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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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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 to Section240.14a-12
UNIVERSAL ACCESS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
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and 0-11.
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<PAGE>
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
2000
[LOGO]
UNIVERSAL ACCESS, INC.
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TABLE OF CONTENTS
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Notice Of Annual Meeting of Stockholders.................... ii
Proxy Statement............................................. 1
Election of Directors................................... 1
Director Information.................................. 1
Committees............................................ 4
Meetings and Attendance............................... 4
Director Compensation................................. 4
Executive Officer Information......................... 5
Executive Compensation.................................. 6
Compensation Committee Report......................... 6
Compensation Committee Interlocks and Insider
Participation........................................ 9
Summary Compensation Table............................ 9
Stock Options......................................... 10
Option Grants in Last Fiscal Year................... 10
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values....................... 11
Other Benefits........................................ 11
Employment Agreements and Change-in-Control
Arrangements......................................... 11
Stock Ownership......................................... 13
Principal Stockholders................................ 13
Other Director and Executive Officer Information........ 15
Transactions with Related Parties and Insiders........ 15
Additional Information.................................. 20
Record Date; Shares Outstanding....................... 20
Quorum................................................ 20
Proxies; Right to Revoke.............................. 20
Default Voting........................................ 21
Tabulation of Votes................................... 21
Voting by Street Name Holders......................... 21
Independent Accountants............................... 21
Proxy Solicitation.................................... 21
Stockholder Proposals for Next Year's Meeting......... 21
Stockholder List...................................... 22
Appendix A, Charter of the Audit Committee of the Board
of Directors........................................... A-1
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UNIVERSAL ACCESS, INC.
233 SOUTH WACKER DRIVE, SUITE 600
CHICAGO, ILLINOIS 60606
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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DATE Thursday, November 9, 2000
TIME 10:00 a.m., Central Time
PLACE Sears Tower
99th Floor
233 South Wacker Drive
Chicago, Illinois 60606
PROPOSAL Election of three directors
RECORD DATE October 17, 2000
VOTING METHODS Internet--Use the website shown on the proxy card
Telephone--Use the toll-free number shown on the proxy card
Written ballot--Complete and return a proxy card
In person--Attend and vote at the meeting
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Stockholders may also transact any other business properly brought before the
meeting. At this time, the Board of Directors knows of no other proposals or
matters to be presented.
This Proxy Statement is accompanied by a copy of the Annual Report to
Stockholders.
ON BEHALF OF THE BOARD OF DIRECTORS:
/s/ Scott D. Fehlan
Scott D. Fehlan, General Counsel and Secretary
October 20, 2000
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[LOGO]
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by Universal Access, Inc., on behalf of the Board of Directors, for the
2000 Annual Meeting of Stockholders. This Proxy Statement and the related proxy
form are being distributed on or about October 20, 2000.
You can vote your shares using one of the following methods:
- Vote through the Internet at the website shown on the proxy card
- Vote by telephone using the toll-free number shown on the proxy card
- Complete and return a written proxy card
Votes submitted through the Internet or by telephone must be received by
midnight, Central Time, on November 8, 2000. Internet and telephone voting are
available 24 hours a day, and if you use one of those methods, you do not need
to return a proxy card. You can also vote in person at the meeting, and
submitting your voting instructions by any of the methods mentioned above will
not affect your right to attend the meeting and vote.
ELECTION OF DIRECTORS
The only proposal scheduled to be voted on at the meeting is the election of
three directors. All of these directors will serve full three-year terms as
Class I directors. The Board of Directors has nominated Paolo Guidi, Carolyn
Katz and Joseph Schocken for the Class I directorships. Mr. Guidi, Ms. Katz and
Mr. Schocken are currently serving as Universal Access directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES.
The Board of Directors has no reason to believe that any nominee would be
unable or unwilling to serve if elected. If a nominee becomes unable or
unwilling to accept nomination or election, the Board of Directors will either
select a substitute nominee or will reduce the size of the Board of Directors.
If you have submitted a proxy and a substitute nominee is selected, your shares
will be voted for the election of the substitute nominee.
In accordance with the bylaws, directors are elected by a plurality of the
votes of shares represented and entitled to be voted at the meeting. That means
the three nominees will be elected if they receive more affirmative votes than
any other nominees.
DIRECTOR INFORMATION
Our Board of Directors currently consists of nine authorized members. The
Board of Directors is divided into three classes, each with a three-year term:
Class I, whose terms will expire at the annual meeting of stockholders to be
held in 2000; Class II, whose term will expire at the annual meeting of
stockholders to be held in 2001; and Class III, whose term will expire at the
annual meeting of stockholders to be held in 2002.
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Set forth below is biographical and other information about the persons who
will make up the Board of Directors following the annual meeting, assuming
election of the nominees named above.
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PAOLO GUIDI Mr. Guidi has served as one of our directors since
Class I August 1999. Mr. Guidi has served as Chairman and Chief
Age: 58 Executive Officer of Aleron, Inc., a provider of global
Director since August 1999 communication services, since September 2000. From
February 1995 to April 2000 Mr. Guidi was the President
and Chief Executive Officer of Teleglobe Communications
Corporation, a provider of intercontinental
telecommunications services. From July 1986 to February
1995, Mr. Guidi was employed by Sprint International
Corporation, a provider of intercontinental
telecommunications services, in various capacities, most
recently as President.
CAROLYN F. KATZ Ms. Katz has served as one of our directors since August
Class I 2000. Since May 2000, Ms. Katz has served as a Principal
Age: 38 of Providence Equity Partners Inc., a private investment
Director since August 2000 firm specializing in equity investments in
Board Committees: Compensation, telecommunications and media companies. From July 1984
Executive Compensation Subcommittee to April 2000 Ms. Katz worked at Goldman Sachs, most
recently as a Managing Director and co-head of Emerging
Communications.
JOSEPH L. SCHOCKEN Mr. Schocken has served as one of our directors since
Class I October 1998. He founded Broadmark Capital Corporation,
Age: 54 an investment banking firm, in November 1986 and serves
Director since October 1998 as its Chairman. Mr. Schocken is also a director of
Board Committees: Audit, Compensation, Broadmark Asset Management Company, an asset management
Executive Compensation Subcommittee firm. Mr. Schocken is also the head of Broadmark Capital
Corporation's Corporate Finance Group where he serves as
an advisor to a number of Broadmark's clients and
portfolio companies.
ROBERT A. POLLAN Mr. Pollan has served as one of our directors since
Class II February 1999. Mr. Pollan has been a Managing Director
Age: 40 of Internet Capital Group, an internet holding company,
Director since February 1999 since June 1998. From August 1995 to June 1998,
Mr. Pollan served as a Chief Technology Officer and Vice
President of Business Development at General Electric
Capital Corporation. From September 1991 to July 1995,
Mr. Pollan was co-founder and Managing Director of
OFR, Ltd., an advisory firm focused on the
organizational and financial restructuring of industrial
enterprises in Central Europe.
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ROBERT J. POMMER, JR. Mr. Pommer co-founded Universal Access in October 1997
Class II and has served as one of our directors since July 1998
Age: 33 and as our Vice Chairman since July 2000. He also served
Director since July 1998 as our Secretary from October 1997 to April 2000 and our
Board Committees: Treasurer from October 1997 to August 1999. Mr. Pommer
Nominating, Compensation served as our Chief Operating Officer from December 1998
to April 2000 and our Chief Technical Officer from
January 2000 to July 2000. Prior to founding Universal
Access, from March 1996 to September 1997, Mr. Pommer
was Vice President of Operations for Arista
Communications, a telecommunications agency firm. From
May 1994 to March 1996, he was a Manager for Strategic
Accounts with TCG, a telecommunications company.
ROLAND VAN DER MEER Mr. Van der Meer has served as one of our directors
Class II since February 1999. In June 1997, Mr. Van der Meer
Age: 40 founded and became a partner of ComVentures, a venture
Director since February 1999 capital firm. From June 1993 to June 1997, Mr. Van der
Board Committees: Audit, Compensation, Meer was a partner at the venture capital firm of
Executive Compensation Subcommittee, Partech International.
Nominating
KEVIN P. POWER Mr. Power has served as one of our directors since
Class III October 2000. Mr. Power has served as Chairman of
Age: 47 MWBKonnect, a developer of independent data centers for
Director since October 2000 the Internet and telecommunications industry, since
October 2000. From November 1994 to September 2000, Mr.
Power worked for Global Telesystems Group, Inc., a
broadband services provider, most recently as President,
GTS Wholesale Services. Mr. Power is currently Chairman
of the European Competitive Telecommunications
Association.
