nor may an amendment make any change in an outstanding right
to purchase stock which adversely affects the rights of any participant,
provided that, the Plan or an offering or purchase period may be terminated if
the Board of Directors determines that termination is in the best interests of
Inktomi and the stockholders or if continuation of the Plan and/or the offering
period would cause Inktomi to incur adverse accounting charges.
If not terminated earlier, the Plan will terminate in 2008.
TAX INFORMATION
The Plan, and the right of participants to make purchases thereunder,
is intended to qualify under the provisions of Section 421 and 423 of the Code.
Under these provisions, no income will be taxable to a participant until the
shares purchased under the Plan are sold or otherwise disposed of. If a
participant disposes of his or her shares of Common Stock within the later of
two years from the offering date that applies to the shares (the beginning of
the offering period or the day on which the employee joined the Plan) or within
one year from the purchase date of the shares, a transaction referred to as a
"disqualifying disposition," the participant will realize ordinary income in the
year of such disposition equal to the amount by which the fair market value of
the stock on the purchase date exceeded the purchase price. In such instances,
the amount of such ordinary income will be added to the participant's basis in
the shares, and any additional gain or resulting loss recognized on the
disposition of the shares after such basis adjustment will be a capital gain or
loss. A capital gain or loss will be long-term if the participant holds the
shares of Common Stock for more than one year after the purchase date.
If the participant disposes of his or her shares of Common Stock more
than two years after the offering date of such option and more than one year
after the purchase date of such option, the participant will realize ordinary
income in the year of such disposition equal to the lesser of (i) the excess of
the fair market value of the shares on the date of disposition over the purchase
price or (ii) 15% of the fair market value of the shares on the offering date of
such option. The amount of such ordinary income will be added to the
participant's basis in the shares, and any additional gain recognized on the
disposition of the shares after such basis adjustment will be long-term capital
gain. If the fair market value of the shares on the date of disposition is less
than the purchase price, there will be no ordinary income and any loss
recognized will be a capital loss.
Inktomi will be entitled to a deduction in the year of a disqualifying
disposition equal to the amount of ordinary income recognized by the participant
as a result of such disposition. In all other cases, no deduction is allowed the
Company.
The foregoing is only a summary of the effect of federal income
taxation upon the participants and Inktomi with respect to participation in the
Plan and does not purport to be complete. Furthermore, the foregoing does not
discuss the income tax laws of any municipality, state or foreign country in
which a participant may reside. Participants should consult their own tax
advisors with respect to the tax consequences of participation in the Plan for
their particular situations.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE AMENDMENT TO THE 1998
EMPLOYEE STOCK PURCHASE PLAN.
11
PROPOSAL NO. 3:
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
GENERAL
The Board of Directors has selected the firm of PricewaterhouseCoopers
LLP as Inktomi's independent auditors to audit the financial statements of
Inktomi for the fiscal year ending September 30, 2002, and recommends that
stockholders vote for ratification of this appointment. PricewaterhouseCoopers
LLP has audited Inktomi's financial statements since inception in 1996.
Representatives of PricewaterhouseCoopers LLP are expected to be present at the
meeting and will have the opportunity to make a statement if they desire to do
so, and are expected to be available to respond to appropriate questions.
Stockholder ratification of the selection of PricewaterhouseCoopers LLP
as Inktomi's independent auditors is not required by Inktomi's Bylaws or
otherwise. However, the Board is submitting the selection of
PricewaterhouseCoopers LLP to the stockholders for ratification as a matter of
good corporate practice. If the stockholders fail to ratify the selection, the
Audit Committee and the Board will reconsider whether or not to retain that
firm. Even if the selection is ratified, the Board in its discretion may direct
the appointment of different independent auditors at any time during the year if
it determines that such change would be in the best interests of Inktomi and its
stockholders.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares present
in person or represented by proxy and voting at the Annual Meeting will be
required to ratify the selection of PricewaterhouseCoopers LLP.
RECOMMENDATION OF THE BOARD
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INKTOMI'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2002.
12
MANAGEMENT
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
executive officers of Inktomi as of January 2002:
NAME AGE POSITION
---- --- --------
David C. Peterschmidt.......... 54 Chairman of the Board, President and Chief Executive Officer
Dr. Eric A. Brewer............. 35 Chief Scientist
Timothy J. Burch............... 50 Vice President of Human Resources
Edward A. Hally................ 51 Senior Vice President and General Manager of Network Products
Jerry M. Kennelly.............. 51 Executive Vice President, Chief Financial Officer and Secretary
Robert Allen Shipp............. 45 Senior Vice President, Worldwide Field Operations
Timothy J. Stevens............. 35 Senior Vice President of Business Affairs, General Counsel and Assistant
Secretary
For biographical summaries of David C. Peterschmidt and Dr. Eric A.
Brewer, see "Election of Directors."
Timothy J. Burch joined Inktomi in December 1999 and was appointed Vice
President of Human Resources in January 2000. From 1996 until joining Inktomi,
he was Vice President of Human Resources at Raychem Corporation. From 1973 until
1996, Mr. Burch served in a number of human resources roles at General Electric
Co., serving most recently as Manager of Human Resources, Asia. Mr. Burch holds
a Bachelor of Arts degree in Sociology from Lafayette College.
Edward A. Hally joined Inktomi as Senior Vice President and General
Manager of Network Products in January 2001. From April 1996 until joining
Inktomi, Mr. Hally worked at Motorola, Inc. where he held a number of management
positions in their cellular infrastructure operations. Most recently he was
Corporate Vice President and General Manager of Motorola's GSM Systems Division.
From 1982 to 1996, Mr. Hally served in a number of sales, marketing and business
development roles at Nortel Networks Corporation's European operations. Mr.
Hally holds a Bachelor of Engineering degree in Electrical Engineering from
University College Dublin.
Jerry M. Kennelly joined Inktomi as Vice President of Finance and Chief
Financial Officer in October 1996. He was appointed Senior Vice President, Chief
Financial Officer and Secretary in December 1999 and was later appointed
Executive Vice President, Chief Financial Officer and Secretary in April 2000.
From June 1990 until joining Inktomi, Mr. Kennelly worked for Sybase, Inc. in a
number of senior financial positions. Most recently, he served as Vice President
of Corporate Finance. Mr. Kennelly holds a Bachelor of Arts degree in Political
Economy from Williams College and a Masters degree in Accounting from the New
York University Graduate School of Business Administration. He is also a
Certified Public Accountant.
Robert Allen Shipp joined Inktomi as its Senior Vice President of
Worldwide Field Operations in September 2001. From 1999 to September 2001 Mr.
Shipp held senior management roles at BEA Systems, Inc. including President of
the E-Commerce Server Division and President of Worldwide Sales. From 1982 to
1999, Mr. Shipp worked at IBM in a variety of sales management positions
including Vice President of West Region Software Sales. Mr. Shipp holds a
Bachelor of Science degree in Electrical Engineering from the Rose-Hulman
Institute.
Timothy J. Stevens joined Inktomi as Vice President of Corporate and
Legal Affairs, General Counsel and Assistant Secretary in July 1997. He was
appointed Vice President Business Affairs, General Counsel and Assistant
Secretary in October 2000 and Senior Vice President Business Affairs, General
Counsel and Assistant Secretary in April 2001. Prior to joining Inktomi, Mr.
Stevens was an attorney with Wilson Sonsini Goodrich & Rosati, where he served
as primary outside counsel for more than thirty private and public companies,
specifically in the areas of venture capital and corporate financing, public
offerings, mergers and acquisitions, and securities and intellectual property
law. Mr. Stevens holds Bachelor of Science degrees in Finance and Management
from the University of Oregon and a Juris Doctor degree from the University of
California, Davis.
