<PAGE>
SCHEDULE 14A INFORMATION
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
<TABLE>
<S> <C>
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 Rule 14a-11(c) or Rule
14a-12
ZIPLINK, INC.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or
schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------
</TABLE>
<PAGE>
ZIPLINK, INC.
900 Chelmsford Street, Tower One
Lowell, Massachusetts 01851
April 7, 2000
Dear Stockholder:
You are cordially invited to attend our Annual Meeting of Stockholders to be
held on Wednesday, May 3, 2000 at 10:00 a.m., Eastern Time, at 900 Chelmsford
Street, Tower Three, Lowell, Massachusetts.
The formal Notice of Meeting and the accompanying Proxy Statement set forth
proposals for your consideration this year. You are being asked to elect seven
directors and to ratify the appointment of Arthur Andersen LLP as the
independent public accountants of the Company.
At the meeting, Christopher W. Jenkins, our President, will be pleased to
report on the affairs of ZipLink, and a discussion period will be provided for
questions and comments of general interest to stockholders.
We look forward to greeting personally those of you who are able to be
present at the meeting. However, whether or not you are able to be with us at
the meeting, it is important that your shares be represented. Accordingly, you
are requested to sign, date and mail, at your earliest convenience, the enclosed
proxy in the envelope provided for your use or to vote by telephone or
electronically.
Thank you for your cooperation.
Very truly yours,
[SIGNATURE]
Henry M. Zachs
CHIEF EXECUTIVE OFFICER AND CO-CHAIRMAN
OF THE BOARD
<PAGE>
ZIPLINK, INC.
900 CHELMSFORD STREET, TOWER ONE
LOWELL, MASSACHUSETTS 01851
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 3, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
ZipLink, Inc. (the "Company") will be held on Wednesday, May 3, 2000 at
10:00 a.m., Eastern Time, at 900 Chelmsford Street, Tower Three, Lowell,
Massachusetts for the following purposes:
To elect seven directors to serve for the ensuing year;
To consider and act upon a proposal to ratify the appointment of Arthur
Andersen LLP as the Company's independent public accountants for the fiscal
year ending December 31, 2000; and
To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
Stockholders of record at the close of business on March 23, 2000 will be
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. HOWEVER, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON,
EACH STOCKHOLDER IS URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED FORM OF PROXY
AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED, OR VOTE BY TELEPHONE OR
ELECTRONICALLY. No postage is required if the proxy is mailed in the United
States. Stockholders who attend the Annual Meeting may revoke their proxy and
vote their shares in person.
By Order of the Board of Directors
ERIC M. ZACHS
SECRETARY
Lowell, Massachusetts
April 7, 2000
<PAGE>
ZIPLINK, INC.
900 CHELMSFORD STREET, TOWER ONE
LOWELL, MASSACHUSETTS 01851
------------------------
PROXY STATEMENT
------------------------
GENERAL INFORMATION
PROXY SOLICITATION
This Proxy Statement is furnished to the holders of Common Stock, par value
$0.001 per share (the "Common Stock"), of ZipLink, Inc. (the "Company") in
connection with the solicitation by the Board of Directors of the Company of
proxies for use at the Annual Meeting of Stockholders (the "Annual Meeting"), or
at any adjournment thereof, pursuant to the accompanying Notice of Annual
Meeting of Stockholders. The Annual Meeting will be held on Wednesday, May 3,
2000 at 10:00 a.m., Eastern Time, at 900 Chelmsford Street, Tower Three, Lowell,
Massachusetts.
It is proposed that at the Annual Meeting: (i) seven directors will be
elected to serve for the ensuing year and (ii) the appointment of Arthur
Andersen LLP as the independent public accountants of the Company for the fiscal
year ending December 31, 2000 will be ratified.
The Board of Directors is not currently aware of any other matters which
will come before the Annual Meeting. If any other matters properly come before
the Annual Meeting, the persons designated as proxies intend to vote in
accordance with their best judgment on such matters.
Proxies for use at the Annual Meeting are being solicited by the Board of
Directors of the Company. Proxies will be solicited chiefly by mail; however,
certain officers, directors, employees and agents of the Company, none of whom
will receive additional compensation therefor, may solicit proxies by telephone,
telegram or other personal contact. The Company will bear the cost of the
solicitation of the proxies, including postage, printing and handling and will
reimburse the reasonable expenses of brokerage firms and others for forwarding
material to beneficial owners of shares of Common Stock.
This proxy statement and related materials are being mailed on or about
April 7, 2000 to all stockholders entitled to vote at the Annual Meeting.
REVOCABILITY AND VOTING OF PROXY
A form of proxy for use at the Annual Meeting and a return envelope for the
proxy are enclosed. Unless otherwise indicated on the form of proxy, shares of
Common Stock represented by any proxy in the enclosed form, assuming the proxy
is properly executed and received by the Company prior to the Annual Meeting,
will be voted with respect to the following items on the agenda: (i) the
election of each of the nominees for director as shown on the form of proxy; and
(ii) the appointment of Arthur Andersen LLP as the independent public
accountants of the Company.
Stockholders may revoke the authority granted by their execution of a proxy
at any time prior to the effective exercise of the powers conferred by that
proxy, by filing with the Secretary of the Company a written notice of
revocation or a duly executed proxy bearing a later date, or by voting in person
at the meeting. Shares of Common Stock represented by executed and unrevoked
proxies will be voted in accordance with the instructions specified in such
proxies. If no specifications are given, the proxies intend to vote the shares
represented thereby "for" the election of each of the nominees for director as
shown on the form of proxy and "for" the ratification of the appointment of
Arthur Andersen LLP as the independent public accountants of the Company, and in
accordance with their best judgment on any other matters which may properly come
before the meeting.
