<PAGE>
===============================================================================
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
ILIFE.COM, 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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
ILIFE.COM, INC.
11811 U.S. Highway One, Suite 101
North Palm Beach, Florida 33408
(561) 627-7330
May 1, 2000
Dear ilife.com, Inc. Stockholders,
You are cordially invited to attend the Annual Meeting of
Stockholders of ilife.com, Inc. (the "Company") that will be held on
Thursday, June 8, 2000. The meeting will begin promptly at 9:00 a.m.
local time, at The Waterford Hotel & Conference Center, 11360 U.S.
Highway One, North Palm Beach, Florida 33408.
The notice of the meeting and proxy statement on the following pages
contain information on the formal business of the meeting. Whether or
not you expect to attend the meeting, please sign, date and return
your proxy promptly in the enclosed envelope to assure your stock will
be represented at the meeting. If you decide to attend the annual
meeting and vote in person, you will, of course, have that
opportunity.
The continuing interest of the stockholders in the business of the
Company is gratefully acknowledged. We hope many will attend the
meeting.
Sincerely,
/s/ Jeffrey M. Cunningham
------------------------
Jeffrey M. Cunningham,
Chairman of the Board
<PAGE>
ILIFE.COM, INC.
11811 U.S. Highway One, Suite 101
North Palm Beach, Florida 33408
(561) 627-7330
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 8, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of ilife.com,
Inc. (the "Company") will be held at The Waterford Hotel & Conference Center,
11360 U.S. Highway One, North Palm Beach, Florida 33408, at 9:00 a.m., Florida
time, on Thursday, June 8, 2000 (the "Annual Meeting"), to consider and act
upon:
1. the election of five directors to the Company's Board of Directors;
2. a proposal to increase the number of shares of common stock available
under the Company's 1999 Equity Compensation Plan;
3. a proposal to ratify and approve the issuance and sale of shares of
the Company's common stock to Jeffrey M. Cunningham;
4. a proposal to ratify the selection of independent public accountants
for the Company's current fiscal year; and
5. such other business as may properly come before the Annual Meeting or
any adjournment thereof.
The Board of Directors has fixed the close of business on April 13, 2000, as
the record date for the determination of stockholders entitled to notice of,
and to vote at, the Annual Meeting.
By Order of the Board of Directors,
/s/ Jeffrey M. Cunningham
Jeffrey M. Cunningham
Chairman of the Board
May 1, 2000
North Palm Beach, Florida
IMPORTANT
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE MARK, DATE
AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE WHICH HAS BEEN
PROVIDED. NO POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES. IN THE
EVENT YOU ARE ABLE TO ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE
YOUR SHARES IN PERSON.
<PAGE>
ILIFE.COM, INC.
11811 U.S. Highway One, Suite 101
North Palm Beach, Florida 33408
(561) 627-7330
----------------
PROXY STATEMENT
----------------
JUNE 8, 2000
----------------
INFORMATION CONCERNING SOLICITATION AND VOTING
Stockholders Meeting
This Proxy Statement and the enclosed proxy card ("Proxy") are furnished on
behalf of the Board of Directors of ilife.com, Inc., a Florida corporation
(the "Company"), for use at the Annual Meeting of Stockholders to be held on
June 8, 2000 at 9:00 a.m., North Palm Beach, Florida time (the "Annual
Meeting"), or at any adjournment or postponement thereof, for the purposes set
forth herein and in the accompanying Notice of Annual Meeting. The Annual
Meeting will be held at The Waterford Hotel & Conference Center, 11360 U.S.
Highway One, North Palm Beach, Florida 33408. The Company intends to mail this
Proxy Statement and the accompanying Proxy on or about May 5, 2000, to all
stockholders entitled to vote at the Annual Meeting.
Stockholders Entitled to Vote
Only holders of record of the Company's $.01 par value per share common
stock (the "Common Stock") at the close of business on April 13, 2000, will be
entitled to notice of and to vote at the Annual Meeting. At the close of
business on April 13, 2000, the Company had outstanding and entitled to vote
13,979,904 shares of Common Stock. Each holder of record of Common Stock on
such date will be entitled to one vote for each share held on all matters to
be voted upon at the Annual Meeting. Any stockholder who signs and returns a
Proxy has the power to revoke it at any time before it is exercised by
providing written notice of revocation to the Secretary of the Company or by
filing with the Secretary of the Company a Proxy bearing a later date. The
holders of a majority of the total shares of Common Stock outstanding on the
record date, whether present at the Annual Meeting in person or represented by
Proxy, will constitute a quorum for the transaction of business at the Annual
Meeting. The shares held by each stockholder who signs and returns the
enclosed Proxy will be counted for purposes of determining the presence of a
quorum at the meeting, whether or not the stockholder abstains on all or any
matter to be acted on at the meeting. Abstentions and broker non-votes both
will be counted toward fulfillment of quorum requirements. A broker non-vote
occurs when a nominee holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have discretionary voting
power with respect to that proposal and has not received instructions from the
beneficial owner.
Counting of Votes
The purpose of the Annual Meeting is to consider and act upon the matters
which are listed in the accompanying Notice of Annual Meeting and set forth in
this Proxy Statement. The enclosed Proxy provides a means for a stockholder to
vote upon all of the matters listed in the accompanying Notice of Annual
Meeting and described in the Proxy Statement. The enclosed Proxy also provides
a means for a stockholder to vote for the nominees for director listed thereon
or to withhold authority to vote for such nominees. The Company's Bylaws
provide that directors are elected by a plurality of the votes cast.
Accordingly, the withholding of authority by a stockholder (including broker
non-votes) will not be counted in computing a plurality and thus will have no
effect on the results of the election of such nominees.
<PAGE>
The accompanying Proxy also provides a means for a stockholder to vote for,
against or abstain from voting on each of the other matters to be acted upon
at the Annual Meeting. Each Proxy will be voted in accordance with the
stockholder's directions. The vote required for the proposal to amend the
Company's 1999 Equity Compensation Plan (proposal 2) and the proposal to
ratify and approve the issuance and sale of Common Stock to Jeffrey M.
Cunningham (proposal 3) is the affirmative vote of the holders of a majority
of the shares represented and entitled to vote at the Annual Meeting, provided
a quorum is present. Abstentions are considered in determining the number of
votes required to obtain a majority of the shares represented and entitled to
vote at the Annual Meeting and will have the same legal effect as a vote
against such proposals.
The vote required to approve the proposal to ratify the selection of the
Company's independent public accountants (proposal 4) is governed by Florida
law and the votes cast favoring such proposal must exceed the votes cast
opposing such proposal, provided a quorum is present. As a result, abstentions
will not be counted and will have no effect on the vote for proposal 4.
With respect to broker non-votes, the shares will not be considered present
at the meeting for the proposals to which authority was withheld or abstained.
Consequently, broker non-votes will not be counted with regard to proposals 2,
3 and 4 but they will have the effect of reducing the number of affirmative
votes required to approve proposals 2 and 3 because they reduce the number of
shares present or represented from which a majority is calculated.
As of April 13, 2000 (the record date for the Annual Meeting), the current
directors and executive officers of the Company owned or controlled the power
to vote approximately 8,265,649 shares of the Common Stock eligible to be
voted at the Annual Meeting, constituting approximately 59.1% of the
outstanding Common Stock. The Company believes that directors and executive
officers will vote all of their shares of Common Stock in favor of the
election of each of the director nominees and in favor of each of the other
proposals and, therefore, that the presence of a quorum, the election of the
director nominees, and the approval of each of the other proposals is
reasonably assured.
Proxies
When the enclosed Proxy is properly signed and returned, the shares which it
represents will be voted at the Annual Meeting in accordance with the
instructions noted thereon. In the absence of such instructions, the shares
represented by a signed Proxy will be voted in favor of the nominees for
election to the Board of Directors, and in favor of the approval of proposals
2, 3 and 4.
Proxies will be solicited from the Company's stockholders by mail. The
Company will pay all expenses in connection with the solicitation, including
postage, printing and handling, and the expenses incurred by brokers,
custodians, nominees and fiduciaries in forwarding proxy material to
beneficial owners. The Company may employ a proxy solicitation firm to solicit
proxies in connection with the Annual Meeting, and the Company estimates that
the fee payable for such services will be less than $10,000. It is possible
that directors, officers and other employees of the Company may make further
solicitation personally or by telephone, facsimile or mail. Directors,
officers and other employees of the Company will receive no additional
compensation for any such further solicitation.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the amount and percent of shares of Common
Stock that, as of April 13, 2000, are deemed under the rules of the Securities
and Exchange Commission (the "Commission") to be "beneficially owned" by each
member of the Board of Directors of the Company, by each nominee for election
to the Board of Directors, by each executive officer of the Company named in
the Summary Compensation Table, by all directors and executive officers of the
Company as a group, and by any person or "group" (as that term is used in the
Securities Exchange Act of 1934, as amended) known to the Company as of that
date to be a "beneficial owner" of more than 5% of the outstanding shares of
Common Stock. The information regarding Robert H. Lessin, Salomon Smith
Barney, Inc. (and its affiliates), and ING Barings LLC is based soley on
reports filed by such entities with the Commission.