13
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation earned for services
rendered to Inktomi in all capacities for the fiscal years ended September 30,
2001, 2000, and 1999 by Inktomi's Chief Executive Officer and its four next most
highly compensated executive officers who earned more than $100,000 during the
fiscal year ended September 30, 2001 and two additional individuals for whom
disclosure would have been otherwise provided but for the fact that the
individuals were not serving as executive officers of Inktomi at the end of the
last completed fiscal year (collectively, the "Named Executive Officers").
Certain grants below identified as grants made under the Stock Option Exchange
Program replace cancelled grants from earlier periods. This table does not
reflect the cancellation of the shares that were granted in earlier periods.
LONG-TERM
COMPENSATION
AWARDS
-------------------------------------- -----------
ANNUAL COMPENSATION SECURITIES
-------------------------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER OPTIONS
--------------------------- ---- --------- --------- --------- -------------
David C. Peterschmidt ................................ 2001 $ 400,000 $ 132,935 500,000
Chairman of the Board, President and 1,472,000(1)
Chief Executive Officer 2000 325,000 394,070 1,200,000
1999 250,000 258,963 400,000
Jerry M. Kennelly .................................... 2001 300,000 113,305 460,000
Executive Vice President, Chief Financial Officer 400,000(1)
and Secretary 2000 240,000 136,750 250,000
1999 220,000 88,751 150,000
Timothy J. Burch(2) .................................. 2001 240,000 44,167 100,000
Vice President, Human Resources 250,000(1)
2000 164,487 53,822 275,000
1999 -- -- --
Timothy J. Stevens ................................... 2001 220,000 73,339 220,000
Senior Vice President of Business Affairs, 210,000(1)
General Counsel, and Assistant Secretary 2000 185,000 82,660 150,000
1999 155,208 47,766 60,000
Edward A. Hally(3) ................................... 2001 225,000 83,111 300,000(4) 640,000
Senior Vice President and General Manager, 2000 -- -- --
Network Products 1999 -- -- --
Kirk Bowman(5) ....................................... 2001 224,539 411,366 233,800(6) 567,000(1)
Former Senior Vice President and General Manager of 2000 216,461 168,435 675,000
World Wide Field Operations 1999 -- -- --
Richard B. Pierce(7) ................................. 2001 234,582 68,944 540,000(1)
Former Executive Vice President 2000 275,000 231,829 400,000
1999 210,000 125,616 200,000
--------------
(1) These shares were issued as part of Inktomi's Stock Option Exchange
Program and are in replacement of options that were previously cancelled.
Inktomi's Stock Option Exchange Program is described in detail below
under the heading "Stock Option Exchange Program."
(2) Mr. Burch joined Inktomi in November 1999 and was elected an officer in
January 2000.
(3) Mr. Hally joined Inktomi in January 2001.
(4) Mr. Hally received a sign-on bonus upon joining Inktomi.
(5) Mr. Bowman joined Inktomi in November 1999 and was elected an officer in
January 2000. His employment with Inktomi terminated in June 2001.
(6) This amount reflects severance paid to Mr. Bowman in connection with his
termination.
(7) Mr. Pierce's employment with Inktomi terminated in June 2001 and he
entered into a consulting relationship with Inktomi that terminates in
June 2002.
14
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with respect to stock
options granted to each of the Named Executive Officers during the fiscal year
ended September 30, 2001. In accordance with the rules of the Securities and
Exchange Commission, also shown below is the potential realizable value over the
term of the option (the period from the grant date to the expiration date) based
on assumed rates of stock appreciation of 5% and 10%, compounded annually. These
amounts are based on certain assumed rates of appreciation and do not represent
Inktomi's estimate of future stock price. Actual gains, if any, on stock option
exercises will be dependent on the future performance of the Common Stock.
Certain grants below identified as grants made under the Stock Option Exchange
Program replace cancelled grants from earlier periods. This table does not
reflect the cancellation of the shares that were granted in earlier periods.
-----------------------------
POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES PERCENT OF ANNUAL RATES OF STOCK
UNDERLYING TOTAL OPTIONS PRICE APPRECIATION FOR
OPTIONS GRANTED TO OPTION TERM(3)
----------- EMPLOYEES IN EXERCISE EXPIRATION ----------------------------
NAME GRANTED FISCAL YEAR(1) PRICE(2) DATE 5% 10%
---- ----------- -------------- -------- ---------- ----------- -----------
David C. Peterschmidt ........ 500,000(4) 2.0% $ 2.25 9/21/11 $ 4,604,842 $11,669,574
1,472,000(5) 5.9 4.21 8/29/11
Jerry M. Kennelly ............ 300,000(4) 1.2 2.25 9/21/11 1,396,364 4,019,786
160,000(6) 0.6 4.21 9/21/11
400,000(5) 1.6 4.21 8/29/11
Timothy J. Burch ............. 100,000(4) 0.4 2.25 9/21/11 803,413 2,036,006
250,000(5) 1.0 4.21 8/29/11
Edward A. Hally .............. 300,000(4) 1.2 2.25 9/21/11 2,821,976 7,151,441
40,000(7) 0.2 7.18 5/14/11
300,000(8) 1.2 11.75 1/8/11
Timothy J. Stevens ........... 100,000(4) 0.4 2.25 9/21/11 834,527 2,355,416
80,000(6) 0.3 4.21 9/21/11
40,000(7) 0.2 7.18 5/14/11
210,000(5) 0.8 4.21 8/29/11
Kirk Bowman .................. 567,000(5) 2.3 4.21 8/29/11 1,501,215 3,804,375
Richard B. Pierce ............ 540,000(5) 2.2 4.21 8/29/11 1,429,729 3,623,214
--------------
(1) Based on an aggregate of 24,988,023 options granted by Inktomi during the
fiscal year ended September 30, 2001 to employees, including the Named
Executive Officers. 10,599,989 options were issued in replacement of
options previously granted under Inktomi's Stock Option Plans which were
cancelled pursuant to Inktomi's Stock Option Exchange Program. The Stock
Option Exchange Program is described below under the heading "Stock
Option Exchange Program".
(2) The exercise price per share of each option was equal to the closing
price of Inktomi's Common Stock on the date of grant by the Board of
Directors.
(3) The potential realizable value is calculated based on the term of the
option at its time of grant (ten years). It is calculated assuming that
the fair market value of the Common Stock on the date of grant
appreciates at the indicated annual rate compounded annually for the
entire term of the option and that the option is exercised and sold on
the last day of its term for the appreciated stock price.
(4) Option was granted under Inktomi's 1998 Stock Plan. All shares under the
option are immediately exercisable; however, as a condition of exercise,
the optionee must enter into a stock restriction agreement giving Inktomi
the right in the event of any termination of employment to repurchase all
then unvested shares at cost. The shares vest over 50 months beginning
September 2001.
(5) Shares were granted in the replacement of options that were cancelled as
a result of Inktomi's Stock Option Exchange Program. Options were granted
under Inktomi's 1998 Stock Plan. All shares under the option are
immediately exercisable; however, as a condition of exercise, the
optionee must enter into a stock restriction agreement giving Inktomi the
right in the event of any termination of employment to repurchase all
then unvested shares at cost. The shares vest over 50 months, retaining
the original vesting schedule.
15
(6) Option was granted under Inktomi's 1998 Stock Option Plan. All shares
under the option are immediately exercisable; however, as a condition of
exercise, the optionee must enter into a stock restriction agreement
giving Inktomi the right in the event of any termination of employment to
repurchase all then unvested shares at cost. The shares vest over 50
months beginning September 1998.
(7) Option was granted under Inktomi's 1998 Stock Plan. All shares under the
option are immediately exercisable; however, as a condition of exercise,
the optionee must enter into a stock restriction agreement giving Inktomi
the right in the event of any termination of employment to repurchase all
then unvested shares at cost. The shares cliff vest in full 12 months
following grant in June 2001.