RECORD DATE AND VOTING RIGHTS
Only stockholders of record at the close of business on March 23, 2000 are
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof. On March 23, 2000, there were 12,939,987 shares
<PAGE>
of Common Stock outstanding, each of which shares is entitled to one vote upon
each of the matters to be presented at the Annual Meeting. The holders of a
majority of the outstanding shares of Common Stock, present in person or by
proxy and entitled to vote, will constitute a quorum at the Annual Meeting.
Abstentions and broker non-votes will be counted for purposes of determining the
presence or absence of a quorum but will not be counted with respect to the
specific matter being voted upon. "Broker non-votes" are shares held by brokers
or nominees which are present in person or represented by proxy, but which are
not voted on a particular matter because instructions have not been received
from the beneficial owner. Under applicable Delaware law, the effect of broker
non-votes on a particular matter depends on whether the matter is one as to
which the broker or nominee has discretionary voting authority under the
applicable rule of the New York Stock Exchange. The effect of broker non-votes
on the specific items to be brought before the Annual Meeting is discussed under
each item.
The affirmative vote of the holders of a plurality of the shares of Common
Stock present in person or represented by proxy and entitled to vote at the
Annual Meeting is required for the election of directors. The affirmative vote
of the holders of a majority of the shares of Common Stock present in person or
represented by proxy and entitled to vote at the Annual Meeting is required for
the ratification of the appointment of Arthur Andersen LLP as the independent
public accountants of the Company.
INTERNET VOTING
Stockholders whose shares are registered in the name of a bank or brokerage
firm may be eligible to vote electronically through the Internet or by
telephone. A large number of banks and brokerage firms are participating in the
ADP Investor Communication Services online program. This program provides
eligible stockholders the opportunity to vote via the Internet or by telephone.
Voting forms will provide instructions for shareholders whose bank or brokerage
firm is participating in ADP's program.
Registered stockholders may vote electronically through the Internet by
following the instructions included with their proxy card. Stockholders not
wishing to vote electronically through the Internet or whose form does not
reference Internet or telephone voting information should complete and return
the enclosed paper proxy card. Signing and returning the proxy card or
submitting the proxy via the Internet or by telephone does not affect the right
to vote in person at the Annual Meeting.
BENEFICIAL OWNERSHIP OF COMMON STOCK BY CERTAIN STOCKHOLDERS AND MANAGEMENT
The following table sets forth information as of March 1, 2000 regarding the
beneficial ownership of the Company's Common Stock of: (i) each person known by
the Company to own beneficially more than five percent of the outstanding Common
Stock; (ii) each director and nominee for director of the Company; (iii) each
executive officer named in the Summary Compensation Table (see "Executive
Compensation" below); and (iv) all directors and executive officers of the
Company as a group. Unless
2
<PAGE>
otherwise indicated, the named beneficial owner has the sole voting and
investment power over the shares listed opposite such beneficial owner's name.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL PERCENTAGE OF
NAME OF BENEFICIAL OWNER OWNERSHIP OF COMMON STOCK(1) COMMON STOCK
- ------------------------ ------------------------------- -------------
<S> <C> <C>
Zachs Family Limited Partnership Number One (2)...... 6,839,002 52.85%
Henry M. Zachs (2)................................... 6,914,991(3) 53.44
Eric M. Zachs (2).................................... 6,914,991(3) 53.44
Nortel Networks, Inc................................. 1,634,781(4) 12.63
Christopher W. Jenkins............................... 400,542(5) 3.09
Ronald C. Lipof...................................... 40,793(6) *
Gary P. Strickland................................... -- --
Russel S. Bernard.................................... -- --
Jai P. Baghat........................................ 1,000 *
Wayne A. Martino..................................... 5,080(7) *
Alan M. Mendelson.................................... 500 *
All directors and executive officers as a group (10
persons) (8)....................................... 7,438,895 57.49%
</TABLE>
- ------------------------
* Represents less than one percent of the Company's Common Stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "SEC"), based on factors including
voting and investment power with respect to shares. Percentage of beneficial
ownership is based on shares of the Company's Common Stock outstanding as of
March 1, 2000. Shares of Common Stock subject to options or warrants
currently exercisable, or exercisable within 60 days after March 1, 2000,
are deemed outstanding for the purpose of computing the percentage ownership
of the person holding such options or warrants, but are not deemed
outstanding for computing the percentage ownership of any other person.
(2) The address for the Zachs Family Limited Partnership Number One, Henry M.
Zachs and Eric M. Zachs, is 40 Woodland Street, Hartford, Connecticut 06105.
(3) Includes 6,839,002 shares owned by Zachs Family Limited Partnership Number
One. Henry M. and Eric M. Zachs are the sole general partners of the Zachs
Family Limited Partnership Number One and share voting and dispositive power
with respect to these shares.
(4) Consists of shares owned by Bay Networks, Inc., a subsidiary of Nortel
Networks, Inc. The address for Nortel Networks, Inc. is 8200 Dixie Road,
Suite 100, Brampton, Ontario, Canada, L6T 5P6.
(5) Includes 26,303 shares issuable upon the exercise of stock options.
(6) Represents 40,793 shares issuable upon the exercise of stock options.
Mr. Lipof ceased to be employed by the Company effective March 3, 2000.
(7) Includes 4,080 shares issuable upon the exercise of stock options.
