<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, For Use of the
Commission Only (as permitted
/X/ Definitive Proxy Statement by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to
Rule 14a-11(c) Rule 14a-12
DIGITAL LAVA INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
- --------------------------------------------------------------------------------
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
DIGITAL LAVA INC.
13160 Mindanao Way
Suite 350
Marina del Rey, CA 90292
--------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
--------------------------------------------------
Our annual meeting of stockholders will be held at 3:00 p.m. on May 31,
2000 at the Marina del Rey Hotel, 13534 Bali Way, Marina Del Rey, CA 90292 for
the purposes of:
(1) electing four directors to hold office until the next annual meeting
of stockholders and until their successors are duly elected and qualified;
(2) approving an amendment to the Digital Lava 1996 Incentive and
Non-Qualified Stock Option Plan; and
(3) to transact such other business as may properly come before the
meeting or any adjournment of the meeting.
Our board of directors has fixed the close of business on April 27, 2000
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the annual meeting.
If you do not expect to be personally present at the meeting, but wish
your stock to be voted for the business to be transacted at the meeting, our
board of directors requests that you fill in, sign and date the enclosed proxy
and promptly return it by mail in the postage paid envelope provided.
By Order of the Board of Directors
/s/ DANNY GAMPE
-----------------------------------
Danny Gampe
Secretary
April 28, 2000
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND PROMPTLY RETURN IT IN THE
ENVELOPE PROVIDED. NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.
<PAGE>
DIGITAL LAVA INC.
PROXY STATEMENT
This proxy statement is furnished to our stockholders in connection with
our board of directors' solicitation of proxies for use at the annual meeting of
stockholders to be held on May 31, 2000, and at any and all adjournments of our
annual meeting. Our principal executive offices are located at 13160 Mindanao
Way, Suite 350, Marina del Rey, California 90292. The approximate date on which
this proxy statement and form of proxy will be sent to our stockholders is May
2, 2000.
On April 27, 2000, the record date for the determination of which
stockholders are entitled to notice of, and to vote at, our annual meeting, we
had 4,680,073 shares of common stock outstanding. Each such share is entitled
to one vote on all matters properly brought before the meeting. Stockholders are
not permitted to cumulate their shares for the purpose of electing directors or
otherwise.
You may revoke the enclosed proxy at any time before it is exercised. If
you attend the meeting and vote in person your proxy will not be used.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock, as of April 6, 2000 by (1) each person known by
us to be the beneficial owner of more than 5% of the outstanding shares of our
common stock, (2) each of our directors and named executive officers and (3) all
of our executive officers and directors as a group.
Beneficial ownership has been determined in accordance with the rules of
the Securities and Exchange Commission and includes voting or investment power
with respect to shares. Unless otherwise indicated, the persons named in the
table have sole voting and investment power with respect to the number of shares
indicated as beneficially owned by them. The number of shares of common stock
outstanding used in calculating the percentage ownership for each listed person
includes the shares of common stock underlying options or warrants held by that
person and exercisable within 60 days of April 6, 2000, but excludes shares of
common stock underlying options or warrants held by any other person.
"Shares of Common Stock Beneficially Owned" includes "Shares Subject to
Options Held by Others" and "Shares Issuable Upon Exercise of Options." Unless
otherwise indicated, the address of each beneficial owner is 13160 Mindanao Way,
Suite 350, Marina del Rey, California 90292.
<TABLE>
<CAPTION>
SHARES OF COMMON PERCENTAGE OF SHARES SUBJECT TO SHARES ISSUABLE
NAME AND ADDRESS OF BENEFICIAL STOCK BENEFICIALLY COMMON STOCK OPTIONS HELD BY UPON EXERCISE OF
OWNER OWNED BENEFICIALLY OWNED OTHERS OPTIONS
- ------------------------------- ------------------ ------------------ ----------------- ------------------
<S> <C> <C> <C> <C>
Robert Greene................. 15,000 0.32% -- --
Dr. James Stigler............. 251,168 5.36% 8,207 5,000
Roger Berman.................. 169,113 3.61% 8,207 5,000
John Carrington............... 10,000 0.21% -- 10,000
Michael Wheeler............... 10,000 0.21% -- 10,000
Joshua Sharfman............... 40,000 0.85% -- 40,000
Peter Webb.................... 0 0.00% -- --
Kipley Bruketa................ 0 0.00% -- --
Danny Gampe................... 15,158 0.32% -- 15,158
Hathaway & Associates,
Ltd (1)..................... 260,000 5.6% -- --
New Frontier Capital, LP.(2).. 242,270 5.2% -- --
All executive officers and
directors as a group (9
persons).................... 495,281 10.43% 16,414 70,000
- ----------------------
</TABLE>
(1) Hathaway & Associates, Ltd are located at 119 Rowayton Avenue, Rowayton, CT
06853.
