Employees
As of December 31, 1999, we had 230 full-time employees, including 86
employees engaged in engineering and Web development, 37 engaged in sales and
marketing, and 107 engaged in general and administrative activities. We plan to
continue to expand our workforce in the near future. Our employees are not
represented by any collective bargaining agreement, and we have never
experienced a work stoppage. We believe our employee relations are good.
Facilities
Our principal administrative and engineering facility is located in
approximately 50,000 square feet of office space in Aliso Viejo, California
under a lease that expires in January 2006. Our lease agreement for this
facility requires monthly base rental payments of approximately $92,000 for the
first six months of the lease and approximately $126,000 per month thereafter.
We believe our existing facility will be sufficient for our needs for at least
the next twelve months.
51
MANAGEMENT
Executive Officers and Directors
The following table provides information with respect to our directors,
executive officers and certain of our significant employees as of December 31,
1999:
Name Age Position(s)
---- --- ----------
<C>
Gregory J. Hawkins....... 45 Chief Executive Officer, President and Chairman of
the Board
Mitch C. Hill............ 40 Chief Financial Officer
Keven F. Baxter.......... 40 Vice President, Corporate Affairs, General Counsel
and Secretary
Robb Brock............... 36 Vice President, Technology
Travis Fagan............. 28 Vice President, Customer Service
John C. Herr............. 33 Vice President, Advertising and Marketing
Anthony A. McAlister..... 40 Vice President, Information Services
Brent Rusick............. 37 Vice President, Sales Operations
Michael D. Walkey........ 35 General Manager, Small Business and Vice
President, Product Management
Murray H. Williams....... 29 Vice President, Global Business Development
Thomas A. Wright......... 39 Vice President, Fulfillment Operations
William L. Burnham....... 28 Director
David B. Ingram.......... 37 Director
Donald M. Kendall(1)..... 78 Director
Charles W. Richion(1).... 63 Director
James B. Roszak(2)....... 58 Director
Edward S. Russell(2)..... 39 Director
John Sculley(2).......... 60 Director
Wayne T. Thorson(1)...... 73 Director
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Gregory J. Hawkins has been our Chief Executive Officer and a Director
since March 1999. Mr. Hawkins became our Chairman of the Board in September
1999 and was elected President in December 1999. From 1991 to February 1999,
Mr. Hawkins served as a Senior Vice President at Ingram Micro, Inc., a large
computer hardware and software distributor. Mr. Hawkins received his B.S. in
Business Administration from Oregon State University.
Mitch C. Hill has been our Chief Financial Officer since November 1999.
Mr. Hill served as the Chief Financial Officer and Senior Vice President at
Walt Disney Imagineering from May 1996 to October 1999. From March 1995 to May
1996, Mr. Hill served as the Chief Financial Officer and Vice President of
Disney Development Company, and from April 1992 to May 1995 he served as the
Director of Finance and New Business. From 1987 to 1991, Mr. Hill worked as an
associate in the investment banking group at Goldman, Sachs & Co. Mr. Hill
received his B.S. in Business Accounting from Brigham Young University and his
M.B.A. from the Harvard Graduate School of Business Administration.
Keven F. Baxter has been our Vice President, Corporate Affairs and General
Counsel since November 1999. Mr. Baxter was elected Secretary in December 1999.
From January 1999 to November 1999, Mr. Baxter
52
practiced corporate and securities law in the Business and Technology Group of
Brobeck, Phleger & Harrison LLP. From June 1995 to December 1998, Mr. Baxter
served in several management roles at Interplay Entertainment Corp., a software
publisher, including Vice President, Corporate Affairs and General Counsel.
From 1988 to 1994, Mr. Baxter practiced corporate and securities law at
Brobeck, Phleger & Harrison LLP. Mr. Baxter received his B.A. in Economics from
the University of California, Santa Barbara and his M.B.A. and J.D. from the
University of California, Berkeley.
Robb Brock has been our Vice President, Technology since July 1997. From
April 1985 to December 1996, Mr. Brock served as the Vice President of Software
Development at Data Faction, Inc., a software development company. Mr. Brock
received his B.A. in Computer Science from National University.