(8) Includes an aggregate of 71,176 shares of Common Stock which may be acquired
by directors and executive officers upon the exercise of stock options.
3
<PAGE>
SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934 BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors, and
persons who beneficially own more than ten percent of the Company's Common
Stock, to file initial reports of ownership and reports of changes in ownership
with the Securities and Exchange Commission (the "SEC"). Executive officers,
directors and greater than ten percent beneficial owners are required by the SEC
to furnish the Company with copies of all Section 16(a) forms they file.
Based upon a review of the copies of such forms furnished to the Company and
written representations from the Company's executive officers and directors, the
Company believes that during fiscal 1999 all Section 16(a) filing requirements
applicable to its executive officers, directors and greater than ten percent
beneficial owners were complied with, except for the following:
Russel S. Bernard, Jai P. Bhagat, Wayne A. Martino and Alan M. Mendelson,
all non-employee directors of the Company and Bay Networks, Inc., a greater than
10% stockholder of the Company, were late in filing their respective Initial
Statements of Beneficial Ownership of Securities on Form 3 ("Form 3"), which
were required to be filed with the SEC on the effective date of the Company's
initial public offering. In addition, Michael Clover, the Company's Chief
Operating Officer, was late in filing his Form 3, which was required to be filed
within 10 days of his becoming an officer of the Company on October 25, 1999.
PROPOSAL NO. 1--ELECTION OF DIRECTORS
Seven directors (constituting the entire Board) are to be elected at the
Annual Meeting. Unless otherwise specified, the enclosed proxy will be voted in
favor of the persons named below (all of whom are currently directors of the
Company). Unless otherwise specified, the enclosed proxy will be voted in favor
of the persons named below to serve until the next annual meeting of
stockholders and until their successors shall have been duly elected and shall
qualify. In the event any of these nominees shall be unable to serve as a
director, the shares represented by the proxy will be voted for the person, if
any, who is designated by the Board of Directors to replace the nominee. All
nominees have consented to be named and have indicated their intent to serve if
elected. The Board of Directors has no reason to believe that any of the
nominees will be unable to serve or that any vacancy on the Board of Directors
will occur.
The nominees, their respective ages, the year in which each first became a
director of the Company and their principal occupations or employment during the
past five years are as follows:
<TABLE>
<CAPTION>
YEAR FIRST PRINCIPAL OCCUPATION
NOMINEE AGE BECAME DIRECTOR DURING THE PAST FIVE YEARS
- ------- -------- --------------- ------------------------------------------------
<S> <C> <C> <C>
Henry M. Zachs........ 65 1995 Co-Chairman of the Company since its inception
in November, 1995 and Chief Executive Officer
since June, 1997. Chief Executive Officer of
Message Center USA, Inc. from June, 1961 until
December, 1995. Mr. Zachs also serves on the
advisory board of Axiom Venture Partners, L.P.,
a venture capital firm.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST PRINCIPAL OCCUPATION
NOMINEE AGE BECAME DIRECTOR DURING THE PAST FIVE YEARS
- ------- -------- --------------- ------------------------------------------------
<S> <C> <C> <C>
Eric M. Zachs......... 40 1995 Co-Chairman of the Company since its inception.
President and Chief Executive Officer from
November, 1995 until June, 1997. President and
Chief Operating Officer at Message Center USA,
Inc. from August, 1993 until December, 1995. Mr.
Zachs serves as a general partner of Bantry Bay
Ventures, a venture capital firm, and as a
director of NetActive Internet (Pty.) Ltd., a
South African Internet service provider listed
on the Johannesburg Stock Exchange.
Christopher W. 40 1997 President of the Company since June, 1997. Chief
Jenkins............... Financial Officer of the Company from November,
1995 until June, 1997. Vice President of
Operations of Message Center USA, Inc. from
June, 1993 until December, 1995. Acting Chief
Financial Officer of Message Center USA, Inc.
from June, 1995 until December, 1995.
Russel S. Bernard..... 42 1999 Principal of Oaktree Capital Management, LLC and
Portfolio Manager of its Real Estate Funds since
April, 1995. Mr. Bernard is also a director of
Metropolis REIT and Jamboree Office REIT.
Jai P. Bhagat......... 53 1999 Vice Chairman of GulfSouth Capital, Inc. since
December, 1999. Mr. Bhagat was Vice Chairman and
a Director of SkyTel Communications, Inc. from
March, 1995 through October, 1999. Mr. Bhagat
was Chairman of the Board of Directors of the
Personal Communications Industry Association in
1988, has served as a member of its Board since
1985, and has served as a member of its Paging
and Messaging Alliance Council since 1997. He
also served as Chairman of the Board of
Directors of American Mobile Satellite
Corporation from 1988 to 1991 and as a member of
its Executive Committee from 1988 to 1994.
Wayne A. Martino...... 40 1999 Principal of Brenner, Saltzman & Wallman, LLP
since July, 1991. Mr. Martino was a director of
Mecklermedia Corporation from December, 1993
until November, 1998.
Alan M. Mendelson..... 52 1999 General Partner of Axiom Venture Partners, L.P.
since April, 1994. Mr. Mendelson is a director
of Cellomics, Inc. and Purilens, Inc. and sits
on the advisory boards of Battery Ventures I,
II, and III, Syncom, Inc. and Connecticut
Innovations, Inc.