(2) New Frontier Capital, LP is located at 919 Third Avenue, New York, NY
10022.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1943 requires our
directors and executive officers and persons who own more than 10% of a
registered class of our equity securities to file with the SEC initial reports
of ownership and reports of changes in ownership of our equity securities. These
people are required by SEC regulations to furnish us with copies of all such
filed reports. To our knowledge, based solely on a review of the copies of such
reports furnished to us, and written representations from certain insiders that
no other reports were required during the year ended December 31, 1999, all
section 16(a) filing requirements applicable to such persons were complied with.
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PROPOSAL 1--ELECTION OF DIRECTORS
Four directors are to be elected at the annual meeting to hold office
until the next annual meeting of stockholders and until their successors have
been duly elected and qualified. Our board of directors currently consists of
seven (7) members; there are three vacancies. We plan to appoint a new director
to our board within the next six months. The election of directors requires the
affirmative vote of a plurality of shares of common stock cast at a meeting at
which a quorum (one-third of the outstanding shares of common stock) is present
or represented. Abstention and broker non-votes are counted for purposes of
determining whether a quorum is present, but do not represent votes cast with
respect to this proposal 1. The persons named in the accompanying proxy form
intend to vote FOR the election of the four persons named in the table below as
directors of Digital Lava, unless authority to do so is withheld. Proxies cannot
be voted for more than four persons. If any of the nominees for director listed
below should become unavailable for election for any reason, the persons named
in the accompanying proxy form have the right to use their discretion to vote
for a substitute.
BOARD OF DIRECTORS AND OFFICERS
The following table sets forth the name, age and position of each nominee
for director and each executive officer:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Robert Greene.............................. 42 Chief Executive Officer and Chairman of the Board
Roger Berman............................... 45 Director
John Carrington............................ 56 Director
Michael Wheeler............................ 49 Director
Joshua D.J. Sharfman....................... 42 President and Chief Technology Officer
Danny Gampe................................ 45 Chief Financial Officer
Peter Webb................................. 46 Vice President, Sales
Ralph Boulware............................. 57 Vice President, Services
Kipley Bruketa............................. 39 Vice President, Marketing
James Hicks................................ 38 Vice President, Product Development
</TABLE>
Robert Greene has served as Chief Executive Officer and a director of
Digital Lava since June 1999. From 1995 to June 1999, Mr. Greene served as
Senior Vice President of The Lightspan Partnership Inc., an interactive
educational software vendor. From 1982 to 1995, Mr. Greene served as Senior Vice
President and Zone General Manager of Showtime Networks, Inc., a cable
television network. Mr. Greene holds a B.A. degree from the University of
Virginia, a Certificate of Marketing Management and a Speakeasy Senior Executive
Certificate from the University of Denver.
Roger Berman has served as a director of Digital Lava since its inception
in July 1995. From July 1995 to December 1997, Mr. Berman was the President of
Digital Lava. Prior to joining Digital Lava, Mr. Berman served as President of
St. Eve International, Inc., an apparel company, from May 1992 to July 1995 and
Sherne Lingerie, Inc. from January 1986 to December 1991. Mr. Berman holds a
B.A. degree from Hamilton College and an MBA from New York University.
John Carrington has served as director of Digital Lava since April 1999.
From 1996 to 1998, Mr. Carrington served as Chairman, President and Chief
Executive Officer of Artios, Inc., a CAD/CAM software vendor. From 1991 to 1995,
he served as President and Chief Executive Officer of Digitalk, a cross-platform
object-oriented software firm. Prior to 1991, Mr. Carrington held several senior
positions in the computer software industry, including Chairman, President and
Chief Executive Officer of Cogensys Corporation and President and Chief
Executive Officer of Del Mar Group. Mr. Carrington holds a B.A. degree from the
University of Texas and an MBA from the Southern Methodist University.