PATRICK C. SHUTT Mr. Shutt co-founded Universal Access in October 1997
Class III and has served as our President and as one of our
Age: 33 directors since our inception. Mr. Shutt has been our
Director since October 1997 Chief Executive Officer since December 1998 and our
Board Committees: Nominating, Chairman since July 2000. Prior to founding Universal
Compensation, Non-Executive Access, from March 1996 to September 1997, Mr. Shutt was
Stock Option Senior Vice President of Operations at Arista
Communications, a telecommunications agency firm. From
February 1994 to March 1996, he was a sales manager with
TCG, a telecommunications company.
JOHN F. SLEVIN Mr. Slevin has served as one of our directors since
Class III February 2000. From October 1975 to January 1999, Mr.
Age 64 Slevin worked for Comdisco, Inc., an equipment leasing
Director since February 2000 company, most recently as its Chairman, Chief Executive
Board Committees: Audit Officer and President. Mr. Slevin is also currently a
director of MediaOne Group, Inc., a broadband
communications company, and lnterworld Corporation, an
enterprise commerce software company.
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COMMITTEES
The Board of Directors maintains five standing committees: Audit,
Compensation, Executive Compensation, Non-Executive Stock Option and Nominating.
AUDIT COMMITTEE. The Audit Committee (1) recommends to the Board of
Directors the annual appointment of our independent accountants, (2) discusses
and reviews in advance the scope and the fees of the annual audit, (3) reviews
the results of the audit with our independent accountants and discusses the
foregoing with the Company's management, (4) reviews and approves non-audit
services of the independent accountants, (5) reviews compliance with our
existing major accounting and financial reporting policies, (6) reviews the
adequacy of our financial organization, (7) reviews management's procedures and
policies relating to the adequacy of our internal accounting controls and
compliance with applicable laws relating to accounting practices and
(8) reviews and discusses with our independent accountants their independence.
The Company was not required to file an Annual Report on Form 10-K for the year
ended December 31, 1999. Each member of the Audit Committee is independent (as
defined in Rule 4200(a)(15) of the National Association of Securities Dealers'
listing standards). The Board of Directors adopted a written charter for our
Audit Committee. A copy of this charter is included as an appendix to this
proxy. The Audit Committee presently consists of Messrs. Schocken, Slevin and
Van der Meer.
COMPENSATION COMMITTEE. The Compensation Committee establishes and reviews
general policies relating to the compensation and benefits of our employees and
reviews and approves equity grants pursuant to our stock option plans to our
employees other than executive officers. The Compensation Committee presently
consists of Ms. Katz and Messrs. Pommer, Schocken, Shutt and Van der Meer.
EXECUTIVE COMPENSATION SUBCOMMITTEE. The Executive Compensation
Subcommittee reviews and approves the compensation of all of our executive
officers and directors, including stock compensation and loans. The Executive
Compensation Subcommittee presently consists of Ms. Katz, Mr. Schocken and
Mr. Van der Meer.
NON-EXECUTIVE STOCK OPTION COMMITTEE. The Non-Executive Stock Option
Committee reviews and approves equity grants pursuant to our stock option plans
to our employees other than executive officers, within parameters established by
the Compensation Committee. The Non-Executive Stock Option Committee presently
consists of Mr. Shutt.
NOMINATING COMMITTEE. The Nominating Committee reviews and approves the
appointment of directors to our Board of Directors. The Nominating Committee
presently consists of Messrs. Shutt, Pommer, and Van der Meer.
MEETINGS AND ATTENDANCE
During fiscal year 1999, the full Board of Directors held six meetings, the
Audit Committee did not meet and the Option Committee did not meet but took
action by written consent twenty times. In September 2000 the Board delegated to
the Compensation Committee authority over matters including those previously
delegated to the Compensation Committee and the Option Committee. In 1999 the
Compensation Committee met once and the Nominating Committee met once. All
directors attended at least 75% of the meetings of the full Board of Directors
and the meetings of the committees on which they served.
DIRECTOR COMPENSATION
In August of 1999 Paolo Guidi was awarded a stock option grant of 200,000
shares of our common stock at an exercise price of $1.38 per share. Mr. Guidi
also received $4,000 in 1999 for his participation in two Board of Directors
meetings. Other than the payment of $2,000 to Mr. Guidi for each board meeting
that he attends in person or by telephone, we do not currently compensate our
directors in cash for their service as members of our Board of Directors,
although they are reimbursed for certain expenses in connection with attending
board of director and committee meetings.
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Our 1999 Director Option Plan provides for the automatic grant of
non-statutory stock options to nonemployee directors. Effective March 16, 2000,
each non-employee director received options to purchase 20,000 shares of common
stock with an exercise price of $14.00 per share. Each 20,000-share option
becomes exercisable as to 25% of the shares subject to the option on each
anniversary of the date of grant, provided the non-employee director remains a
director on such dates. After termination as a non-employee director, an
optionee must exercise an option within the time set forth in his or her option
agreement. If termination is due to death or disability, the option will remain
exercisable for 12 months. In all other cases, the option will remain
exercisable for a period of three months. However, an option may never be
exercised later than the expiration of its term.
Mr. Shutt and Mr. Pommer, the only directors who are also Universal Access
employees, do not receive any additional compensation for serving on the Board
of Directors.
EXECUTIVE OFFICER INFORMATION
Set forth below is biographical and other information about the executive
officers of Universal Access, Inc.
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ROBERT M. BROWN Mr. Brown has served as our Chief Financial Officer since
Age: 49 July 2000. He served as Senior Vice President, Finance and
Treasury from February 2000 to July 2000 and as Vice
President, Finance and Treasury from August 1999 to February
2000. From September 1998 to May 1999, Mr. Brown served as
Vice President, Finance and Treasurer at Edelman Public
Relations Worldwide. From December 1996 to February 1998, he
was Chief Financial Officer at JVS Financial Group, a
mortgage and insurance corporation. From June 1977 to
December 1996, Mr. Brown was employed by McDonald's
Corporation in various capacities, most recently as
Department Director, Restaurant Development.
SCOTT D. FEHLAN Mr. Fehlan has served as our General Counsel since September
Age 32 1999. He has served as our Secretary since April 2000 and
served as our Assistant Secretary from September 1999 to
April 2000. From January 1995 to May 1998, Mr. Fehlan was an
associate, and from June 1998 to September 1999 he was a
shareholder of Shefsky & Froelich Ltd., a law firm. From
January 1993 to January 1995, he was an associate with
Kirkland & Ellis, a law firm. Mr. Fehlan holds a J.D. from
Yale Law School.
JAMES B. KEARNS Mr. Kearns has served as Chief Information Officer since
Age 39 April 2000. From December 1998 to April 2000, Mr. Kearns
served as Vice President, Information Services for MMI
Companies, Inc., a healthcare risk management company. From
September 1998 to December 1998, Mr. Kearns was a consultant
with Advanced Graphical, Inc., a consulting company. From
July 1997 to September 1998, Mr. Kearns served as Chief
Information Officer for JVS Financial Group, Inc., a
mortgage and insurance corporation, and from September 1990
to July 1997, Mr. Kearns was a Vice President, Information
Services for Access Health, Inc., a leader in the personal
health management industry.
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GEORGE A. KING Mr. King has served as our Chief Development Officer since
Age 41 May 2000. From August 1999 until May 2000, he served as
Senior Vice President, Corporate Development. From our
inception to August 1999, Mr. King served as an advisor to
the executive officer group. From our inception to February
1999, he was one of our directors. Prior to joining
Universal Access, from February 1995 to November 1996, Mr.
King was a Managing Director of Cambridge Partners, an
investment banking firm. From December 1996 to August 1999,
he was a Senior Managing Director of Hudson AIPR, LLC, a
financial advisory firm. From January 1994 to February 1995,
Mr. King was a Vice President of Credit Suisse First Boston,
an investment banking firm.
ROBERT E. RAINONE, JR. Mr. Rainone has served as our Chief Operating Officer since
Age 38 April 2000. He served as our Chief Development Officer from
February 2000 to April 2000. From October 1998 to February
2000, Mr. Rainone was Vice President of Marketing at Open
Port Technology, an internet messaging company. From March
1993 to August 1997, Mr. Rainone was employed by U.S.
Robotics Corporation, a networking equipment manufacturer
and subsidiary of 3Com Corporation, in various capacities,
most recently as Vice President and General Manager of
Business Access.