</TABLE>
All directors of the Company are elected by the stockholders for a one-year
term and hold office until the next annual meeting of stockholders of the
Company and until their successors are elected and qualified. Henry M. Zachs,
the Co-Chairman and Chief Executive Officer of the Company, is the father of
Eric M. Zachs, the Co-Chairman of the Company. Except for the relationship
between Henry M. and Eric M. Zachs, there are no family relationships among the
directors and executive officers of the Company.
5
<PAGE>
The Board of Directors of the Company has an Audit Committee and a
Compensation Committee. It has no nominating committee. The Audit Committee and
Compensation Committee were formed on June 1, 1999.
The Audit Committee is composed of Russel S. Bernard, Jai P. Bhagat and Alan
M. Mendelson. The Audit Committee is charged with reviewing results and scope of
audits and other services provided by the Company's independent accountants. The
Audit Committee met four times during the year ended December 31, 1999.
The Compensation Committee is composed of Russel S. Bernard, Alan M.
Mendelson and Eric M. Zachs. The Compensation Committee reviews the compensation
levels of the Company's executive officers, makes recommendations to the Board
of Directors concerning salaries and incentive compensation for the Company's
employees and consultants and establishes and approves salaries and incentive
compensation for the Company's executive officers. The Compensation Committee
also administers the Company's 1999 Stock Option Plan. The Compensation
Committee acted by written consent three times in the fiscal year ended
December 31, 1999.
During the fiscal year ended December 31, 1999, the Board of Directors held
four meetings. The Board acted by written consent three times prior to its
initial public offering and two times following its initial public offering.
Each director attended at least 75% of the meetings of the Board of Directors
held when he was a director and of all committees of the Board of Directors on
which he served.
VOTE REQUIRED
The seven nominees receiving the highest number of affirmative votes of the
shares present in person or represented by proxy and entitled to vote, a quorum
being present, shall be elected as directors. Only votes cast for a nominee will
be counted, except that the accompanying proxy will be voted for all nominees in
the absence of instructions to the contrary. Abstentions, broker non-votes and
instructions on the accompanying proxy card to withhold authority to vote for
one or more nominees will not be counted as a vote for any such nominee.
THE BOARD OF DIRECTORS DEEMS THE ELECTION AS DIRECTORS OF THE SEVEN NOMINEES
LISTED ABOVE TO BE IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND
RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THESE NOMINEES.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning all cash and
non-cash compensation awarded to, earned by, or paid to, the Company's Chief
Executive Officer and to all other executive officers whose total cash
compensation exceeded $100,000 for services rendered to the Company during the
fiscal years indicated (collectively, with the Chief Executive Officer, the
"Named Executive Officer").
6
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
FISCAL -------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION(1)(2)
- --------------------------- -------- --------- -------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Henry M. Zachs........................ 1999 $ 60,768 $ -- -- $ --
Co-Chairman and Chief Executive 1998 90,000 -- -- --
Officer(3) 1997 90,000 -- -- --
Christopher W. Jenkins................ 1999 148,153 90,000 100,000 2,280
President and Director(4) 1998 135,000 25,000 52,606 1,685
1997 136,923 -- -- --
Gary P. Strickland.................... 1999 82,500 29,600 80,000 --
Chief Financial Officer(5) 1998 -- -- -- --
1997 -- -- -- --
Ronald C. Lipof....................... 1999 94,576 38,250 10,000 540
Chief Marketing and Strategic 1998 98,461 13,500 81,585 --
Officer(6) 1997 11,385 -- -- --
</TABLE>
- ------------------------
(1) Pursuant to the SEC's rules on executive compensation disclosure, "All Other
Compensation" does not include perquisites because the aggregate amount of
such compensation for each of the persons listed did not exceed the lesser
of (i) $50,000 or (ii) 10 percent of the combined salary and bonus for such
person in each such year.
(2) Consists of Company contributions made on behalf of the various individuals
under the Company's 401K plan.
(3) Salary accrued for $90,000 in each of 1997 and 1998 was forgiven by
Mr. Henry M. Zachs in March, 1999.
(4) Mr. Jenkins is a party to an employment agreement with the Company. See
"--Employment Agreements." Bonuses of $25,000 earned in 1998 and $90,000
earned in 1999 were paid in 1999 and 2000, respectively. A $50,000 portion
of Mr. Jenkins salary earned in 1997 was paid in 1998.
(5) Mr. Strickland joined the Company as Chief Financial Officer in April, 1999.
A bonus of $29,600 accrued in 1999 was paid to Mr. Strickland in March,
2000.
(6) Mr. Lipof ceased to be employed by the Company effective March 3, 2000.
The following table sets forth information with respect to option grants in
1999 to the Named Executive Officers.
7
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(4)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED(#)(1) FISCAL YEAR(2) ($/SH) DATE 5% ($) 10% ($)
- ---- ------------- -------------- ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Henry M. Zachs................... -- -- $ -- -- $ -- $ --
Christopher W. Jenkins........... 100,000 18% 14.00 5/26/09 880,000 2,230,000
Gary P. Strickland(3)............ 80,000 14% 14.00 5/26/09 704,000 1,784,000
Ronald C. Lipof.................. 10,000 2% 14.00 5/26/09 88,000 223,000
</TABLE>
- ------------------------
(1) Options vest 20% on each of the first five anniversaries of the date of
grant.
(2) Based upon options to purchase 570,100 shares granted to all employees in
1999.
(3) 50% of these options will become immediately exercisable upon a change of
control of the Company.
