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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
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 Under Rule 14a-12
NET VALUE HOLDINGS, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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NET VALUE HOLDINGS, INC.
1085 Mission Street
San Francisco, California 94103
August 3, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
(the "Meeting") of Net Value Holdings, Inc. (the "Company") which will be held
at the law offices of Buchanan Ingersoll Professional Corporation, 140 Broadway,
35th Floor, New York, New York 10005, on Monday, September 25, 2000 at 10:00
A.M. local time. Your Board of Directors and management look forward to
personally greeting those stockholders able to attend.
At the Meeting, stockholders will be asked to:
(1) approve an amendment to the Company's Certification of
Incorporation (the "Certificate") to change the name of the
Company from "Net Value Holdings, Inc." to "Stonepath Group, Inc."
(2) approve an amendment to the Certificate to provide for the
classification of the Board of Directors into three different
classes and to establish procedures for filling vacancies on the
Board of Directors;
(3) approve an amendment to the Certificate to increase the number of
authorized shares of Common Stock from 50,000,000 to 100,000,000;
(4) approve an amendment to the Certificate to increase the number of
authorized shares of Preferred Stock from 10,000,000 to
20,000,000;
(5) elect four (4) directors in the event that the stockholders
approve the classification of the Board of Directors, two (2) of
which will serve until the 2001 Annual Meeting of Stockholders or
until their successors are elected and qualified, one (1) of which
will serve until the 2002 Annual Meeting of Stockholders or until
his/her successor is elected and qualified and one (1) of which
will serve until the 2003 Annual Meeting of Stockholders or until
his/her successor is elected and qualified; or, in the
alternative, elect four (4) directors in the event that the
stockholders do not approve the classification of the Board of
Directors, to serve a one year term or until their successors are
elected and qualified;
(6) approve the granting of incentive stock options ("ISOs") under the
Company's Amended and Restated 2000 Stock Incentive Plan (the
"Plan") and qualify the Plan for the Section 162(m) exemption of
the Internal Revenue Code of 1986, as amended, as described in the
accompanying proxy statement;
(7) ratify the appointment of KPMG, LLP as the Company's independent
auditors for the year ending December 31, 2000; and
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(8) consider such other matters as may be properly brought before the
Meeting and at any adjournment(s) or postponement(s) thereof.
These matters are discussed in greater detail in the accompanying Proxy
Statement.
Your Board of Directors recommends a vote FOR the proposed amendments
to the Certificate, FOR the election of the four (4) directors nominated, FOR
the approval of the granting of ISOs under the Plan and qualifying the Plan for
the Section 162(m) exemption, and FOR the ratification of KPMG, LLP as the
Company's independent auditors.
Regardless of the number of shares you own or whether you plan to
attend, it is important that your shares be represented and voted at the
Meeting. You are requested to sign, date and mail the enclosed proxy promptly.
A copy of the Annual Report for the year ended December 31, 1999 is
enclosed for your information. No material contained in the Annual Report is to
be considered a part of the proxy solicitation material.
We wish to thank you for your loyal support of the Company and your
participation in this process.
Sincerely,
/s/ Andrew P. Panzo
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Andrew P. Panzo
Chairman of the Board
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NET VALUE HOLDINGS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held September 25, 2000
August 3, 2000
To the Stockholders of Net Value Holdings, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Net Value Holdings, Inc. (the "Company") will be held at the law
offices of Buchanan Ingersoll Professional Corporation, 140 Broadway, 35th
Floor, New York, New York 10005, on Monday, September 25, 2000 at 10:00 A.M.
local time, for the following purposes:
(1) to approve an amendment to the Company's Certification of
Incorporation (the "Certificate") to change the name of the
Company from "Net Value Holdings, Inc." to "Stonepath Group, Inc."
(2) to approve an amendment to the Certificate to provide for the
classification of the Board of Directors into three different
classes and to establish procedures for filling vacancies on the
Board of Directors;
(3) to approve an amendment to the Certificate to increase the number
of authorized shares of Common Stock from 50,000,000 to
100,000,000;
(4) to approve an amendment to the Certificate to increase the number
of authorized shares of Preferred Stock from 10,000,000 to
20,000,000;
(5) to elect four (4) directors in the event that the stockholders
approve the classification of the Board of Directors, two (2) of
which will serve until the 2001 Annual Meeting of Stockholders or
until their successors are elected and qualified, one (1) of which
will serve until the 2002 Annual Meeting of Stockholders or until
his/her successor is elected and qualified and one (1) of which
will serve until the 2003 Annual Meeting of Stockholders or until
his/her successor is elected and qualified; or, in the
alternative, elect four (4) directors in the event that the
stockholders do not approve the classification of the Board of
Directors, to serve a one year term or until their successors are
elected and qualified;
(6) to approve the granting of incentive stock options under the
Company's Amended and Restated 2000 Stock Incentive Plan (the
"Plan") and qualify the Plan for the Section 162(m) exemption of
the Internal Revenue Code of 1986, as amended, as described in the
accompanying proxy statement;
(7) to ratify the appointment of KPMG, LLP as the Company's
independent auditors for the year ending December 31, 2000; and
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(8) to consider such other matters as may be properly brought before
the Meeting and at any adjournment(s) or postponement(s) thereof.
A copy of the Annual Report for the year ended December 31, 1999 is
enclosed for your information. No material contained in the Annual Report is to
be considered a part of the proxy solicitation material.
Only stockholders of record as of the close of business on July 28,
2000 will be entitled to vote at the Meeting and any adjournment(s) or
postponement(s) thereof.
All stockholders are cordially invited to attend the Meeting. However,
to assure your representation at the Meeting, you are urged to complete, sign,
date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the Meeting may vote in person even if he or she has returned a proxy.
By Order of the Board of Directors,
/s/ Andrew P. Panzo
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Andrew P. Panzo
Chairman of the Board
YOUR VOTE IS IMPORTANT
You are urged to sign, date and promptly
return your proxy in the enclosed envelope.
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NET VALUE HOLDINGS, INC.
1085 Mission Street
San Francisco, California 94103
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Directors of
Net Value Holdings, Inc. (the "Company") to be voted at the Annual Meeting of
Stockholders (the "Meeting") of the Company to be held at the law offices of
Buchanan Ingersoll Professional Corporation, 140 Broadway, 35th Floor, New York,
New York 10005, on Monday, September 25, 2000 at 10:00 A.M. local time, and at
any adjournment(s) or postponement(s) thereof for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders. The proxy solicitation
materials were mailed on or about August 3, 2000 to all stockholders entitled to
vote at the Meeting.
Record Date and Share Ownership
Stockholders of record at the close of business on July 28, 2000 (the
"Record Date") are entitled to notice of and to vote at the Meeting, and at any
adjournment(s) or postponement(s) thereof. At the Record Date, 17,793,846 shares
of the Company's Common Stock, $.001 par value per share (the "Common Stock"),
and 4,166,667 shares of Series C Convertible Preferred Stock, par value $.001
per share (the "Preferred Stock"), were issued, outstanding and entitled to
notice of and to vote as a single class (in the case of the Preferred Stock, on
the basis of the number of shares of Common Stock into which each share of
Preferred Stock is convertible) on all matters at the Meeting and at any
adjournment(s) or postponement(s) thereof. As of the Record Date, each share of
Preferred Stock was convertible into one (1) share of Common Stock, and
therefore, each share of Preferred Stock is entitled to one vote. The number of
shares of Common Stock outstanding does not include 1,616,835 shares (the "Spink
Shares") of Common Stock that were issued to Douglas Spink, former Chief
Technology Officer and director of the Company, which have been cancelled as a
result of Mr. Spink's termination for cause, but which are the subject of a
legal proceeding discussed in this Proxy Statement on page 30, "Legal
Proceedings Affecting Outstanding Securities."
Revocability of Proxies
The execution of a proxy will not affect a stockholder's right to
attend the Meeting and vote in person. Any proxy given pursuant to this
solicitation may be revoked by the person giving it at any time before it is
used at the Meeting by filing with the Secretary of the Company either: (i) a
written notice of revocation; (ii) a proxy bearing a later date than the most
recently submitted proxy; or (iii) by attendance at the Meeting and voting in
person. Attendance at the Meeting will not, by itself, revoke a proxy.
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Annual Report
A copy of the Company's Annual Report for the year ended December 31,
1999 accompanies this Proxy Statement. No material contained in the Annual
Report is to be considered a part of the proxy solicitation material.
The mailing address of the Company's executive office is 1085 Mission
Street, San Francisco, California 94103.
Quorum and Voting Requirements; Solicitation
As discussed further in "Legal Proceeding Affecting Outstanding
Securities," the Court of Chancery of the State of Delaware entered an order
under Section 211 of the Delaware General Corporation Law (the "DGCL")
permitting the Company to hold its annual meeting of stockholders on September
25, 2000. Pursuant to Section 211 of the DGCL, and notwithstanding anything to
the contrary contained in the Company's Bylaws or Certificate of Incorporation,
those stockholders present in person or by proxy shall constitute a quorum for
the conduct of business at the Meeting.