(8) Option was granted under Inktomi's 1998 Stock Plan. All shares under the
option are immediately exercisable; however, as a condition of exercise,
the optionee must enter into a stock restriction agreement giving Inktomi
the right in the event of any termination of employment to repurchase all
then unvested shares at cost. The shares vest over 50 months beginning
January 2001.
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the Named
Executive Officers concerning option exercises for the fiscal year ended
September 30, 2001 and exercisable and unexercisable options held as of
September 30, 2001.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES SEPTEMBER 30, 2001 SEPTEMBER 30, 2001(2)
ACQUIRED VALUE ------------------------------ ----------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
David C. Peterschmidt ........ -- -- 4,100,800(3) -- $4,791,744 --
Jerry M. Kennelly ............ -- -- 1,020,000(4) -- 147,000 --
Timothy J. Burch ............. -- -- 350,000(5) -- 49,000 --
Edward A. Hally .............. -- -- 640,000(6) -- 147,000 --
Timothy J. Stevens ........... -- -- 510,000(7) -- 49,000 --
Kirk Bowman .................. -- -- 567,000(8) -- -- --
Richard B. Pierce ............ -- -- 740,000(9) -- -- --
--------------
(1) Based upon the market price of the purchased shares on the exercise date
less the option exercise price paid for such shares.
(2) Based on a value of $2.74 per share, the closing price of Inktomi's stock
on the Nasdaq National Market on September 28, 2001, minus the per share
exercise price, multiplied by the number of shares underlying the option.
(3) Includes an option to purchase 3,934,136 shares of Common Stock of which
2,205,336 shares have been exercised, an option to purchase 400,000
shares of Common Stock, an option to purchase 272,000 shares of Common
Stock, an option to purchase 1,200,000 shares of Common Stock, and an
option to purchase 500,000 shares of Common Stock. All shares under the
options are immediately exercisable; however, as a condition of exercise,
the optionee must enter into a stock restriction agreement giving Inktomi
the right in the event of any termination of employment to repurchase all
then unvested shares at cost. For the first option of 3,934,136 shares,
4% of the shares were vested on August 1, 1996 and 4% of the shares
vested monthly thereafter. For the option of 400,000 shares, 2% of the
shares were vested on September 30, 2001, and an additional 2% of the
shares become vested monthly thereafter. For the option of 272,000
shares, 2% of the shares were vested on August 1, 1999, and an additional
2% of the shares become vested monthly thereafter. For the option for
1,200,000 shares, 2% of the shares vested on August 1, 2000, and an
additional 2% of the shares become vested monthly thereafter. For the
option for 500,000 shares, 2% of the shares vested on October 1, 2001,
and an additional 2% of the shares become vested monthly thereafter.
(4) Includes an option to purchase 160,000 shares of Common Stock, a second
option to purchase 150,000 shares of Common Stock, a third option to
purchase 250,000 shares of Common Stock, a fourth option to purchase
160,000 shares and a fifth option to purchase 300,000 shares. All shares
under the options are immediately exercisable; however, as a condition of
exercise, the optionee must enter into a stock restriction agreement
giving Inktomi the right in the event of any termination of employment to
repurchase all then unvested shares at cost. For the first option, 2% of
the shares vested on September 30, 2001, and an additional 2% of the
shares become vested monthly thereafter. For the second option, 2% of the
shares vested on August 1, 1999 and an additional 2% of the shares become
vested monthly thereafter. For the third option, 2% of the shares
16
vested on August 1, 2000 and an additional 2% of the shares become vested
monthly thereafter. For the fourth option, 2% of the shares vested on
October 1, 1998 and an additional 2% of the shares become vested monthly
thereafter. For the fifth option, 2% of the shares vested on October 1,
2001 and an additional 2% of the shares become vested monthly thereafter.
(5) Includes an option to purchase 175,000 shares of Common Stock, a second
option for 75,000 shares of Common Stock and a third option to purchase
100,000 shares of Common Stock. All shares under the options are
immediately exercisable; however, as a condition of exercise, the
optionee must enter into a stock restriction agreement giving Inktomi the
right in the event of any termination of employment to repurchase all
then unvested shares at cost. For the first option, 25% of the shares
vested on August 29, 2001, and an additional 2% of the remaining shares
become vested monthly thereafter. For the second option, 2% of the shares
vested on August 1, 2000 and an additional 2% of the shares become vested
monthly thereafter. For the third option, 2% of the shares vested on
October 1, 2001 and an additional 2% of the shares become vested monthly
thereafter.
(6) Includes two options to purchase 300,000 shares of Common Stock each and
a third option to purchase 40,000 shares of Common Stock. All shares
under the options are immediately exercisable; however, as a condition of
exercise, the optionee must enter into a stock restriction agreement
giving Inktomi the right in the event of any termination of employment to
repurchase all then unvested shares at cost. For the first option of
300,000 shares, 12% of the shares vested on July 8, 2001 and an
additional 2% of the shares become vested monthly thereafter. For the
second option of 300,000 shares, 2% of the shares vested on October 1,
2001 and an additional 2% of the shares become vested monthly thereafter.
For the third option of 40,000 shares, 100% of the shares become vested
on June 1, 2002.
(7) Includes an option to purchase 80,000 shares of Common Stock, a second
option to purchase 40,000 shares of Common Stock, a third option to
purchase 60,000 shares of Common Stock, a fourth option to purchase
150,000 shares of Common Stock, a fifth option to purchase 80,000 shares
of Common Stock and a sixth option to purchase 100,000 shares of Common
Stock. All shares under the options are immediately exercisable; however,
as a condition of exercise, the optionee must enter into a stock
restriction agreement giving Inktomi the right in the event of any
termination of employment to repurchase all then unvested shares at cost.
For the first option, 2% of the shares vested on September 30, 2001, and
an additional 2% of the shares become vested monthly thereafter. For the
second option, 100% of the shares become vested on June 1, 2002. For the
third option, 2% of the shares vested on August 1, 1999 and an additional
2% of the shares become vested monthly thereafter. For the fourth option,
2% of the shares vested on August 1, 2000 and an additional 2% of the
shares become vested monthly thereafter. For the fifth option, 2% of the
shares vested on October 1, 1998 and an additional 2% of the shares
become vested monthly thereafter. For the sixth option, 2% of the shares
vested on October 1, 2001 and an additional 2% of the shares become
vested monthly thereafter.
(8) Includes an option to purchase 75,000 shares of Common Stock, and a
second option to purchase 492,000 shares of Common Stock. All shares
under the options are immediately exercisable; however, as a condition of
exercise, the optionee must enter into a stock restriction agreement
giving Inktomi the right in the event of any termination of employment to
repurchase all then unvested shares at cost. For the first option, 2% of
the shares vested on August 1, 2000, and an additional 2% of the shares
become vested monthly thereafter. For the second option, 32% of the
shares vested on August 29, 2001 and an additional 2% of the shares
become vested monthly after December 31, 2001. Mr. Bowman terminated his
consulting position with the Company on December 31, 2001.
(9) Includes an option to purchase 200,000 shares of Common Stock, a second
option to purchase 400,000 shares of Common Stock and a third option to
purchase 140,000 shares of Common Stock. All shares under the options are
immediately exercisable; however, as a condition of exercise, the
optionee must enter into a stock restriction agreement giving Inktomi the
right in the event of any termination of employment to repurchase all
then unvested shares at cost. For the first option, 2% of the shares
become vested on September 30, 2001, and an additional 2% of the shares
become vested monthly thereafter. For the second option, 2% of the shares
become vested on August 1, 2000 and an additional 2% of the shares become
vested monthly thereafter. For the third option, 57% of the shares become
vested on August 29, 2001 and an additional 2% of the shares become
vested monthly after June 30, 2002.