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned (1)
-----------------------
Number of
Shares of Percentage
Name of Beneficial Owner Common Stock of Class
- ------------------------ ------------ ----------
<S> <C> <C>
Peter C. Morse (2)..................................... 5,499,217 39.3%
Principal Stockholder and Director
Robert H. Lessin (3)................................... 1,276,367 9.1%
Principal Stockholder
Bruns H. Grayson (4)................................... 1,270,367 9.1%
Principal Stockholder and Director
ING Barings LLC (5).................................... 947,896 6.8%
Principal Stockholder
Salomon Smith Barney Inc. and Salomon Brothers Holding
Company Inc (6)....................................... 931,028 6.7%
Principal Stockholder
Randall E. Poliner (7)................................. 784,067 5.6%
Principal Stockholder and Director
Jeffrey M. Cunningham (8).............................. 431,499 3.1%
Chairman of the Board
Robert P. O'Block (9).................................. 161,317 1.2%
Director
Elisabeth DeMarse...................................... -- *
President, Chief Executive Officer and Director
William Martin......................................... -- *
Director
G. Cotter Cunningham (10).............................. 31,250 *
Senior Vice President--Sales & Marketing
Edward V. Blanchard, Jr. (11).......................... 141,333 1%
Executive Vice President--Mergers & Acquisitions
Peter W. Minford (12).................................. 39,876 *
Senior Vice President--Administration
Robert J. DeFranco (13)................................ 11,719 *
Vice President--Finance & Chief Accounting Officer
William P. Anderson, III (14).......................... 281,913 2.0%
Former President, Chief Executive Officer and Director
Sara Campbell Taylor................................... 43,000 *
Former Senior Vice President--Sales & Syndication
All current executive officers and directors as a group
(22 persons) (15)..................................... 8,487,104 59.8%
</TABLE>
- --------
* Less than 1% of the outstanding Common Stock.
3
<PAGE>
(1) For purposes of calculating the percentage beneficially owned, the number
of shares of Common Stock deemed outstanding includes (i) 13,979,904
shares outstanding as of April 13, 2000, and (ii) shares issuable by us
pursuant to options held by the respective person or group which may be
exercised within 60 days following April 13, 2000. These options are
considered to be outstanding and to be beneficially owned by the person
or group holding such options for the purpose of computing the percentage
ownership of such person or group but are not treated as outstanding for
the purpose of computing the percentage ownership of any other person or
group.
(2) Includes 5,417 shares of Common Stock issuable upon exercise of stock
options. The address of Mr. Morse is 200 Four Falls Plaza, Suite 205,
West Conshohocken, Pennsylvania 19428.
(3) Includes 384,600 shares of Common Stock owned by BRM Holdings LLC. Mr.
Lessin is a controlling person of BRM Holdings LLC and is the beneficial
owner of such shares. The address of Mr. Lessin is 826 Broadway, New
York, New York 10003.
(4) Includes 5,417 shares of Common Stock issuable upon exercise of stock
options, 959,850 shares owned by ABS Ventures IV, L.P. and 305,100 shares
owned by ABX Fund, L.P. Mr. Grayson is the managing member of ABS
Ventures IV, L.P. and ABX Fund, L.P. Mr. Grayson disclaims beneficial
ownership of the shares owned by the limited partnerships. The address of
Mr. Grayson is 1 South Street, Suite 2150, Baltimore, Maryland 21202.
(5) The address of ING Barings LLC is 55 East 52nd Street, New York, New York
10055.
(6) The shares shown are beneficially owned by Salomon Smith Barney Inc.
("SSBI") and Salomon Brothers Holding Company Inc ("SBHCI"), and by their
affiliates, Salomon Smith Barney Holdings Inc. ("SSB Holdings") and
Citigroup Inc. SSB Holdings and Citigroup Inc. disclaim beneficial
ownership. The address of SSBI, SBHCI and SSB Holdings is 388 Greenwich
Street, New York, New York 10013. The address of Citigroup Inc., is 153
East 53rd Street, New York, New York 10043.
(7) Includes 5,417 shares of Common Stock issuable upon exercise of stock
options, 515,000 shares owned by Antares Capital Fund II Limited
Partnership and 263,650 shares owned by ACF Side Fund Limited
Partnership. Mr. Poliner is president of Antares Capital Partners II,
Inc., the general partner of such limited partnerships. The address of
Mr. Poliner is 7900 Miami Lakes Drive West, Miami Lakes, Florida 33016.
(8) The shares shown are held in escrow by the Company pending the
stockholder vote on proposal 3 herein. See "Proposal 3. Ratification and
Approval of Sale of Stock to Jeffrey M. Cunningham."
(9) Includes 5,417 shares of Common Stock issuable upon exercise of stock
options.
(10) Represents 31,250 shares of Common Stock issuable upon exercise of stock
options.
(11) Includes 108,333 shares of Common Stock issuable upon exercise of stock
options and 33,000 shares that Mr. Blanchard owns jointly with his wife.
(12) Includes 31,250 shares of Common Stock issuable upon exercise of stock
options.
(13) Represents 11,719 shares of Common Stock issuable upon exercise of stock
options.
(14) Includes 149,375 shares issuable upon exercise of stock options and
12,500 shares held by Mr. Anderson's children.
(15) Includes 221,455 shares of Common Stock issuable upon exercise of stock
options, 2,043,600 shares owned by entities controlled by directors and
33,000 shares owned jointly with a spouse.
4
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
Introduction
At the Annual Meeting, five directors are to be elected for the terms
described below. The Board of Directors is divided into three classes, each of
whose members serve for staggered three-year terms. The Board is currently
comprised of two Class I directors (Mr. O'Block and Mr. Poliner), three Class
II directors (Mr.Grayson, Mr. Jeffrey M. Cunningham and Ms. DeMarse), and two
Class III directors (Mr. Morse and Mr. Martin). At each annual meeting of
stockholders, a class of directors will be elected for a three-year term to
succeed the directors of the same class whose terms are then expiring. The
terms of the Class I directors, Class II directors, and Class III directors
will expire upon the election and qualification of successor directors at the
2000, 2001 and 2002 annual meeting of stockholders, respectively. The Board of
Directors elected Robert P. O'Block as a director of the Company on May 27,
1999 and designated him as a Class I director. The Board of Directors elected
Jeffrey M. Cunningham as a director of the Company on April 5, 2000 and
designated him as a Class II director. The Board of Directors elected William
Martin as a director of the Company on April 25, 2000 and designated him as a
Class III director. The Board of Directors elected Elisabeth DeMarse as a
director of the Company on April 27, 2000 and designated her as a Class II
director. In accordance with Florida law the term of any new director elected
by the Board expires at the next election of directors by the stockholders.
Accordingly, Mr. O'Block's, Mr. Cunningham's, Mr. Martin's and Ms. DeMarse's
terms expire at the Annual Meeting. If reelected, Mr. Poliner and Mr. O'Block
will serve as Class I directors whose terms will expire at the 2003 annual
meeting of stockholders, Mr. Cunningham and Ms. DeMarse will serve as a Class
II directors whose terms will expire at the 2001 annual meeting of
stockholders, and Mr. Martin will serve as a Class III director whose term
will expire at the 2002 annual meeting of stockholders. There are no family
relationships among any of the directors or the director nominees of the
Company.
Shares represented by executed Proxies will be voted, if authority to do so
is not withheld, for the election of the nominees named below. In the event
that any nominee should be unavailable for election as a result of an
unexpected occurrence, such shares will be voted for the election of such
substitute nominee or nominees as the Board of Directors may select. Each of
the nominees has agreed to serve as a director if elected, and management has
no reason to believe that they will be unable to serve.
The Board of Directors recommends a vote FOR each of the nominees for
director.
Information Concerning the Directors
The name and age, principal occupation or employment, and other data
regarding each director, based on information received from the respective
director, are set forth below:
Nominees to Serve as Class I Directors
Randall E. Poliner, age 44, has served as a director of the Company since
November 1998. Since April 1993, Mr. Poliner has served as President of
Antares Capital Corporation, a private venture capital firm investing equity
capital in developmental and expansion stage companies. Mr. Poliner holds a
Bachelor of Electrical Engineering from the Georgia Institute of Technology,
an M.S. from Carnegie-Mellon University and an M.B.A. from Harvard Business
School.
Robert P. O'Block, age 57, has served as a director of the Company since May
1999. For 30 years, Mr. O'Block was with McKinsey & Company, Inc., serving as
a consultant to a wide variety of business, nonprofit and public sector
organizations in the United States, Europe and the Far East. As a former
director of McKinsey & Company, Mr. O'Block led studies in financial
restructuring; corporate, business unit and product strategy; manufacturing
operations; and organization. He started his career as a member of the faculty
of Harvard
5
<PAGE>
University where he performed research and taught courses in the areas of
production and operations management, business economics and real estate. Mr.
O'Block is currently a general partner of Freeport Center, a real estate and
distribution complex in Utah. He is also Chairman of the Board of Overseers of
the Boston Symphony Orchestra and a member of the Board of the U.S. Ski Team.
Mr. O'Block received a bachelor's degree in mechanical engineering from Purdue
University and an M.B.A. from Harvard Business School.
If reelected, Mr. Poliner's and Mr. O'Block's terms as Class I directors
will expire at the 2003 annual meeting of stockholders.
Nominees to Serve as Class II Directors
Jeffrey M. Cunningham, age 47, has served as a director and Chairman of the
Board of the Company since April 5, 2000. From 1998 to April 2000, Mr.
Cunningham was president and chief executive officer of MyWay.com and
president of CMGI, Inc.'s Internet Media Group. From June 1998 to November
1998, he served as president and chief executive officer of Knowledge Universe
Training. He was a Group Publisher of Forbes Inc. from 1993 to 1998. From 1989
to 1993, he was Publisher of Forbes Inc. Mr. Cunningham currently serves on
the board of directors of Schindler Holding (Zurich), Pagenet, Countrywide
Mortgage and Collegelink.com. He received his BA from Binghamton University in
1974.
Elisabeth DeMarse, age 44, has served as a director, President and Chief
Executive Officer of the Company since April 27, 2000. From April 1999 to
April 2000, Ms. DeMarse served as executive vice president, content, strategy
and acquisitions of Hoover's, Inc. From February 1999 to April 1999, Ms.