Although there are no controlling precedents under Delaware law
regarding the treatment of broker non-votes in certain circumstances, the
Company intends to apply the principles set forth below. As used herein,
"uninstructed shares" means shares held by a broker who has not received
instructions from its customers on such matters and the broker has so notified
the Company on a proxy form in accordance with industry practice or has
otherwise advised the Company that it lacks voting authority. As used herein,
"broker non-votes" means the votes that could have been cast on the matter in
question by brokers with respect to uninstructed shares if the brokers had
received their customers' instructions and such shares cannot otherwise be voted
in accordance with applicable New York Stock Exchange regulations.
The vote required to approve Proposals 1 through 4 to amend the
Certificate is the affirmative vote of the majority of the outstanding shares
entitled to vote at the Meeting. Accordingly, abstentions and broker non-votes
have the effect of negative votes with respect to the approval of these
Proposals. The vote required for Proposals 6 and 7 to ratify the selection of
auditors and to approve the granting of incentive stock options ("ISOs") under
the Company's Amended and Restated 2000 Stock Incentive Plan (the "Plan") and
qualify the plan for the Section 162(m) exemption under the Internal Revenue
Code of 1986, as amended (the "Code"), is the affirmative vote of the majority
of the shares entitled to vote that are present in person or by proxy at the
Meeting. Accordingly, abstentions and broker non-votes have the effect of
negative votes with respect to the approval of these Proposals. Nominees
receiving a plurality of the votes cast will be elected as directors.
Abstentions and broker non-votes will not be taken into account in determining
the outcome of the election of a director.
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Proxies which are validly executed by stockholders and which are
received by the Company no later than the business day preceding the Meeting
will be voted in accordance with the instructions contained thereon. If no
instructions are given, the proxy will be voted in accordance with the
recommendations of the Board of Directors and in the discretion of the proxy on
all other matters presented at the Meeting. For the reasons set forth in more
detail in the Proxy Statement, the Board of Directors recommends a vote FOR the
amendment to the Certificate changing the Company's name, FOR the amendment to
the Certificate classifying the Board of Directors, FOR the amendment to the
Certificate to increase the number of shares of Common Stock, FOR the amendment
to the Certificate to increase the number of shares of Preferred Stock, FOR the
election of directors nominated, FOR the approval of the granting of ISOs under
the Plan and the qualification of the Plan under Section 162(m) of the Code, and
FOR the ratification of KPMG, LLP as the Company's independent auditors.
The cost of this proxy solicitation will be borne by the Company. The
Company has retained Morrow & Co., Inc. as a proxy solicitor to assist in the
distribution of proxy materials and solicitation of votes, at an approximate
cost of $15,000 plus out-of-pocket expenses. The Company will reimburse brokers
and other persons holding stock in their names or in the names of nominees for
their expenses incurred in sending proxy materials to principals and obtaining
their proxies.
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PROPOSAL 1
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
TO CHANGE THE NAME OF THE COMPANY
The Board of Directors has approved a resolution amending the
Certificate to change the name of the Company. At the Meeting, stockholders will
consider and vote on this proposed amendment. The text of the proposed amendment
is attached to this Proxy Statement as Exhibit A. The statements made in this
Proxy Statement with respect to this amendment to the Certificate should be read
in conjunction with and are qualified in their entirety by reference to Exhibit
A. In the event that this Proposal is approved, the Board of Directors will
consider conforming amendments to the Bylaws at the meeting of the Board of
Directors which is expected to follow shortly after the Meeting.
Description of Proposed Amendment
This Proposal would amend Article Fourth, Section 1 of the Certificate
to change the name of the Company from "Net Value Holdings, Inc." to "Stonepath
Group, Inc."
Reasons for Proposal
The Company was named "Net Value Holdings, Inc." to reflect the fact
that the Company was primarily a holding company for NetValue, Inc. In
recognition, however, of the evolving growth opportunities within the Internet
industry, during the second half of 1999, the Company shifted the focus of its
business strategy away from NetValue, Inc. and towards the development and
management of a network of early stage technology businesses. The Board of
Directors believes that the name "Stonepath Group, Inc." better reflects the
Company's current business strategy.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of at least the majority of the shares entitled to
vote at the Meeting is required in order to approve this Proposal 1. An
abstention or failure to vote on this Proposal is not an affirmative vote; and
therefore, will have the same effect as a negative vote on this Proposal at the
Meeting. If approved, this Proposal 1 will become effective upon the filing of a
Certificate of Amendment to the Certificate with the Secretary of State of
Delaware which is expected to follow shortly after the approval of this
Proposal 1.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE COMPANY NAME CHANGE.
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PROPOSAL 2
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
TO CLASSIFY THE BOARD OF DIRECTORS
The Board of Directors has approved a resolution amending the
Certificate to provide for a classified Board of Directors (the "Classified
Board") and to establish procedures for filling vacancies on the Board. At the
Meeting, stockholders will consider and vote on this proposed amendment. The
text of the proposed amendment is attached to this Proxy Statement as Exhibit B.
The statements made in this Proxy Statement with respect to this amendment to
the Certificate should be read in conjunction with and are qualified in their
entirety by reference to Exhibit B. In the event that this Proposal is approved,
the Board of Directors will consider conforming amendments to the Bylaws at the
meeting of the Board of Directors which is expected to follow shortly after the
Meeting.
This amendment may have the effect of making it more difficult for
stockholders to remove the existing management of the Company; and therefore,
the amendment may discourage potentially unfriendly bids for the Company's
stock. See "Possible Anti-Takeover Effects of the Proposal" below.
Description of Proposed Amendment
The Certificate would be amended to include an Article Fourth, Section
11 providing for a classified Board of Directors. The Proposal would operate to
divide the Board of Directors into three separate classes of directors, as
nearly equal in number as possible, to serve a three year term and until their
successors are duly elected and qualified with each class being elected at
different annual stockholder meetings. Following the effectiveness of the
Proposal, Class I will consist of two (2) directors who will serve for an
initial term of one (1) year, Class II will consist of one (1) director who will
serve for an initial term of two (2) years, and Class III will consist of one
(1) director who will serve for an initial term of three (3) years. See
"PROPOSAL 5-ELECTION OF DIRECTORS." At each annual meeting after 2000, directors
will be elected to succeed those whose terms then expire and each newly elected
director will serve for a three year term. The proposed amendment would replace
the prior system of electing all of the directors annually for one year terms.
If the number of directors constituting the Board of Directors is
increased or decreased, the resulting number of directors will be apportioned
among the three classes so as to make all classes as nearly equal in number as
possible, except that the term of any incumbent director may not be shortened.
Under the DGCL, if a Board is classified by action of the stockholders, unless
the Certificate specifies otherwise, members of the Board of Directors may be
removed by the stockholders before the expiration of their respective terms only
for cause. The Proposal provides that any director may be removed from office
only for cause and only by the affirmative vote of the holders of two-thirds of
the combined voting power of the then outstanding shares of stock entitled to
vote generally in the election of directors, voting together as a single class.
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The effect of a Classified Board of Directors may be circumvented by
increasing or decreasing the size of the Board of Directors. At present,
vacancies in the Board of Directors, including vacancies resulting from an
increase in the number of directors, are required to be filled by a vote of the
majority of the remaining members of the Board of Directors, although less than
a quorum, and each person so elected serves as a director until a successor is
elected by the stockholders. The Proposal provides that the size of the Board of
Directors may be fixed solely by action of the Board of Directors itself; and
any vacancies in the Board of Directors may be filled by a majority vote of the
remaining directors then in office, even though less than a quorum, and each
person so elected would serve for the remainder of the full term of the class in
which the new directorship was created or the vacancy occurred. The DGCL
provides that the Certificate, including these provisions, may be amended by the
stockholders only with the consent of the Board.
Reasons for Proposal
Since directors will be serving for longer terms which expire at
different times, the Board of Directors believes that a Classified Board will
promote continuity of management; and thereby, enhance the ability of the
Company to carry out long range plans and goals for its benefit and the benefit
of its stockholders. The Board of Directors believes that a Classified Board
will assist the Company in maintaining continuity of management into the future.
Additionally, the Proposal has certain anti-takeover effects that the Board
believes will deter unsolicited takeover attempts and protect the value of each
stockholder's investment in the Company.
A Classified Board would also extend the time it would take for a
majority stockholder to obtain control of the Company's Board of Directors; and
thereby, limit takeover tactics which the Board of Directors might deem abusive.
Assuming each class of directors is equal in size, a majority stockholder could
not obtain control of the Board of Directors until the second annual
stockholders' meeting after it acquired a majority of the voting stock. During
this time, the Board of Directors would have a better opportunity to defend the
Company against such takeover tactics and to negotiate with any majority
stockholder to obtain more favorable price and terms in any merger or tender
offer.