17
STOCK OPTION EXCHANGE PROGRAM
In February 2001, Inktomi's Board of Directors approved a Stock Option
Exchange program. Under this program, all employees (including executive
officers and outside directors) were given the opportunity to cancel one or more
stock options previously granted to them in exchange for one or more new stock
options to be granted at least six months and one day from the date the old
options are cancelled, provided the individual is still employed or providing
service on such date. The participation deadline for the program was February
28, 2001. The number of shares subject to the new options was equal to the
number of shares subject to the old options, and the exercise price of the new
options was the fair market value of Inktomi Common Stock on the date they were
granted. The new options have the same vesting schedule as the old options and
will be immediately exercisable as to vested shares when granted (however, new
options granted to executive officers and outside directors will lose three
months of vesting and be subject to a trading blackout of three months following
the grant). Officers cancelled a total of 3,439,000 shares in the Stock Option
Exchange Program with option prices ranging between $42.30 and $116.50, and
non-employee Directors cancelled a total of 268,800 shares with option prices
ranging between $27.44 and $116.50. Each of these cancelled options was replaced
with a new stock option in August 2001 with an option price of $4.21 per share.
The following table sets forth certain information with respect to the
participation of the Named Executive Officers in Inktomi's Stock Option Exchange
Program during the fiscal year ended September 30, 2001:
EXECUTIVE OFFICER STOCK OPTION EXCHANGES
SECURITIES
UNDERLYING TERMINATION
DATE ORIGINAL NUMBER OF MARKET PRICE OF EXERCISE PRICE DATE EXCHANGE DATE OF ORIGINAL
STOCK OPTIONS OPTIONS STOCK AT TIME OF AT TIME OF STOCK OPTIONS NEW EXERCISE OPTION AT DATE
NAME CANCELLED EXCHANGED CANCELLATION(1) CANCELLATION GRANTED PRICE(2) OF CANCELLATION
----------------------- ------------ ------------ ---------------- -------------- ---------- ------------ ---------------
David C. Peterschmidt.. 2/28/01 272,000 $11.31 $42.38 8/29/01 $4.21 6/15/09
2/28/01 1,200,000 $11.31 $116.75 8/29/01 $4.21 6/15/10
Jerry M. Kennelly...... 2/28/01 150,000 $11.31 $42.38 8/29/01 $4.21 6/15/09
2/28/01 250,000 $11.31 $116.75 8/29/01 $4.21 6/15/10
Timothy J. Burch....... 2/28/01 175,000 $11.31 $59.50 8/29/01 $4.21 12/2/09
2/28/01 75,000 $11.31 $116.75 8/29/01 $4.21 6/15/10
Timothy J. Stevens..... 2/28/01 60,000 $11.31 $42.38 8/29/01 $4.21 6/15/09
2/28/01 150,000 $11.31 $116.75 8/29/01 $4.21 6/15/10
Kirk Bowman............ 2/28/01 492,000 $11.31 $53.66 8/29/01 $4.21 11/5/09
2/28/01 75,000 $11.31 $116.75 8/29/01 $4.21 6/15/10
Richard B. Pierce...... 2/28/01 140,000 $11.31 $42.38 8/29/01 $4.21 6/15/09
2/28/01 400,000 $11.31 $116.75 8/29/01 $4.21 6/15/10
(1) Market price of Common Stock at time of cancellation was the closing price
of our Common Stock on the date of cancellation, February 28, 2001.
(2) New exercise price was determined by using the closing price of our Common
Stock on the date the new stock options were granted under the Stock Option
Exchange Program, August 29, 2001.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL PLANS AND
AGREEMENTS
Inktomi has an employment agreement with David C. Peterschmidt, its
President and Chief Executive Officer. The agreement provides for an initial
annual salary of $150,000. The agreement is for no specified length of term, and
either party has the right to terminate the agreement at any time with or
without cause. The agreement does not provide for any mandatory severance,
although Inktomi has the right to continue to pay Mr. Peterschmidt his then
current salary for up to 12 months following termination of employment, in which
case Mr. Peterschmidt may not compete against Inktomi for such time period.
Inktomi has an employment agreement with Edward A. Hally, Senior Vice
President and General Manager of Network Products. The agreement is for no
specified length of term, and either party has the right to terminate the
agreement at any time with or without cause. The agreement provides that if Mr.
Hally is terminated without cause then he shall be entitled to continue
receiving pay at his then current monthly salary for a period of six months from
the date of termination. The agreement also provides that should Mr. Hally be an
employee in good standing on January 12, 2005 and if the "Gross Exercise Value"
of all of his exercised and exercisable options does not exceed $1.5 million,
then Inktomi shall pay Mr. Hally as a bonus the difference between $1.5 million
and the Gross Exercise Value. Gross Exercise Value (i) for exercised stock
options shall equal the spread between the exercise price of such stock options
and the issuance price after deductions for taxes; and (ii) for exercisable
stock options shall equal the spread between the price of Inktomi's common stock
at the close of trading on January 12, 2005 and the issuance price after
deductions for taxes.
Under each of Inktomi's stock option plans, all shares under the options
are immediately exercisable; however, as a condition of exercise, the optionee
must enter into a stock restriction agreement giving Inktomi the right in the
event of any termination of employment to repurchase all then unvested shares.
Each of Inktomi's stock option plans also provide that each outstanding option
will fully vest in the event an optionee is terminated from employment without
cause within twelve months of a change of control of Inktomi.
Each of the executive officers of Inktomi have entered into Management
Retention and Change of Control Agreements that provide for full vesting of all
outstanding options and restricted stock in the event such executive is
constructively terminated within twelve months of a change of control of
Inktomi.
FEES BILLED FOR SERVICES RENDERED BY PRINCIPAL ACCOUNTANT
For the fiscal year ended September 30, 2001, PricewaterhouseCoopers LLP, our
independent auditor and principal accountant, billed the approximate fees set
forth below.
Audit Fees $ 280,000
Financial Information Systems Design and Implementation Fees $ 275,000
All Other Fees $1,012,000
18
The Audit Committee considered and determined that the accountant's
provision of information technology services (financial information systems
design and implementation) and other non-audit services is compatible with the
accountant's independence. All Other Fees includes fees for audit work in
connection with merger and acquisition activities and our shelf offering of
Common Stock and fees for work related to tax issues.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors currently consists
of Frank C. Gill, Fredric W. Harman and Alan F. Shugart, all of whom are outside
directors of Inktomi. The Compensation Committee reviews and recommends to the
Board of Directors the compensation and benefits of all officers of Inktomi and
establishes and reviews general policies relating to compensation and benefits
of employees of Inktomi. The following is the report of the Compensation
Committee describing compensation policies and rationale applicable to Inktomi's
executive officers with respect to the compensation paid to such executive
officers for the fiscal year ended September 30, 2001. The information contained
in this report, as well as the information contained in the stock price
performance graph which follows, shall not be deemed to be "soliciting material"
or to be "filed" with the Securities and Exchange Commission, nor shall such
information be incorporated by reference into any future filing under the
Securities Act of 1933, as amended, or the 1934 Securities Exchange Act, as
amended, except to the extent that Inktomi specifically incorporates such
information by reference in such filing.
COMPENSATION PHILOSOPHY AND REVIEW
Inktomi's executive compensation program is designed to align the
interests of executives with the interests of stockholders and to reward
executives for achieving corporate and individual objectives. The executive
compensation program is also designed to attract and retain the services of
qualified executives in the highly competitive Internet and computer networking
marketplaces. Executive compensation currently consists of a base salary,
quarterly incentive plan, long-term equity incentives, and other compensation
and benefit programs generally available to other employees.