Michael Wheeler is currently President and Director of e2enet. From 1996
to 1999 Mr. Wheeler was President of CNBC/Dow Jones Business Video a joint
venture between NBC, Microsoft and Dow Jones. From 1991 to 1996, Mr. Wheeler was
Senior Vice President and General Manager of NBC New Media. From 1987 to 1991
Mr. Wheeler was President of the Financial News Network. Mr. Wheeler is also a
founding member and Vice Chairman of the New York New Media Association. Mr.
Wheeler is a member of the NYNMA Angels Investor group and also
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<PAGE>
helped create the handbook "Building A Successful New Media Business." Mr.
Wheeler received a B.A. in journalism from the University of Missouri.
Joshua D.J. Sharfman has served as President of Digital Lava since
February 1999. From May 1996 to June 1999, Mr. Sharfman served as Chief
Executive Officer and a director of Digital Lava. From 1994 to 1996, Mr.
Sharfman served as Vice President of Research and Development at
ParcPlace-Digitalk, Inc., a cross-platform object-oriented software firm. From
1993 to 1994, he operated his own software development consulting firm. From
1984 to 1993, Mr. Sharfman served as Executive Vice President of Research and
Development at Dassault Systemes USA, a wholly owned subsidiary of Dassault
Systemes SARL, and in a variety of marketing and development management
functions at CADAM Inc., both of which are CAD/CAM software vendors. From 1981
to 1984, Mr. Sharfman served as Section Head of the Electro-Optical and Data
Systems Group at Hughes Aircraft Company. Since 1980, Mr. Sharfman has also
served as an Adjunct Professor of Engineering at the University of Southern
California. Mr. Sharfman holds a B.S. degree from the University of California,
Los Angeles and a M.S. degree from the University of Southern California.
Danny Gampe has served as Chief Financial Officer of Digital Lava since
January 1998. From 1997 to January 1998, Mr. Gampe served as Vice President of
Finance and Administration for eShare Technologies, an Internet software
development firm. From 1992 to 1997, Mr. Gampe served as Chief Financial Officer
of Robbins Research International, a seminar development company. From 1991 to
1992, Mr. Gampe served as Manager of Financial Planning & Analysis at Wahlco
Environmental Systems, Inc. Mr. Gampe holds a B.A. degree from the University of
California at Long Beach and an MBA from the University of Redlands. In
addition, Mr. Gampe has been a Certified Management Accountant since 1993.
Peter Webb has served as Vice President of Sales for Digital Lava since
November 1999. In 1999 Mr. Webb served as Vice President of Sales & Marketing
for SPI, Inc., a start-up developer of advanced prototyping software. From 1997
to 1999, Mr. Webb served as Sales Manager and Acting General Manager for
Kodak/Danka, Inc., a Fortune 500 organization. From 1995 to 1997, Mr. Webb
served as Industry Sales Manager for Avid Technology, a software development
firm. From 1989 to 1995, Mr. Webb served as National Sales Director for Howtek,
Inc., a pre-press equipment sales organization. Mr. Webb holds a Bachelors
degree from Syracuse University.
Ralph Boulware has served as Vice President of Services for Digital Lava
since February 2000. From 1996 to 1999 Mr. Boulware served as Senior Vice
President and Director of Operations for WFS Financial, a financing
organization. From 1992 to 1996, Mr. Boulware served as Managing Partner for
Alternative Resources Now, Inc., a receivables factoring organization. From 1989
to 1992 Mr. Boulware was Chief Operating Officer for Data Line Service Company,
an organization providing data processing support to financial institutions.
From 1984 to 1989 Mr. Boulware served as Vice President and Manager, Data
Services for First Interstate Bank of California. Mr. Boulware holds a Bachelors
degree from the University of San Francisco and an MBA from the University of
California at Los Angeles.
Kipley Bruketa has served as Vice President of Marketing for Digital Lava
since October 1999. From 1996 to 1999, Ms. Bruketa served as Director, Marketing
Communications for Arthur Andersen, a public accounting firm. From 1995 to 1996,
Ms. Bruketa served as Management Supervisor for Rogers & Associates, a boutique
communications firm. From 1994 to 1995, Ms. Bruketa served as Manager, Marketing
Communications for Kaufman and Broad, a real estate developer. From 1993 to
1994, Ms. Bruketa served as Account Supervisor for Hill & Knowlton, a public
relations firm. From 1988 to 1992 Ms. Bruketa held various management positions
with Bank of America. Ms. Bruketa holds a Bachelors degree from the University
of Illinois.