DeMarse was a consultant to Hoover's. From October 1998 to January 1999, Ms.
DeMarse was a consultant to GTCR Golder Rauner, a private equity investment
firm. From December 1988 to July 1998, Ms. DeMarse served as vice president,
marketing and business development of Bloomberg, a financial information
provider. From October 1985 to December 1988, Ms. DeMarse served as vice
president of Citicorp where she was responsible for business development. From
June 1980 to June 1985, Ms. DeMarse served as director of marketing for
Western Union, a provider of communication services. Ms. DeMarse holds a B.A.
from Wellesley College and a M.B.A. from Harvard Business School.
If reelected, Mr. Cunningham's and Ms. DeMarse's terms as Class II directors
will expire at the 2001 annual meeting of stockholders.
Nominee to Serve as Class III Director
William Martin, age 22, has served as a director of the Company since April
25, 2000. He is currently executive vice president of Novix Media, an
Internet-based media and entertainment company. In 1998 Mr. Martin was a co-
founder of Raging Bull, an investment-based Internet web site. He is currently
on deferment from the University of Virginia's McIntire School of Commerce.
If reelected, Mr. Martin's term a Class III director will expire at the 2002
annual meeting of stockholders.
Continuing Directors
The director of the Company continuing in office as a Class II Director,
elected to serve until the 2001 annual meeting, is as follows:
Bruns H. Grayson, age 52, has served as director of the Company since June
1997. Since 1982, Mr. Grayson has been the managing partner of ABS Ventures, a
series of venture capital funds affiliated with DB Alex. Brown, LLC. Mr.
Grayson is a director of several private companies. Mr. Grayson holds a B.A.
from Harvard College, an M.A. from Oxford University and a J.D. from the
University of Virginia Law School. Mr. Grayson was a Rhodes Scholar in 1974.
6
<PAGE>
The director of the Company continuing in office as a Class III Director,
elected to serve until the 2002 annual meeting, is as follows:
Peter C. Morse, age 52, has served as a director of the Company since July
1993. Mr. Morse served as our Chief Executive Officer from July 1993 until July
1997 and served as our Chairman from July 1997 until April 1999. Since 1982,
Mr. Morse has served as president of Morse Partners, Ltd., a private equity
firm that acquires operating companies and provides expansion capital. From
1986 to 1990, Mr. Morse was chairman of FAO 7 Schwarz, the national chain of
children's gifts stores. Mr. Morse holds a B.S.B.A. from Georgetown University
and an M.B.A. from Columbia University.
Board of Directors Meetings and Committees
During 1999, the Board of Directors held 11 meetings. All of the incumbent
directors attended at least 75% of the aggregate total number of meetings of
the Board of Directors and meetings of committees of the Board of Directors on
which they served.
The members of the Audit Committee are Peter C. Morse (Chairman), Randall E.
Poliner and Robert O'Block. The primary function of the Audit Committee is to
assist the Board of Directors in fulfilling its oversight responsibilities by
reviewing: the financial reports and other financial information provided by
the Company to any governmental body or the public; the Company's systems of
internal controls regarding finance, accounting, legal compliance and ethics
that management and the Board have established; and the Company's accounting
and financial reporting process. The Audit Committee encourages continuous
improvement of, and fosters adherence to, the Company's policies, procedures
and practices at all levels.
The members of the Compensation Committee are Bruns H. Grayson (Chairman) and
Randall E. Poliner. The Compensation Committee reviews and evaluates the
compensation and benefits of all our officers, reviews general policy matters
relating to compensation and benefits of employees of the Company and makes
recommendations concerning these matters to the Board of Directors. The
Compensation Committee also administers our stock option plans.
The Company currently does not have a nominating committee. Instead, the full
Board of Directors identifies individuals as nominees for election as directors
of the Company.
7
<PAGE>
Executive Compensation
Summary Compensation Table. The following table sets forth, for the years
indicated, the total compensation paid to or accrued for G. Cotter Cunningham,
our interim President and Chief Executive Officer, William P. Anderson, III,
who served as our President and Chief Executive Officer until his resignation
on February 25, 2000, and the four other individuals who served as executive
officers during 1999 with the next highest total annual salary and bonus that
exceeded $100,000 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
--------------------------------- -----------------------
Number of
Other Restricted Securities All
Annual Stock Underlying Other
Name and Principal Position Year- Salary Bonus Compensation(1) Awards Options Compensation
- --------------------------- ----- -------- -------- --------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
G. Cotter Cunningham (2)...... 1999 $121,154 $ 19,200 $24,164(3) -- 100,000 $18,574(4)
Senior Vice President-- 1998 -- -- -- -- -- --
Sales & Marketing 1997 -- -- -- -- -- --
Edward V. Blanchard, Jr. (5).. 1999 $140,192 $ 50,000 -- -- 400,000 --
Executive Vice President-- 1998 -- -- -- -- -- --
Mergers & Acquisitions 1997 -- -- -- -- -- --
Peter W. Minford.............. 1999 $138,270 $ 37,500 -- 3,270 --
Senior Vice President-- 1998 97,309 -- -- 71,730 --
Administration 1997 -- -- -- -- --
Robert J. DeFranco (6)........ 1999 $ 93,750 $ 14,650 -- 37,500 --
Vice President--Finance & 1998 -- -- -- -- --
Chief Accounting Officer 1997 -- -- -- -- --
William P. Anderson, III (7).. 1999 $344,005 $125,000 -- 358,500 --
Former President & 1998 275,000 -- -- -- --
Chief Executive Officer 1997 137,500 -- $30,852(8) $354,253(9) -- --
and former director
Sara Campbell Taylor (10)..... 1999 $101,359 $ 97,971 -- 25,000 --
Former Senior Vice 1998 78,616 60,117 -- -- --
President--Sales & 1997 62,923 13,000 -- -- --
Syndication
</TABLE>
- --------
(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation received in the form of perquisites and other personal
benefits has been omitted because such perquisites and other personal
benefits constituted less than the lesser of $50,000 or 10% of the total
annual salary and bonus for the Named Executive Officer for such year.
(2) Mr. G. Cotter Cunningham served as interim President and Chief Executive
Officer from February 25, 2000 until April 27, 2000. Prior to that time,
he served as Senior Vice President--Sales & Marketing and he continues to
serve in that capacity. Mr. Cunningham joined the Company in March, 1999.
(3) Consists of reimbursement of relocation expenses.
(4) Consists of reimbursement of certain expenses incurred prior to joining
the Company.
(5) Mr. Blanchard joined the Company in May, 1999.
(6) Mr. DeFranco joined the Company in March, 1999.
(7) Mr. Anderson served as President and Chief Executive Officer and as a
director from July 1997 until his resignation on February 25, 2000.
(8) Consists of reimbursement of relocation expenses.
(9) Consists of the net value of a restricted stock award of 454,170 shares of
Common Stock granted in exchange for a promissory note in the amount of
$236,168. On March 10, 1999, 189,238 shares had vested and the remaining
shares were reacquired by the Company. Compensation expense of
approximately $1,782,000 was recorded in the quarter ended March 31, 1999.
As a result of the reacquisition, the Company cancelled $137,765 of the
note, and the remaining balance of the note, $98,403, was forgiven.
8
<PAGE>
(10) Ms. Taylor served as Senior Vice President--Sales & Syndication from May,
1996 until her resignation on January 25, 2000.
Option Grants in Last Fiscal Year
The following table sets forth all individual grants of stock options during
the year ended December 31, 1999, to each of the Named Executive Officers:
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------
Number of Percent of Potential Realizable
Securities Total Options Value at Assumed
Underlying Granted to Exercise or Annual Rates of Stock
Options Employees in Base Price Expiration Price Appreciation
Name Granted Fiscal Year Per Share Date for Option Term(1)
- ---- ---------- ------------- ----------- ---------- ---------------------
5% 10%
---------- ----------
<S> <C> <C> <C> <C> <C> <C>
G. Cotter Cunningham.... 100,000 5.8% $ 2.97 3/2/09 $1,462,000 $2,504,000
Edward V. Blanchard,
Jr..................... 400,000 23.2 13.00 5/13/09 3,272,000 8,288,000
Peter W. Minford........ 3,270 0.2 2.97 3/2/09 47,807 81,881
Robert J. DeFranco...... 37,500 2.2 2.97 3/2/09 548,250 939,000
William P. Anderson,
III.................... 358,500 20.8 2.97 3/2/09 5,241,270 8,976,840
Sara Campbell Taylor.... 25,000 1.4 2.97 3/2/09 365,500 626,000
</TABLE>
- --------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on the fair market value per share on the date of grant and
assumed rates of stock price appreciation of 5% and 10% compounded annually
from the date the respective options were granted to their expiration date.
These assumptions are mandated by the rules of the Securities and Exchange
Commission and are not intended to forecast future appreciation of our
stock price. The potential realizable value computation is net of the
applicable exercise price, but does not take into account federal or state
income tax consequences and other expenses of option exercises or sales of
appreciated stock. Actual gains, if any, are dependent upon the timing of
such exercise and the future performance of our Common Stock. There can be
no assurance that the rates of appreciation in this table can be achieved.
This table does not take into account any appreciation in the price of our
common stock to date.