BETH TARTER Ms. Tarter has served as Senior Vice President, Human
Age 42 Resources since June 2000, and as Vice President, Human
Resources from March 2000 to June 2000. From November 1996
to March 2000, Ms. Tarter served as Vice President Human
Resources at Open Text Corporation, a web-based software
development company. From August 1995 to November 1996, she
was Human Resources Director at Stein & Company, a
full-service real estate company, and from October 1991 to
August 1995, Ms. Tarter was Human Resources Manager at
Aramark, a contract food service company.
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EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors establishes our general
compensation policies and the Executive Compensation Subcommittee, which
includes only non-employee directors, establishes the compensation plans and the
specific compensation levels for executive officers, including our Chairman,
President and Chief Executive Officer. This report describes the philosophy that
underlies the cash and equity-based components of our executive compensation
program. It also describes the details of each element of the program, including
the rationale for the compensation paid to our senior executives.
GENERAL COMPENSATION PHILOSOPHY
The primary objectives of our executive compensation policies include the
following:
-- To attract, motivate, and retain a highly qualified executive management
team;
-- To link executive compensation to our financial performance as well as
to define individual management objectives established by the committee;
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-- To compensate competitively with the practices of similarly situated
internet infrastructure companies; and
-- To create management incentives designed to enhance stockholder value.
We compete in an aggressive and dynamic industry and, as a result, believe
that finding, motivating, and retaining quality employees, particularly senior
managers, sales personnel, and technical personnel are key factors to our future
success. Our compensation philosophy seeks to align the interests of
stockholders and management by tying compensation to our financial performance,
either directly in the form of salary and bonuses paid in cash or indirectly in
the form of appreciation of stock options and in certain instances, restricted
stock granted to principal executive officers.
CASH COMPENSATION
We seek to provide cash compensation to our executive officers, including
base salary and an annual cash bonus, at levels that are commensurate with cash
compensation of executives with comparable responsibility at similarly situated
internet infrastructure companies. Annual increases in base salary are
determined on an individual basis based on market data and a review of the
officer's performance and contribution to various individual, departmental, and
corporate objectives. Cash bonuses are intended to provide additional incentives
to achieve such objectives.
The salaries and cash bonuses of each of our executive officers, other than
the Chairman, President and Chief Executive Officer, were determined by the
Committee, upon the recommendation of the Chairman, President and Chief
Executive Officer. The Compensation Committee sets new goals for each of our
executives each fiscal year on the basis of past performance and objectives for
the next fiscal year. The Chairman, President and Chief Executive Officer's base
salary was determined by the Board of Directors, upon the recommendation of the
Committee.
Based on a review of public company proxy data, compensation data supplied
by independent executive compensation research and consulting firms, and other
relevant market data, the committee believes that cash compensation paid to our
executive officers, including our Chairman, President and Chief Executive
Officer, were generally consistent with amounts paid to officers with similar
responsibilities at similarly situated internet infrastructure companies. We
note that competition for qualified management and technical personnel in the
internet infrastructure industry is extremely intense, and we expect such
competition to remain intense for the foreseeable future. As a result, in order
to insure access to qualified personnel, we believe that it will continue to be
necessary to provide compensation packages, consisting of cash compensation and
equity incentives, that are at least competitive with, and in certain instances
superior to, compensation paid by other internet infrastructure companies.
EQUITY BASED COMPENSATION
Stock options are periodically granted to provide additional incentive to
executives and other employees to maximize long-term total return to our
stockholders. Stock options are a particularly strong incentive because they are
valuable to employees only if the fair market value of our common stock
increases above the exercise price, which is set at the fair market value of our
common stock on the date the option is granted. In addition, employees must
remain employed by us for a fixed period of time in order for the options to
vest fully. Options generally vest over a four year period to encourage option
holders to continue in our employ. All of the options granted in the year ended
December 31, 1999 were approved by the stock option committee, pursuant to its
delegated authority, or the full Board of Directors. In making its
determinations, the committee considers the executive's position at Universal
Access, such executive's individual performance, the number of options held (if
any) and the extent to which such options are vested, and any other factors that
the committee may deem relevant.
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TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code limits the federal income tax
deductibility of compensation paid to our Chairman, President and Chief
Executive Officer and to each of the other four most highly-compensated
executive officers. We may deduct such compensation only to the extent that
during any fiscal year the compensation paid to such individual either does not
exceed $1 million or meets certain specified conditions (including stockholder
approval). At this time, we have determined that the Section 162(m) deduction
limitation does not apply because the Company falls within the extended reliance
period for corporations that become publicly held in connection with an initial
public offering. We will continue to monitor the reliance period and will take
appropriate action when it is warranted in the future.
COMPENSATION OF THE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Patrick C. Shutt co-founded the Company in October 1997 and serves as
Chairman, President and Chief Executive Officer. During 1999, Mr. Shutt's base
annual salary was $195,561. As a result of the Company's performance in fiscal
1999, Mr. Shutt received $99,283 as an incentive bonus in 1999. In addition, in
August 1999, Mr. Shutt received a stock option grant of 500,000 shares. These
options vested on the grant date and have an exercise price of $1.51 per share
(the fair market value of the common stock on the date of grant was $1.38 per
share). We granted the options in recognition of Mr. Shutt's continued
leadership and vision, which has contributed significantly to the Company's
exceptional performance in creating stockholder value.
CONCLUSION
We believe these executive compensation policies and programs serve the
interests of stockholders and the Company effectively. The various pay vehicles
offered are carefully designed to provide increased motivation for senior
executives to contribute to the Company's overall future success, thereby
enhancing the value of the Company for the stockholders' benefit.
The foregoing report has been approved by all of the members of the
Committee.
THE COMPENSATION COMMITTEE
Carolyn Katz
Robert Pommer
Joseph Schocken
Patrick Shutt
Roland Van der Meer
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of our Compensation Committee are Ms. Katz and Messrs. Pommer,
Schocken, Shutt and Van der Meer. Except for Mr. Pommer and Mr. Shutt, none of
the members of the Compensation Committee is currently or has been, at any time
since our formation, one of our officers or employees. None of the members of
the Executive Compensation Subcommittee, which reviews and approves the
compensation of all of our directors and executive officers, is currently or has
been, at any time since our formation, one of our officers or employees. None of
our executive officers currently serves or in the past has served as a member of
the Board of Directors or Compensation Committee of any entity that has one or
more executive officers serving on our board or Compensation Committee. Mr. Van
der Meer is a partner of ComVentures, a holder of approximately 14.59% of our
outstanding stock that has purchased shares of Series B preferred stock,
Series C preferred stock and Series D preferred stock. Mr. Schocken is the
chairman of Broadmark Capital Corporation, a holder of approximately 1.25% of
our outstanding stock that has purchased shares of our common stock, Series A
preferred stock and Series D preferred stock. Broadmark Capital Corporation
provided financial services to us in connection with the placement of our
Series A preferred stock and Series D preferred stock. As consideration for
these services, we paid Broadmark approximately $502,190 and issued them
warrants for our common stock and our Series A preferred stock. In addition,
Broadmark received options to purchase a total of 839,994 shares of our common
stock from three of our stockholders. Prior to the formation of the Compensation
Committee, compensation decisions were made by our entire Board of Directors.
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation earned, awarded or paid for
services rendered to us in all capacities for the fiscal year ended
December 31, 1999 by our Chief Executive Officer and our next four most highly
compensated executive officers who earned more than $100,000 in salary and bonus
during the fiscal year ended December 31, 1999, whom we refer to in this proxy
statement collectively as the "named executive officers":
SUMMARY COMPENSATION TABLE
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COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES
------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS COMPENSATION
--------------------------- -------- -------- ------------ ------------
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Patrick C. Shutt................................ $196,561 $99,283 500,000 $ --
Chairman, President and
Chief Executive Officer
Robert J. Pommer, Jr............................ 182,508 94,889 300,000 --
Vice Chairman
Donna M. Shore.................................. 150,012 78,701 200,000 --
Formerly Executive Vice President,
Chief Financial Officer, Treasurer
Kenneth A. Napier............................... 77,492 27,525 550,000 16,693(1)
Senior Vice President, Major Accounts
Mark A. Dickey.................................. 119,500 42,221 150,000 --
Senior Vice President,
Global Development
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(1) Consists of a housing allowance
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STOCK OPTIONS
The following table shows information regarding stock options granted to the
named executive officers during the fiscal year ended December 31, 1999. The
potential realizable value is based on the assumption that our common stock
appreciates at the annual rate shown, compounded annually, from the date of
grant until the expiration of the ten-year term. These numbers are calculated
based on Securities and Exchange Commission requirements and do not reflect
projections or estimates of future stock price growth. Potential realizable
values are computed by:
- Multiplying the number of shares of common stock underlying each option by
$14.00 per share, the initial public offering price per share;
- Assuming that the total stock value derived from that calculation
compounds at the annual 0%, 5% or 10% rate shown in the table for the
entire ten-year term of the option; and
- Subtracting from that result the total option exercise price.