James Hicks joined Digital Lava in July 1997 and has served as Vice
President of Development since September 1999. From 1995 to 1996, Mr. Hicks
served as Director of Customer Services and Quality Assurance with Compulink
Business Systems, Inc., a healthcare practice management software products and
services organization. From 1989 to 1995, Mr. Hicks held various management
positions with the New Product Development and Quality Assurance groups at
Broadway & Semour, a systems integration services organization serving the
financial services industry. Mr. Hicks holds a Bachelors degree from San
Francisco State University and an MBA from The Peter F. Drucker Graduate
Management Center at Claremont Graduate University.
5
<PAGE>
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During 1999 there were four meetings of the board of directors. As of
April 27, 2000 there have been two meetings of the board of directors in 2000. A
quorum of directors was present, either in person or by telephone, for all
meetings held in 2000. Actions were also taken during 2000 by the unanimous
written consent of the directors.
The member of the audit committee is Roger Berman. The audit committee
has the responsibility of reviewing with the independent auditors the plans and
results of the audit engagement, reviewing the adequacy, scope and results of
the internal accounting controls and procedures, reviewing the degree of
independence of the auditors, reviewing the auditor's fees and recommending the
engagement of the auditors to the full board of directors.
The members of the compensation committee during 1999 were James Stigler
and John Carrington. Presently, the sole compensation committee member is John
Carrington. The compensation committee administers our stock option plan and
other corporate benefits programs. The compensation committee also reviews and
approves bonuses, stock option grants, compensation philosophy and current
competitive status, and executive officer compensation.
The board of directors does not have a standing nominating committee.
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid during 1997,
1998 and 1999 to our Chief Executive Officer and each of our four most highly
compensated executive officers other than the Chief Executive Officer who were
serving as executive officers as of December 31, 1999.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------- -------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS ($) OPTIONS (#)
- ------------------------------------------- --------- --------- --------- -------------
<S> <C> <C> <C> <C>
Robert Greene............................. 1999 $159,231 -- 376,820
Chief Executive Officer 1998 -- -- --
1997 -- -- --
Joshua Sharfman........................... 1999 $230,000 $60,000 90,000
President and Chief Technology Officer 1998 $230,000 -- --
1997 $190,000 -- --
Peter Webb................................ 1999 $ 28,333 $25,000 50,000
Vice President, Sales 1998 -- -- --
1997 -- -- --
Danny Gampe............................... 1999 $125,000 $20,000 14,528
Chief Financial Officer 1998 $125,000 -- 5,472
1997 -- -- --
Kipley Bruketa............................ 1999 $ 30,721 -- 35,000
Vice President, Marketing 1998 -- -- --
1997 -- -- --
</TABLE>
6
<PAGE>
OPTION GRANTS. The following option grants were made to officers named in
the above table during 1999:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SECURITIES TOTAL OPTIONS EXERCISE OR
UNDERLYING GRANTED TO BASE PRICE EXPIRATION
OPTIONS GRANTED EMPLOYEES (PER SHARE) DATE
----------------- ------------- ------------ ---------------------
<S> <C> <C> <C> <C>
Robert Greene..................... 376,820 45.54 % $ 6.125 June 21, 2009
Joshua Sharfman................... 40,000 4.83 % $ 7.500 February 22, 2009
Joshua Sharfman................... 50,000 6.04 % $ 3.375 November 12, 2009
Peter Webb........................ 50,000 6.04 % $ 3.000 November 1, 2009
Danny Gampe....................... 14,528 1.76 % $ 5.000 March 2, 2009
Kipley Bruketa.................... 35,000 4.23 % $ 4.000 October 11, 2009
</TABLE>
OPTION EXERCISES AND OPTION VALUES. The following table sets forth
information with respect to stock options held by the above-named officers on
December 31, 1999. These officers did not exercise any options in 1999. The
value of the options is based on the fair market value of the options at
December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
OF STOCK UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS
AT DECEMBER 31, 1999 AT DECEMBER 31, 1999
----------------------------------- -----------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------ --------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Robert Greene...................... -- 376,820 -- $ 329,718
Joshua Sharfman.................... 40,000 50,000 -- $ 181,000
Peter Webb......................... -- 50,000 -- $ 200,000
Danny Gampe........................ 10,315 9,685 $ 9,686 $ 19,372
Kipley Bruketa..................... -- 35,000 -- $ 105,000
</TABLE>
For a description of the 1996 Incentive and Non-Qualified Stock Option Plan,
under which these options were granted, see "Proposal 2--Amendment to the
Digital Lava 1996 Incentive and Non-Qualified Stock Option Plan."