Aggregated Option Exercises in Last Fiscal Year and Year-End Option Values
The following table summarizes the number of shares and value realized by
each of the Named Executive Officers upon the exercise of options and the value
of the outstanding options held by the Named Executive Officers at December 31,
1999:
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at Fiscal Year-End at Fiscal Year-End(1)
Shares Acquired Value ------------------------- -------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
G. Cotter Cunningham.... -- -- -- 100,000 $ -- $153,000
Edward V. Blanchard,
Jr..................... -- -- -- 400,000 -- --
Peter W. Minford........ -- -- 29,888 45,113 95,642 138,901
Robert J. DeFranco...... -- -- -- 37,500 -- 57,375
William P. Anderson,
III.................... -- -- 89,625 268,875 137,126 411,379
Sara Campbell Taylor.... -- -- -- 25,000 -- 38,250
</TABLE>
- --------
(1) Based on the fair market value of our Common Stock as of December 31, 1999,
of $4.50 per share as reported on the Nasdaq National Market, less the
exercise price payable upon exercise of such options.
9
<PAGE>
Employment Agreements
Mr. Anderson entered into an employment agreement with the Company effective
as of March 10, 1999. Pursuant to this agreement, Mr. Anderson was entitled to
receive an annual base salary of $275,000 and a bonus as determined by the
Board of Directors. In addition, Mr. Anderson was eligible to participate in,
and has been granted options to acquire 358,500 shares of common stock under,
the Company's 1999 Equity Compensation Plan. Under the terms of the agreement,
Mr. Anderson assigned to the Company all of his copyrights, trade secrets and
patent rights that relate to the business of the Company. Additionally, Mr.
Anderson agreed not to compete with the Company during the term of his
employment and for a period of two years after termination of his employment.
Mr. Anderson has also agreed not to solicit customers and employees of the
Company for a period of two years following termination of his employment with
the Company. On February 25, 2000, Mr. Anderson stepped down as president,
chief executive officer and director of the Company. Pursuant to the terms of
Mr. Anderson's employment agreement, the Company will pay Mr. Anderson
severance payments in the amount of $22,916.66 per month for a period of six
months from February 25, 2000. Additionally, pursuant to the terms of his
employment agreement and original stock option grant, Mr. Anderson's options
will continue to vest at a rate of 9,960 shares per month until November 15,
2000. The Company also agreed to continue to pay Mr. Anderson's COBRA health
insurance premiums. Accordingly, a cash charge in the amount of approximately
$150,000 and a noncash charge of approximately $860,000 were recorded in the
quarter ended March 31, 2000. Further, if there is a change in control of the
Company prior to November 15, 2000, Mr. Anderson would immediately vest in 100%
of the remaining unvested shares and, accordingly, a noncash charge would be
recorded at that time.
On May 12, 1999, the Company entered into an employment agreement with Edward
V. Blanchard, Jr., under which the Company employed Mr. Blanchard to perform
certain services for the Company as Executive Vice President. Under the
agreement, which terminates on May 30, 2000 unless otherwise extended or
terminated pursuant to the terms of the agreement, Mr. Blanchard receives an
annual salary of $225,000 with bonuses as determined by the Company. Upon
termination of the agreement, in certain circumstances, Mr. Blanchard is
eligible for six months' severance equal to the amount of his base salary for
the same time period. In addition to the employment agreement, the Company
granted to Mr. Blanchard a nonqualified option to acquire 400,000 shares of the
Company's common stock pursuant to the Company's 1999 Equity Compensation Plan.
The exercise price of the option is $13.00 per share. Mr. Blanchard is eligible
to receive additional stock option grants in the sole discretion of the Board.
Elisabeth DeMarse entered into an employment agreement with the Company
effective as of April 27, 2000. Pursuant to this agreement, Ms. DeMarse is
entitled to receive an annual base salary of $300,000 and a bonus of $100,000
payable in quarterly installments. In addition, Ms. DeMarse is eligible to
participate, and has been granted 541,936 shares of Common Stock under, the
Company's 1999 Equity Compensation Plan. The Company has agreed to provide
other benefits, including $500,000 in term life insurance and participation in
the Company's benefit plans available to other executive officers. Under the
terms of the employment agreement, Ms. DeMarse agrees to assign to the Company
all of her copyrights, trade secrets and patent rights that relate to the
business of the Company. Additionally, during the term of her employment and
for a period of one year thereafter, Ms. DeMarse agrees not to compete with the
Company and not to recruit any of the Company's employees, unless the Company
terminates her without cause or she resigns for good reason. Upon Ms. DeMarse's
termination of employment for certain reasons (i.e., without cause, disability,
resignation for good reason (as defined in the agreement), or a change of
control), the Company agrees to pay her a severance equal to 12 months' base
salary, as well as reimburse her for health, dental and life insurance coverage
premiums for one year after such termination. The agreement terminates on April
27, 2002, unless otherwise extended by the parties.
Stock Option and other Compensation Plans
1997 Equity Compensation Plan. The Company's 1997 Equity Compensation Plan
(the "1997 Plan") became effective on July 30, 1997. The aggregate number of
shares reserved for issuance under the 1997 Plan is 1,500,000 shares. The
purpose of the 1997 Plan is to provide incentives for key employees, officers,
consultants
10
<PAGE>
and directors to promote the success of the Company, thereby benefiting
stockholders and aligning the economic interests of the participants with those
of the stockholders. Awards granted under the 1997 Plan may be restricted
stock, options intended to qualify as "incentive stock options" or nonqualified
stock options.
As of April 13, 2000, options to purchase 1,046,376 shares of Common Stock
were outstanding under the 1997 Plan at a weighted average exercise price of
$5.16 per share. To date, 7,417 shares have been issued upon exercise of
options granted under the 1997 Plan.
1999 Equity Compensation Plan. The Company's 1999 Equity Compensation Plan
(the "1999 Plan") became effective on March 10, 1999. The aggregate number of
shares reserved for issuance under the 1999 Plan is 1,500,000 shares although
the Board has approved an amendment to increase the number of shares to
3,500,000. The purpose of the 1999 Plan is to provide incentives for key
employees, officers, consultants and directors to promote the success of the
Company, thereby benefiting stockholders and aligning the economic interests of
the participants with those of the stockholders. Awards granted under the 1999
Plan may be restricted stock, options intended to qualify as "incentive stock
options" or nonqualified stock options. For additional information with respect
to the 1999 Plan and a proposed amendment to the plan, see "Proposal 2.
Amendment to the 1999 Equity Compensation Plan."
As of April 13, 2000, options to purchase 1,226,027 shares of common stock
were outstanding under the 1999 Plan at a weighted average exercise price of
$6.82 per share.
Incentive Compensation Plan. The Company has adopted an incentive
compensation plan. The plan is administered by the Compensation Committee of
the Board of Directors, which determines eligible participants, performance
goals, measurement criteria, performance ratings and amount and timing of
payments. Awards under the plan are determined annually on the basis of our
performance over the year in relation to certain pre-determined financial and
operating goals. All awards are paid in full, in cash, following the year of
performance. Awards are granted under the plan at the sole discretion of the
Compensation Committee. During 1999, awards were granted to the executive
officers as follows; G. Cotter Cunningham--$19,200; Edward V. Blanchard--
$50,000; Peter W. Minford--$37,500; Robert J. DeFranco--$14,650; William P.
Anderson, III--$125,000; Sara Campbell Taylor--$22,500.
Employee Leasing
The Company leases all of its employees from Vincam Human Resources, Inc. The
terms under which the Company leases its employees are set forth in an
agreement with Vincam dated February 25, 1999.
The agreement with Vincam is a co-employment arrangement, which allows Vincam
to assume some of the Company's rights and responsibilities with respect to the
Company employees. All of the Company's employees have submitted employment
applications to Vincam and have been approved for hire by Vincam but assigned
to the Company's worksite to perform services under the Company's direction and
control. The Company transfers to Vincam's payroll all employees identified to
work at the Company's workplace provided each such employee accepts employment
offered by Vincam. Vincam maintains workers' compensation coverage and group
health coverage for each employee.
Vincam assumes the Company's rights as to the employees, including the right
to hire, fire, discipline and pay wages. The Company does, however, retain the
right to reject the assignment of any worker to its worksite by Vincam prior to
assignment to the Company's worksite or during the course of the assignment. As
a result, the Company retains control over employees in a manner typical of an
employer/employee relationship. Additionally, the Company retains such
discretion, supervision and control over the employees as is necessary to
conduct its business on a day-to-day basis.
The agreement had an initial term of one year that expired on February 25,
1999. The agreement was renewed for an additional term expiring May 31, 2000.
During this time, either party may terminate the
11
<PAGE>
agreement by giving thirty days' written notice, unless terminated for cause,
which includes non-payment when due of any amount payable under the agreement
or breach of a material term. The agreement renews automatically for additional
one-year terms.
Limitation of Liability and Indemnification of Officers and Directors
The Company's Articles of Incorporation provide that the liability of its
directors for monetary damages is eliminated to the fullest extent permissible
under Florida law and that the Company may indemnify its officers, employees
and agents to the fullest extent permitted under Florida law.
The Company's Bylaws provide that the Company must indemnify its directors
against all liabilities to the fullest extent permitted under Florida law and
that it must advance all reasonable expenses incurred in a proceeding where the
director was either a party or a witness because he or she was a director.
Compensation of Directors
Neither employee nor non-employee directors receive compensation for services
performed in their capacity as directors. The Company reimburses each director
for reasonable out-of-pocket expenses incurred in attending meetings of the
Board of Directors and any of its committees.
Compensation Committee Interlocks and Insider Participation
The following non-employee directors were the members of the Compensation
Committee of the Board of Directors during 1999: Bruns H. Grayson and Randall
E. Poliner. None of the members of the Compensation Committee is an executive
officer of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own beneficially more than 10%
of the Company's Common Stock to file reports of ownership and changes in
ownership of such stock with the Securities and Exchange Commission. To the
Company's knowledge, its directors, executive officers and 10% stockholders
complied during 1999 with all applicable Section 16(a) filing requirements
except that Peter C. Morse filed a late Form 4 and the following persons filed
a late Form 3: Edward V. Blanchard, Patricia Davis, David C. Florian, Paul R.