Possible Anti-Takeover Effects of the Proposal
The Board of Directors believes that this Proposal may have
anti-takeover effects as described below. Also described below are the general
anti-takeover provisions of the DGCL.
Anti-Takeover Provisions of the DGCL
The DGCL contains a number of provisions that are designed to
strengthen the position of incumbent management in connection with a takeover
attempt. For example, Delaware law provides that a company has the general
power, exercisable by its board of directors, to accept, reject, respond to or
take no action in respect of an actual or proposed acquisition, divestiture,
tender offer, takeover or other fundamental change. The case law of Delaware has
developed special standards for deciding whether to uphold or advocate the
actions of incumbent management in the context of takeover proposals.
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The Company has applied for listing on The American Stock Exchange
("AMEX"). If such listing is approved, the Company will also be subject to
Section 203 of the DGCL, which provides that a person who acquires fifteen
percent (15%) or more of the outstanding voting stock of a Delaware corporation
becomes an "interested stockholder." Section 203 prohibits a corporation from
engaging in mergers or certain other "business combinations" with an interested
stockholder for a period of three (3) years, unless (i) prior to the date the
stockholder becomes an interested stockholder, the board of directors approves
either the business combination or the transaction which results in the
stockholder becoming an interested stockholder, or (ii) the interested
stockholder is able to acquire ownership of at least eight-five percent (85%) of
the outstanding voting stock of the corporation (excluding shares owned by
directors of the corporation who are also officers and shares owned by certain
employee stock plans) in the same transaction by which the stockholder became an
interested stockholder, or (iii) the interested stockholder obtains control of
the board of directors, which then approves a business combination which is
authorized by a vote of the holders of two-thirds of the outstanding voting
stock not held by the interested stockholder.
The definition of interested stockholder does not include persons whose
ownership of voting stock exceeds the fifteen percent (15%) threshold as a
result of action taken by the corporation unless that person thereafter acquires
additional stock.
A "business combination" is defined broadly in the DGCL to include any
merger or consolidation with the interested stockholder, any merger or
consolidation caused by the interested stockholder in which the surviving
corporation will not be subject to Delaware law, or the sale, lease, exchange,
mortgage, pledge, transfer or other disposition to the interested stockholder of
any assets of the corporation having a market value equal to or greater than ten
percent (10%) of the aggregate market value of the assets of the corporation.
"Business combination" is also defined to include transfers of stock of the
corporation or a subsidiary to the interested stockholder (except for transfers
in conversion, exchange or pro rata distribution which do not increase the
interested stockholder's proportionate ownership of a class or series), or any
receipt by the interested stockholder (except proportionately as a stockholder)
of any loans, advances, guaranties, pledges or financial benefits.
Possible Consequences of the Anti-Takeover Effects of the Proposal
The Board of Directors believes the Proposal, to the extent that it
deters unsolicited takeover attempts, will promote conditions of stability in
the business, management and control of the Company, discourage in advance
certain takeover offers or other attempts to accumulate the Company's stock and
encourage anyone contemplating such actions to negotiate with the Company and
will assist the Company in defending against any such action if the Board of
Directors does not believe it to be in the best interests of the Company and all
of its stockholders. Although the Board of Directors is not aware of any overt
threat of such a takeover attempt at this time, the Board of Directors believes
the Proposal is in the best interest of the Company.
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A takeover offer often places the target corporation in the position of
making a forced sale. Hostile acquirers sometimes make takeover offers when the
market price of a potential target's stock may be temporarily depressed. The
Board of Directors believes that the consideration offered in such a situation,
even though it may be in excess of the then market price, may be less than the
consideration which could be obtained in a freely negotiated transaction. In a
freely negotiated transaction, the Board of Directors would have the opportunity
to seek a suitable partner at a time of its choosing and to negotiate the most
favorable price and terms that reflect not only the current, but also the future
value of the Company. The Board of Directors may also believe that the takeover
offer is not in the best interests of the Company and its stockholders for
additional reasons, such as those exhibited in the large number of business
failures which result from over-leveraged transactions. In the context of an
unsolicited offer, the Board may not have adequate time to consider fully the
takeover offer and to determine what actions are in the best interests of the
Company and its stockholders despite the provisions of applicable federal law
regarding the minimum duration of certain takeover offers. The Proposal attempts
to ameliorate the problems inherent in these situations.
Takeover offers or other non-market acquisitions of stock are usually
made at prices above the prevailing market price of the corporation's stock and
often have a corresponding effect on such market price. Accumulation of stock
through market purchases, whether or not for the purpose of acquiring control,
may also support the price of a corporation's stock at levels higher than
otherwise would be the case. The Proposal may discourage such takeover offers
and purchases, even if holders of a majority of the Company's shares desire to
sell such shares.
The Proposal may also make it more difficult to accomplish a
transaction requiring stockholder approval or to displace management quickly,
even if a majority of the stockholders of the Company desire to do so. Under
certain circumstances, the Proposal may permit management of the Company to
perpetuate itself in control of the Company. In addition, the Proposal could
encourage a potential purchaser of the Company to negotiate with the Board of
Directors and offer terms acceptable to it. Such terms might include
continuation of the existing management of the Company or a commitment by the
purchaser to provide benefits (such as employment contracts) not available to
stockholders generally.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of at least the majority of the shares entitled to
vote at the Meeting is required in order to approve this Proposal 2. An
abstention or failure to vote on this Proposal is not an affirmative vote; and
therefore, will have the same effect as a negative vote on this Proposal at the
Meeting. If approved, this Proposal 2 will become effective upon the filing of a
Certificate of Amendment to the Certificate with the Secretary of State of
Delaware which is expected to follow shortly after the approval of this Proposal
2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
CLASSIFICATION OF THE BOARD OF DIRECTORS.
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PROPOSAL 3
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM
50,000,000 TO 100,000,000
The Board of Directors has approved a resolution amending the
Certificate to increase the number of shares of Common Stock which the Company
is authorized to issue from 50,000,000 shares to 100,000,000 shares. A true and
correct copy of the proposed amendment is attached hereto as Exhibit C. The
statements made in this Proxy Statement regarding this amendment to the
Certificate should be read in conjunction with and are qualified in their
entirety by reference to Exhibit C.
Description of Common Stock
Currently, the Certificate authorizes the issuance of 50,000,000 shares
of Common Stock, par value $.001 per share. As of the Record Date, the Company
had 17,793,846 shares of Common Stock issued and outstanding. The issued and
outstanding shares of Common Stock are fully paid and nonassessable and held by
approximately 273 stockholders of record. The holders of Common Stock are
entitled to one vote for each share held of record on all matters to be voted on
by the stockholders. There is no cumulative voting with respect to the election
of directors. The holders of a majority of the outstanding shares of Common
Stock and Series C Preferred Stock, voting together as one class, can elect all
members of the Board of Directors, and holders of the remaining shares by
themselves cannot elect any member of the Board of Directors.
The holders of Common Stock are entitled to receive dividends in the
discretion of the Board of Directors. The Company may only pay dividends out of
funds legally available for this purpose. In the event of the liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all assets remaining available for distribution to
them after payment of liabilities and after provision has been made for each
class of stock, if any, having preference over Common Stock. Holders of shares
of Common Stock, as such, have no conversion, preemptive or other subscription
rights, and there are no redemptive provisions applicable to Common Stock. All
of the outstanding shares of Common Stock are fully paid and nonassessable.
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Reason for the Increase in the Number of Share of Common Stock
The Company currently has outstanding: (1) 17,793,846 shares of Common
Stock; (2) shares of Series C Preferred Stock convertible into 4,166,667 shares
of Common Stock; (3) options to purchase 5,061,000 of Common Stock; and (4)
warrants to purchase 2,981,986 shares of Common Stock. In addition, the Company
will be obligated to issue approximately 1.9 million shares of Common Stock upon
the completion of a previously announced proposed merger with NetValue, Inc., a
majority-owned subsidiary of the Company.
The Board of Directors considers the proposed increase in the number of
authorized shares of Common Stock desirable because it would give the Board of
Directors the necessary flexibility to issue Common Stock in connection with and
in furtherance of general corporate purposes, whether in the nature of stock
dividends and splits, acquisitions, financing, employee benefits, the
acquisition of other companies, compensation of directors of any other
appropriate corporate purpose. The issuance of additional Common Stock will
dilute the voting power of the currently outstanding shares of Common Stock.