EMPLOYMENT AND CONSULTING AGREEMENTS
ROBERT GREENE. We have entered into an employment agreement with Robert
Greene, Chief Executive Officer, which expires on June 30, 2002. Under the terms
of his employment agreement, Mr. Greene receives an annual base salary of
$300,000 and stock options to purchase 5% of the equity of Digital Lava on a
fully diluted basis as of July 1, 1999. Subject to certain conditions, these
stock options will vest as follows: 40% on July 1, 2000, and 20% on each of the
first, second and third anniversaries of such date. Mr. Greene is eligible to
receive an annual bonus of up to $100,000 and future grants of stock options at
the discretion of the board of directors. A state court may determine not to
enforce, or only partially enforce, certain provisions of this agreement.
JOSHUA SHARFMAN. We have entered into an employment agreement with Joshua
Sharfman, President, which expires on December 31, 2001. Under the terms of his
employment agreement, Mr. Sharfman is entitled to receive an annual base salary
of not less than $230,000 . In addition, the agreement provides that if Mr.
Sharfman is terminated without cause he will receive a severance payment equal
to his annual salary. Mr. Sharfman's employment agreement provides that he will
not, directly or indirectly, compete with us for a period of six months
following his termination in certain circumstances.
ROGER BERMAN. On March 1, 1999, we entered into a consulting agreement
with Roger Berman under which Mr. Berman has agreed to provide us with certain
financial, operational and strategic development services, including financing
and credit strategies, cash management and human resources. The agreement has a
term of two years. Under the agreement, Mr. Berman receives an annual fee of
$60,000 and received a $60,000 bonus in February 1999. Mr. Berman is a director
of Digital Lava.
JAMES STIGLER. On March 1, 1999, we entered into a consulting agreement
with James Stigler under which Dr. Stigler has agreed to provide certain
consulting services to us, including development, financial and strategic
advisory services. The agreement has a term of two years. Under the agreement,
Dr. Stigler receives an annual fee of $24,000 and received a $40,000 bonus in
February 1999.
7
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DIRECTORS' COMPENSATION
Our directors who are not full-time employees of Digital Lava receive
$1,000 for attendance at each meeting of the board of directors or any committee
of the board and are reimbursed for their out-of-pocket expenses in connection
with their attendance.
PERFORMANCE GRAPH
The following graph compares Digital Lava's cumulative stockholder's
return for the period beginning February 17, 1999 (the date on which our common
stock was first publicly traded) and ending March 1, 2000 with the cumulative
total return of the Amex Composite Index over the same period.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
17-FEB 01-MAR 01-APR 01-MAY 01-JUN 01-JUL 01-AUG 01-SEP 01-OCT 01-NOV 01-DEC 01-JAN 01-FEB 01-MAR
1999 1999 1999 1999 1999 1999 1999 1999 1999 1999 1999 2000 2000 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Amex
Composite.... 1 1.014 1.033 1.128 1.127 1.154 1.138 1.137 1.142 1.169 1.212 1.274 1.268 1.455
Digital
Lava......... 0.875 0.6667 1.65 1.283 0.75 0.85 0.6667 0.575 0.5833 0.4 0.5 0.9333 0.9333 0.6667
</TABLE>
8
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CERTAIN TRANSACTIONS
We issued a $20,000 promissory note to James Stigler in October 1998. The
note bore interest at 12% per annum and was payable in October 1999. The note
was paid in full on February 22, 1999.
In December 1998, we issued a $300,000 promissory note to Henry Stigler,
the father of James and Thomas Stigler. We paid the note in full on February 22,
1999. Mr. Stigler also received warrants to purchase 150,000 shares of common
stock at $9.75 per share in connection with the promissory note.
In November 1999, we issued a $230,000 loan to Joshua Sharfman in
exchange for a promissory note. The note bears no interest and is payable on or
before July 1, 2001.
Each of the transactions described above were ratified by our entire
board of directors, a majority of whom did not have an interest in the
transactions. We believe that the terms of the transactions described above were
no less favorable to us than could have been obtained from unaffiliated third
parties. We have adopted a policy that all future transactions between us and
our officers, directors and affiliates must (1) be approved by a majority of
those members of our board of directors that are not parties, directly or
indirectly through affiliates, to the transaction and (2) be on terms no less
favorable to us than could be obtained from unrelated third parties.