Travis Fagan has been our Vice President, Customer Service since December
1999. From June 1998 to December 1999, Mr. Fagan held several management
positions at Wells Fargo Online Financial Services, including Vice President,
Manager of Customer Development and Vice President, Manager of Customer Care.
From August 1996 to June 1998, Mr. Fagan served as a Manager, Customer Service
at U.S. West, and from May 1994 to August 1996, Mr. Fagan served as a Senior
Consultant at Arthur Andersen Business Consulting. Mr. Fagan received his B.A.
in business administration and his Masters in Professional Accounting from the
University of Texas, Austin.
John C. Herr has been our Vice President, Advertising and Marketing since
December 1998. From 1993 to December 1998, Mr. Herr served in several
management roles at Ziff Davis, Inc., including the Vice President of
International and Executive Vice President of Worldwide Marketing. Mr. Herr's
previous experiences include working in consumer marketing as a Johnson &
Johnson brand manager, and as a strategy consultant at Bain & Company. Mr. Herr
received his B.A. in Economics from Harvard University and his M.B.A. from the
Harvard Graduate School of Business Administration.
Anthony A. McAlister has served as our Vice President, Information
Services since November 1998. Prior to joining us, from January 1998 to
November 1998, he was employed as the Vice President of Information Services
for SpeedServe.com, an online retailer of books, movies and games. From
December 1987 to January 1998, Mr. McAlister served as a Director of
Application Development for Ingram Entertainment, Inc. Mr. McAlister holds an
Associate degree in Data Processing from Nashville State Technical Institute.
Brent Rusick has been our Vice President, Sales Operations since November
1997. Prior to that, Mr. Rusick served as a U.S. Channel Sales Manager at
Packard Bell NEC, Inc. from March 1995 to November 1997. From August 1994 to
March 1995, he served as a Regional Sales Manager for Tech Data Corp.
Mr. Rusick received his B.S. in Business Administration and Finance from San
Diego State University.
Michael D. Walkey has been our General Manager, Small Business and Vice
President, Product Management since November 1999. Mr. Walkey served as the
President and Chief Executive Officer of BLT Electronics, Inc. from April 1999
to November 1999. From August 1990 to April 1999, Mr. Walkey served as the Vice
President, Purchasing for Ingram Micro, Inc. Mr. Walkey received his B.S. in
Business Management from Pepperdine University.
Murray H. Williams has been our Vice President, Global Business
Development since December 1999. Prior to that, Mr. Williams served as our Vice
President, Finance from November 1998 to December 1999 and as our Director of
Finance from February 1998 to November 1998. From January 1993 to February
1998, Mr. Williams served in various capacities at KPMG Peat Marwick, LLP, most
recently as a Manager. Mr. Williams received his B.A. in Accounting and Real
Estate from the University of Wisconsin, Madison.
Thomas A. Wright has been our Vice President, Fulfillment Operations since
December 1999. From September 1990 to November 1999, Mr. Wright held several
management positions at Ingram Micro, Inc., including Vice President, Logistics
and Sr. Director North American Operations.
53
William L. Burnham has been a Director since September 1999. Since August
1999, Mr. Burnham has been a General Partner of SOFTBANK Capital Partners LP.
From July 1998 to August 1999, Mr. Burnham was a Vice President at Credit
Suisse First Boston. From May 1998 to July 1998, Mr. Burnham served as a Vice
President at Deutsche Morgan Grenfell, and from April 1997 to May 1998, he
served as a Vice President at US Bancorp Piper Jaffray. Prior to this, Mr.
Burnham served as a Senior Associate at Booz Allen & Hamilton from August 1993
to March 1997. Mr. Burnham was elected to our Board as a representative of
SOFTBANK Capital Partners as a result of our Series B preferred stock financing
in October 1999. Mr. Burnham received his A.B. in Political Science from
Washington University.
David B. Ingram has been a Director since December 1998. Since July 1991,
Mr. Ingram has served in various capacities at Ingram Entertainment Inc., most
recently as its Chairman of the Board and President. Mr. Ingram currently
serves on the board of directors of the Video Software Dealers Association,
First American National Bank, Nashville Community Advisory Board, and is a
board member of several privately held companies. Mr. Ingram was elected to our
Board of Directors as a representative of Ingram Entertainment Inc. under a
voting agreement that will terminate upon the closing of this offering. Mr.