Hederman, Lou H. Hensley, Joseph W. Jones, Kenneth A. Kurson, John F. Packel,
Elizabeth Sensky and Procopia T. Skoran. The Company is not aware of any other
persons other than directors and executive officers and their affiliates who
own more than 10% of the common stock.
12
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
General
The Compensation Committee of the Company's Board of Directors has furnished
the following report on Executive Compensation in accordance with the rules and
regulations of the Securities and Exchange Commission. This report outlines the
duties of the Committee with respect to executive compensation, the various
components of the Company's compensation program for executive officers and
other key employees, and the basis on which the 1999 compensation was
determined for the executive officers of the Company, with particular detail
given to the 1999 compensation for the Company's former Chief Executive
Officer.
Compensation of Executive Officers Generally
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for establishing compensation levels for the executive officers of
the Company, including the annual bonus plan for executive officers and for
administering the Company's equity compensation plans. The Committee is
comprised of two non-employee directors: Messrs. Grayson (Chair) and Poliner.
The Committee's overall objective is to establish a compensation policy that
will (i) attract, retain and reward executives who contribute to achieving the
Company's business objectives; (ii) motivate executives to obtain these
objectives; and (iii) align the interests of executives with those of the
Company's long-term investors. The Company compensates executive officers with
a combination of salary and incentives designed to focus their efforts on
maximizing both the near-term and long-term financial performance of the
Company. In addition, the Company's compensation program rewards individual
performance that furthers Company goals. The executive compensation program
includes the following: (i) base salary; (ii) incentive bonuses; (iii) long-
term equity incentive awards in the form of stock option grants; and (iv) other
benefits. Each executive officer's compensation package is designed to provide
an appropriately weighted mix of these elements, which cumulatively provide a
level of compensation roughly equivalent to that paid by companies of similar
size and complexity.
Base Salary. Base Salary levels for each of the Company's executive officers,
including the Chief Executive Officer, are generally set within a range of base
salaries that the Committee believes are paid to similar executive officers at
companies deemed comparable based on the similarity in revenue level, industry
segment and competitive employment market to the Company. In addition, the
Committee generally takes into account the Company's past financial performance
and future expectations, as well as the performance of the executives and
changes in the executives' responsibilities.
Incentive Bonuses. The Committee recommends the payment of bonuses to provide
an incentive to executive officers to be productive over the course of each
fiscal year. These bonuses are awarded only if the Company achieves or exceeds
certain corporate performance objectives. The incentive bonus to each executive
officer is based on the individual executive's performance as it relates to the
Company's performance.
Equity Incentives. Stock options are used by the Company for payment of long-
term compensation to provide a stock-based incentive to improve the Company's
financial performance and to assist in the recruitment, retention and
motivation of professional, managerial and other personnel. Generally, stock
options are granted to executive officers from time to time based primarily
upon the individual's actual and/or potential contributions to the Company and
the Company's financial performance. Stock options are designed to align the
interests of the Company's executive officers with those of its stockholders by
encouraging executive officers to enhance the value of the Company, the price
of the Common Stock, and hence, the stockholder's return. In addition, the
vesting of stock options over a period of time is designed to create an
incentive for the individual to remain with the Company. The Company has
granted options to the executives on an ongoing basis to provide continuing
incentives to the executives to meet future performance goals and to remain
with the Company. During the fiscal year ended December 31, 1999, options to
purchase an aggregate of 645,086 shares of Common Stock were granted to the
Company's current executive officers.
13
<PAGE>
Other Benefits. Benefits offered to the Company's executive officers are
provided to serve as a safety net of protection against the financial
catastrophes that can result from illness, disability, or death. Benefits
offered to the Company's executive officers are substantially the same as
those offered to all of the Company's regular employees. In September 1996,
the Company established a tax-qualified deferred compensation 401(k) Savings
Plan (the "Plan") covering all of the Company's eligible full-time employees.
Under the Plan, participants may elect to contribute, through salary
reductions, up to 18% of their annual compensation subject to a statutory
maximum. The Company provides additional matching contributions in the amount
of 50% up to the first 6% contributed under the Plan. The Plan is designed to
qualify under Section 401 of the Internal Revenue Code so that the
contributions by employees or by the Company to the Plan, and income earned on
plan contributions, are not taxable to employees until withdrawn from the
Plan, and so that contributions by the Company will be deductible by the
Company when made.
Compensation of the Chief Executive Officer
The Committee annually reviews the performance and compensation of the Chief
Executive Officer based on the assessment of his past performance and its
expectation of his future contributions to the Company's performance. William
P. Anderson, III served as the Company's Chief Executive Officer from 1997
until February 25, 2000. In 1999, Mr. Anderson's base salary was set at
$275,000. G. Cotter Cunningham served as the Company's interim President and
Chief Executive Officer from February 25, 2000 until April 27, 2000. In 1999
Mr. Cunningham's base salary was set at $150,000 and has been set at $180,000
for the year 2000. On April 27, 2000, the Company elected Elisabeth DeMarse as
President and Chief Executive Officer. Pursuant to her employment agreement
with the Company, the Company has agreed to pay Ms. DeMarse an annual salary
of $300,000 plus an annual bonus of $100,000. The Committee believes the
compensation paid to Messrs. Anderson and Cunningham was and the compensation
to be paid to Ms. DeMarse is reasonable.
Policy with Respect to Qualifying Compensation for Deductibility
Section 162(m) of the Internal Revenue Code imposes a limit on tax
deductions for annual compensation (other than performance-based compensation)
in excess of one million dollars paid by a corporation to its Chief Executive
Officer and the other four most highly compensated executive officers of a
corporation. The Company has not established a policy with regard to Section
162(m) of the Code, since the Company has not and does not currently
anticipate paying cash compensation in excess of one million dollars per annum
to any employee. None of the compensation paid by the Company in 1999 was
subject to the limitations on deductibility. The Board of Directors will
continue to assess the impact of Section 162(m) on its compensation practices
and determine what further action, if any, is appropriate.
Compensation Committee
Bruns H. Grayson (Chairman)
Randall E. Poliner
14
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph provides a comparison of the cumulative total
stockholder return on the Company's Common Stock for the period from the date
of the Company's initial public offering on May 13, 1999 through December 31,
1999, against the cumulative stockholder return during such period achieved by
the Nasdaq Stock Market Index for U.S. Companies ("Nasdaq US") and the Media
General Financial Services Internet Information Providers Index ("MG Internet
Index"). The graph assumes that $100 was invested on May 13, 1999 in the
Company's Common Stock and in each of the comparison indices, and assumes
reinvestment of dividends.
Comparison of Cumulative Total Return
Among ilife.com, Inc.,
The Nasdaq Stock Market Index for U.S. Companies
And the Media General Financial Services Index for Internet Information
Providers
[Line Graph]
<TABLE>
<CAPTION>
MG Internet
Measurement Period ilife.com, Inc. NASDAQ US Index
- ------------------ --------------- --------- -----------
<S> <C> <C> <C>
Measurement Point--May 13, 1999........... $100.00 $100.00 $100.00
June 30, 1999............................. 50.48 105.34 92.57
September 30, 1999........................ 40.38 107.17 89.04
December 31, 1999......................... 34.62 157.88 141.43
</TABLE>
The Stock Performance Graph shall not be deemed incorporated by reference by
any general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended (collectively, the "Acts"), except to the
extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
CERTAIN TRANSACTIONS
The Company entered into three lease agreements with Bombay Holdings, Inc.
for its principal corporate offices and facilities. Bombay is wholly owned by
Peter C. Morse, a director and principal stockholder of the Company. The
leases include renewal options and require the Company to pay a percentage of
the common maintenance charges. Rent expense paid to Bombay for the year ended
December 31, 1999, the six months ended December 31, 1998, and the years ended
June 30, 1998 and 1997 was $265,815, $99,192, $164,552 and $85,591
respectively. The Company believes that the terms of the lease agreements are
no less favorable to us than those that could have been obtained from
unaffiliated third parties.
15
<PAGE>
In June 1998, Mr. Morse acquired 10,769 shares of Series A Preferred Stock
from the Company for a purchase price of $65.00 per share, which was the price
paid by third parties in the same transaction. The aggregate purchase price was
$699,985. Immediately prior to completion of the Company's initial public
offering in May 1999, these shares of preferred stock were converted into
538,450 shares of Common Stock having an aggregate value of $6,999,850 based on
the initial public offering price of $13.00 per share.
In November 1998, Mr. Morse acquired 527 shares of Series B Preferred Stock
from the Company for a purchase price of $114 per share, which was the price
paid by third parties in the same transaction. The aggregate purchase price was
$60,078. Immediately prior to completion of the Company's initial public
offering, these shares of preferred stock were converted into 26,350 shares of
Common Stock having an aggregate value of $342,550 based on the initial public
offering price.
As part of a compensation package, the Company sold 454,170 shares of common
stock to William P. Anderson, III, our former President and Chief Executive
Officer, effective when Mr. Anderson was hired in July 1997. In exchange for
such shares, Mr. Anderson executed a promissory note to the Company for
$236,168, which was payable over a ten-year term and bore interest at 6.42%.
The stock sale was treated as a variable option grant for accounting purposes
with respect to the difference between the purchase price of such shares of
$2.97 per share and the fair market value of such shares of $10.80 per share at
the time of the transaction. Accordingly, compensation expense was recorded,
totaling approximately $2,113,000 for the year ended December 31, 1999. These
shares were subject to vesting provisions, which had lapsed as to 189,238
shares as of March 10, 1999. On that date, the Company reacquired 264,932
shares of unvested Common Stock from Mr. Anderson in exchange for cancellation
of $137,765 of Mr. Anderson's promissory note. The remaining amount of the
note, in the amount of $98,403, was forgiven.