Actual gains, if any, on stock option exercises will be dependent on the
future performance of our common stock.
The percentage of total options granted is based on an aggregate of
7,131,250 options granted by us during the fiscal year ended December 31, 1999,
to our employees including the named executive officers. Unless otherwise
indicated, options were granted with an exercise price equal to the fair market
value of our common stock, as determined in good faith by our Board of Directors
at the time of the grants.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED ANNUAL RATES
SECURITIES GRANTED TO OF STOCK APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM
OPTIONS DURING PRICE PER EXPIRATION --------------------------------------
NAME GRANTED(#) PERIOD SHARE DATE 0% 5% 10%
---- ---------- ---------- --------- ---------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Patrick C. Shutt...... 500,000(1) 7.01% $ 1.51(2) August 4, 2009 $6,245,000 $10,647,262 $17,401,197
Robert J. Pommer,
Jr.................. 300,000(1) 4.21 1.51(2) August 4, 2009 3,747,000 6,388,357 10,440,718
Donna M. Shore........ 200,000(1) 2.80 1.38 August 4, 2009 2,524,000 4,284,905 6,986,479
Kenneth A. Napier..... 50,000(1) 0.7 6.10 November 5, 2009 395,000 835,226 1,510,620
100,000(1) 1.4 1.38 August 4, 2009 1,262,000 2,142,452 3,493,239
400,000(3) 5.61 0.27 June 25, 2009 5,492,000 9,013,810 14,416,958
Mark A. Dickey........ 150,000(4) 2.10 1.38 August 5, 2009 1,893,000 3,213,679 5,239,859
</TABLE>
--------------------------
(1) As of December 31, 1999, these options were completely vested.
(2) The fair market value of our common stock on the date of this grant was
$1.38 as determined in good faith by our Board of Directors.
(3) This option to purchase our common stock vests as to one fourth of the
shares on June 25, 2000 with the remaining shares vesting ratably on a
monthly basis thereafter.
(4) This option to purchase our common stock vests as to one fourth of the
shares on August 5, 2000 with the remaining shares vesting ratably on a
monthly basis thereafter.
-10 -
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table presents information regarding the named executive
officers, concerning option exercises for the year ended December 31, 1999 and
exercisable and unexercisable options held as of December 31, 1999. The value of
unexercised in-the-money options is based on a price of $7.20 per share, the
fair market value of our stock on December 31, 1999, as determined by our Board
of Directors, minus the per share exercise price, multiplied by the number of
shares underlying the option.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1999 DECEMBER 31, 1999
ACQUIRED ON --------------------------- ---------------------------
NAME EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Patrick C. Shutt................... 500,000 300,000 -- $2,159,999 $ --
Robert J. Pommer, Jr............... 300,000 300,000 -- 2,159,999 --
Donna M. Shore..................... 200,000 121,875 328,125 877,297 2,361,953
Kenneth A. Napier.................. -- -- 400,000 -- 2,772,000
-- 50,000 -- 55,000 --
-- 100,000 -- 582,500 --
Mark A. Dickey..................... -- 150,000 -- 873,750
-- 121,875 328,125 877,297 2,361,953
</TABLE>
OTHER BENEFITS
401(K) RETIREMENT PLAN. In 1999, we adopted the Universal Access, Inc.
401(k) Savings Plan and Trust, covering our eligible full-time employees located
in the United States. The 401(k) plan is intended to meet the requirements of
Sections 401(a) and 401(k) of the Internal Revenue Code, as amended, so that
contributions to the 401(k) plan by employees, and the investment earnings
thereon, are not taxable to employees until withdrawn from the 401(k) plan.
Under the 401(k) plan, employees may elect to reduce their current eligible
compensation by up to the lesser of 15% of their annual compensation or the
statutorily prescribed annual limit ($10,500 in 2000) and to have the amount of
the reduction contributed to the 401(k) plan. The 401(k) plan does permit
discretionary matching contributions to the 401(k) plan by us on behalf of
participants in the 401(k) plan who have completed at least a year of service to
us. To date, there have been no matching contributions.
EMPLOYEE STOCK PURCHASE PLAN. Universal Access maintains an employee stock
purchase plan that is available to substantially all employees. Participating
employees may purchase common stock at the end of each participation period at a
purchase price equal to 85% of the lower of the fair market value of the stock
at the beginning or the end of the period. The six-month participation periods
run from May to October and from November to April each year. Employees may
contribute up to 15% of their compensation to the plan, up to a maximum of
$25,000 per calendar year.
EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL ARRANGEMENTS
EMPLOYMENT AGREEMENTS
From time to time, we have entered into employment agreements with our
executive officers, including the executive officers listed in the "Summary
Compensation Table." Each of the employment agreements currently in effect is
for a renewable one-year term. Each of our current executive officers is
entitled to a commuting allowance of $500 per month, except for Mr. Shutt,
Mr. Pommer, Mr. Rainone and Mr. Brown, who are entitled to an allowance of $600
per month. Each of our current executive officers is entitled to be paid an
annual bonus at our discretion pursuant to our compensation plan.
-11 -
<PAGE>
PATRICK SHUTT. In September 1998, Patrick Shutt entered into an employment
agreement with us. In September 2000, we amended and restated our employment
agreement with Mr. Shutt. Mr. Shutt is currently entitled to an annual salary of
$300,000.
ROBERT BROWN. In August 1999, Robert Brown entered into an employment
agreement with us. We amended and restated our employment agreement with
Mr. Brown in September 2000. Mr. Brown is currently entitled to an annual salary
of $215,000.
MARK DICKEY. In November 1998, Mark Dickey entered into an employment
agreement with us. We amended our employment agreement with Mr. Dickey in
February 2000. Mr. Dickey is currently entitled to an annual salary of $170,000.
SCOTT FEHLAN. In September 1999, Scott Fehlan entered into an employment
agreement with us. We amended and restated our employment agreement with
Mr. Fehlan in September 2000. Mr. Fehlan is currently entitled to an annual
salary of $185,000.
JAMES KEARNS. In July 2000, James Kearns entered into an employment
agreement with us. We amended and restated our employment agreement with
Mr. Kearns in September 2000. Under the employment agreement, Mr. Kearns is
entitled to an annual salary of $185,000.
GEORGE KING. In August 1999, George King entered into an employment
agreement with us. We amended and restated our employment agreement with
Mr. King in September 2000. Mr. King is currently entitled to an annual salary
of $185,000.
KENNETH NAPIER. In July 1999, Kenneth Napier entered into an employment
agreement with us. We amended our employment agreement with Mr. Napier in
February 2000. Mr. Napier is currently entitled to an annual salary of $145,000.
ROBERT POMMER. In September 1998, Robert Pommer entered into an employment
agreement with us. In September 2000, we amended and restated our employment
agreement with Mr. Pommer. Mr. Pommer is currently entitled to an annual salary
of $215,000.
ROBERT RAINONE. In February 2000, Robert Rainone entered into an employment
agreement with us. We amended and restated our employment agreement with
Mr. Rainone in September 2000. Mr. Rainone is currently entitled to an annual
salary of $215,000.
DONNA SHORE. In November 1998, Donna Shore, formerly Executive Vice
President, Chief Financial Officer and Treasurer, entered into an employment
agreement with us. We amended our employment agreement with Ms. Shore in
February 2000. Under the employment agreement, Ms. Shore was entitled to an
annual salary of $175,000 with an annual bonus to be paid upon the completion of
performance-based milestones. Ms. Shore was also entitled to a car allowance of
$600 per month. Ms. Shore's employment agreement had an initial term of three
years and was renewable for additional one-year terms.
BETH TARTER. In June 2000, Beth Tarter entered into an employment agreement
with us. We amended and restated our employment agreement with Ms. Tarter in
September 2000. Under the employment agreement, Ms. Tarter is entitled to an
annual salary of $185,000.