The Compensation Committee has considered the potential impact of Section
162(m) of the Internal Revenue Code on the compensation paid to Inktomi's
executive officers. Section 162(m) disallows a tax deduction for any
publicly-held corporation for individual compensation exceeding $1.0 million in
any taxable year for any of the executive officers, unless compensation is
performance-based. In general, it is the Compensation Committee's policy to
qualify, to the maximum extent possible, its executives' compensation for
deductibility under applicable tax laws.
BASE SALARIES
Base salary levels for the Chief Executive Officer and other executive
officers are intended to compensate executives competitively within the
high-technology marketplace. Base salaries are determined on an individual basis
by evaluating each executive's scope of responsibility, past performance, prior
experience and data on prevailing compensation levels in relevant markets for
executive talent. Regarding the latter measure, certain companies included in
the peer group index of the stock performance graph are also included in surveys
reviewed by the Compensation Committee in determining salary levels for the CEO
and other executive officers of Inktomi. Base salaries for executives are
reviewed annually by the Compensation Committee.
QUARTERLY INCENTIVE PLAN
Inktomi provides quarterly incentive bonuses for its executive officers
as well as other key management employees. The quarterly incentive plan is
intended to provide a direct link between management compensation and the
achievement of corporate, divisional and individual objectives. The level of
bonus is based as a percentage of the base salary for the manager for the year.
At the beginning of each quarter, Inktomi sets certain corporate objectives
(including financial performance goals), each business unit sets certain
divisional objectives and each individual manager sets his or her own personal
objectives to support the achievement of the corporate and divisional
objectives. At the end of the quarter, performance is assessed and the level of
bonus payable, if any, is determined. Achievement of corporate and divisional
objectives is given more weight than achievement of individual objectives for
purposes of determining the quarterly bonus.
19
LONG-TERM EQUITY INCENTIVES
Inktomi provides long-term equity incentives to its executive officers
and to all other employees through the grant of stock options under its stock
option plans. The purpose of granting stock options is to create a direct link
between compensation and the long-term performance of Inktomi. Stock options are
generally granted at an exercise price equal to 100% of the fair market on the
date of grant, have a ten year term and generally vest in installments over 50
months. Because the receipt of value by an executive officer under a stock
option is dependent upon an increase in the price of Inktomi's Common Stock,
this portion of the executives' compensation is directly aligned with an
increase in stockholder value. The primary stock options granted to executive
officers are generally in conjunction with the executive officer's acceptance of
employment with Inktomi. When determining the number of stock options to be
awarded to an executive officer, the Compensation Committee considers the
executive's position, skills and experience, the executive's role in defining
and meeting Inktomi's long-term strategic performance goals, the needs of the
company in light of business and economic conditions and comparisons to formal
and informal surveys of executive stock option grants made by other enterprise
software and computer networking companies. The Compensation Committee also
reviews stock option levels for executive officers periodically in light of the
current business environment, long-term strategic and performance objectives and
each executive's current and anticipated contributions to Inktomi's future
performance. Reflecting the challenging economic times, the desire to preserve
continuity in management and the changing scope of Inktomi's business, the
Compensation Committee recommended (and the full Board of Directors granted)
stock option grants in September 2001 for the CEO of 500,000 shares and for the
other Named Executive Officers of an aggregate of 1,115,000 shares. These
options vest monthly over 50 months beginning as of September 1, 2001. Two
additional grants were awarded to Mr. Kennelly and Mr. Stevens at above fair
market value in September 2001. These shares vest monthly over 50 months
beginning as of September 1, 1998.
OTHER COMPENSATION
Inktomi's executive officers are also eligible to participate in
compensation and benefit programs generally available to other employees,
including Inktomi's Employee Stock Purchase Plan. In addition, from time to
time, executive officers have received sign-on bonuses or other bonuses based on
extraordinary effort.
CEO COMPENSATION
David C. Peterschmidt is President, CEO and Chairman of the Board of
Directors. The Compensation Committee reviews Mr. Peterschmidt's compensation
annually using the same criteria and policies as are employed for other
executive officers. Mr. Peterschmidt's compensation was initially determined in
part by the terms of an employment agreement entered into upon his acceptance of
employment with Inktomi in July 1996. See "Management--Employment Contracts,
Termination of Employment and Change of Control Plans and Agreements" above.
However, the Compensation Committee retains the discretion to increase Mr.
Peterschmidt's compensation to levels above those provided in the employment
agreement. Mr. Peterschmidt received his first increase in base salary from
$150,000 during fiscal 1998 to $250,000 for fiscal 1999. His salary was
increased to $325,000 for the 2000 fiscal year and was further increased to
$400,000 for the 2001 fiscal year. The Compensation Committee set Mr.
Peterschmidt's salary for the 2001 fiscal year in September of 2000, a period in
which Inktomi was experiencing substantial growth and had not yet experienced
the economic downturn that encompassed much of fiscal year 2001. The
Compensation Committee at the time based its decision to increase Mr.
Peterschmidt's base salary on a variety of factors, including his leadership
skills, the increasing scope and responsibility of the CEO office and
comparisons of CEO compensation levels for companies of similar size and
maturity. Mr. Peterschmidt received bonuses under Inktomi's quarterly incentive
plan equal to 42% of his base salary for fiscal 2001, or $169,587. This bonus
was substantially less than received by Mr. Peterschmidt in each of the two
previous fiscal years reflecting the financial downturn Inktomi encountered in
the 2001 fiscal year and the correlation between bonuses under the quarterly
incentive plan and the financial performance of Inktomi. In addition, he
received stock option grants in fiscal 2001 as described above.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS:
Frank C. Gill
Fredric W. Harman
Alan F. Shugart
20
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Gill, Harman and Shugart served as members of the Compensation
Committee of the Board of Directors of Inktomi during fiscal 2001. None of these
individuals was an officer or employee of Inktomi or of any of its subsidiaries
during fiscal 2001. Mr. Peterschmidt participates in the discussions and
decisions regarding salaries and incentive compensation for all executive
officers of Inktomi, except that Mr. Peterschmidt is excluded from discussions
regarding his own salary and incentive compensation.
In September 2001, the Board of Directors granted options to purchase
35,000 shares of Common Stock at $2.25 per share to each of Frank C. Gill,
Fredric W. Harman and Alan F. Shugart in connection with their continued service
as members of the Board of Directors. The shares under these options vest on a
monthly basis over 50 months, subject to continued service as a member of the
Board of Directors. In February 2001 Messrs. Gill, Harman and Shugart agreed to
surrender and cancel a total of 268,800 shares in the Stock Option Exchange
Program described above and in return, in August 2001, Mr. Gill received two
option grants for a total of 218,600 shares at $4.21 per share, Mr. Harman
received one option grant for 25,000 shares at $4.21 per share and Mr. Shugart
received one option grant for 25,000 shares at $4.21 per share.
In August 1999, Inktomi, certain venture capital funds affiliated with
Oak Investment Partners and Mr. Peterschmidt made investments in Campus
Pipeline, a privately held provider of online services that connects students,
faculty, staff, administrators, prospective students and alumni with their
campus community, academic resources and administrative services. Inktomi
invested $100,000 and purchased 16,461 shares of Series A Preferred Stock, the
Oak Investments venture capital funds invested $9.2 million and purchased
1,514,407 shares of Series A Preferred Stock, and Mr. Peterschmidt invested $3.9
million and purchased 638,438 shares of Series A Preferred Stock. Mr. Harman is
a Managing Member of certain entities that are the General Partners of the Oak
Investments venture capital funds. Mr. Peterschmidt and Mr. Harman each joined
the Board of Directors of Campus Pipeline in connection with their investments.