Potential Anti-takeover Effect
Although neither the Board of Directors nor the management of the
Company views this Proposal as an anti-takeover measure, the Company could use
authorized but unissued Common Stock to frustrate persons seeking to effect a
takeover or otherwise gain control of the Company. For example, the Company
could privately place shares of the Common Stock with purchasers who might side
with the Board of Directors in opposing a hostile takeover bid or issue shares
to a holder which would, thereafter, have sufficient voting power to assure that
any proposal to amend or repeal the Bylaws or certain provisions of the
Certificate would receive the requisite vote. Notwithstanding the potential
anti-takeover effect of the authorization of additional Common Stock, the Board
of Directors believes it is in the best interest of the Company to increase the
number of authorized share of Common Stock for the reasons set forth above.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of at least a majority of the outstanding shares
entitled to vote at the Meeting is required to approve this Proposal to amend
the Certificate to authorize an increase in the number of share of Common Stock
available for issuance. An abstention or failure to vote on this Proposal is not
an affirmative vote, and therefore will have the same effect as a negative vote
on this Proposal at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL TO THIS
PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
FROM 50,000,000 TO 100,000,000.
10
<PAGE>
PROPOSAL 4
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF PREFERRED STOCK
FROM 10,000,000 TO 20,000,000
The Board of Directors has approved a resolution amending the
Certificate to increase the number of shares of Preferred Stock which the
Company is authorized to issue from 10,000,000 shares to 20,000,000 shares. A
true and correct copy of the proposed amendment is attached hereto as Exhibit C.
The statements made in this Proxy Statement regarding this amendment to the
Certificate should be read in conjunction with and are qualified in their
entirety by reference to Exhibit C.
Description of Preferred Stock
Within the limits and restrictions contained in the Certificate, the
Board of Directors has the authority, without further action by the
stockholders, to issue up to 10,000,000 shares of Preferred Stock, $.001 par
value per share, in one or more series, and to fix, as to any such series, the
dividend rate, redemption prices, preferences on liquidation or dissolution,
sinking fund terms, if any, conversion rights, voting rights, and any other
preference or special rights and qualifications.
The Company has issued three series of Preferred Stock: the Series A
Shares, Series B Shares and the Series C Shares. The Certificate of Designation
for each series of Preferred Stock sets forth the general rights and preferences
of each series. As of the Record Date, there are no Series A or Series B Shares
outstanding, and there are 4,166,667 Series C Shares outstanding.
Series C Preferred Stock
In March 2000, the Company sold 4,166,667 shares of Series C Preferred
Stock to a group of institutional investors and their affiliates led by Tudor
Investment Corporation, Brown Simpson Asset Management and BNY Capital Markets,
Inc. for an aggregate purchase price of $50 million.
Each share of Series C Preferred Stock is convertible into one share of
Common Stock. This conversion ratio is subject to adjustment under certain
circumstances to protect the holders of the Series C Preferred Stock against
future dilutive transactions. The holders of Series C Preferred Stock may
convert their shares of Series C Preferred Stock into shares of Common Stock at
any time. The Series C Preferred Stock shall automatically be converted into
shares of Common Stock upon:
o the affirmative vote of holders of 80% of the outstanding shares of
Series C Preferred Stock;
o the closing of a public offering of Common Stock pursuant to which
the offering price is at least $30 per share; and
11
<PAGE>
o upon the Company's election, provided that the registration
statement registering the resale of the shares of Common Stock
issuable upon conversion of the Series C Preferred Stock has been
declared effective by the Securities and Exchange Commission and
remains effective and the closing market price of the Common Stock
has been equal to at least $18 per share for a period of at least
20 consecutive business days.
The Series C Preferred Stock accrues a dividend of 8% per annum which
is required to be paid on a quarterly basis in kind in the form of additional
shares of Series C Preferred Stock. This dividend rate shall increase by 1% on
October 3, 2000 and by an additional 1% on the 90th day of each 90-day period
thereafter if the application to list the shares of Common Stock on the NASDAQ
SmallCap Market or another national exchange has not been approved prior to such
dates.
The Company is obligated to redeem the issued and outstanding shares of
Series C Preferred Stock within 60 days of receiving written notice from holders
of at least 80% of the issued and outstanding shares of Series C Preferred Stock
upon:
o any voluntary or involuntary bankruptcy, receivership, assignment
for the benefit of creditors, liquidation or acceleration of any
third party obligations;
o any payment default continuing for at least 120 days where the
aggregate amount in default is greater than $750,000; and
o the Company's use of the proceeds of the offering in a manner which
is not permitted by the Series C Preferred Stock Purchase
Agreement.
Any such redemption shall be at a price per share equal to the greater
of (i) the liquidation value of Series C Preferred Stock of $12.00 per share
plus all accrued and unpaid dividends, or (ii) the fair market value per share
of the Common Stock on the redemption date.
The holders of Series C Preferred Stock are entitled to vote on all
matters on which holders of Common Stock are entitled to vote. The holders of
Series C Preferred Stock and Common Stock, respectively, vote together as a
single class on an as-if-converted basis on all matters submitted to a vote of
stockholders.
12
<PAGE>
Reason for the Increase in the Number of Shares of Preferred Stock
The Board of Directors considers the proposed increase in the number of
authorized shares of Preferred Stock desirable because it would give the Board
of Directors the necessary flexibility to issue Preferred Stock in connection
with and in furtherance of general corporate purposes. Currently, the Company
has no specific plans for the further issuance of Preferred Stock. See "PROPOSAL
3-AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK FROM 50,000,000 TO 100,000,000 - Reason for
the Increase in the Number of Shares of Common Stock."
Potential Anti-takeover Effect
Although neither the Board of Directors nor the management of the
Company views this Proposal as an anti-takeover measure, the ability of the
Board of Directors to issue Preferred Stock may have the effect of delaying or
deterring a change in control or management of the Company.
In addition, one of the effects of undesignated Preferred Stock may be
to enable the Board of Directors to render more difficult or to discourage an
attempt to obtain control of the Company by means of a tender offer, proxy
contest, merger or otherwise, and thereby protect the continuity of the
Company's management. The issuance of shares of Preferred Stock pursuant to the
Board of Directors' authority described above may adversely affect the rights of
the holders of Common Stock. For example, Preferred Stock issued by the Company
may rank prior to the Common Stock as to dividend rights, liquidation
preferences or both, may have full or limited voting rights and may be
convertible into shares of Common Stock. Accordingly, the issuance of shares of
Preferred Stock may discourage bids for the Common Stock or may otherwise
adversely affect the market price of the Common Stock.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of at least a majority of the outstanding shares
entitled to vote at the Meeting is required to approve this Proposal to amend
the Certificate to authorize an increase in the number of shares of Preferred
Stock available for issuance. An abstention or failure to vote on this Proposal
is not an affirmative vote, and therefore will have the same effect as a
negative vote on this Proposal at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THIS
PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF PREFERRED STOCK
FROM 10,000,000 TO 20,000,000.
13
<PAGE>
PROPOSAL 5
ELECTION OF DIRECTORS
Nominees for Consideration at the Meeting
The Bylaws provide that the Board of Directors shall consist of at
least one (1), but not more than nine (9) directors. The Board of Directors, in
its discretion by majority vote, may increase and decrease the number of
directors on the Board of Directors. Currently, the Board of Directors consists
of four (4) directors.
The four persons listed below have been nominated by the Board of
Directors to serve as directors of the Company.
If the amendment to the Certificate to provide for a Classified Board
of Directors is adopted, the Board of Directors will be divided into three
classes. See "PROPOSAL 2-AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO
CLASSIFY THE BOARD OF DIRECTORS." This Meeting will be the first election of
directors after the amendment which created the Classified Board. Accordingly,
at the Meeting, two directors will be elected for a term expiring at the
Company's 2001 Annual Meeting, one director for a term expiring at the 2002
Annual Meeting, and one director for a term expiring at the 2003 Annual Meeting
and, in each case, until their successors are duly elected and qualified. At
each Annual Meeting after 2000, directors will be elected to succeed those
directors whose terms then expire and each person so elected will serve for a
three year term.
If the Amendment to the Certificate is not approved, directors elected
at the Meeting will serve one year terms until the 2001 Annual Meeting and until
their successors are duly elected and qualified.
Unless otherwise specified, each properly executed proxy received will
be voted for the election of the nominees named below to serve as directors
until the end of their respective terms or until his/her successor is elected
and qualified. The Company is not aware of any reason that any nominee will be
unable to serve or will decline to serve as a director. In the event that any
nominee is unable to serve or will not serve as a director, it is intended that
the proxies solicited hereby will be voted for such other person or persons as
shall be nominated by management.
The following table sets forth certain information with respect to each
of the nominees for director and their current positions with the Company.
14
<PAGE>
CLASS I
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Directors Whose Term Year in Which
Expires at the 2001 Service as a
Annual Meeting Principal Occupation Director Began
-------------- -------------------- --------------
<S> <C> <C>
Stephen George, 32 Director 1999
Darr Aley, 35 Director 1999
--------------------------------------------------------------------------------------------------------------------
</TABLE>
Stephen George
Mr. George has served as a member of the Board of Directors since July
1999. Mr. George is also the chief executive officer of Epylon Corporation, a
business-to-business e-commerce company located in the San Francisco Bay area.