Ingram received his B.A. in History from Duke University and his M.B.A. from
the Owen Graduate School of Management, Vanderbilt University.
Donald M. Kendall has been a Director since August 1998. Since 1991, Mr.
Kendall has served as a Consultant and Ambassador at Large for PepsiCo, Inc.,
and from 1986 to 1991, he served as the Chairman of the Executive Committee for
PepsiCo. From 1965 to 1986, Mr. Kendall served as PepsiCo's Chairman of the
Board and Chief Executive Officer. Mr. Kendall attended Western Kentucky
University before becoming a Navy pilot in World War II.
Charles W. Richion has been a Director since August 1998. From June 1997
to July 1998, Mr. Richion served as the Vice President of Corporate Development
for Identix, Inc. From 1965 to 1996, Mr. Richion served as the Vice President
of U.S. Sales and Vice President of Global Partners at Hewlett Packard, Co.
Mr. Richion currently serves on the board of directors of Identix, Inc. He
received his B.S.E.E. from the University of Pennsylvania.
James B. Roszak has been a Director since August 1998. From June 1991 to
June 1997, Mr. Roszak served as the President of the Life Insurance Division of
Transamerica Life Companies. Mr. Roszak received his B.S. in Business from the
University of Southern California.
Edward S. Russell has been a Director since August 1998. Since October
1996, Mr. Russell has served as a General Partner at SOFTBANK Technology
Ventures, Inc. From 1988 to October 1996, Mr. Russell served as the Executive
Director at SBC Warburg. Mr. Russell was elected to our Board as a
representative of SOFTBANK Technology Ventures as a result of our Series A
preferred stock financing in August 1998. Mr. Russell received his B.S. in
Computer Science from Carnegie Mellon University.
John Sculley has been a Director since August 1998. Since 1994, Mr.
Sculley has served as a partner in the investment firm of Sculley Brothers LLC.
From November 1993 to February 1994, Mr. Sculley served as the Chief Executive
Officer of Spectrum Information Technologies, Inc. In January 1995, Spectrum,
together with three of its four operating subsidiaries, filed voluntary
petitions for reorganization under Chapter 11 of the United States Bankruptcy
Code in the United States Bankruptcy Court for the Eastern District of New
York. From 1983 to 1993, Mr. Sculley served as the Chief Executive Officer of
Apple Computer, Inc. Since 1984, Mr. Sculley has also been the Chief Executive
Officer of Sculley Bros., Inc. Mr. Sculley serves on the board of directors of
Netobjects Inc., Talk City, Inc. and NFO Worldwide, Inc. Mr. Sculley received
his B.S. in Architecture from Brown University and his M.B.A. from the Wharton
School of Business.
Wayne T. Thorson has been a Director since August 1998. Since 1958, Mr.
Thorson has served as the Chief Executive Officer of Thorson, Inc., a highway
construction company. Mr. Thorson attended Concordia College where he studied
business administration.
54
Classified Board of Directors
Our Board of Directors will be divided into three classes of directors
serving staggered three-year terms upon the closing of this offering. As a
result, approximately one-third of the Board of Directors will be elected each
year. These provisions, together with the provisions of our certificate of
incorporation, allow the Board of Directors to fill vacancies of or increase
the size of the Board of Directors, and may deter our stockholders from
removing incumbent directors and filling these vacancies with its own nominees
to gain control of the Board.
Our Board of Directors has designated that Messrs. Richion, Sculley and
Thorson will serve as Class I Directors, whose terms expire at the 2001 annual
meeting of stockholders. Messrs. Ingram, Kendall and Russell will serve as
Class II Directors, whose terms expire at the 2002 annual meeting of
stockholders. Messrs. Burnham, Hawkins and Roszak will serve as Class III
Directors, whose terms expire at the 2003 annual meeting of stockholders.
Committees of the Board
The Board of Directors has established two standing committees: the audit
committee and the compensation committee. The audit committee consists of
Messrs. Roszak, Russell and Sculley. The audit committee recommends the
appointment of independent public accountants for the annual audit of our
financial statements to the Board of Directors. The audit committee reviews the
scope of the annual audit and other services the auditors are asked to perform.