In September 1999, Inktomi and Campus Pipeline entered into a portal services
agreement under which Inktomi provided Commerce Engine Services to Campus
Pipeline for integration into its online campus platform. In March 2001, Inktomi
sold its Commerce Engine to a third party and therefore Inktomi has no ongoing
commercial relationship with Campus Pipeline. In fiscal year 2001 Inktomi
received no revenue from Campus Pipeline.
Dr. Eric A. Brewer is the founder and Chairman of The Federal Search
Foundation, a private, non-profit organization formed to establish the search
engine behind the first Federal Government web portal. During the last fiscal
year, The Federal Search Foundation expanded their scope of web search services,
and purchased web search products from Inktomi totaling $183,300 in fiscal year
2001.
David C. Peterschmidt serves as a director of Portal Software, Inc.
During the last fiscal year, Inktomi bought consulting services and software
from Portal Software, Inc., in the amount of approximately $90,246.
21
BOARD AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors, currently consists of
Frank C. Gill, Frederic W. Harman and Alan F. Shugart, all of whom are
independent as that term is defined in Rule 4200(a)(14) of the National
Association of Securities Dealers' listing standards. The Audit Committee
assists the Board of Directors in fulfilling its responsibility for oversight of
the quality and integrity of the accounting, auditing and reports practices of
Inktomi and such other duties as directed by the Board of Directors. The Audit
Committee reviewed and discussed Inktomi's audited Consolidated Financial
Statements for the fiscal year ended September 30, 2001 with Inktomi's
management. The Audit Committee also discussed with PricewaterhouseCoopers LLP,
Inktomi's independent accountants, the auditor's responsibilities, any
significant issues arising during the audit, and other matters required to be
discussed by SAS 61. The Audit Committee received the written disclosures and
the letter from the independent accountants required by Independence Standards
Board Standard No. 1, and has discussed with the independent accountants the
independent accountants' independence. Based on its review and the discussions
noted above, the Audit Committee recommended to the Board of Directors that
Inktomi's Consolidated Financial Statements for the fiscal year ended September
30, 2001 be included in Inktomi's Annual Report on Form 10-K for the fiscal year
ended September 30, 2001 for filing with the Securities and Exchange Commission.
RESPECTFULLY SUBMITTED BY THE AUDIT COMMITTEE:
Frank C. Gill
Fredric W. Harman
Alan F. Shugart
CERTAIN RELATED TRANSACTIONS
Certain other transactions are described under the caption "Compensation
Committee Interlocks and Insider Participation."
In April 2001, Inktomi provided Edward Hally, Senior Vice President and
General Manager of Network Products, a relocation loan in the amount of $1.7
million dollars, in connection with his relocation to the San Francisco Bay
Area. The loan, plus any accrued unpaid interest, will be due in April 2005. If
employment ends before April 2005, accrued interest will be due annually
starting December 31st of the year following the year in which the separation
became effective. This note accrues interest at the rate of 4.94% per annum.
In December 2001, Inktomi provided two loans to David Peterschmidt, Chief
Executive Officer, President and Chairman of the Board, totaling $4.7 million,
of which $2.7 million has been repaid. These loans are represented by full
recourse promissory notes accruing interest at the rate of 6% per annum. The
remaining balance, of $2.0 million plus any accrued unpaid interest, will become
due in December 2003.
Each of the executive officers of Inktomi have entered into Management
Retention and Change of Control Agreements that provide for full vesting of all
outstanding options and restricted stock in the event such executive is
constructively terminated within twelve months of a change of control of
Inktomi.
All future transactions, including any loans from Inktomi to its
officers, directors, principal stockholders or affiliates, will be approved by a
majority of the Board of Directors, including a majority of the independent and
disinterested members of the Board of Directors or, if required by law, a
majority of disinterested stockholders, and will be on terms no less favorable
to Inktomi than could be obtained from unaffiliated third parties.
22
STOCK PRICE PERFORMANCE
The following graph shows a comparison of cumulative total stockholder
returns for Inktomi's Common Stock, the Nasdaq Stock Market Index for U.S.
Companies, the JP Morgan Hambrecht & Quist Internet 100 Index and the JP Morgan
Hambrecht & Quist Technology Index. The graph assumes the investment of $100 on
June 10, 1998, the date of Inktomi's initial public offering. The data regarding
Inktomi assumes an investment at the initial public offering price of $4.50 per
share of Inktomi's Common Stock (adjusted for all stock splits subsequent to
June 9, 1998). The performance shown is not necessarily indicative of future
performance.
COMPARISON OF 3 YEAR CUMULATIVE TOTAL RETURN*
AMONG INKTOMI CORPORATION, NASDAQ STOCK MARKET (U.S.) INDEX,
THE JP MORGAN H & Q INTERNET 100 INDEX
AND THE JP MORGAN H & Q TECHNOLOGY INDEX
[PERFORMANCE GRAPH]
Cumulative Total Return
---------------------------------------------------------------
6/10/98 9/98 9/99 9/00 9/01
------- ------ ------ ------- ------
INKTOMI CORP ...................... 100.00 209.03 666.84 1266.67 30.44
NASDAQ STOCK MARKET (U.S.) ........ 100.00 96.88 158.28 210.15 85.89
JP MORGAN H & Q INTERNET 100 ...... 100.00 98.83 305.75 441.18 103.01
JP MORGAN H & Q TECHNOLOGY ........ 100.00 93.77 180.61 294.06 97.57
*$100 INVESTED ON 6/10/98 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING SEPTEMBER 30.
23
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Inktomi's
executive officers and directors, and persons who own more than 10% of a
registered class of Inktomi's equity securities, to file certain reports
regarding ownership of, and transactions in, Inktomi's securities with the
Securities and Exchange Commission. Such executive officers, directors and 10%
stockholders are also required by Securities and Exchange Commission rules to
furnish Inktomi with copies of all Section 16(a) forms that they file. Based
solely on its review of the copies of such forms received by it, or written
representations from certain reporting persons, Inktomi believes that for the
fiscal year ended September 30, 2001, all reporting persons complied with
Section 16(a) filing requirements except for the following: (i) Mr. Hally failed
to file a form 3 report on a timely basis and (ii) Mr. Brewer failed to file a
form 4 report covering one transaction on a timely basis.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of Inktomi which are intended to be presented
by such stockholders at Inktomi's 2003 Annual Meeting of Stockholders must be
received by Inktomi no later than October 10, 2002 to be included in the proxy
statement and form of proxy relating to that meeting. Please send any such
proposals to Inktomi Corporation, 4100 East Third Avenue, Foster City,
California 94404, Attn: Investor Relations, with a copy to the attention of
Inktomi's General Counsel.
FORM 10-K
Inktomi will mail without charge, upon written request, a copy of
Inktomi's Annual Report on Form 10-K for the fiscal year ended September 30,
2001, including the financial statements, schedules, and a list of exhibits.
Requests should be sent to Inktomi Corporation, 4100 East Third Avenue, Foster
City, California 94404, Attn: Investor Relations.
OTHER MATTERS
The Board of Directors knows of no other matters to be submitted to the
meeting. If any other matters properly come before the meeting, then the persons
named in the enclosed form of proxy will vote the shares they represent in such
manner as the Board may recommend.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ TIM STEVENS
------------------------------------------
Tim Stevens
Senior Vice President of Business Affairs,
General Counsel and Assistant Secretary
Foster City, California
February 5, 2002
24
EXHIBIT A
INKTOMI CORPORATION
1998 EMPLOYEE STOCK PURCHASE PLAN
(UPDATED DECEMBER 30, 1999)
AS AMENDED
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean Inktomi Corporation and any
Designated Subsidiary of the Company.
(e) "Compensation" shall mean all gross earnings, bonuses and
commissions.