Prior to forming Epylon Corporation, Mr. George was a Vice President in the San
Francisco office of Goldman Sachs & Co., from January 1996 to May 1999 where he
provided a broad range of financial services to emerging technology companies,
entrepreneurs, management teams and venture capitalists with a specialization in
the Internet industry. From April 1992 through January 1996, Mr. George worked
as an investment banker for Merrill Lynch, Pierce, Fenner & Smith, Inc. Mr.
George currently serves on the Board of Directors of YesAsia, Inc. Mr. George
received a BA in Government from Cornell University.
Darr Aley
Mr. Aley has served as a member of the Board of Directors since July
1999. Mr. Aley is also the chief technology officer of Epylon Corporation. Prior
to joining the Company's management team, Mr. Aley was Vice President of
Corporate Development at Lycos, Inc. from August 1998 to August 1999, where he
was responsible for developing Internet joint ventures and strategic alliances.
From December 1997 to August 1998, Mr. Aley worked at WhoWhere.com, a search
engine that enables users to locate a person's home and e-mail address. From
December 1996 to December 1997, Mr. Aley worked at Zip Two, a venture capital
firm. From December 1994 to December 1996, Mr. Aley worked at Soft Bank, a
venture capital firm. Mr. Aley currently serves on the Board of Directors of
College411.com, Inc. Mr. Aley received a BA from the University of New
Hampshire.
15
<PAGE>
CLASS II
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Director Whose Term Year in Which
Expires at the 2002 Service as a
Annual Meeting Principal Occupation Director Began
-------------- -------------------- --------------
<S> <C> <C>
Lee C. Hansen, 33 President and Director 2000
--------------------------------------------------------------------------------------------------------------------
</TABLE>
Lee C. Hansen
Mr. Hansen has served as the Company's President since October 1, 1999
and as one of the directors since April 2000. Prior to joining the management
team, Mr. Hansen was Senior Vice President of Corporate Strategy and Development
at Bank of America Corporation from May 1997 to September 1999, where he managed
strategic projects and merger and acquisition activities. From July 1993 to
April 1997, Mr. Hansen served as a Vice President in the International Capital
Raising Group and an Associate in the Lease Finance, Private Placement and High
Yield Groups at Banc of America Securities. Mr. Hansen currently serves on the
Board of Directors of AssetExchange, Inc. and AlarmX.com, Inc. Mr. Hansen
received an MBA from the J.L. Kellogg Graduate School at Northwestern University
and a BSBA from Bucknell University.
CLASS III
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Director Whose Term Year in Which
Expires at the 2003 Service as a
Annual Meeting Principal Occupation Director Began
-------------- -------------------- --------------
<S> <C> <C>
Andrew P. Panzo, 35 Chairman of the Board of Directors 1999
and Chief Executive Officer
--------------------------------------------------------------------------------------------------------------------
</TABLE>
Andrew P. Panzo
Mr. Panzo has served as the Company's Chairman and Chief Executive
Officer since January 1999. From October 1993 to June 1999, Mr. Panzo was a
managing director at American Maple Leaf Financial Corporation, a boutique
investment banking firm located in Philadelphia, Pennsylvania. Mr. Panzo was one
of the original founders of NetValue, Inc. in September 1996. Mr. Panzo
currently serves on the Board of Directors of NetValue, Inc. and the Board of
Directors of metacat.com, Inc. Mr. Panzo received a Masters degree in
International Business and Finance from Temple University.
16
<PAGE>
Board Meetings
During the year ended December 31, 1999, the Board of Directors met and
took action by consent 14 times and took action by resolution once, and no
director missed more than 25% of the total Board meetings. The Company had no
committees of the Board of Directors during the year ended December 31, 1999.
In June 2000, the Company adopted an Audit Committee Charter for the
purpose of complying with the newly adopted audit committee rules of AMEX. The
Company was required to adopt the Audit Committee Charter in connection with its
recent applications for listing on AMEX. Currently, no directors have been
appointed to the Audit Committee as the Company does not have directors who meet
the independence standards required by AMEX. The Company intends to add
directors to the Board who satisfy those independence standards. The Audit
Committee Charter is attached to this Proxy Statement as Appendix 1.
Director's Compensation
Currently, the Company has no policy with respect to the granting of
fees to directors in connection with their service to the Company. However, the
Company may reimburse directors for their cost of travel and lodging to attend
meetings of the Board of Directors or committees thereof.
17
<PAGE>
EXECUTIVE COMPENSATION
The table below sets forth information concerning the compensation the
Company paid in 1999 to the chief executive officer and each executive officer
who was paid compensation during his tenure with the Company at an annual rate
of greater than $100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
Name and ------------------------- -------------------
Principal Position Salary Bonus Number of Options
------------------ ------- -------- -------------------
<S> <C> <C> <C>
Andrew P. Panzo, $87,500 -0- 1,020,000
Chairman of the Board and
Chief Executive Officer
Lee C. Hansen, $34,615 -0- 900,000
President
Thomas Aley, $23,077 $50,000 -0-
Executive Vice President
</TABLE>
From September 4, 1998 through January 6, 1999, Alexis Christodoulou
served as the sole officer and director. During this period, Mr. Christodoulou
did not receive any compensation in exchange for his services.
Employment Agreements
In June 1999, the Company entered into a three year employment
agreement with Mr. Panzo. In addition to an annual salary of $150,000, Mr.
Panzo's employment agreement provides for bonus compensation at the discretion
of the Board of Directors. Pursuant to the employment agreement, Mr. Panzo is
entitled to fringe benefits including participation in pension, profit sharing
and bonus plans, as applicable, and life insurance, hospitalization, major
medical, paid vacation and expense reimbursement. Mr. Panzo's employment
agreement provides he is entitled to receive options to purchase 1,200,000
shares of Common Stock. Options to purchase 120,000 shares of Common Stock
vested immediately and the remainder of the options will vest pro rata on a
monthly basis over a three year period. Mr. Panzo may exercise these options for
five years following their vesting date at an exercise price of $1.00 per share.
In September 1999, Mr. Panzo agreed to reduce his option award and surrendered
180,000 options. Mr. Panzo now holds options to purchase 1,020,000 shares of
Common Stock.
18
<PAGE>
In September 1999, the Company entered into a three year employment
agreement with Lee Hansen pursuant to which Mr. Hansen will serve as President.
In addition to an annual salary of $150,000, Mr. Hansen's employment agreement
provides for bonus compensation at the discretion of the Board of Directors.
Pursuant to his employment agreement, Mr. Hansen is entitled to fringe benefits
including participation in pension, profit sharing and bonus plans, as
applicable, and life insurance, hospitalization, major medical, paid vacation
and expense reimbursement. The Company awarded Mr. Hansen options to purchase
900,000 shares of Common Stock. Options to purchase 90,000 shares of Common
Stock vested immediately and the remainder of the options will vest pro rata on
a monthly basis over a three year period. As long as he is a Company employee,
Mr. Hansen may exercise these options at an exercise price of $1.00 per share
until the later of:
o the fifth anniversary of their vesting date; or
o one year after the effective date of a registration statement
registering the resale of the shares of Common Stock issuable upon
exercise of the options.
If Mr. Hansen's employment is terminated, then the exercise period of his
options may be reduced.
In November 1999, the Company entered into a one year employment
agreement with Mr. Thomas Aley pursuant to which he will serve as Executive Vice
President. In addition to an annual salary of $150,000, Mr. Thomas Aley's
employment agreement provides for bonus compensation at the discretion of the
Board of Directors. Pursuant to his employment agreement, Mr. Thomas Aley is
entitled to fringe benefits including participation in pension, profit sharing
and bonus plans, as applicable, and life insurance, hospitalization, major
medical, paid vacation and expense reimbursement. In April 2000, the Company
amended Mr. Thomas Aley's employment agreement to award him options to purchase
900,000 shares of Common Stock. Options to purchase 150,000 shares of Common
Stock vested immediately and the remainder of the options will vest pro rata on
a monthly basis over a three year period. Mr. Thomas Aley may exercise these
options at an exercise price of $1.00 per share until the later of:
o the fifth anniversary of their vesting date; or
o one year after the effective date of a registration statement
registering the resale of the shares of Common Stock issuable upon
exercise of the options.
In April 2000, the Company entered into a three year employment
agreement with Stephen M. Cohen pursuant to which Mr. Cohen will serve as Senior
Vice President, General Counsel. In addition to an annual salary of $150,000,
Mr. Cohen's employment agreement provides for bonus compensation at the
discretion of the Board of Directors. Pursuant to his employment agreement, Mr.
Cohen is entitled to fringe benefits including participation in pension, profit
sharing and bonus plans, as applicable, and life insurance, hospitalization,
major medical, paid vacation and expense reimbursement. The Company awarded Mr.