(4) These amounts represent assumed rates of appreciation in the price of the
Company's Common Stock during the terms of the options in accordance with
rates specified in applicable federal securities regulations. Actual gains,
if any, on stock option exercises will depend on the future price of the
Common Stock and overall stock market conditions. The 5% rate of
appreciation over the 10-year option term of the $14.00 stock price on each
date of grant would result in a stock price of $22.80. The 10% rate of
appreciation over the 10-year option term of the $14.00 stock price on each
date of grant would result in a stock price of $36.30. There is no
representation that the rates of appreciation reflected in this table will
be achieved.
The following table sets forth information with respect to (i) stock options
exercised in 1999 by the Named Executive Officers and (ii) unexercised stock
options held by such individuals at December 31, 1999.
AGGREGATED OPTION EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED, IN-
OPTIONS HELD AT FISCAL THE-MONEY OPTIONS AT
SHARES YEAR END FISCAL YEAR END ($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Henry M. Zachs.................. -- $ -- -- -- $ -- $ --
Christopher W. Jenkins.......... -- -- 26,303 -- 248,300 --
Gary P. Strickland.............. -- -- -- -- -- --
Ronald C. Lipof................. -- -- 40,793 -- 419,755 --
</TABLE>
- ------------------------
(1) Based on a closing stock price of the Company's Common Stock on the Nasdaq
National Market on December 31, 1999 of $12.50.
EMPLOYMENT AGREEMENTS
Christopher Jenkins, the Company's President, is employed under an
Employment Agreement that expires in December 2001, unless earlier terminated by
either party. The Agreement originally provided for a compensation package
consisting of a base salary equal to $150,000 per year, which was increased to
$180,000 per year in 1999, and an annual performance bonus in an amount to be
determined by the Company. Mr. Jenkins is also eligible to participate in all of
the Company's fringe benefit programs. In the
8
<PAGE>
event that the Company terminates Mr. Jenkins' employment without cause (as
defined in the agreement), Mr. Jenkins will receive severance compensation equal
to his then base salary for the one-year period following termination. The
agreement contains non-competition and non-solicitation covenants which
restricts Mr. Jenkins during and after his employment. Pursuant to the
Employment Agreement, 26,303 options granted to Mr. Jenkins under the
predecessor of the 1999 Stock Option Plan became immediately exercisable upon
the closing of the Company's initial public offering on June 1, 1999.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive additional
compensation for serving as directors. Effective June 1, 1999, each director who
is not an employee of the Company receives $1,000 for attendance at each Board
of Directors and Committee meeting. No Committee member received compensation
for any Committee meeting held in 1999. Pursuant to the Company's 1999 Stock
Option Plan, each non-employee director automatically receives a grant of
options to purchase 10,000 shares of Common Stock upon first becoming a
director. At each annual meeting of the Company's stockholders, each
non-employee director who is re-elected and has served continuously as a
director for at least six months prior to such meeting is automatically granted
an option to purchase 4,000 shares of Common Stock. This number of options was
increased to 4,000 from 2,000 in February, 2000 through an amendment to the
Company's 1999 Stock Option Plan adopted by the Board of Directors. The exercise
price of all options granted to directors is the fair market value of the Common
Stock on the date of the grant. Directors are also reimbursed for their
out-of-pocket expenses in attending board and committee meetings in accordance
with the Company's expense reimbursement policies. Pursuant to the Company's
1999 Stock Option Plan, Messrs. Bernard, Baghat, Martino, Mendelson and Eric
Zachs each received a grant of options to purchase 10,000 shares of Common Stock
on June 1, 1999, at a per share price of $14.00 (the fair market value on that
date).
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee") advises the Chief Executive Officer and the Board of Directors on
compensation matters generally, determines the compensation of the Chief
Executive Officer, reviews and takes action on the recommendation of the Chief
Executive Officer as to the appropriate compensation of other officers and key
personnel, and approves the grants of bonuses to officers and key personnel. The
Compensation Committee is also responsible for the administration of the
Company's 1999 Stock Option Plan. Prior to the establishment of the Compensation
Committee in June, 1999, salary, bonus and stock option grants to employees were
determined by Henry Zachs, the Company's Co-Chairman of the Board and Chief
Executive Officer, after consultation with members of the Board of Directors.
GENERAL COMPENSATION POLICY FOR EXECUTIVE OFFICERS. The fundamental policy
of the Compensation Committee is to provide the Company's executive officers
with competitive compensation opportunities based upon their contribution to the
development and financial success of the Company and their personal performance.
It is the Compensation Committee's objective to have a portion of each executive
officer's compensation contingent upon the Company's performance as well as upon
each executive officer's own level of performance. Accordingly, the compensation
package for each executive officer is comprised of three elements: (i) base
salary which reflects individual performance and is designed primarily to be
competitive with salary levels in the industry, (ii) cash bonuses which reflect
the achievement of performance objectives and goals, and (iii) long-term
stock-based incentive awards which strengthen the mutuality of interests between
the executive officers and the Company's stockholders.
FACTORS. The principal factors which the Compensation Committee considered
with respect to each executive officer's compensation for fiscal 1999 are
summarized below. The Compensation Committee may, however, in its discretion
apply entirely different factors with respect to executive compensation for
future years.
9
<PAGE>
- BASE SALARY. The base salary for each executive officer is determined on
the basis of the following factors: experience, personal performance, the
salary levels in effect for comparable positions within and without the
industry, and internal base salary comparability considerations. The
weight given to each of these factors differs from individual to
individual, as the Compensation Committee deems appropriate. Base salaries
are generally reviewed on an annual basis, with adjustments made in
accordance with the factors indicated above. In addition, in reviewing
annual adjustments, the Compensation Committee takes into account the
Company's performance in the fiscal year then ended.