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<PAGE>
PROPOSAL 2--AMENDMENT TO THE DIGITAL LAVA 1996 INCENTIVE
AND NON-QUALIFIED STOCK OPTION PLAN
The Digital Lava 1996 Incentive and Non-Qualified Stock Option Plan was
adopted by our board of directors, and approved by our stockholders, on December
2, 1996.
On April 25, 2000, the compensation committee recommended and the board
of directors unanimously adopted, subject to stockholder approval, an amendment
to the plan to increase the number of shares of common stock available for
issuance under the plan from 1,000,000 to 2,000,000.
SUMMARY OF PROPOSED AMENDMENT
The plan currently permits options to be granted covering up to 1,000,000
shares of common stock. The board of directors proposes to amend the plan to
provide for an increase in the number of shares of common stock reserved for
issuance under the plan from 1,000,000 to 2,000,000 and to provide that the
maximum number of shares subject to options granted under the plan to any
individual in any calendar year will not exceed 750,000 shares. As of April 27,
2000 approximately 92% of the shares of common stock reserved for issuance
under the plan were subject to outstanding options leaving only approximately
79,680 shares of common stock reserved for issuance under the plan. The board
believes that the increase in the number of shares of common stock available for
issuance as provided in the amendment will increase the size of the plan to a
size which is commensurate with the number of shares of common stock that are
issued and outstanding, provide the compensation committee with greater
flexibility in the administration of the plan and is appropriate in light of the
growth of Digital Lava and the resulting addition of new employees who will be
subject to the plan. The number of shares of common stock that are issued and
outstanding has increased from 110,730 to 4,680,075 since December 31, 1996. We
believe there should be a corresponding change in the number of shares
authorized for issuance pursuant to the plan. The increase in the number of
shares authorized for issuance as provided in the plan would represent 21.6% of
the issued and outstanding shares of our common stock as of December 31, 1999.
The principal features of the plan as proposed to be amended are
summarized below. The plan was filed as an exhibit to our registration statement
on Form SB-2 filed with the Securities and Exchange Commission on October 23,
1998 and was incorporated by reference in our annual report on Form 10-KSB for
the year ended December 31, 1999.
GENERAL
The purposes of the plan are to attract and retain the best available
personnel, to provide additional incentive to the employees, consultants and
directors of Digital Lava, and to promote the success of our business.
The plan provides for the granting of incentive stock options and/or
nonstatutory stock options to any employee, consultant or director of Digital
Lava.
ADMINISTRATION
The plan is administered by the compensation committee of the board of
directors. The committee determines which individuals will participate in the
plan. The committee is also responsible for the interpretation and construction
of any provision of the plan. All decisions, determinations and interpretations
of the committee are final and binding on all holders of the options.
ELIGIBILITY
Options may be granted to any employee, consultant, or director as the
committee may from time to time designate, provided that incentive stock options
may be granted only to employees.
MISCELLANEOUS PROVISIONS
The plan provides that if an optionee's continuous status as an employee,
consultant or director is terminated for any reason whatever, the optionee may
exercise the option to the extent permitted under the terms of the optionee's
option agreement. To the extent that the optionee was not entitled under the
optionee's option agreement
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to exercise the option at the date of termination or if the optionee does not
exercise the option within the time specified in the optionee's option
agreement, the option shall terminate.
No option may be exercised after the expiration of ten years from the
date it is granted. No option granted to an optionee who, at the time the option
is granted, owns stock representing more than 10% of the voting power of all
classes of stock of Digital Lava or any parent or subsidiary, may be exercised
after the expiration of five years from the date it is granted. No option may be
exercised for a fraction of a share of common stock.
We have the right to deduct withholding taxes from any payments made
pursuant to the plan or to make such other provisions as it deems necessary or
appropriate to satisfy our obligations to withhold Federal, state or local
income or other taxes incurred by reason of payments or the issuance of shares
of common stock under the plan.
SHAREHOLDER VOTE
Approval of the plan will require the affirmative vote of the holders of
a majority of the shares of the common stock represented and voting in person or
by proxy at the meeting, assuming a quorum is present. Abstention and broker
non-votes are counted for purposes of determining whether a quorum is present,
but will have the effect of votes against this proposal 2. Properly executed,
unrevoked proxies will be voted FOR Proposal 2 unless a vote against Proposal 2
or abstention is specifically indicated in the proxy.