Cohen options to purchase 300,000 shares of Common Stock at an exercise price of
$6.75 per share. Options to purchase 50,000 shares of Common Stock vested
immediately, options to purchase 62,500 shares of Common Stock vest on April 17,
19
<PAGE>
2001, and the remaining options to purchase 187,500 shares of Common Stock vest
pro rata on a monthly basis from April 18, 2001 through April 17, 2004, provided
that if after the expiration of the initial term of the employment agreement the
Company elects not to extend Mr. Cohen's employment for an additional one year
for reasons other than a "for cause" termination as defined in the employment
agreement, then Mr. Cohen shall vest fully in all of his options at the end of
his initial term of employment as if he had remained a Company employee for a
full term of four years.
Pursuant to his employment agreement, the Company has agreed to provide
Mr. Cohen with a loan in the principal amount of $100,000 at the beginning of
each of the first two years of the term of his employment agreement. Each of the
loans shall accrue interest at the rate of 8% per annum and shall be due on
April 17, 2004 or such earlier date that Mr. Cohen shall have received aggregate
proceeds of $5,000,000 from the sale of his options or the shares of Common
Stock underlying his options. However, Mr. Cohen is not required to repay the
loans if by April 17, 2004, the sum of the proceeds which he has received from
the sale of his options or the shares of Common Stock underlying his options and
the remaining equity in the options as of April 17, 2004 does not equal or
exceed $5,000,000.
In February 2000, the Company entered into a letter agreement with
James F. Elwell pursuant to which Mr. Elwell will serve as Vice
President-Finance and Controller. This agreement provides Mr. Elwell with an
annual salary of $120,000. The Company awarded Mr. Elwell options to purchase
120,000 shares of Common Stock at an exercise price of $10.032 per share.
Options to purchase 30,000 shares of Common Stock vest on February 28, 2001, and
the remaining options to purchase 90,000 shares of Common Stock vest pro rata on
a monthly basis from March 1, 2001 through February 28, 2004. This agreement may
be terminated at any time by the Company or Mr. Elwell without advance notice.
Change in Control Arrangements
Each of the aforementioned employment agreements provides the employee
with the following rights upon a change of control:
Andrew Panzo: If Mr. Panzo terminates his employment agreement due to a
change in control, then the Company must continue to pay him his salary and
bonus, based upon the average annual bonus paid to him prior to termination of
his employment, for the lesser of one year from the date of termination of his
employment agreement or the remaining original three year term of his employment
agreement. In addition, all of Mr. Panzo's unvested stock options shall
immediately vest as of the termination date of his employment agreement due to a
change in control.
Lee Hansen: If Mr. Hansen terminates his employment agreement due to a
change in control, then the Company must continue to pay him his salary and
bonus, based upon the average annual bonus paid to him prior to termination of
his employment, for the lesser of one year from the date of termination of his
employment agreement or the remaining original three year term of his employment
agreement.
20
<PAGE>
Thomas Aley: If Mr. Aley terminates his employment agreement due to a
change in control, then the Company must continue to pay him his salary and
bonus, based upon the average annual bonus paid to him prior to termination of
his employment, for the lesser of one year from the date of termination of his
employment agreement or the remaining original term of his employment agreement.
Stephen Cohen: If Mr. Cohen terminates his employment agreement due to
a change in control that occurs after September 21, 2000, then the Company must
continue to pay him his salary and bonus, based upon the average annual bonus
paid to him prior to termination of his employment, for the lesser of one year
from the date of termination of his employment agreement or the remaining
original term of his employment agreement. In addition, all of Mr. Cohen's
unvested stock options shall immediately vest as of the termination date of his
employment agreement.
James F. Elwell: If the Company terminates Mr. Elwell upon a change in
control that occurs on or before February 28, 2001, then his stock options which
were scheduled to vest on February 28, 2001 shall vest at the rate of 2,500
options per month from February 28, 2000 until Mr. Elwell's termination date.
In each of these employment agreements, a change in control is defined
as the occurrence of any one of the following:
o any "person" as such term is used in Sections 3(a)(9) and 13(d) of
the Securities Exchange Act of 1934, other than one of the
subsidiaries or affiliates becomes a "beneficial owner," as such
term is used in Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, of 50% or more of any class of issued and
outstanding capital stock which ownership interest constitutes 50%
or more of all issued and outstanding voting shares; and
o the majority of the members of the Board of Directors consists of
individuals other than members of the Board of Directors on the
date of the employment agreement, provided that persons elected to
the Board of Directors whose election or nomination was supported
by one-half of the directors at the date of the employment
agreement shall be considered a member of the Board of Directors as
of the date of the employment agreement.
Consulting Agreements
In connection with the merger on July 31, 1999 with Strategicus
Partners, Inc. ("Strategicus Partners") the Company entered into consulting
agreements with each of Stephen George and Darr Aley, current directors, as well
as Barry Uphoff, a former director. Each of Messrs. George, Darr Aley and Uphoff
were former principal shareholders of Strategicus Partners. Pursuant to the
terms of the consulting agreements, the Company issued options to purchase an
aggregate of 6,255,876 shares of Common Stock to Messrs. Uphoff, Darr Aley and
George and agreed to pay each of them a monthly retainer of $500. Messrs.
Uphoff, Darr Aley and George have subsequently agreed to surrender a substantial
21
<PAGE>
portion of these options. In May 2000, the Company finalized the terms of these
options in warrant agreements in which the Company issued to each of Messrs.
Uphoff and Darr Aley warrants to purchase 332,416 shares of Common Stock, of
which warrants to purchase 192,275 shares vested immediately and warrants to
purchase 140,141 shares remain subject to vesting provisions, and the Company
issued Mr. George warrants to purchase 382,416 shares of Common Stock, of which
warrants to purchase 192,275 shares vested immediately and warrants to purchase
190,141 shares remain subject to vesting provisions. The unvested shares issued
pursuant to each of these warrant agreements will vest monthly on a pro rata
basis over a period of 36 months from the date of the warrant agreements. In
connection with his resignation from the Board of Directors in May 2000, Mr.
Uphoff terminated his consulting agreement.
Mr. Darr Aley's consulting agreement also provides for the forgiveness
of a loan in the principal amount of $267,000 as follows:
o one-third of the principal amount of this loan, plus accrued
interest thereon, if Mr. Darr Aley remains engaged by the Company
on the first anniversary of the effective date of the merger with
Strategicus Partners;
o one-third of the principal amount of these loans, plus accrued
interest thereon, if Mr. Darr Aley remains engaged by the Company
on the second anniversary of the effective date of the merger with
Strategicus Partners; and
o one-third of the principal amount of this loan, plus accrued
interest thereon, if Mr. Darr Aley remains engaged by the Company
on the third anniversary of the effective date of the merger with
Strategicus Partners.
On October 1, 1999 the Company entered into a consulting agreement with
Paul H. Stephens, a founder and formerly a principal of the investment banking
firm of Robertson Stephens & Company. Under the consulting agreement, Mr.
Stephens has been appointed to a newly created Advisory Board. In this capacity,
Mr. Stephens will review and advise the Company regarding the Company's business
and prospects and the business and prospects of the affiliate companies. He will
also assist the Company in completing acquisitions of and making investments in
other businesses and will assist the Company in obtaining additional rounds of
financing. Mr. Stephens led Robertson Stephens' research and institutional sales
effort in the late 1970's and early 1980's and then transitioned into its new
business corporate finance department where he worked until 1985. He then
restructured the firm's venture capital group, managing it until 1990, when he
formed The RS Orphan Fund, LP, a limited partnership focused on investing
globally in undiscovered or neglected growth companies. In June 1993, Mr.
Stephens launched The Contrarian Fund, a public mutual fund that also has a
global focus on developing companies.
In exchange for rendering these consulting services, the Company sold a
total of 676,374 shares of Common Stock to The RS Orphan Fund, LP and The RS
Orphan Offshore Fund, LP for a total purchase price of $676,374. These funds
also purchased a total of 1,324 shares of Series B Preferred Stock and warrants
to purchase 80,976 shares of Common Stock in an October 1999 private placement
22
<PAGE>
offering. These funds are managed by Mr. Stephens. No additional compensation
will be paid to Mr. Stephens pursuant to the consulting agreement. The Company
will reimburse Mr. Stephens for reasonable business expenses which he incurs in
performing his duties pursuant to the consulting agreement. This consulting
agreement has a three year term and either the Company or Mr. Stephens may
terminate this agreement upon one month's notice to the other party.