- BONUS. The incentive compensation of executive officers is closely
related to Company performance. A portion of the cash compensation of
executive officers consists of contingent compensation. Bonus awards are
based on, among other things, performance objectives and goals that are
tailored to the responsibilities and functions of key executives. The
Compensation Committee felt that the Company's executives and key
employees reached personalized performance objectives, and contributed to
the Company's successful completion of its initial public offering on
June 1, 1999 and to the Company's revenue growth during 1999. As a result
of achieving these Company objectives and personalized performance
objectives during 1999, the Compensation Committee approved bonuses for
its executive officers and key employees for 1999.
- LONG-TERM INCENTIVE COMPENSATION. Long-term incentives are provided
through grants of stock options. The grants are designed to align the
interests of each executive officer with those of the stockholders and
provide each individual with a significant incentive to manage the Company
from the perspective of an owner with an equity stake in the Company. Each
option grant allows the individual to acquire shares of the Company's
Common Stock at a fixed price per share (generally, the market price on
the grant date) over a specified period of time (up to ten years). Each
option generally becomes exercisable in installments over a five-year
period, contingent upon the executive officer's continued employment with
the Company. Accordingly, the option grant will provide a return to the
executive officer only if the executive officer remains employed by the
Company during the vesting period, and then only if the market price of
the underlying shares appreciates. The Company granted options to its
executive officers and key employees in 1999 which were issued in
connection with its initial public offering or upon commencement of
employment.
CEO COMPENSATION. In determining the base salary payable to the Company's
Chief Executive Officer in 1999, the Compensation Committee considered Henry M.
Zachs performance in fiscal 1998, and the reduction in time Mr. Henry M. Zachs
was expected to devote to the business of the Company following the consummation
of the Company's initial public offering. Mr. Zachs did not receive a
performance bonus or incentive stock options in 1999.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). Section 162(m) of the
Internal Revenue Code generally denies a federal income tax deduction for
certain compensation exceeding $1,000,000 paid to the Chief Executive Officer or
any of the four other highest paid executive officers, excluding (among other
things) certain performance-based compensation. Through December 31, 1999, this
provision has not affected the Company's tax deductions, but the Committee will
continue to monitor the potential impact of Section 162(m) on the Company's
ability to deduct executive compensation.
COMPENSATION COMMITTEE
Eric M. Zachs, Chairman
Russel S. Bernard
Alan M. Mendelson
10
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Board of Directors did not have a Compensation Committee until
June 1, 1999. Consequently, most matters concerning executive officer
compensation for fiscal 1999 were addressed by Henry Zachs, the Company's
Co-Chairman of the Board and Chief Executive Officer, after consultation with
members of the Board of Directors. Decisions with respect to 1999 year-end
bonuses and stock option grants were made by the Compensation Committee. Each of
Messrs. Russel S. Bernard, Alan M. Mendelson and Eric M. Zachs, served as
members of the Compensation Committee during the fiscal year ended December 31,
1999. No member of the Compensation Committee was during the 1999 fiscal year an
officer or employee of the Company. Eric M. Zachs was President and Chief
Executive Officer of the Company from November, 1995 until June, 1997. No
executive officer of the Company serves as a member of the board of directors or
compensation committee of any entity that has one or more executive officers
serving as a member of the Company's Board of Directors or Compensation
Committee. Eric M. Zachs had certain relationships and engaged in certain
transactions with the Company prior to its initial public offering as described
in "Certain Relationships and Related Party Transactions" below.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
REORGANIZATION OF LLC. The Company was originally organized as a
Connecticut limited liability company (the "Connecticut LLC") in November, 1995
by the Company's founder Eric M. Zachs. On May 25, 1999, the Company converted
from a limited liability company to a corporation in order to have a business
organization that is more typical of other publicly-traded entities. In March,
1999, in order to facilitate the ultimate conversion to a Delaware corporation,
the Connecticut LLC was merged with and into a newly-formed Delaware limited
liability company (the "Delaware LLC"), retaining the name ZipLink, LLC. As a
result of such merger, all of the assets and liabilities of the Connecticut LLC
were acquired by the Delaware LLC and all membership interests and options and
warrants to acquire membership interests in the Connecticut LLC were exchanged
for economically equivalent interests in the Delaware LLC.
On May 25, 1999, all of the membership units in the Delaware LLC were
transferred to a newly-formed Delaware corporation known as ZipLink, Inc.
Immediately following such transfer, the Delaware LLC merged with and into
ZipLink, Inc., as a result of which all of the assets and liabilities of the
Delaware LLC were transferred to ZipLink, Inc. In connection with such transfer
of membership units and merger, each membership unit in the Delaware LLC (other
than membership units held by Nortel Networks, a holder of more than 5% of the
Company's Common Stock, and the Zachs Family Limited Partnership Number One (the
"Zachs Partnership")) was exchanged into approximately .82 shares of Common
Stock of the Company, each option and warrant to acquire a membership unit in
the Delaware LLC was exchanged for an option or warrant, as applicable, to
purchase approximately .82 shares of the Company's Common Stock, each membership
unit in the Delaware LLC held by Nortel Networks was exchanged into
approximately .83 shares of Common Stock, each membership unit in the Delaware
LLC held by the Zachs Partnership was exchanged into approximately .82 shares of
Common Stock, and additional capital contributions provided by the Henry and
Eric M. Zachs and the Zachs Partnership (collectively, the "Zachs Founders")
were exchanged into 104,977 shares of Common Stock.