On March 9, 1999, the Company issued Mr. Anderson options to acquire 358,500
shares of Common Stock at an exercise price of $2.97 per share. The fair market
value of such shares on that date was $10.80 per share; accordingly the Company
will incur a stock compensation charge of approximately $2,807,000 relating to
these options over a three-year vesting period. The options were intended to
qualify as incentive stock options. The options vest in equal monthly
installments.
On March 9, 1999, the Company issued a promissory note to Antares Capital
Fund II Limited Partnership. Randall E. Poliner, a director of the Company, is
President of the general partner of Antares. Pursuant to the note, Antares
loaned the Company $1,000,000 at an interest rate of 8%, which was payable on
April 9, 1999. The amount borrowed under the note was used for general
corporate purposes. On April 9, 1999, in accordance with the terms of the note,
the principal amount plus interest was automatically converted into 6,784
shares of Series B Preferred Stock at a conversion price of $148.40 per share.
The fair market value of such shares was $10.80 per share; accordingly the
Company incurred a finance charge of approximately $2,656,000 for the year
ended December 31, 1999. Each share of Series B Preferred Stock was converted
into 50 shares of Common Stock immediately prior to completion of the Company's
initial public offering. The aggregate value of the shares at conversion was
$4,409,600, calculated at the initial public offering price.
Our Board of Directors has adopted a resolution whereby all future
transactions with related parties, including any loans from the Company to our
officers, directors, principal stockholders or affiliates, must 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 a majority of the
disinterested stockholders and must be on terms no less favorable to us than
could be obtained from unaffiliated third parties.
16
<PAGE>
PROPOSAL 2
AMENDMENT TO THE 1999 EQUITY COMPENSATION PLAN
General
Effective April 5, 2000, the Board approved, and recommends to the
stockholders that they approve, an amendment to the Company's 1999 Equity
Compensation Plan (the "1999 Plan") to increase the number of shares of Common
Stock available for grant under such plan from 1,500,000 to 3,500,000, an
increase of 2,000,000 shares of Common Stock.
The purpose of the 1999 Plan is to provide employees, consultants, and
advisors of the Company and its subsidiaries, as well as non-employee members
of the Board of Directors of the Company, with the opportunity to receive
grants of stock options and restricted stock. The Company believes that the
1999 Plan will encourage participants to contribute materially to the growth of
the Company, thereby benefiting the Company's stockholders, and will align the
economic interests of the participants with those of the stockholders.
Effective April 27, 2000, the Board of Directors elected Elisabeth DeMarse as
President and Chief Executive Officer of the Company. In connection with her
employment with the Company, the Board of Directors granted to Ms. DeMarse
options to purchase an aggregate of 541,936 shares of Common Stock (the
"DeMarse Options") pursuant to the 1999 Plan. The options vest as to 25% six
months from the date of grant; and as to the remaining 75%, in equal monthly
installments over the next 18 months thereafter, with 100% vesting on the
second anniversary of the date of grant. The options have an exercise price of
$2.688 per share. As a result of the grant of options to Ms. DeMarse, 1,842,963
shares had been granted as restricted stock or were subject to outstanding
options granted under the 1999 Plan, exceeding the number of shares previously
authorized under the 1999 Plan by 342,963 shares. Accordingly, the DeMarse
Option grant provides that the grant of options is subject to the stockholder
approval of this Proposal 2 to the extent the number of shares of Common Stock
underlying the DeMarse Options exceed the number of shares available for grant
under the 1999 Plan. As a result, in the event the stockholders do not approve
this Proposal 2, DeMarse Options for the purchase of 541,936 shares of Common
Stock will be forfeited and she will have grounds to terminate her employment
agreement for good reason.
The following summary of the principal features and effects of the 1999 Plan
does not purport to be complete and is subject to, and qualified in its
entirety by reference to, the text of the 1999 Plan which is available upon
request by any stockholder.
Types of Awards
Incentive stock options ("ISOs"), nonqualified stock options ("NQSOs"), and
restricted stock awards may be granted under the 1999 Plan (collectively,
"Awards").
Administration
The 1999 Plan is administered by a committee consisting of three or more
persons appointed by the Board (the "1999 Plan Committee"), all of whom may be
"outside directors" as defined under Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"), and related Treasury regulations, and
"non-employee directors" as defined under Rule 16b-3 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). The Company's Compensation
Committee currently acts as the 1999 Plan Committee.
The 1999 Plan Committee has authority (i) to determine the individuals to
whom grants shall be made under the 1999 Plan, (ii) determine the type, size
and terms of the grants to be made to each such individual, (iii) determine the
time when the grants will be made and the duration of any applicable exercise
or restriction period, including the criteria for exercisability and the
acceleration of exercisability, (iv) determine the terms of any applicable
noncompetition or other agreements relating to grants, and (v) deal with any
other matters arising
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under the 1999 Plan. In addition, the 1999 Plan Committee has full power to
interpret the 1999 Plan, to make factual determinations and to adopt or amend
such rules, regulations, agreements and instruments for implementing the 1999
Plan and for the conduct of its business as it deems necessary or advisable in
its sole discretion.
Eligibility and Grants of 1999 Plan Awards
Under the terms of the 1999 Plan, all employees of the Company and its
subsidiaries ("Employees"), including Employees who are officers or members of
the Board, and non-Employee members of the Board are eligible for consideration
for the granting of Awards by the 1999 Plan Committee. In addition, consultants
and advisors ("Key Advisors") who perform services to the Company are eligible
to participate in the 1999 Plan if such Key Advisors render bona fide services
and such services are not in connection with the offer or sale of securities in
a capital-raising transaction. As of April 13, 2000, there were approximately
239 Employees of the Company and its subsidiaries, all of whom are eligible to
participate in the 1999 Plan.
Shares Available
The stock subject to the Awards and other provisions of the 1999 Plan is the
authorized but unissued or reacquired shares of Common Stock of the Company.
Currently, subject to adjustment in accordance with the terms of the 1999 Plan,
up to 1,500,000 shares of Common Stock, in the aggregate, have been authorized
to be granted or purchased under the 1999 Plan, and the unexercised portion of
shares of Common Stock allocable to expired or terminated options or shares of
restricted stock returned to the Company by forfeiture may again become subject
to Awards under the 1999 Plan.
Terms of Options
Option Price. The purchase price (the "Exercise Price") of the Common Stock
underlying each option granted under the 1999 Plan may be equal to, greater
than or less than the fair market value of the Common Stock on the date the
option is granted; provided, however, that (i) the Exercise Price of an ISO
shall be equal to, or greater than the fair market value of a share of Company
Stock on the date the ISO is granted and (ii) the Exercise Price of an ISO
which is granted to an Employee who, at the time of grant, owns more than 10%
of the total combined voting power of all classes of stock of either the
Company or any parent or subsidiary corporation of the Company), shall not be
less than 110% of the fair market value of Common Stock on the date of grant.
Vesting. Options granted under the 1999 Plan will become exercisable (i.e.,
vested) with such terms and conditions, consistent with the 1999 Plan, as may
be determined by the 1999 Plan Committee at the time the Company grants the
options and as specified in each option agreement. The Board may accelerate the
exercisability of any or all outstanding Options at any time for any reason.
The vesting of options may also be accelerated upon a Change of Control (see
below).
Term and Exercise of Options. Each option the Company grants under the 1999
Plan may be exercised on such dates, during such periods and for such number of
shares as determined by the 1999 Plan Committee and as specified in each option
agreement. The term of any option will be determined by the 1999 Plan
Committee, but the term may not exceed 10 years from the date of grant (or 5
years in the case of ISOs granted to optionees who own more than 10% of the
total combined voting power of all classes of stock of either the Company or
any parent or subsidiary corporation). No option may be granted under the 1999
Plan after 10 years from the earlier of the date the 1999 Plan was approved by
the stockholders or was adopted by the Board. Upon exercise of an option, an
option holder must pay for the Common Stock subject to the exercise. Payment
may be made (i) in cash, (ii) in shares of Common Stock (including Common Stock
acquired in connection with the exercise of an Option, subject to such
restrictions as the Board deems appropriate) having a fair market value equal
to the exercise price), or (iii) by such other methods as the Board may
approve, including payment through a broker in accordance with the procedures
permitted by Regulation T of the Federal Reserve Board.
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Transfers. The 1999 Plan does not permit an optionee to sell, assign or
otherwise transfer options except by will or by the laws of descent and
distribution or, with respect to grants other than ISOs, if permitted in any
specific case by the 1999 Plan Committee, pursuant to a domestic relations
order (as defined under the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the regulations thereunder). Options are
exercisable during the optionee's life only by the optionee. Upon the death of
the optionee, options will be exercisable by the optionee's personal
representative or beneficiary. Notwithstanding the foregoing, the 1999 Plan
Committee may provide that the optionee may transfer NQSO to family members or
other persons or entities according to such terms as the 1999 Plan Committee
may determine; provided that the grantee receives no consideration for the
transfer and the transferred option shall continue to be subject to the same
terms and conditions as were applicable to the option immediately before the
transfer.
Termination of Employment. In the event that an optionee ceases to be
employed by, or provide services to, the Company for any reason other than
disability, death or termination for cause, any vested options shall terminate
unless exercised within 90 days after the date on which the optionee ceases to
be employed by, or provide services to, the Company (or within such other
period of time as may be specified by the 1999 Plan Committee), but in no event
later than the date of expiration of the option term. In the event an optionee
ceases to be employed by, or provide services to, the Company on account of the
optionee's death or disability, any vested option shall terminate unless
exercised within one year after the date on which the optionholder ceased to be
employed by, or provide service to, the Company (or within such other period of
time as may be specified by the 1999 Plan Committee), but in no event later
than the date of expiration of the option term. Any nonvested option, as of the
date on which the optionee ceased to be employed by, or provide services to,
the Company shall terminate as of such date. In the event that an optionee
ceases to be employed by, or provide services to, the Company on account of
"termination for cause" by the Company, any option held by the optionholder
shall terminate as of the date the optionholder ceases to be employed by, or
provide services to, the Company.