Stock Options
Effective as of June 1, 2000 (with amendments effective as of July 31,
2000), the Company adopted and implemented the "Amended and Restated Net Value
Holdings, Inc. 2000 Stock Incentive Plan," (the "Plan") which covers 5,000,000
shares of Common Stock. Under its terms, employees, officers and directors of
the Company and its subsidiaries are currently eligible to receive non-qualified
stock options, restricted stock awards, and, upon approval of the Proposal by
stockholders, will be eligible to receive incentive stock options within the
meaning of Section 422 of the Code. In addition, advisors and consultants who
perform services for the Company or its subsidiaries are eligible to receive
non-qualified stock options under the Plan. The Plan is administered by the
Board of Directors or a committee designated by the Board of Directors. All
stock options granted under the Plan are exercisable for a period of up to ten
(10) years from the date of grant. The Company may not grant incentive stock
options pursuant to the Plan at exercise prices which are less than the fair
market value of Common Stock on the date of grant. The term of an incentive
stock option granted under the Plan to a stockholder owning more than 10% of the
issued and outstanding Common Stock may not exceed five years and the exercise
price of an incentive stock option granted to such stockholder may not be less
than 110% of the fair market value of Common Stock on the date of grant. The
Plan contains certain limitations on the maximum number of shares of Common
Stock that may be awarded in any calendar year to any one individual for the
purposes of Section 162(m) of the Code. As of July 28, 2000, options to purchase
306,000 shares of Common Stock were outstanding under the Plan. Each of these
stock options has an exercise price of $4.00 per share.
23
<PAGE>
In addition to the stock options covered by the Plan, the Company has
also issued in private transactions, options to purchase 4,940,000 shares of
Common Stock. These options were issued prior to the adoption of the Plan by the
Board of Directors. From inception through July 28, 2000, these options were
issued at the following exercise prices:
Number of Stock Options Exercise Price
----------------------- --------------
3,000,000 $1.00
260,000 $3.75 - $4.88
340,000 $6.25 - $6.75
430,000 $7.75 - $7.99
100,000 $8.00 - $9.00
210,000 $9.13 - $11.03
105,000 $13.00 - $14.00
290,000 $16.38 - $16.88
205,000 $19.25 - $19.64
---------
4,940,000
=========
The following table sets forth information regarding options granted in
1999 to the executive officers named in the Summary Compensation table above.
Amounts represent the hypothetical gains that could be achieved from the
respective options if exercised at the end of the option term. These gains are
based on assumed rates of stock appreciation of 5% and 10% compounded annually
from the date the respective options were granted to their expiration date based
upon the grant price.
Individual Grants
<TABLE>
<CAPTION>
% of Total
Options Potential Realizable Value at Assumed
Granted to Market Annual Rates of Stock Price
Number of Employees Price Appreciation for Option Term (4)
Options in Fiscal Exercise on Date --------------------------------------
Name Granted Year Price of Grant Expiration Date 5% 10%
---- ---------- ---------- -------- --------- --------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Andrew P. Panzo 120,000 5.5% $1.00 $7.13 June 1, 2004 $971,987 $1,257,952
Andrew P. Panzo 300,000(1) 13.8% $1.00 $7.13 June 30, 2005 $2,566,465 $3,489,369
Andrew P. Panzo 300,000(2) 13.8% $1.00 $7.13 June 30, 2006 $2,709,788 $3,868,306
Andrew P. Panzo 300,000(3) 13.8% $1.00 $7.13 June 30, 2007 $2,860,277 $4,285,136
Lee C. Hansen 90,000 4.1% $1.00 $4.56 Oct. 1, 2004 $434,073 $571,316
Lee C. Hansen 270,000(1) 12.4% $1.00 $4.56 Oct. 31, 2005 $1,380,830 $1,912,342
Lee C. Hansen 270,000(2) 12.4% $1.00 $4.56 Oct. 31, 2006 $1,463,372 $2,130,576
Lee C. Hansen 270,000(3) 12.4% $1.00 $4.56 Oct. 31, 2007 $1,550,040 $2,370,633
</TABLE>
24
<PAGE>
(1) The options included in this grant vest pro rata on a monthly basis
throughout the twelve month period commencing on the date of grant.
(2) The options included in this grant vest pro rata during the 12 month period
commencing on the first anniversary of the date of grant.
(3) The options included in this grant vest pro rata during the 12 month period
commencing on the second anniversary of the date of grant.
(4) As required by the rules of the Securities and Exchange Commission, the
dollar amounts reflected represent the hypothetical gain that would exist
for the options based on assumed 5% and 10% annual compound rates of stock
price appreciation over the full option term. These prescribed rates are
not intended to forecast possible future appreciation, if any, of the
Common Stock.
The following table sets forth information concerning year end option
values for fiscal 1999 for the executive officers named in the Summary
Compensation Table above. The value of unexercised in-the-money options is
calculated based on the closing bid price of Common Stock on December 31, 1999
of $11.00.
Fiscal Year End Option Values
<TABLE>
<CAPTION>
Number of Unexercised Options Value of Unexercised
At Fiscal Year End In-The-Money Options
------------------ --------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Andrew P. Panzo 300,000 720,000 $3,000,000 $7,200,000
Lee C. Hansen 157,500 157,500 $1,575,000 $742,500
</TABLE>
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
LJ Soldinger Associates completed the audit of the Company's
consolidated financial statements for the years ended December 31, 1997 and
1998. In February 2000, the Company dismissed LJ Soldinger Associates as its
independent accounting firm and engaged KPMG, LLP as its independent accounting
firm. KPMG, LLP completed the audit of the Company's consolidated financial
statements for the year ended December 31, 1999. LJ Soldinger Associates has
confirmed that they did not have any disputes or disagreements with the
Company's management regarding accounting principles or practices, financial
disclosure or auditing scope of procedures.
For periods in which the Company was inactive prior to its acquisition
of a controlling interest in NetValue, Inc., Barry L. Friedman, P.C. completed
audits of the Company's financial statements and was subsequently dismissed when
the Company engaged LJ Soldinger Associates in 1998. Barry L. Friedman, P.C.
confirmed that they did not have any disputes or disagreements with management
regarding accounting principles or practices, financial disclosure or auditing
scope or procedures.
25
<PAGE>
SECURITY OWNERSHIP OF EXECUTIVE OFFICERS, DIRECTORS AND
BENEFICIAL OWNERS OF GREATER THAN 5%
OF THE COMPANY'S VOTING SECURITIES
The following tables sets forth information with respect to the
beneficial ownership of Common Stock and Preferred Stock owned, as of July 28,
2000, by:
o the holders of more than 5% of any class of the Company's voting
securities;
o each of the directors;
o each of the executive officers; and
o all directors and executive officers of the Company as a group.
As of July 28, 2000, an aggregate of 17,793,846 shares of Common Stock
and 4,166,667 shares of Series C Preferred Stock were issued and outstanding.
For purposes of computing the percentages under the following tables, it is
assumed that all options and warrants to acquire Common or Preferred Stock which
have been issued to the directors, executive officers and the holders of more
than 5% of Common or Preferred Stock and are fully vested or will become fully
vested within 60 days of the date of this Proxy Statement have been exercised by
these individuals and the appropriate number of shares of Common and Preferred
Stock have been issued to these individuals. The number of shares of Common
Stock reflected as outstanding has also been determined on the basis that
1,616,835 shares of Common Stock that were issued to a former officer are no
longer issued and outstanding as a result of the termination for cause of the
former officer. This matter is currently the subject of a material legal
proceeding as discussed below. See "Legal Proceedings Affecting Outstanding
Securities."
26
<PAGE>
COMMON STOCK
<TABLE>
<CAPTION>
Shares Owned
Beneficially and
Name of Beneficial Owner Position of Record (1) Percentage of Class
------------------------ -------- ------------- -------------------
<S> <C> <C> <C>
Rozel International Holdings, Ltd. Beneficial Owner 2,819,852 15.8
Whitehill House
Newby Road, Industrial Estate
Hazel Grove, Stockport
Cheshire, United Kingdom
SK7 5DA
Andrew P. Panzo (2) Officer, Director 638,582 3.6
Two Penn Center Plaza, Suite 605
Philadelphia, PA 19102
Darr Aley (3) Director 344,467 1.9
C/o Epylon Corporation
645 Harrison Street, Suite 200
San Francisco, CA 94107
Stephen George (4) Director 348,634 2.0
C/o Epylon Corporation
645 Harrison Street, Suite 200
San Francisco, CA 94107
Lee C. Hansen (5) Officer, Director 315,000 1.8
1085 Mission Street
San Francisco, CA 94102
Thomas Aley (6) Officer 212,500 1.2
1000 Winter Street, Suite 1100
Walthom, MA 02451
Stephen M. Cohen (7) Officer 50,000 *
Two Penn Center Plaza, Suite 605
Philadelphia, PA 19102
James F. Elwell (8) Officer 0 *
1085 Mission Street
San Francisco, CA 94102
All directors and executive officers as a 1,909,183 10.7
group (7 people)
</TABLE>
(*) Less than one percent.
(1) Beneficial ownership has been determined in accordance with Rule 13d-3 under
the Securities Exchange Act of 1934. Unless otherwise noted, the Company
believes that all persons named in the table have sole voting and investment
power with respect to all shares of Common Stock beneficially owned by them.
27
<PAGE>
(2) Includes 494,119 shares of Common Stock issuable upon exercise of vested
options. Does not include 525,881 shares of Common Stock issuable pursuant
to options not presently exercisable and not exercisable within 60 days of
the date of this Proxy Statement. Also includes 75,200 shares of Common
Stock which Mr. Panzo owns with his spouse as joint tenants with the right
of survivorship.