Our executive officers listed under "Management" have provisions in their
employment agreements which provide that if we terminate their individual
employment terms for any reason other than cause, death or total disability, or
if their authority, duties or responsibilities with us have been substantially
reduced, then we will provide them with health, life and disability insurance
for the one year period after their termination. In addition, other than for
Mark Dickey, we must also pay them the balance of their base salaries and bonus
for the lesser of six months or the remaining term of their
-12 -
<PAGE>
employment terms. For Mark Dickey, we must pay him the balance of his base
salary and bonus for the lesser of four months or the remaining term of his
employment term.
CHANGE OF CONTROL ARRANGEMENTS
Excluding Mark Dickey's August 1999 option grant for 150,000 shares of our
common stock and his September 2000 option grant for 25,000 shares of our common
stock, any unvested options to purchase shares held by our executive officers
will fully vest if there is a change of control which results in both:
- any sale of all or substantially all of our assets, any merger of us with
another company or any other corporate reorganization in which more than
50% of our voting power is transferred; and
- the officer no longer being employed by us or the successor entity under
substantially similar terms and conditions that existed prior to the
change of control.
STOCK OWNERSHIP
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of September 30, 2000, by:
- each of the individuals listed on the "Summary Compensation Table" above;
- each of our directors;
- each person (or group of affiliated persons) who is known by us to own
beneficially 5% or more of our common stock; and
- all current directors and executive officers as a group.
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 held by that person that are currently
exercisable or exercisable within 60 days of September 30, 2000, are deemed
issued and outstanding. These shares, however, are not deemed outstanding for
purposes of computing percentage ownership of each other stockholder.
Except as indicated in the footnotes to this table and subject to applicable
community property laws, each stockholder named in the table has sole voting and
investment power with respect to the shares shown as beneficially owned by them.
This table also includes shares owned by a spouse as community property.
Percentage of ownership is based on 90,149,939 shares of common stock
outstanding on September 30, 2000. The percentage of common stock outstanding as
of September 30, 2000 is calculated in accordance with the rules of the
Securities and Exchange Commission. Unless otherwise
-13 -
<PAGE>
indicated, the address of each of the individuals named below is: c/o Universal
Access, Inc., 233 South Wacker Drive, Suite 600, Chicago, Illinois 60606.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------------
SHARES ISSUABLE
PURSUANT TO OPTIONS
NUMBER AND WARRANTS
OF SHARES EXERCISABLE WITHIN PERCENT
BENEFICIALLY 60 DAYS OF BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED SEPTEMBER 30, 2000 OWNED
------------------------------------ ------------ ------------------- ------------
<S> <C> <C> <C>
DIRECTORS, EXECUTIVE OFFICERS AND 5% STOCKHOLDERS
Entities Affiliated with ComVentures (1) ............ 13,018,913 -- 14.44%
505 Hamilton Avenue
Suite 305
Palo Alto, CA 94301
Entities Affiliated with Internet Capital Group 20,679,122 1,000,002 23.78
(2) ...............................................
435 Devon Park Drive
Suite 800
Wayne, PA 19087
Patrick C. Shutt (3)................................. 5,369,000 300,000 6.27
Robert J. Pommer (4)................................. 5,084,090 312,500 5.97
Donna M. Shore....................................... 249,887 109,750 *
Kenneth A. Napier.................................... 150,000 141,667 *
Mark A. Dickey....................................... 40,625 231,250 *
Carolyn F. Katz...................................... -- -- *
Paolo Guidi.......................................... -- 200,000 *
Robert A. Pollan (2)................................. 20,679,122 1,000,002 23.78
Kevin P. Power....................................... 2,000 -- *
Joseph L. Schocken (5) .............................. 1,116,738 -- 1.24
2800 One Union Square
600 University Street
Seattle, WA 98101
John F. Slevin (6)................................... 57,365 4,863 *
Roland A. Van der Meer (1)........................... 13,018,913 -- 14.44
All directors and executive officers as a
group (15 persons)................................. 46,252,478 2,639,907 52.69
</TABLE>
------------------------
* Less than 1% of the outstanding shares of common stock.
(1) Includes 12,390,375 shares held by Communication Ventures III, L.P., and
625,221 shares held by Communication Ventures III CEO & Entrepreneurs' Fund,
L.P., 917 shares held by Mr. Van der Meer's wife in an IRA account and 2,400
shares held individually by Mr. Van der Meer. The sole general partner of
Communication Ventures III, L.P. and Communication Ventures III CEO &
Entrepreneurs' Fund is ComVen III, L.L.C. The managing members of ComVen
III, L.L.C. are Roland Van der Meer, David Helfrich and Clifford Higgerson.
Roland Van der Meer, one of our directors, and each of the other managing
members of ComVen III, L.L.C. disclaim beneficial ownership of the shares
held by Communication Ventures III, L.P. and Communication Ventures III
CEO & Entrepreneurs' Fund, except to the extent of their pecuniary interest
therein.
(2) Includes 20,664,122 shares held by Internet Capital Group, Inc., 15,000
shares held individually by Mr. Pollan and a warrant to purchase 1,000,002
shares held by Internet Capital Group, Inc. Robert Pollan is a managing
director of Internet Capital Group, Inc. Mr. Pollan disclaims beneficial
-14 -
<PAGE>
ownership of the shares held by Internet Capital Group, Inc., except to the
extent of his pecuniary interest therein.
(3) Includes 4,499,000 shares held by Patrick Shutt as Trustee of the Patrick C.
Shutt Declaration of Trust dated December 22, 1999, an option to purchase
300,000 shares held individually by Patrick Shutt, and 870,000 shares held
by the Shutt Family Limited Partnership. The general partners of the Shutt
Family Limited Partnership are Patrick Shutt and his wife.
(4) Includes 3,884,545 shares held individually by Robert Pommer, Jr., an option
to purchase 300,000 shares held individually by Robert Pommer, Jr., 199,545
shares held by Elizabeth M. Pommer as Trustee of the Elizabeth M. Pommer
Declaration of Trust dated December 31, 1999 and 1,000,000 shares are held
by the Pommer Family Limited Partnership dated December 31, 1999.
(5) Includes 960,002 shares held by Broadmark Investments, LLC., and 157,986
shares held by Broadmark Capital Corporation. Mr. Schocken is a non-member
manager of Broadmark Investments, LLC and is the chairman of Broadmark
Capital Corporation. Mr. Schocken disclaims beneficial ownership of the
shares held by Broadmark Investments, LLC and Broadmark Capital Corporation,
except as to his pecuniary interest therein.
(6) Includes 57,365 shares received as a liquidating distribution from Advanced
Equities Investments I, LLC. Mr. Slevin previously reported beneficial
ownership of 713,128 shares of Universal Access, Inc. held by Advanced
Equities Investments I, LLC, but disclaimed beneficial ownership over the
655,763 shares in which Mr. Slevin did not have a pecuniary interest. Also
includes a warrant to purchase 4,863 shares held individually by John
Slevin. Mr. Slevin is a non-managing member of Advanced Equities Investments
I, LLC and disclaims beneficial ownership of the shares held by Advanced
Equities Investments I, LLC.
OTHER DIRECTOR AND EXECUTIVE OFFICER INFORMATION
TRANSACTIONS WITH RELATED PARTIES AND INSIDERS
Other than the employment agreements described under "Management" and the
transactions described below, there has not been, nor is there currently
proposed, any transaction or series of similar transactions to which we were or
are to be a party in which the amount involved exceeds $60,000, and in which any
director, executive officer, holder of more than 5% of our common stock or any
member of the immediate family of any of these people had or will have a direct
or indirect material interest.
-15 -
<PAGE>
TRANSACTIONS WITH DIRECTORS, EXECUTIVE OFFICERS AND 5% STOCKHOLDERS
COMMON STOCK. The following table summarizes the private placement
transactions (or in the case of Internet Capital Group, our initial public
offering) in which we sold common stock or granted warrants to acquire common
stock to our directors, executive officers, 5% stockholders and persons and
entities affiliated with them.