(f) "Designated Subsidiary" shall mean any Subsidiary which
has been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of
the Company for tax purposes whose customary employment with the Company is at
least twenty (20) hours per week and more than five (5) months in any calendar
year. For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each
Offering Period.
(i) "Exercise Date" shall mean the last day of each Purchase
Period.
(j) "Fair Market Value" shall mean, as of any date, the value
of Common Stock determined as follows:
(1) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day on the date of such determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable, or;
(2) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of such determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable, or;
(3) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Board, or;
(4) For purposes of the Enrollment Date of the first
Offering Period under the Plan, the Fair Market Value shall be the initial price
to the public as set forth in the final prospectus included within the
registration statement on Form S-1 filed with the Securities and Exchange
Commission for the initial public offering of the Company's Common Stock (the
"Registration Statement").
(k) "Offering Periods" shall mean the periods of approximately
twenty-four (24) months during which an option granted pursuant to the Plan may
be exercised, commencing on the first Trading Day on or after May 1 and November
1 of each year and terminating on the last Trading Day in the periods ending
twenty-four months later; provided, however, that the first Offering Period
under the Plan shall commence with the first Trading Day on or after the date on
which the Securities and Exchange Commission declares the Company's Registration
Statement effective and ending on the last Trading Day on or before April 30,
2000. The duration and timing of Offering Periods may be changed pursuant to
Section 4 of this Plan.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
(m) "Purchase Price" shall mean an amount equal to 85% of the
Fair Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower; provided however, that, in the event (i) the
Company's shareholders approve an increase in the number of shares available for
issuance under the Plan, (ii) all or a portion of such additional shares are to
be issued with respect to one or more Offering Periods that are underway at the
time of such shareholder approval ("New Shares"), and (iii) the Fair Market
Value of a share of Common Stock on the date of such approval (the
"Authorization Date FMV") is higher than the Fair Market Value on the Enrollment
Date for any such Offering Period, the Purchase Price with respect to New Shares
shall be 85% of the Authorization Date FMV or the Fair Market Value of a share
of Common Stock on the Exercise Date, whichever is lower.
(n) "Purchase Period" shall mean the approximately six month
period commencing after one Exercise Date and ending with the next Exercise
Date, except that the first Purchase Period of any Offering Period shall
commence on the Enrollment Date and end with the next Exercise date.
(o) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(p) "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by the Company
or a Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock
exchanges and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee who shall be employed by the Company on a
given Enrollment Date shall be eligible to participate in the Plan.
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(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) to
the extent that, immediately after the grant, such Employee (or any other person
whose stock would be attributed to such Employee pursuant to Section 424(d) of
the Code) would own capital stock of the Company and/or hold outstanding options
to purchase such stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of the capital stock of the
Company or of any Subsidiary, or (ii) to the extent that his or her rights to
purchase stock under all employee stock purchase plans of the Company and its
subsidiaries accrues at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the fair market value of the shares at
the time such option is granted) for each calendar year in which such option is
outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after May 1 and November 1 each year, or on such other date as
the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
April 30, 2000. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without shareholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan
by completing a subscription agreement authorizing payroll deductions in the
form of Exhibit B to this Plan and filing it with the Company's payroll office
prior to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the
first payroll following the Enrollment Date and shall end on the last payroll in
the Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions ("Payroll
Deductions") made on each pay day during the Offering Period in an amount not
exceeding fifteen percent (15%) of the Compensation which he or she receives on
each pay day during the Offering Period. For purposes of the first Offering
Period only, the maximum payroll deductions a participant may elect shall not
exceed twenty percent (20%) of Compensation. In the event the participant elects
to deduct greater than fifteen percent (15%) of Compensation in the first
Offering Period, then for all other Offering Periods and Purchase Periods, the
maximum payroll deductions a participant may elect shall automatically be
reduced to fifteen percent (15%) of his or her Compensation.
(b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her participation in
the Plan as provided in Section 10 hereof, or may increase or decrease the rate
of his or her payroll deductions during the Offering Period by completing or
filing with the Company a new subscription agreement authorizing a change in
payroll deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more
-3-
quickly. A participant's subscription agreement shall remain in effect for
successive Offering Periods unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
participant's payroll deductions may be decreased to zero percent (0%) at any
time during a Purchase Period. Payroll deductions shall recommence at the rate
provided in such participant's subscription agreement at the beginning of the
first Purchase Period which is scheduled to end in the following calendar year,
unless terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part,
or at the time some or all of the Company's Common Stock issued under the Plan
is disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period,
each eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than
25,000 shares of the Company's Common Stock (subject to any adjustment pursuant
to Section 19) on the Enrollment Date, and provided further that such purchase
shall be subject to the limitations set forth in Sections 3(b) and 13 hereof.
Exercise of the option shall occur as provided in Section 8 hereof, unless the
participant has withdrawn pursuant to Section 10 hereof. The option shall expire
on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares
shall be exercised automatically on the Exercise Date, and the maximum number of
full shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal.
(a) A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any time by giving written notice to the
Company in the form of Exhibit C to this Plan. All of the participant's payroll
deductions credited to his or her account shall be paid to such participant
promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period shall be automatically terminated, and no further payroll
deductions for the purchase of shares shall be made for such Offering Period. If
a participant withdraws from an Offering Period, payroll deductions shall not
resume at the beginning of the succeeding Offering Period unless the participant
delivers to the Company a new subscription agreement.
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(b) A participant's withdrawal from an Offering Period shall
not have any effect upon his or her eligibility to participate in any similar
plan which may hereafter be adopted by the Company or in succeeding Offering
Periods which commence after the termination of the Offering Period from which
the participant withdraws.
11. Termination of Employment.
Upon a participant's ceasing to be an Employee, for any
reason, he or she shall be deemed to have elected to withdraw from the Plan and
the payroll deductions credited to such participant's account during the
Offering Period but not yet used to exercise the option shall be returned to
such participant or, in the case of his or her death, to the person or persons
entitled thereto under Section 15 hereof, and such participant's option shall be
automatically terminated. The preceding sentence notwithstanding, a participant
who receives payment in lieu of notice of termination of employment shall be
treated as continuing to be an Employee for the participant's customary number
of hours per week of employment during the period in which the participant is
subject to such payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. Stock.
(a) The maximum number of shares of the Company's Common Stock
which shall be made available for sale under the Plan shall be 2,000,000 shares,
plus an annual increase to be added on each anniversary date of the adoption of
the Plan equal to the lesser of (i) the number of shares needed to restore the
maximum aggregate number of shares available for purchase under the Plan to
2,000,000 shares or (ii) a lesser amount determined by the Board, subject to
adjustment upon changes in capitalization of the Company as provided in Section
19 hereof. If, on a given Exercise Date, the number of shares with respect to
which options are to be exercised exceeds the number of shares then available
under the Plan, the Company shall make a pro rata allocation of the shares
remaining available for purchase in as uniform a manner as shall be practicable
and as it shall determine to be equitable.
(b) The participant shall have no interest or voting right in
shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan
shall be registered in the name of the participant or in the name of the
participant and his or her spouse.
14. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. Designation of Beneficiary.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such participant's death
subsequent to an Exercise Date on which the option is exercised but prior to
delivery to such participant of such shares and cash. In addition, a participant
may file a written designation of a beneficiary who is to receive any cash from
the participant's account under the Plan in the event of such participant's
death prior to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required for
such designation to be effective.