PURCHASES FROM NORTEL NETWORKS, INC. The Company purchased equipment and
services from Nortel Networks, in the aggregate amount of $410,000 during the
year ended December 31, 1999. Commencing July, 1999, the Company obtained
hardware maintenance and software subscription services from Nortel Networks at
the rate of $423,000 per annum.
HENRY ZACHS GUARANTEES. In March 1998, Fleet Bank made loans to the Company
under a $15.0 million line of credit, which amount was increased to
$20.0 million in October, 1998 and to $25.0 million in April, 1999. The Company
used approximately $20.0 million of the net proceeds from its initial public
offering to repay the entire outstanding indebtedness to Fleet Bank in June,
1999. The Fleet Bank line of
11
<PAGE>
credit was secured by a pledge of all of the Company's assets and supported by a
personal guarantee from Henry Zachs. Henry Zachs did not receive any
compensation for providing such personal guarantee of the Fleet Bank Line of
Credit. The Fleet Bank loan bore interest at a floating rate equal to LIBOR plus
0.30% (which was equal to 5.366% per annum as of June, 1999). The Company
believes that the loans from Fleet Bank were at interest rates, in amounts and
on other terms which were more favorable to the Company than those which the
Company could have obtained without the guarantee of Henry Zachs. Prior to
consummation of the Company's initial public offering, Henry Zachs agreed to
guarantee up to $10.0 million of additional indebtedness to the Company from
institutional lenders acceptable to Mr. Zachs. Mr. Zachs agreement to provide
such guarantee terminated upon the closing of the Company's initial public
offering. The Company does not anticipate that any further loans to the Company
will be supported by a guarantee from Henry Zachs.
ZACHS FOUNDERS ADVANCES. During the period from 1996 through December,
1997, the Company acted as a collection and dispersal agent for other companies
controlled by the Zachs Founders which did not then have full-time accounting
and cash management personnel. Some of the proceeds collected by the Company
were retained by the Company and recorded as non-interest bearing advances. The
principal amount of such advances at the end of 1997 was $479,600 and at the end
of 1998 was $476,100. Such advances were repaid in March, 1999. The Company
ceased to act as a collection or dispersal agent for affiliates of the Zachs
Founders in January, 1999 and does not intend to reinstitute such arrangement in
the future.
REAL PROPERTY LEASES. The Company leases approximately 3,500 square feet of
office and co-location space in Hartford, Connecticut from Henry Zachs. Rent
payable by the Company under this lease is $39,000 per annum, including taxes,
insurance, and certain utilities.
SALARY ACCRUALS. The Company accrued, but did not pay, salary to Henry
Zachs of $90,000 per year for each of 1997 and 1998. In March, 1999, Mr. Zachs
agreed to forgive the Company's obligation to pay all such accrued salary. A
portion of salary was accrued to Christopher Jenkins for $50,000 for 1997 and
paid in 1998. Bonuses of $25,000 and $90,000 to Mr. Jenkins for 1998 and 1999,
were paid in 1999 and 2000, respectively. The Company also accrued a bonus to
Mr. Strickland of $29,600 in 1999, which was paid in March, 2000.
TRADEMARK LICENSE. Under an oral royalty-free license, the Company has used
certain trademarks owned by Henry Zachs or subject to pending applications made
by him. In March, 1999, Mr. Zachs granted the Company a royalty-free, perpetual
non-exclusive license to use all such trademarks and trademark applications for
Internet related applications. Mr. Zachs has agreed not to grant any further
licenses to any of such trademarks or trademark applications without the consent
of the Company. Under certain circumstances, the Company has an option to
purchase all of such trademarks and trademark applications for nominal
consideration. Mr. Zachs received no payment or other consideration for granting
such license.
OTHER TRANSACTIONS. For the past several years, Wayne A. Martino, a
director of the Company, has performed legal services on the Company's behalf in
his capacity as a principal of the New Haven, Connecticut law firm of Brenner,
Saltzman & Wallman, LLP, as have other principals and employees of such firm.
The fees paid by the Company to such law firm during 1999 were $567,948.
COMPARATIVE PERFORMANCE BY THE COMPANY
The following graph compares the cumulative total stockholder return on the
Company's Common Stock with the cumulative total stockholder return of (i) the
Nasdaq Stock Market Index and (ii) the Russell 2000 Index. Although the chart
would normally be for a five-year period, the Common Stock of the Company began
trading publicly on May 26, 1999 and, as a result, the following chart commences
as of
12
<PAGE>
such date. THE TOTAL STOCKHOLDER RETURN SHOWN ON THE PERFORMANCE GRAPH BELOW IS
NOT NECESSARILY INDICATIVE OF THE FUTURE RETURNS ON THE COMPANY'S COMMON STOCK.
ZIPLINK, INC.
COMPARISON OF CUMULATIVE TOTAL RETURN
(MAY 26, 1999-DECEMBER 31, 1999)
COMPARISON OF 7 MONTH CUMULATIVE TOTAL RETURN*
AMONG ZIPLINK, INC., NASDAQ STOCK MARKET INDEX
AND RUSSELL 2000 INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS
<S> <C> <C>
5/26/1999 12/31/1999
ZipLink, Inc. 100.00 89.29
Nasdaq Stock Market 100.00 157.09
Russell 2000 Index 100.00 99.96
</TABLE>
<TABLE>
<CAPTION>
05/26/99 12/31/99
--------- --------
<S> <C> <C>
ZipLink, Inc............. 100.00 89.29
Nasdaq Stock Market...... 100.00 157.09
Russell 2000 Index....... 100.00 99.96
</TABLE>
* ASSUMES $100 INVESTED ON 5/26/99
INCLUDING REINVESTMENTS OF DIVIDENDS.