<TABLE>
<CAPTION>
WARRANTS TO
SHARES OF PURCHASE
DATES OF PRICE PER COMMON COMMON
PURCHASER PURCHASE SHARE STOCK STOCK
--------- ------------------------------- --------- --------- -----------
<S> <C> <C> <C> <C>
Patrick C. Shutt .................. August 4, 1999 $1.5125 500,000 --
(executive officer, director and
5% stockholder)
Robert J. Pommer, Jr. ............. August 4, 1999 1.5125 300,000 --
(director and 5% stockholder)
Donna M. Shore..................... August 4, 1999 1.375 200,000 --
(former executive officer) February 24, 2000 0.01 6,170 --
August 1, 2000- --
August 28, 2000 0.01 40,250 --
September 14, 2000- --
September 27, 2000 0.01 50,000 --
October 6, 2000 0.01 25,000 --
Kenneth A. Napier.................. February 19, 2000 1.38 50,000 --
(former executive officer) September 18, 2000 0.27 100,000 --
Scott D. Fehlan.................... February 10, 2000- --
(executive officer) February 14, 2000 2.79 10,000 --
March 1, 2000 2.79 5,000 --
April 3, 2000- --
April 17, 2000 2.79 1,500 --
June 16, 2000 2.79 1,000 --
July 3, 2000 2.79 1,000 --
August 25, 2000-
August 29, 2000 2.79 1,500 --
September 14, 2000-
September 27, 2000 2.79 11,000 --
October 2, 2000 2.79 1,000 --
Broadmark Investments, L.L.C ...... February 8, 1999 0.50 -- 360,000
(Joseph L. Schocken, one of our
directors, is a non-member
manager of Broadmark Investments,
L.L.C. and has voting and
investment power over the members
of Broadmark Investments, L.L.C.)
Internet Capital Group ............ March 14, 2000 14.00 2,300,000 --
(Robert A. Pollan, one of our
directors and is managing
director of Internet Capital
Group, Inc.)
</TABLE>
For current information on the holdings of these stockholders, see "Principal
Stockholders".
-16 -
<PAGE>
SERIES A PREFERRED STOCK. On several dates in 1998 and 1999, we sold our
Series A preferred stock and granted warrants to acquire Series A preferred
stock, each share of which converted into six shares of common stock in
connection with our initial public offering. The following includes all
purchasers who are officers, directors, 5% stockholders and persons and entities
affiliated with them:
<TABLE>
<CAPTION>
WARRANTS TO
SHARES OF PURCHASE
SERIES A SERIES A
DATES OF PRICE PER PREFERRED PREFERRED
PURCHASER PURCHASE SHARE STOCK STOCK
--------- ------------- --------- --------- -----------
<S> <C> <C> <C> <C>
Entities affiliated with Broadmark Investments
L.L.C........................................ March 5, 1999 $3.00 19,999 --
(Joseph L. Schocken, one of our directors,
has voting and investment power over the
members of Broadmark Investments,
L.L.C.).................................... March 8, 1999 3.00 -- 43,900
</TABLE>
SERIES B PREFERRED STOCK. In February and April 1999, we sold Series B
preferred stock and warrants to acquire Series B preferred stock, each share of
which converted into six shares of common stock in connection with our initial
public offering. The following includes all purchasers who are officers,
directors, 5% stockholders and persons and entities affiliated with them:
<TABLE>
<CAPTION>
WARRANTS TO
SHARES OF PURCHASE
SERIES B SERIES B
DATES OF PRICE PER PREFERRED PREFERRED
PURCHASER PURCHASE SHARE STOCK STOCK
--------- ---------------- --------- --------- -----------
<S> <C> <C> <C> <C>
Communications Ventures III, L.P............. February 8, 1999 $3.00 1,111,111
Communications Ventures III CEO &
Entrepreneurs' Fund, L.P................. February 8, 1999 3.00 55,555 --
Communications Ventures III CEO &
Entrepreneurs' Fund, L.P................... February 8, 1999 0.01 -- 11,112
Communications Ventures III, L.P............. February 8, 1999 0.01 -- 222,223
Internet Capital Group, Inc.................. February 8, 1999 0.01 -- 166,667
Internet Capital Group, Inc.................. February 8, 1999 3.00 833,334 --
</TABLE>
Communications Ventures III, L.P. and Communications Ventures III CEO &
Entrepreneurs' Fund, L.P. are affiliated with ComVentures. ComVentures is a 5%
stockholder and Roland Van der Meer, who is one of our directors, is a principal
of ComVentures. Internet Capital Group, Inc. is a 5% stockholder and Robert
Pollan, who is one of our directors, is a managing director of Internet Capital
Group, Inc.
SERIES C PREFERRED STOCK. In May, 1999, we sold our Series C preferred
stock at a purchase price of $3.00 per share. Each share of Series C preferred
stock converted into three shares of common stock in connection with our initial
public offering. The following includes all purchasers who are officers,
directors, 5% stockholders and persons and entities affiliated with them:
<TABLE>
<CAPTION>
SHARES OF
SERIES C
DATES OF PREFERRED
PURCHASER PURCHASE STOCK
--------- ------------ ---------
<S> <C> <C>
Communications Ventures III, L.P............................ May 13, 1999 309,525
Communications Ventures III CEO & Entrepreneurs' Fund,
L.P....................................................... May 13, 1999 15,476
Internet Capital Group, Inc................................. May 13, 1999 325,000
</TABLE>
SERIES D PREFERRED STOCK. On several dates in 1999, we sold our Series D
preferred stock at a purchase price of $4.25 per share. Each share of Series D
preferred stock converted into three shares
-17 -
<PAGE>
of common stock in connection with our initial public offering. The following
includes all purchasers who are officers, directors, 5% stockholders and persons
and entities affiliated with them:
<TABLE>
<CAPTION>
SHARES OF
SERIES D
PREFERRED
PURCHASER DATES OF PURCHASE STOCK
--------- ------------------ ---------
<S> <C> <C>
Communications Ventures III, L.P............................ August 25, 1999 784,313
Communications Ventures III CEO & Entrepreneurs' Fund,
L.P....................................................... August 25, 1999 39,216
Internet Capital Group, Inc................................. June 30, 1999 3,764,706
Entities affiliated with Broadmark Investments L.L.C........ September 30, 1999 37,332
</TABLE>
LOANS TO EXECUTIVE OFFICERS AND DIRECTORS
PATRICK SHUTT. In August 1999 we loaned $756,250 to Patrick Shutt, our
Chairman, President and Chief Executive Officer and one of our directors, under
a promissory note which was amended and restated in December 1999, in connection
with his purchase of 500,000 shares of our common stock. This loan accrues
interest at a rate of 6% and is due and payable on or before August 2004. The
principal amount outstanding under his loan on September 30, 2000 was $756,250.
ROBERT POMMER. In May 1999, we loaned $200,000 to Robert Pommer, our Vice
Chairman and one of our directors, under a promissory note. This loan accrues
interest at an annual rate of 6% and will be due and payable in April 2004. In
August 1999 we loaned $453,750 to Robert Pommer under a promissory note which
was amended and restated in December 1999, in connection with his purchase of
300,000 shares of our common stock. This loan accrues interest at an annual rate
of 6% and is due and payable on or before August 2004. The principal amount
outstanding under his loans on September 30, 2000 was $653,750.
OPTION GRANTS TO EXECUTIVE OFFICERS AND DIRECTORS
PATRICK SHUTT. In July 1998 we granted to Patrick Shutt an option to
purchase 300,000 shares of our common stock at an exercise price of $0.01 per
share. In August 1999 we granted to Mr. Shutt an option to purchase 500,000
shares of our common stock at an exercise price of $1.51 per share.
ROBERT BROWN. In August 1999, we granted to Robert Brown an option to
purchase a total of 84,000 shares of our common stock at an exercise price of
$1.38 per share. In September 1999, we granted Mr. Brown an option to purchase
46,000 shares of our common stock at an exercise price of $2.79 per share. In
February 2000, we granted Mr. Brown an option to purchase 170,000 shares of our
common stock at an exercise price of $8.10 per share. In September 2000 we
granted to Mr. Brown options to purchase 250,000 shares of our common stock at
an exercise price of $15.13 per share and 350,000 shares of our common stock at
an exercise price of $42.00 per share.
MARK DICKEY. In November 1998 we granted to Mark Dickey an option to
purchase 450,000 shares of our common stock at an exercise price of $0.01 per
share. In August 1999 we granted Mr. Dickey an option to purchase 150,000 shares
of our common stock at an exercise price of $1.38 per share. In September 2000
we granted to Mr. Dickey an option to purchase 25,000 shares of our common stock
at an exercise price of $15.63 per share.
SCOTT FEHLAN. In September 1999 we granted to Scott Fehlan an option to
purchase 500,000 shares of our common stock at an exercise price of $2.79 per
share. In September 2000 we granted to Mr. Fehlan an option to purchase 50,000
shares of our common stock at an exercise price of $42.00 per share.
-18 -
<PAGE>
PAOLO GUIDI. In August 1999, we granted to Paolo Guidi an option to
purchase a total of 200,000 shares of our common stock at an exercise price of
$1.38 per share.