STOCKHOLDERS' PROPOSALS FOR 2001
ANNUAL MEETING OF STOCKHOLDERS
Proposals which stockholders intend to present at the 2001 annual meeting
of stockholders must be received by Digital Lava by December 31, 2000 to be
eligible for inclusion in the proxy material for that meeting.
ANNUAL REPORT ON FORM 10-KSB
STOCKHOLDERS MAY OBTAIN, FREE OF CHARGE, A COPY OF OUR ANNUAL REPORT ON
FORM 10-KSB FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999, AND ANY AMENDMENTS OR
EXHIBITS THERETO, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, BY
SENDING A WRITTEN REQUEST TO DIGITAL LAVA INC., 13160 MINDANAO WAY, SUITE 350,
MARINA DEL REY, CALIFORNIA 90292, ATTENTION: PRESIDENT.
OTHER MATTERS
As of the date of this proxy statement, management knows of no matters to
be presented at the annual meeting other than those described in this proxy
statement. If any other matters come before the meeting, the persons named in
the enclosed form of proxy are expected to vote the proxy in accordance with
their best judgment on such matters.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ DANNY GAMPE
---------------------------------
Danny Gampe
Secretary
Dated: April 28, 2000
11
<PAGE>
DIGITAL LAVA INC.
REVOCABLE PROXY
Annual Meeting of Stockholders
May 31, 2000
This Proxy is solicited on behalf of the Board of Directors
The undersigned, as a holder of common stock of Digital Lava Inc., hereby
appoints Robert Greene and Danny Gampe as Proxies, with the full power of
substitution, to represent and to vote as designated on this card all of the
shares of common stock of Digital Lava which the undersigned is entitled to vote
at the annual meeting of stockholders to be held on May 31, 2000 at 3:00 P.M.,
or any adjournment thereof.
Unless otherwise marked, this proxy will be voted FOR the election of the
nominees listed below to the Board of Directors and FOR the amendment of the
Digital Lava 1996 Incentive and Non-Qualified Stock Option Plan. If any other
business is presented at the annual meeting of stockholders, this proxy will be
voted in accordance with the discretion of the Proxies named above.
The Board of Directors recommends a vote "FOR" the nominees listed below
and "FOR" Proposal 2.
1. ELECTION OF DIRECTORS (PROPOSAL 1 IN THE PROXY STATEMENT)
/ / FOR all nominees listed / / WITHHOLD AUTHORITY NOMINEES: Robert Greene
at right except as marked to vote for all Roger Berman
to the contrary nominees listed at right John Carrington
Michael Wheeler
(INSTRUCTIONS: To withhold authority to vote for any of the individual nominees,
PRINT that person's name on the line below.)
- --------------------------------------------------------------------------------
2. AMENDMENT TO THE DIGITAL LAVA 1996 INCENTIVE AND NON-QUALIFIED STOCK OPTION
PLAN (PROPOSAL 2 IN THE PROXY STATEMENT)
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL
BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF THE NOMINEES
TO THE BOARD OF DIRECTORS IDENTIFIED
ABOVE, AND FOR THE APPROVAL OF THE
AMENDMENT TO THE DIGITAL LAVA 1996
INCENTIVE AND NON-QUALIFIED STOCK OPTION
PLAN. THIS PROXY WILL BE VOTED, IN THE
DISCRETION OF THE PROXIES NAMED, ON SUCH
OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE ANNUAL MEETING.
This proxy is revocable at any time, and
the undersigned reserves the right to
attend the annual meeting of
stockholders and vote in person. The
undersigned hereby revokes any proxy
heretofore given in respect of the
shares of Digital Lava.
THE BOARD OF DIRECTORS URGES THAT YOU
FILL IN, SIGN AND DATE THIS PROXY AND
RETURN IT PROMPTLY BY MAIL IN THE
ENCLOSED ENVELOPE. NO POSTAGE IS
NECESSARY IF MAILED IN THE UNITED
STATES.
- ------------------- ------------------------ Dated:
---------------
Signature* Signature*
NOTE: Please sign exactly as name(s) appear on your stock certificate. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as each. If more than one name is shown, as in the case of joint
tenancy, each party must sign. If a corporation, please sign in full corporate
name by the president or other authorized officer.