-5-
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution,
Liquidation, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action
by the shareholders of the Company, the Reserves, the maximum number of shares
each participant may purchase each Purchase Period (pursuant to Section 7), as
well as the price per share and the number of shares of Common Stock covered by
each option under the Plan which has not yet been exercised shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of shares of Common Stock effected without
receipt of consideration by the Company; 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 Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, 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 thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of
all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each outstanding option shall be
assumed or an equivalent option substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the option, any
-6-
Purchase Periods then in progress shall be shortened by setting a new Exercise
Date (the "New Exercise Date") and any Offering Periods then in progress shall
end on the New Exercise Date. The New Exercise Date shall be before the date of
the Company's proposed sale or merger. The Board shall notify each participant
in writing, at least ten (10) business days prior to the New Exercise Date, that
the Exercise Date for the participant's option has been changed to the New
Exercise Date and that the participant's option shall be exercised automatically
on the New Exercise Date, unless prior to such date the participant has
withdrawn from the Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and
for any reason terminate or amend the Plan. Except as provided in Section 19
hereof, no such termination can affect options previously granted, provided that
an Offering Period may be terminated by the Board of Directors on any Exercise
Date. Except as provided in Section 19 hereof, no amendment may make any change
in any option theretofore granted which adversely affects the rights of any
participant. To the extent necessary to comply with Section 423 of the Code (or
any successor rule or provision or any other applicable law, regulation or stock
exchange rule), the Company shall obtain shareholder approval in such a manner
and to such a degree as required.
(b) Without shareholder consent and without regard to whether
any participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
21. Notices. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may
require the person exercising such option 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 of
the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
24. Automatic Transfer to Low Price Offering Period. To the extent
permitted by any applicable laws, regulations, or stock exchange rules, if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering
-7-
Period, then all participants in such Offering Period shall be automatically
withdrawn from such Offering Period immediately after the exercise of their
option on such Exercise Date and automatically re-enrolled in the immediately
following Offering Period as of the first day thereof.
-8-
EXHIBIT B
INKTOMI CORPORATION
1998 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: _____________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ___________________________________ hereby elects to participate in the
Inktomi Corporation 1998 Employee Stock Purchase Plan (the "Employee
Stock Purchase Plan") and subscribes to purchase shares of the
Company's Common Stock in accordance with this Subscription Agreement
and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of ____% of my Compensation on each payday (up to 15%) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise
my option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is
in all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is
subject to shareholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should
be issued in the name(s) of (Employee or Employee and Spouse only):
_______________________________________________________________________
_________________________________________________.
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after
the Exercise Date, I will be treated for federal income tax purposes
as having received ordinary income at the time of such disposition in
an amount equal to the excess of the fair market value of the shares at
the time such shares were purchased by me over the price which I paid
for the shares. I hereby agree to notify the Company in writing within
30 days after the date of any disposition of my shares and I will make
adequate provision for Federal, state or other tax withholding
obligations, if any, which arise upon the disposition of the Common
Stock. The Company may, but will not be obligated to, withhold from my
compensation the amount necessary to meet any applicable withholding
obligation including any withholding necessary to make available to the
Company any tax deductions or benefits attributable to sale or early
disposition of Common Stock by me. If I dispose of such shares at any
time after the expiration of the 2-year and 1-year holding periods, I
understand that I will be treated for federal income tax purposes as
having received income only at the time of such disposition, and that
such income will be taxed as ordinary income only to the extent of an
amount equal to the lesser of (1) the excess of the fair market value
of the shares at the time of such disposition over the purchase price
which I paid for the shares, or (2) 15% of the fair market value of the
shares on the first day of the Offering Period. The remainder of the
gain, if any, recognized on such disposition will be taxed as capital
gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent
upon my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan (please print first, middle and last name
of beneficiary(ies), address of beneficiary(ies) and relationship to
you):__________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:
-------------------
----------------------------------------
Signature of Employee
----------------------------------------
Spouse's Signature (If beneficiary other
than spouse)
----------------------------------------
Employee's Social Security Number
----------------------------------------
Employee's Address
----------------------------------------
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EXHIBIT C
INKTOMI CORPORATION
1998 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Inktomi
Corporation 1998 Employee Stock Purchase Plan which began on
___________________________________, 19____ (the "Enrollment Date") hereby
notifies the Company that he or she hereby withdraws from the Offering Period.
He or she hereby directs the Company to pay to the undersigned as promptly as
practicable all the payroll deductions credited to his or her account with
respect to such Offering Period. The undersigned understands and agrees that his
or her option for such Offering Period will be automatically terminated. The
undersigned understands further that no further payroll deductions will be made
for the purchase of shares in the current Offering Period and the undersigned
shall be eligible to participate in succeeding Offering Periods only by
delivering to the Company a new Subscription Agreement.
Name and Address of Participant:
----------------------------------------
----------------------------------------
----------------------------------------
Signature:
----------------------------------------
Date:
-----------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
INKTOMI CORPORATION
2002 ANNUAL MEETING OF STOCKHOLDERS
MARCH 20, 2002
The undersigned stockholder(s) of Inktomi Corporation, a Delaware
corporation, hereby acknowledge(s) receipt of the Notice of 2002 Annual Meeting
of Stockholders and Proxy Statement, each dated February 5, 2002, and hereby
appoints David C. Peterschmidt and Jerry M. Kennelly, and each of them, proxies
and attorneys-in-fact, with full power of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 2002 Annual Meeting
of Stockholders of Inktomi Corporation to be held March 20, 2002, at 9:00 a.m.,
Pacific Standard Time, at the San Mateo Marriott Hotel, 1770 South Amphlett
Boulevard, San Mateo, California, 94402, and at any adjournment or adjournments
thereof, and to vote all shares of Common Stock which the undersigned would be
entitled to vote if then and there personally present, on the matters set forth
on the reverse side:
(continued, and to be signed and dated on reverse side)
THERE ARE THREE WAYS TO VOTE YOUR PROXY
VOTE BY PHONE
1-800-240-6326
Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week.
Have your proxy card in hand when you call. You will be prompted to enter your
3-digit company number and a 7-digit control number, which are located above,
and then follow the simple instructions.
http://www.eproxy.com/inkt/
Use the Internet to vote your proxy 24 hours a day, 7 days a week. Have your
proxy card in hand when you access the web site. You will be prompted to enter
your 3-digit company number and a 7-digit control number, which are located
above, to create an electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we have provided.
Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned this proxy card.
THE DIRECTORS RECOMMEND A VOTE "FOR" ITEMS 1, 2 AND 3
1. Election of directors
[ ] FOR all nominees listed below
(except as written below)
[ ] WITHHOLD AUTHORITY
to vote for all nominees
listed below
(Instructions: To withhold authority to vote for any individual nominee,
write the number(s) in the box provided to the right)
01 David C. Peterschmidt 02 Dr. Eric A. Brewer 03 Frank Gill
04 Greg Myers 05 Alan F. Shugart
2. Proposal to amend Inktomi's 1998 Employee Stock Purchase Plan to increase
the number of shares available for annual issuance by an aggregate of
800,000 shares to 2,000,000 shares
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to ratify the appointment of PricewaterhouseCoopers LLP as
Inktomi's independent auditors for fiscal 2002
[ ] FOR [ ] AGAINST [ ] ABSTAIN
and in their direction, upon such other matters which may properly come before
the meeting or any adjournment or adjournments thereof.
The shares represented by this proxy when properly executed will be voted in the
manner directed herein by the undersigned stockholder(s). IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED "FOR" ITEMS 1 2 AND 3. If any other matters
properly come before the meeting, the persons named in this proxy will vote, in
their discretion, provided, that they will not vote in the election of directors
for persons for whom authority to vote has been withheld.
Dated
Signature(s) of Stockholder(s) in Box
PLEASE SIGN exactly as your name appears
at left. Joint owners should each sign.
Executors, administrators, trustees,
etc., should so indicate when signing.
If signer is a corporation, please sign
full name by duly authorized officer.
Address change? Mark box [ ]
Indicate change at left