JAMES KEARNS. In March 2000, we granted to James Kearns an option to
purchase a total of 200,000 shares of our common stock at an exercise price of
$8.10 per share. In September 2000 we granted to Mr. Kearns options to purchase
50,000 shares of our common stock at an exercise price of $15.13 per share and
100,000 shares of our common stock at an exercise price of $42.00 per share.
GEORGE KING. In August 1999, we granted to George King an option to
purchase 100,000 shares of our common stock at an exercise price of $2.11 per
share. In November 1999, we granted Mr. King an option to purchase 25,000 shares
of our common stock at an exercise price of $6.10 per share. In September 2000
we granted to Mr. King an option to purchase 50,000 shares of our common stock
at an exercise price of $42.00 per share.
KENNETH NAPIER. In June 1999 we granted to Kenneth Napier an option to
purchase 400,000 shares of our common stock at an exercise price of $0.27 per
share. In August 1999 we granted to Mr. Napier an option to purchase 100,000
shares of our common stock at an exercise price of $1.38 per share. In
November 1999 we granted to Mr. Napier an option to purchase 50,000 shares of
our common stock at an exercise price of $7.20 per share.
ROBERT POMMER. In July 1998 we granted to Robert Pommer an option to
purchase 300,000 shares of our common stock at an exercise price of $0.01 per
share. In August 1999 we granted to Mr. Pommer an option to purchase 300,000
shares of our common stock at an exercise price of $1.51 per share. In
September 2000 we granted to Mr. Pommer an option to purchase 50,000 shares of
our common stock at an exercise price of $42.00 per share.
ROBERT RAINONE. In February 2000, we granted to Robert Rainone an option to
purchase 500,000 shares of our common stock at an exercise price of $8.10 per
share. In September 2000 we granted to Mr. Rainone options to purchase 150,000
shares of our common stock at an exercise price of $15.13 per share and 250,000
shares of our common stock at an exercise price of $42.00 per share.
DONNA SHORE. In November 1998 we granted to Donna Shore an option to
purchase 450,000 shares of our common stock at an exercise price of $0.01 per
share. In August 1999 we granted to Ms. Shore an option to purchase 200,000
shares of our common stock at an exercise price of $1.38 per share. In
February 2000 we granted to Ms. Shore an option to purchase 210,000 shares of
our common stock at an exercise price of $8.10 per share.
BETH TARTER. In March 2000, we granted to Beth Tarter an option to purchase
30,000 shares of our common stock at an exercise price of $8.10 per share and
70,000 shares of our common stock at an exercise price of $54.63 per share. In
July 2000, we granted Ms. Tarter an option to purchase 70,000 shares of our
common stock at an exercise price of $24.00 per share. In September 2000 we
granted to Ms. Tarter an option to purchase 100,000 shares of our common stock
at an exercise price of $15.13 per share.
OTHER TRANSACTIONS
We entered into an engagement letter agreement with Broadmark Capital
Corporation in August 1998 and amended this agreement in October 1998 and in
February 1999. Joseph Schocken, one of our directors, is the Chairman of
Broadmark Capital Corporation. Broadmark Capital Corporation provided services
to us in connection with the placement of our Series A preferred stock,
Series B preferred stock and Series D preferred stock. As consideration for
their services, we paid them approximately $502,190 and we issued them warrants
to purchase our common stock and our Series A preferred stock. In addition, they
received options, which were exercised in March 2000, to purchase a total of
839,994 shares of our common stock from three of our shareholders.
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<PAGE>
Internet Capital Group purchases circuit access from us under five-year
contracts entered into from October through December 1999 with minimum purchase
commitments totaling approximately $29,000 per month. In the year ended
December 31, 1999, Internet Capital Group paid us approximately $40,000 under
these contracts.
In November 1999, Advanced Equities, Inc. provided services to us in
connection with the placement of our Series E preferred stock. John Slevin, one
of our directors, owns approximately five percent of Advanced Equities, Inc. As
consideration for Advanced Equities, Inc.'s services, we paid them approximately
$385,000. We also issued Advanced Equities, Inc. a warrant to purchase 40,000
shares of Series E preferred stock with an exercise price of $18.30 per share.
On November 10, 1999, Advanced Equities Investments I, LLC purchased 256,831
shares of our Series E preferred stock at a purchase price of $18.30 per share.
Mr. Slevin is a non-managing member of Advanced Equities Investments I, LLC.
INDEMNIFICATION
We have entered into indemnification agreements with each of our directors
and officers. These indemnification agreements and our certificate of
incorporation and bylaws require us to indemnify our directors and officers to
the fullest extent permitted by Delaware law.
All future transactions, including any loans from us to our 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 us than could be obtained from unaffiliated third parties.
ADDITIONAL INFORMATION
RECORD DATE; SHARES OUTSTANDING
Stockholders of record at the close of business on October 17, 2000, are
entitled to vote their shares at the annual meeting. As of that date, there were
90,412,841 shares of common stock outstanding and entitled to be voted at the
meeting. The holders of those shares are entitled to one vote per share.
QUORUM
More than 50% of the stockholders entitled to vote must be represented at
the meeting before any business may be conducted. If a quorum is not present,
the stockholders who are represented may adjourn the meeting until a quorum is
present. The time and place of the adjourned meeting will be announced at the
time the adjournment is taken, and no other notice need be given. An adjournment
will have no effect on the business that may be conducted at the meeting.
PROXIES; RIGHT TO REVOKE
By submitting your proxy, you will authorize Patrick C. Shutt and Robert J.
Pommer, Jr. to represent you and vote your shares at the meeting in accordance
with your instructions. They may also vote your shares to adjourn the meeting
and will be authorized to vote your shares at any adjournments or postponements
of the meeting. If you attend the meeting, you may vote your shares in person,
regardless of whether you have submitted a proxy. In addition, you may revoke
your proxy by sending a written notice of revocation to Universal Access'
Corporate Secretary, by submitting a later-dated proxy or by voting in person at
the meeting.
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<PAGE>
DEFAULT VOTING
If you submit a proxy but do not indicate any voting instructions, your
shares will be voted FOR the election of all nominees for director, and if any
other business properly comes before the stockholders for a vote at the meeting,
your shares will be voted according to the discretion of the holders of the
proxy.
TABULATION OF VOTES
Wells Fargo Shareowners Services, the transfer agent, will tabulate and
certify the votes. If your shares are treated as a broker non-vote, your shares
will be included in the number of shares represented for purposes of determining
whether a quorum is present. Because the election of directors (the only
proposal to be presented) is done by a plurality of votes, a broker non-vote
will have no effect on the outcome of the vote.
VOTING BY STREET NAME HOLDERS
If you are the beneficial owner of shares held in "street name" by a broker,
the broker, as the record holder of the shares, is required to vote those shares
according to your instructions. If you do not give instructions to the broker,
the broker will be entitled to vote the shares in its discretion.
INDEPENDENT ACCOUNTANTS
The Board of Directors has again selected PricewaterhouseCoopers LLP as
independent accountants for fiscal 2000. Representatives of that firm will be at
the meeting to respond to appropriate questions, and they will have an
opportunity to make a statement if they desire to do so.
PROXY SOLICITATION
Universal Access will bear all costs of this proxy solicitation. Proxies may
be solicited by mail, including electronic mail, in person, by telephone or by
facsimile by officers, directors and regular employees. Universal Access also
has retained Morrow & Co., Inc. ("Morrow") to assist in the solicitation of
proxies. Morrow will receive a fee for such services of approximately $2,500,
plus reasonable out-of-pocket expenses, which will be paid by Universal Access.
Universal Access may also reimburse brokerage firms, custodians, nominees and
fiduciaries for their expenses to forward proxy materials to beneficial owners.
STOCKHOLDER PROPOSALS FOR NEXT YEAR'S MEETING
INCLUSION IN NEXT YEAR'S PROXY STATEMENT. Any stockholder who desires to
present a proposal for consideration at next year's annual meeting and to
include such proposal in next year's proxy statement must deliver the proposal
to Universal Access's principal executive offices within a reasonable time
before March 16, 2001, the anticipated mailing date of the proxy statement for
next year's annual meeting. Proposals should be addressed to Corporate
Secretary, Universal Access, Inc., 233 South Wacker Drive, Suite 600, Chicago,
Illinois 60606.