Terms of Restricted Stock
Vesting. Restricted stock granted under the 1999 Plan is subject to such
restrictions as the 1999 Plan Committee determines and is subject to forfeiture
by the recipient until the earlier of (i) the time such restrictions lapse or
are satisfied, or (ii) the time such shares are forfeited.
Transfers. The 1999 Plan does not permit a recipient to sell, assign or
otherwise transfer restricted stock prior to the time all restrictions have
lapsed or are satisfied.
Termination Of Employment. Generally, the termination of the recipient's
employment with the Company or a parent or subsidiary for any reason (other
than a "Change of Control") will result in forfeiture of any restricted stock
for which the restrictions have not lapsed, although the 1999 Plan Committee
may provide otherwise.
Amendment and Termination
The Board may amend or terminate the 1999 Plan at any time, provided however,
that the Board shall not amend the Plan without stockholder approval if such
approval is required by Section 162(m) of the Code and if Section 162(m) is
applicable to the Plan. The Plan shall terminated on the day immediately
preceding the tenth anniversary of its effective date, unless the Plan is
terminated earlier by the Board or is extended by the Board with approval of
the stockholders. A termination or amendment of the 1999 Plan that occurs after
a grant is made shall not materially impair the rights of a grantee unless the
grantee consents or unless the Board's action is required to comply with
applicable laws.
Change of Control
For purposes of the 1999 Plan, a "Change of Control" shall be deemed to have
occurred if:
(i) Any "person" (as such term if used in Section 13(d) and 14(d) of the
Exchange Act) (other than a person who is a stockholder of the Company as of
the effective date of the 1999 Plan) becomes a "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing more than 50% of the voting power of the then
outstanding securities of the Company; or
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(ii) The stockholders of the Company approve (or, if stockholder approval is
not required, the Board approves) an agreement providing for (i) the merger or
consolidation of the Company with another corporation where the stockholders of
the Company, immediately prior to the merger or consolidation, will not
beneficially own, immediately after the merger or consolidation, shares
entitling such stockholders to more than 50% of all votes to which all
stockholders of the surviving corporation would be entitled in the election of
directors; (ii) the sale or other disposition of all or substantially all of
the assets of the Company, or (iii) a liquidation or dissolution of the
Company.
Upon a Change of Control, unless the Board determines otherwise, (i) all
outstanding options shall automatically accelerate and become fully
exercisable, and (ii) all restrictions and conditions on all outstanding
restrict stock shall immediately lapse. In addition, upon a Change of Control
where the Company is not the surviving corporation (or survives only as a
subsidiary of another corporation), all outstanding options that are not
exercised shall be assumed by, or replaced with comparable options by, the
surviving corporation. Any replacement options shall entitle the optionee to
receive the same amount and type of securities as the grantee would have
received as a result of the Change of Control had the optionee exercised the
option immediately prior to the Change of Control.
Notwithstanding the foregoing, in the event of a Change of Control, the Board
may (i) require the optionees surrender their outstanding options in exchange
for cash or Common Stock as determined by the Board, in an amount equal to the
amount by which the then fair market value of the shares of the Company Stock
subject to the optionees unexercised option exceeds the Exercise Price of the
Options, or (ii) after giving optionees an opportunity to exercise their
outstanding options, terminate any or all unexercised options at such time as
the Board deems appropriate.
Notwithstanding the foregoing, the Board shall not have the right to take any
actions described in the Plan (including without limitation actions described
in the paragraph immediately above) that would make the Change of Control
ineligible for pooling of interests accounting treatment or that would make the
Change of Control ineligible for desired tax treatment if, in the absence of
such right, the Change of Control would qualify for such treatment and the
Company intends to use such treatment with respect to a Change of Control.
Adjustments
If there is any (i) capital contribution without the issuance of additional
shares of Common Stock, or (ii) change in the number or kind of Common Stock
outstanding (w) by reason of a stock dividend, spinoff, recapitalization, stock
split, or combination or exchange of shares, (x) by reason of a merger,
reorganization or consolidation in which the Company is the surviving
corporation, (y) by reason of a reclassification or change in par value, or (z)
by reason of any other extraordinary event affecting the outstanding Company
Stock as a class without the receipt of consideration, an appropriate and
equitable adjustment will be made by the 1999 Plan Committee to the number of
shares that any individual participant in the Plan may be granted in any year,
the number of shares covered by outstanding grants, the kind of shares issued
under the 1999 Plan, and the price per share of such grant.
Federal Income Tax Consequences
Part of the 1999 Plan qualifies as an incentive stock option plan, and any
option granted in accordance with such portion of the 1999 Plan qualifies as an
ISO, all within the meaning of Section 422 of the Code. The tax effects of any
other stock option granted under the 1999 Plan should be determined under
Section 83 of the Code. The following is a brief description of the
consequences under the Code of the receipt or exercise of Awards.
ISOs. An option holder has no tax consequences upon issuance or, generally,
upon exercise of an ISO. An option holder will recognize income when he sells
or exchanges the shares acquired upon exercise of an ISO. This income will be
taxed at the applicable capital gains rate if the sale or exchange occurs after
the expiration of the requisite holding periods. Generally, the requisite
holding periods expire two years after the date of grant of the ISO and one
year after the date of acquisition of the Common Stock pursuant to the exercise
of the ISO.
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If an option holder disposes of the Common Stock acquired pursuant to
exercise of an ISO before the expiration of the requisite holding periods, the
option holder will recognize compensation income in an amount equal to the
difference between the option price and the lesser of (i) the fair market value
of the shares on the date of exercise and (ii) the price at which the shares
are sold. This amount will be taxed at ordinary income rates. If the sale price
of the shares is greater than the fair market value on the date of exercise,
the difference will be recognized as gain by the option holder and taxed at the
applicable capital gains rate. If the sale price of the shares is less than the
option price, the option holder will recognize a capital loss equal to the
excess of the option price over the sale price.
For these purposes, the use of shares acquired upon exercise of an ISO to pay
the option price of another option (whether or not it is an ISO) will be
considered a disposition of the shares. If this disposition occurs before the
expiration of the requisite holding periods, the option holder will have the
same tax consequences as are described in the immediately preceding paragraph.
If the option holder transfers any such shares after holding them for the
requisite holding periods or transfers shares acquired pursuant to exercise of
a NQSO or on the open market, he generally will not recognize any income upon
the exercise. Whether or not the transferred shares were acquired pursuant to
an ISO and regardless of how long the option holder has held such shares, the
basis of the new shares received pursuant to the exercise will be computed in
two steps. In the first step, a number of new shares equal to the number of
older shares tendered (in payment of the option's exercise) is considered
exchanged under Section 1036 of the Code and the rulings thereunder; these new
shares receive the same holding period and the same basis that the option
holder had in the old tendered shares, if any, plus the amount included in
income from the deemed sale of the old shares and the amount of cash or other
nonstock consideration paid for the new shares, if any. In the second step, the
number of new shares received by the option holder in excess of the old
tendered shares receives a basis of zero, and the option holder's holding
period with respect to such shares commences upon exercise.
An option holder may have tax consequences upon exercise of an ISO if the
aggregate fair market value of shares of the Common Stock subject to ISOs which
first become exercisable by an option holder in any one calendar year exceeds
$100,000. If this occurs, the excess shares will be treated as though they are
subject to a NQSO instead of an ISO. Upon exercise of an option with respect to
these shares, the option holder will have the tax consequences described below
with respect to the exercise of NQSOs.
Finally, except to the extent that an option holder has recognized income
with respect to the exercise of an ISO (as described in the preceding
paragraphs), the amount by which the fair market value of a share of the Common
Stock at the time of exercise of the ISO exceeds the option price will be
included in determining an option holder's alternative minimum taxable income
and may cause the option holder to incur an alternative minimum tax liability
in the year of exercise.
There is no tax consequences to the Company upon the issuance or, generally,
upon the exercise of an ISO. However, to the extent that an option holder
recognizes ordinary income upon exercise, as described above, the Company will
have a deduction in the same amount.
NQSOs. Neither the Company nor the option holder has income tax consequences
from the issuance of NQSOs. Generally, in the tax year when an option holder
exercises NQSOs, the option holder recognizes ordinary income in the amount by
which the fair market value of the shares at the time of exercise exceeds the
option price for such shares. The Company will have a deduction in the same
amount as the ordinary income recognized by the option holder in the Company's
tax year in which or with which the option holder's tax year (of exercise)
ends.
If an option holder exercises a NQSO by paying the option price with
previously acquired shares of Common Stock, the option holder will recognize
income (relative to the new shares he is receiving) in two steps. In the first
step, a number of new shares equivalent to the number of older shares tendered
(in payment of the NQSO exercised) is considered to have been exchanged in
accordance with Section 1036 of the Code and the rulings thereunder, and no
gain or loss is recognized. In the second step, with respect to the number of
new shares acquired in excess of the number of old shares tendered, the option
holder will recognize income on those new shares equal to their fair market
value less any nonstock consideration tendered.
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The new shares equal to the number of the older shares tendered will receive
the same basis the option holder had in the older shares, and the option
holder's holding period with respect to the tendered older shares will apply to
those new shares. The excess new shares received will have a basis equal to the
amount of income recognized by the option holder by exercise, increased by any
nonstock consideration tendered. Their holding period will commence upon the
exercise of the option.