This committee also reviews the report on our financial statements prepared by
the auditors following the audit, and our accounting and financial policies in
general. The audit committee also reviews management's procedures and policies
with respect to our internal accounting controls.
The compensation committee consists of Messrs. Kendall, Richion and Thorson.
The compensation committee reviews and approves salaries, benefits and bonuses
for all executive officers. It reviews and recommends to the Board of Directors
on matters relating to employee compensation and benefit plans. The
compensation committee also administers our stock purchase, equity incentive
and stock option plans.
Compensation Committee Interlocks and Insider Participation
We did not have a compensation committee for the fiscal year ended December
31, 1998. For the fiscal year ended December 31, 1998, all decisions regarding
executive compensation were made by our Board of Directors. We created our
compensation committee in February 1999 and elected Messrs. Blum, Kendall and
Thorson to serve as members of that committee. Mr. Blum served as our President
and Chief Executive Officer and Director during the fiscal year ended December
31, 1998. However, Mr. Blum resigned his position as President in December
1998, his position as Chief Executive Officer on March 1, 1999, and his
position as a Director in September 1999. No other interlocking relationship
exists between any of our executive officers or any member of our compensation
committee and any member of any other company's board of directors or
compensation committee.
Director Compensation
Our directors receive no cash remuneration for serving on the Board of
Directors or any Board committee. However, Directors are reimbursed for all
reasonable expenses incurred by them in attending Board and committee meetings.
Directors who are also employees are eligible to receive options and be issued
shares of common stock directly under our 1999 Stock Incentive Plan.
Nonemployee directors will also receive automatic option grants under our 1999
Stock Incentive Plan.
Employment Contracts and Termination of Employment and Change of Control
Arrangements
As of March 1, 1999, Gregory J. Hawkins entered into a one year employment
agreement with us to serve as our Chief Executive Officer. Mr. Hawkins' base
salary under this agreement is $240,000 per year. We also
55
granted Mr. Hawkins options to purchase 4,542,281 shares of our common stock at
an exercise price of $3.83 per share, the fair market value on the grant date.
We provide Mr. Hawkins with health and related benefits that are generally made
available to our other senior executives and a monthly car allowance of $800.
Mr. Hawkins is an at-will employee and his employment can be terminated at any
time by him or by us. If we terminate Mr. Hawkins' employment for any reason,
other than for cause, Mr. Hawkins will have the right to exercise 1,022,015
options that would otherwise vest in February 2000, and will be entitled to
receive health benefits and monthly payments of his base salary for the
remainder of his one year term, or six months, whichever is longer.
Mitch C. Hill commenced his employment as our Chief Financial Officer on
November 1, 1999. Mr. Hill's base salary is $220,000 per year, and he was
granted an option to purchase 1,211,099 shares of our common stock at an
exercise price of $9.14 per share, the fair market value on the grant date. If
we terminate Mr. Hill's employment for any reason, other than willful
wrongdoing or gross negligence, Mr. Hill will have the right to receive his
annual base salary for one year and the right to exercise any options that
would otherwise vest in the subsequent twelve month period.
We do not currently have any other employment contracts with any of our
named executive officers. Accordingly, our Board of Directors may terminate the
employment of any named executive officer at any time at its discretion. Our
compensation committee has the authority to provide for an accelerated vesting
of any outstanding options if an individual's employment is terminated
following an acquisition or a hostile change in control of BUY.COM.
Executive Compensation
The following table summarizes the compensation earned by, and paid to, our
Chief Executive Officer, our former Chief Executive Officer and founder, our
Chief Financial Officer and our other most highly compensated executive
officers who received compensation in excess of $100,000 for the year ended
December 31, 1998 and December 31, 1999. We provide our officers with non-cash
group life and health benefits generally available to all salaried employees.
These benefits are not included in the table below due to applicable Securities
and Exchange Commission rules. No named executive officer received personal
benefits or perquisites that exceeded the lesser of $50,000 or 10% of his total
annual salary and bonus for 1998 or 1999.