PRESENTATION AT MEETING. For any proposal that is not submitted for
inclusion in next year's proxy statement (as described in the preceding
paragraph) but is instead sought to be presented directly at next year's annual
meeting, SEC rules permit management to vote proxies in its discretion if
(a) Universal Access receives notice of the proposal before the close of
business on February 1, 2001 and advises stockholders in next year's proxy
statement about the nature of the matter and how management intends to vote on
such matter or (b) does not receive notice of the proposal prior to the close of
business on February 1, 2001. Notices of intention to present proposals at next
year's annual meeting should be addressed to Corporate Secretary, Universal
Access, Inc., 233 South Wacker Drive, Suite 600, Chicago, IL 60606.
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<PAGE>
DIRECTOR NOMINEES. In recommending candidates to the Board of Directors,
the Nominating Committee seeks persons of proven judgment and experience.
Stockholders who wish to suggest qualified candidates may write to the Corporate
Secretary, Universal Access, Inc., 233 South Wacker Drive Suite 600, Chicago,
Illinois 60606, stating in detail the qualifications of the persons they
recommend.
STOCKHOLDER LIST
For at least ten days prior to the meeting, a list of the stockholders
entitled to vote at the annual meeting will be available for examination, for
purposes germane to the meeting, during ordinary business hours at Universal
Access' principal executive offices. The list will also be available for
examination at the meeting.
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<PAGE>
APPENDIX A
UNIVERSAL ACCESS, INC.
a Delaware corporation
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
PURPOSES
The purpose of the Audit Committee of the Board of Directors of Universal
Access, Inc., a Delaware corporation (the "Company"), shall be to make such
examinations as are necessary to monitor the Company's system of internal
controls, to provide the Company's Board of Directors with the results of its
examinations and recommendations derived therefrom, to outline to the Board of
Directors improvements made, or to be made, in internal accounting controls, to
nominate independent auditors and to provide to the Board of Directors such
additional information and materials as it may deem necessary to make the Board
of Directors aware of significant financial matters which require the Board of
Director's attention.
In addition, the Audit Committee will undertake those specific duties and
responsibilities listed below and such other duties as the Board of Directors
may from time to time prescribe. The Audit Committee shall review the adequacy
of this Charter on an annual basis.
MEMBERSHIP
The Audit Committee members will be appointed by, and will serve at the
discretion of, the Board of Directors and will consist of at least three members
of the Board of Directors, each of whom:
1. Will be an independent director, as defined in NASDAQ Rule 4200;
2. Will be able to read and understand fundamental financial statements, in
accordance with the NASDAQ National Market Audit Committee requirements;
and
3. At least one of whom will have past employment experience in finance or
accounting, requisite professional certification in accounting, or other
comparable experience or background, including a current or past
position as a chief executive or financial officer or other senior
officer with financial oversight responsibilities.
RESPONSIBILITIES
The responsibilities of the Audit Committee shall include:
1. Recommending the appointment of independent auditors to the Board of
Directors;
2. Reviewing fee arrangements with the independent auditors;
3. Reviewing the independent auditors' proposed audit scope, approach and
independence;
4. Discussing with the Company's independent auditors the financial
statements and audit findings, including discussing with the Company's
independent auditors any significant adjustments, management judgments
and accounting estimates, significant new accounting policies and
disagreements with management and any other matters described in SAS
No. 61, as may be modified or supplemented;
5. Reviewing the written disclosures and the letter from the Company's
independent auditors required by ISB Standard No. 1, as may be modified
or supplemented; discussing with the
A-1
<PAGE>
independent auditors any such disclosed relationships and their impact
on the independent auditors' independence; and recommending that the
Board of Directors take appropriate action to oversee the independence
of the independent auditors;
6. Reviewing the performance of the independent auditors, who shall be
accountable to the Board of Directors and the Audit Committee;
7. Reviewing the quality and adequacy of the Company's system of internal
controls through discussions with management and the independent
auditors;
8. Reviewing the activities, organizational structure and qualifications of
the Company's finance department;
9. Reviewing and discussing the audited financial statements with
management and the independent auditors;
10. Periodically interviewing relevant members of management concerning the
Company's financial statements and audit findings, and the Company's
accounting policies and procedures;
11. Reviewing with management and the independent auditors before release
the audited financial statements and Management's Discussion and
Analysis in the Company's annual report on Form 10-K;
12. Reviewing before release the unaudited quarterly operating results in
the Company's quarterly earnings release;
13. Overseeing compliance with the requirements of the Securities and
Exchange Commission for disclosure of independent auditor's services and
audit committee members and activities;
14. Overseeing compliance with the Company's Standards of Business Conduct
and with the Foreign Corrupt Practices Act;
15. Reviewing, in conjunction with counsel, any legal matters that could
have a significant impact on the Company's financial statements;
16. Providing oversight and review of the Company's asset management
policies, including an annual review of the Company's investment
policies and performance for cash and short-term investments;
17. If necessary, instituting special investigations and, if appropriate,
hiring special counsel or experts to assist;
18. Providing a report in the Company's proxy statement in accordance with
the requirements of Item 306 of Regulation S-K and Item 7(e)(3) of
Schedule 14A; and
19. Performing other oversight functions as requested by the full Board of
Directors.
In addition to the above responsibilities, the Audit Committee will
undertake such other duties as the Board of Directors may delegate to it and
will report, at least annually, to the Board of Directors regarding the
Committee's examinations and recommendations.
MEETINGS
The Audit Committee will meet at least quarterly prior to the release of the
Company's financial results for that quarter. The Audit Committee may establish
its own schedule and shall provide such schedule to the Board of Directors in
advance.
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<PAGE>
The Audit Committee will meet separately with the Company's president and
separately with the Company's chief financial officer at least annually to
review the financial controls of the Company. The Audit Committee will meet with
the independent auditors of the Company at such times as it deems appropriate to
review the independent auditor's examination and management report.
MINUTES
The Audit Committee will maintain written minutes of its meetings, which
minutes will be filed with the minutes of the meetings of the Board of
Directors.
A-3
<PAGE>
UNIVERSAL ACCESS, INC.
ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, NOVEMBER 9, 2000
10:00 A.M., CENTRAL TIME
SEARS TOWER
99TH FLOOR
233 SOUTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
Take the escalator from the Sears Tower lobby to the 2nd
floor (Restaurant Level). Then take the elevator marked
"Skylobby 67" to the 67th floor. On 67, look for the
elevator marked "90-102" and take it to the 99th floor.
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[LOGO] PROXY
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING
ON NOVEMBER 9, 2000.
The shares of stock you hold in your account will be voted as you specify on the
reverse side.
IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR" THE ELECTION AS
DIRECTORS OF THE NOMINEES LISTED ON THE REVERSE SIDE.
By signing the proxy, you acknowledge receipt of the proxy statement related to
the Annual Meeting, revoke all prior proxies and appoint Patrick C. Shutt and
Robert J. Pommer, Jr., and each of them, with full power of substitution, to
vote your shares on the matters shown on the reverse side and any other matters
which may come before the Annual Meeting and all postponements or adjournments.
SEE REVERSE FOR VOTING INSTRUCTIONS.
<PAGE>
--------------------
COMPANY #
CONTROL #
--------------------
THERE ARE THREE WAYS TO VOTE YOUR PROXY
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
VOTE BY PHONE -- TOLL FREE -- 1-800-240-6326 -- QUICK *** EASY *** IMMEDIATE
- Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week, until 12:00 p.m. Central Time on November 8, 2000.
- You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above.
- Follow the simple instructions the recording provides you.
VOTE BY INTERNET -- HTTP://WWW.EPROXY.COM/UAXS/ -- QUICK *** EASY *** IMMEDIATE
- Use the Internet to vote your proxy 24 hours a day, 7 days a week, until
12:00 p.m. on November 8, 2000.
- You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above to obtain your records and create an
electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
provided or return it to Universal Access, Inc., c/o Shareowner Services-SM-,
P.O. Box 64873, St. Paul, MN 55164-0873.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD
- PLEASE DETACH HERE -
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES.
1. Election of directors:
01 Paolo Guidi 03 Joseph L. Schocken
02 Carolyn F. Katz
/ / Vote FOR all nominees (except as marked)
/ / Vote WITHHELD from all nominees
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY ---------------
INDICATED NOMINEE, WRITE THE NUMBER(S) OF THE NOMINEE(S) IN
THE BOX PROVIDED TO THE RIGHT.) ---------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR THE NOMINEES.
Address Change? Mark Box / /
Indicate changes below: Date
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Signature(s) in Box
Please sign exactly as your name(s)
appear on Proxy. If held in joint
tenancy, all persons must sign.
Trustees, administrators, etc., should
include title and authority.
Corporations should provide full name of
corporation and title of authorized
officer signing the proxy.