Restricted Stock. A holder of restricted stock will recognize income upon its
receipt, but generally only to the extent that it is not subject to a
substantial risk of forfeiture. If the restricted stock is subject to
restrictions that lapse in increments over a period of time, so that the holder
becomes vested in a portion of the shares as the restrictions lapse, the holder
will recognize income in any tax year only with respect to the shares that
become nonforfeitable during that year. The income recognized will be equal to
the fair market value of those shares, determined as of the time that the
restrictions on those shares lapse. That income generally will be taxable at
ordinary income tax rates. The Company generally will be entitled to a
deduction in an amount equal to the amount of ordinary income recognized by the
holder of the restricted stock.
A holder of restricted stock may elect instead to recognize ordinary income
for the taxable year in which he receives an award of restricted stock in an
amount equal to the fair market value of all shares of restricted stock awarded
to him (even if the shares are subject to forfeiture). That income will be
taxable at ordinary income tax rates. At the time of disposition of the shares,
a holder who has made such an election will recognize gain in an amount equal
to the difference between the sales price and the fair market value of the
shares at the time of the award. Such gain will be taxable at the applicable
capital gains rate. Any such election must be made within 30 days after the
transfer of the restricted stock to the holder. The Company will be entitled to
a deduction in an amount equal to the amount of ordinary income recognized by
the holder at the time of his election.
Limitation on Company Deductions. No federal income tax deduction is allowed
for compensation paid to a "covered employee" in any taxable year of the
Company beginning on or after January 1, 1994, to the extent that such
compensation exceeds $1,000,000. For this purpose, "covered employees" are
generally the chief executive officer of the Company and the four highest
compensated officers of the Company whose annual salary and bonus exceeds
$100,000, and the term "compensation" generally includes amounts includable in
gross income as a result of the exercise of stock options or stock appreciation
rights, or the receipt of restricted stock. This deduction limitation does not
apply to compensation that is (1) commission based compensation,
(2) performance based compensation, (3) compensation which would not be
includable in an employee's gross income, and (4) compensation payable under a
written binding contract in existence on February 17, 1993, and not materially
modified thereafter.
Proposed regulations indicate that compensation attributable to a stock
option will generally satisfy the limitation exception for performance based
compensation if the grant or award is made by a "compensation committee" (a
committee composed of "outside" directors), the plan under which the option or
right is granted states the maximum number of shares with respect to which
options or rights may be granted during a specified period to any employee,
and, under the terms of the option or right, the amount of compensation the
employee could receive is based solely on an increase in the value of the stock
after the date of the grant or award. Stock options granted under the 1999 Plan
may possibly satisfy these requirements, depending upon the specific terms,
provisions, restrictions and limitations of such options or rights.
ERISA. The 1999 Plan is not, and is not intended to be, an employee benefit
plan or qualified retirement plan. The 1999 Plan is not, therefore, subject to
the Employee Retirement Income Security Act of 1974, as amended, or Section
401(a) of the Code.
The Board of Directors recommends a vote FOR the approval of the amendment to
the 1999 Plan.
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PROPOSAL 3
RATIFICATION AND APPROVAL OF SALE OF STOCK
TO JEFFREY M. CUNNINGHAM
Pursuant to the terms of a Stock Purchase Plan and Subscription Agreement
dated April 5, 2000 (the "Purchase Agreement"), the Company issued and sold to
Jeffrey M. Cunningham an aggregate of 431,499 shares of the Company's common
stock (the "Shares") at a purchase price of $997,841.44 (or $2.3125 per share).
The Board of Directors of the Company approved the issuance and sale of the
Shares on April 5, 2000. The purchase price of the Shares is equal to the
closing price per share of the Company's Common Stock on that date as reported
by the Nasdaq National Market. The Board of Directors also elected Mr.
Cunningham as a director and Chairman of the Board of the Company.
The Company is requesting that the stockholders ratify and approve the
issuance and sale of the Shares to Mr. Cunningham. The Board of Directors has
determined that the sale of the Shares is important to promote and increase the
personal interests of Mr. Cunningham in the Company's welfare. The sale of the
Shares also provided incentive to Mr. Cunningham for agreeing to serve as
Chairman of the Board of the Company.
The Purchase Agreement provides that the Company must hold the purchase price
in escrow until the date and time the Company's stockholders vote on this
proposal to ratify and approve the issuance and sale of the Shares under the
Purchase Agreement. In the event the stockholders of the Company approve the
issuance and sale of the Shares under the Purchase Agreement, the purchase
price will be released from escrow to the Company and the Company will deliver
the Shares to Mr. Cunningham. In the event that the stockholders do not approve
this proposal, the Company will return the purchase price, with interest, to
Mr. Cunningham and will cancel the Shares.
Effective April 5, 2000, the Company also granted to Mr. Cunningham options
for the purchase of 141,905 shares of Common Stock at an exercise price of
$4.50 per share and options to purchase an aggregate of 125,622 shares of
Common Stock at an exercise price of $3.75 per share (collectively, the
"Cunningham Options"). One-half of the Cunningham Options vest and become
exercisable on March 31, 2001, and the balance vest and become exercisable in
equal monthly increments commencing on April 30, 2001 and concluding on March
31, 2002. The Cunningham Options have a term of 10 years from the date of
grant. The Company granted the Cunningham Options under the terms of the 1999
Plan. For a description of the terms and conditions of the 1999 Plan see
"Proposal 2. Amendment to the 1999 Equity Compensation Plan."
The Board of Directors recommends a vote FOR ratification and approval of the
issuance and sale of the Shares to Jeffrey M. Cunningham pursuant to the terms
of the Purchase Agreement.
PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Effective April 5, 2000, the Board of Directors appointed the accounting firm
of KPMG LLP to serve as its independent auditor for the fiscal year ending
December 31, 2000. The appointment of this firm was recommended to the Board by
its Audit Committee. A proposal to ratify that appointment will be presented at
the Annual Meeting. Representatives of KPMG LLP are expected to be present at
the meeting. They will have an opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions from
stockholders.
The Board of Directors recommends a vote FOR ratification of selection of
independent auditors.
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STOCKHOLDER PROPOSALS
Rules of the Securities and Exchange Commission require that any proposal by
a stockholder of the Company for consideration at the 2001 Annual Meeting of
Stockholders must be received by the Company no later than January 3, 2001 if
any such proposal is to be eligible for inclusion in the Company's proxy
materials for its 2000 Annual Meeting. Under such rules, the Company is not
required to include stockholder proposals in its proxy materials unless certain
other conditions specified in such rules are met.
In order for a stockholder to bring any business or nominations before the
Annual Meeting of Stockholders, certain conditions set forth in Article II,
Sections 16 and 17 of the Company's Amended and Restated Bylaws must be
complied with, including, but not limited to, delivery of notice to the Company
not less than 60 days prior to the meeting as originally scheduled; provided,
however, that in the event that less than 70 days notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by a stockholder must be received by the Company not later than the close of
business on the tenth day following the earlier of (i) the day on which such
notice of the date of the meeting is mailed or (ii) the date on which such
public disclosure was made.
OTHER MATTERS
Management of the Company is not aware of any other matter to be presented
for action at the Annual Meeting other than those mentioned in the Notice of
Annual Meeting of Stockholders and referred to in this Proxy Statement.
However, should any other matter requiring a vote of the stockholders arise,
the representatives named on the accompanying Proxy will vote in accordance
with their best judgment as to the interests of the Company and stockholders.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Jeffrey M. Cunningham
Jeffrey M. Cunningham,
Chairman of the Board
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ilife.com, Inc.
11811 U.S. Highway One, Suite 101
North Palm Beach, Florida 33408
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints G. Cotter Cunningham and Robert J. DeFranco,
and each of them, with full power of substitution, as Proxy, to represent and
vote all of the shares of Common Stock of ilife.com, Inc. held of record by the
undersigned on April 13, 2000, at the Annual Meeting of Stockholders to be held
on June 8, 2000 or any adjournment thereof, as designated hereon and in their
discretion as to other matters.
Please sign exactly as name appears on the reverse side. When shares are held
by joint tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
The shares represented by this proxy will be voted as directed by the
Stockholder. If no direction is given when the duly executed proxy is returned,
such shares will be voted "FOR" all nominees in Proposal 1 and "FOR" Proposals
2, 3 and 4.
I PLAN TO ATTEND MEETING [_]
The Board of Directors Recommends a vote "FOR all nominees" in Proposal 1 and
"FOR" Proposals 2, 3 and 4.
Proposal 1 - Election of the following Nominees as Directors: Nominees: Randall
E. Poliner (Class I), Robert P. O'Block (Class I), Jeffrey M. Cunningham (Class
II), Elisabeth DeMarse (Class II), and William Martin (Class III)
FOR WITHHELD
all Nominees listed above For all Nominees listed
(except as marked to the above [_]
contrary) [_]
(Instruction: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name above.)
(Please date and sign on reverse)
(Continued on reverse side)
Proposal 2 - Ratification and approval of amendment to the Company's 1999
Equity Compensation Plan:
FOR [_] AGAINST [_] ABSTAIN [_]
Proposal 3 - Ratification and approval of the issuance and sale of shares of
Common Stock to Jeffrey M. Cunningham:
FOR [_] AGAINST [_] ABSTAIN [_]
Proposal 4 - Approval of the appointment of KPMG LLP as independent auditors of
the Company for the fiscal year ending December 31, 2000:
FOR [_] AGAINST [_] ABSTAIN [_]
PLEASE MARK YOUR CHOICE
LIKE THIS X IN BLUE OR
BLACK INK.
------------------------------------
Date
------------------------------------
Signature
------------------------------------
Signature if held jointly
Please mark, date and sign as your
name appears above and return in
the enclosed envelope.