PROPOSAL NO. 2--RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected the firm of Arthur Andersen, LLP,
independent public accountants, to audit the accounts of the Company for fiscal
year ending December 31, 2000, and it is proposed that the selection of such
firm be ratified by the stockholders at the Annual Meeting. Arthur Andersen LLP
audited the financial statements of the Company for the year ended December 31,
1999. In the event such appointment is not ratified, it will be reconsidered by
the Board of Directors. A representative of Arthur Andersen LLP is expected to
be present at the Annual Meeting, will have an opportunity to make a statement
if he or she desires to do so and is expected to be available to respond to
appropriate questions from stockholders.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of Common
Stock of the Company present or represented and entitled to vote is required for
the ratification of the appointment of Arthur Andersen LLP as the independent
accountants of the Company. Abstentions and broker non-votes have the same legal
effect as votes cast against this proposal.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 2 TO BE IN THE BEST INTERESTS OF
THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
13
<PAGE>
STOCKHOLDER PROPOSALS
All stockholder proposals which are intended to be presented at the Annual
Meeting of Stockholders of the Company to be held in 2001 must be received by
the Company no later than December 8, 2000 for inclusion in the Board of
Directors' proxy statement and form of proxy relating to that meeting. The
Company's Amended and Restated By-Laws impose certain requirements which must be
complied with in connection with the submission of stockholder proposals.
Pursuant to the Company's Amended and Restated By-Laws, no stockholder may
present a proposal to be voted on at the 2001 Annual Meeting of Stockholders
unless such stockholder complies with certain requirements set forth in the
Amended and Restated By-Laws, including giving notice of such stockholder's
proposal at the Annual Meeting, no earlier than January 22, 2001 and no later
than February 21, 2001.
OTHER BUSINESS
The Board of Directors knows of no other business to be acted upon at the
Annual Meeting. However, if any other business properly comes before the Annual
Meeting, it is the intention of the persons named in the enclosed proxy to vote
on such matters in accordance with their best judgment.
The prompt return of your proxy will be appreciated and helpful in obtaining
the necessary vote. Therefore, whether or not you expect to attend the Annual
Meeting, please sign the proxy and return it in the enclosed envelope.
By Order of the Board of Directors
Eric M. Zachs
SECRETARY
Dated: April 7, 2000
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1999 WILL BE SENT, WITHOUT THE ACCOMPANYING EXHIBITS, WITHOUT
CHARGE TO ANY STOCKHOLDER REQUESTING IT IN WRITING FROM: ZIPLINK, INC.,
ATTENTION: INVESTOR RELATIONS, 900 CHELMSFORD STREET, TOWER ONE, LOWELL,
MASSACHUSETTS 01851.
14
<PAGE>
- -------------------------------------------------------------------------------
ZIPLINK, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 3, 2000
The undersigned, a stockholder of ZipLink, Inc. (the "Corporation"),
hereby constitutes and appoints Henry M. Zachs and Eric M. Zachs and each of
them, the true and lawful proxies and attorneys-in-fact of the undersigned,
with full power of substitution in each of them, to vote all shares of Common
Stock of the Corporation which the undersigned is entitled to vote at the
Annual Meeting of Stockholders of the Corporation to be held on Wednesday,
May 3, 2000, and at any and all adjournments or postponements thereof, as
follows:
(CONTINUED ON REVERSE SIDE)
- -------------------------------------------------------------------------------
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
ZIPLINK, INC.
MAY 3, 2000
Please Detach and Mail in the Envelope Provided
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
A /X/ Please mark your votes as in this example.
FOR the WITHHOLDING
nominees listed AUTHORITY to
at right (except vote for all
as marked to the the nominees
contrary below) listed at right
FOR AGAINST ABSTAIN
1. ELECTION / / / / NOMINEES: Henry M. Zachs (2) PROPOSAL TO RATIFY THE / / / / / /
OF Eric M. Zachs APPOINTMENT OF ARTHUR
DIRECTORS Christopher W. Jenkins ANDERSEN LLP AS THE
Russel S. Bernard INDEPENDENT PUBLIC
(INSTRUCTIONS: To withhold authority to vote for any Jai P. Bhagat ACCOUNTANTS OF THE
individual nominee, strike a line through the nominee's Wayne A. Martino CORPORATION FOR FISCAL
name in the list at right.) Alan M. Mendelson YEAR 2000.
(3) In their discretion, upon such other
business as may properly come before the
meeting and any and all adjournments and
postponements thereof
Shares represented by this Proxy will be voted
in accordance with the instructions indicated
in items 1 and 2 above. IF NO INSTRUCTION IS
INDICATED, THIS PROXY WILL BE VOTED FOR ALL
LISTED NOMINEES FOR DIRECTORS AND FOR PROPOSAL
2.
Any and all proxies heretofore given by the
undersigned are hereby revoked.
PLEASE DATE, SIGN AND MAIL IN THE ENCLOSED
REPLY ENVELOPE.
Signature ______________________ Date ___________ Signature ______________________ Date ___________
NOTE: Please sign exactly as your name(s) appear hereon. If shares are held by two or more persons each should sign. Trustees,
executors and other fiduciaries should indicate their capacity. Shares held by corporations, partnerships, associations,
etc. should be signed by an authorized person, giving full title or authority.>
</TABLE>
- -------------------------------------------------------------------------------