(3) Includes 201,883 shares of Common Stock issuable upon exercise of vested
options. Does not include 130,533 shares of Common Stock issuable pursuant
to options not presently exercisable and not exercisable within 60 days of
the date of this Proxy Statement.
(4) Includes 206,050 shares of Common Stock issuable upon exercise of vested
options. Does not include 176,366 shares of Common Stock issuable pursuant
to options not presently exercisable and not exercisable within 60 days of
this date of this Proxy Statement.
(5) Includes 315,000 shares of Common Stock issuable upon exercise of vested
options. Does not include 585,000 shares of Common Stock issuable pursuant
to options not presently exercisable and not exercisable within 60 days of
the date of this Proxy Statement.
(6) Includes 212,500 shares of Common Stock issuable upon exercise of vested
options. Does not include 687,500 shares of Common Stock issuable pursuant
to options not presently exercisable and not exercisable within 60 days of
the date of this Proxy Statement.
(7) Includes 50,000 shares of Common Stock issuable upon exercise of vested
options. Does not include 250,000 shares of Common Stock issuable pursuant
to options not presently exercisable within 60 days of the date of this
Proxy Statement.
(8) Does not include 120,000 shares of Common Stock issuable pursuant to options
not presently exercisable and not exercisable within 60 days of the date of
this Proxy Statement.
28
<PAGE>
SERIES C PREFERRED STOCK
<TABLE>
<CAPTION>
Shares of
Series C Preferred Stock
Owned Beneficially and
Name of Beneficial Owner of Record (1) Percentage of Class
------------------------ ------------- -------------------
<S> <C> <C>
Brown Simpson Partners I, Ltd. 833,336 20.0
Carnegie Hall Tower
152 West 57th Street, 40th Fl.
New York, NY 10019
Montrose Investments Ltd. 583,333 14.0
300 Crescent Ct., Suite 700
Dallas TX 75201
The Raptor Global Portfolio, Ltd. 414,833 10.0
40 Rowes Wharf, 2nd Fl.
Boston, MA 02110
</TABLE>
(1) Beneficial ownership has been determined in accordance with Rule 13d-3 under
the Securities Exchange Act of 1934. Unless otherwise noted, the Company
believes that all persons named in the table have sole voting and investment
power with respect to all shares of Series C Preferred Stock beneficially
owned by them.
29
<PAGE>
Legal Proceedings Affecting Outstanding Securities
In October 1999, the Company terminated its employment agreement with
Douglas Spink, its former Chief Technology Officer and director, for cause due
to Mr. Spink's material breach of this agreement and his breach of his fiduciary
duties to the Company. The Company believes that Mr. Spink engaged in various
acts that were not in the Company's best interests, including various instances
of misappropriation or attempted misappropriation of the Company's assets and
various acts of insubordination and dishonesty in his dealings with other
officers and directors. The various agreements which the Company entered into
with Mr. Spink stated that if Mr. Spink's employment was terminated for cause,
he forfeits all unvested shares of Common Stock which he held on the date of
termination and he would be obligated to repay all loans which the Company
advanced to him if the termination date was prior to December 31, 1999 and 50%
of the principal balance of these loans and all accrued interest thereon if the
termination date was prior to May 28, 2000.
On January 7, 2000, Mr. Spink filed an action against the Company in
the United States District Court for the District of Oregon, alleging that the
Company's termination of his employment constituted a breach of his employment
agreement and violated Oregon statutes regarding the payment of wages. The
complaint seeks damages in the amount of $17,000,000 on the breach of contract
claim, plus prejudgment interest from the date of the alleged breach of the
employment agreement or, in the alternative, an order directing the Company to
specifically perform its obligations under its employment agreement with Mr.
Spink. The complaint seeks damages in the amount of $150,000 on the wage claim,
plus penalty wages, prejudgment interest, costs and disbursements. On July 21,
2000, the Court dismissed Mr. Spink's complaint against the Company with the
right to amend. Should Mr. Spink amend his complaint, the Company intends to
vigorously defend this action.
On May 5, 2000, the Company filed an action against Mr. Spink and Merus
Partners, Inc., an Oregon corporation principally owned by Mr. Spink ("Merus"),
in the United States District Court for the District of Delaware, asserting
various claims, including a claim for injunctive relief requiring Mr. Spink to
forfeit and return 1,610,835 of his unvested shares of Common Stock since he was
terminated for cause. The Company filed an amended complaint against Mr. Spink,
asserting additional claims against him on July 28.
In related matters, during June 2000, Mr. Spink filed actions in the
Court of Chancery of the State of Delaware in and for New Castle County seeking
to compel the Company to call an annual meeting of its stockholders and to
inspect its stockholder list. Mr. Spink asserted other claims in these
proceedings which were stayed by the court or withdrawn by Mr. Spink. With the
consent of Mr. Spink, the Court entered an order permitting the Company to
conduct its annual meeting on September 25, 2000 pending SEC approval of the
Company's proxy materials. Mr. Spink voluntarily dismissed his remaining claim
in the Chancery Court proceeding.
30
<PAGE>
In another matter related to this dispute, on or about June 5, 2000,
Greg Biggs filed a complaint in the Circuit Court in the State of Oregon for the
County of Multnomah against Mr. Spink and Strategicus Partners. The Company was
also named as a defendant in this action. In his complaint, Mr. Biggs alleges
that prior to the Company's merger with Strategicus Partners, he entered into an
agreement with Mr. Spink to acquire 40% of the issued capital stock of
Strategicus Partners, which he currently values at $4,000,000. Mr. Biggs also
contends that he was "squeezed out" of the management of Strategicus Partners by
Mr. Spink and was, therefore, denied the opportunity to participate in the
Company's merger with Strategicus Partners in July 1999. Apart from a claim for
shares of the Company's capital stock equal to Mr. Biggs' ownership interest in
Strategicus Partners, Mr. Biggs does not recite any facts relating to claims
against the Company. The Company has filed an answer essentially denying Mr.
Bigg's claims. The Company also asserted a claim against Mr. Spink for
indemnification relating to the Biggs lawsuit in the Delaware federal court
proceeding initiated by the Company against Mr. Spink.
Finally, on or about July 27, Steve Rosendahl, Jim Steuer and Pinnacle
Technology L.L.C., filed a complaint against Mr. Spink, the Company, Merus and
Aspen Value, LLC, in the Circuit Court in the State of Oregon for Multnomah
County. The plaintiffs in this case allegedly purchased shares of Common Stock
from Mr. Spink in January 2000. The plaintiffs apparently seek a declaratory
judgment against the Company regarding their ownership of 140,000 shares of Mr.
Spink's stock in the Company. This complaint has not yet been served, but the
Company intends to fully investigate and defend this action. The Company has
also asserted a claim for indemnification against Mr. Spink in its Delaware
proceeding.
In the event that Mr. Spink prevails in his lawsuit against the Company
and a court of law determines that some or all of the Spink Shares were validly
issued and outstanding as of the Record Date, any outcome at the Meeting could
potentially be challenged. Such a challenge would most likely occur if: (1) the
Spink Shares would have been voted against a Proposal, and (2) the vote of the
Spink Shares would have determined the outcome of the Proposal. If the potential
outcome of a Proposal at the Meeting is affected by the Company's treatment of
the Spink Shares, to assure that all actions are validly taken, the Company's
management may withdraw the Proposal in question from consideration at the
Meeting.
31
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Share Exchange Transactions with Rozel International Holdings, Ltd.
In October 1998, the Company completed a share exchange transaction
with Rozel International Holdings, Ltd. in which the Company issued 1,000,000
shares of Common Stock valued at $4,630,000 and 500,000 shares of Series A
Preferred Stock valued at $40,000 in exchange for 178,700 shares of the Series A
Preferred Stock of NetValue, Inc. This represented 100% of the issued and
outstanding shares of Series A Preferred Stock of NetValue, Inc. In October
1998, the Company also completed a share exchange transaction with Rozel
International Holdings, Ltd. in which the Company issued 1,145,594 shares of
Common Stock valued at $4,628,200 and 1,145,594 shares of Series A Preferred
Stock valued at $91,648 in exchange for 4,582,377 shares of common stock of
NetValue, Inc. Rozel International Holdings, Ltd. is a beneficial owner of
approximately 15.9% of Common Stock.
Recapitalization of Securities Issued in Strategicus Merger
The Company completed the merger with Strategicus Partners on July 30,
1999. Subject to vesting provisions described in the merger agreement, the
Company issued the following shares of capital stock to the stockholders of
Strategicus Partners:
<TABLE>
<CAPTION>
Vested Shares of Unvested Shares of
Vested Shares of Unvested Shares of Series A Series A
Name Common Stock Common Stock Preferred Stock Preferred Stock
---- ------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C>
Douglas Spink 239,847 1,641,310 73,678 504,187
Barry Uphoff 120,394 1,760,763 36,983 540,882
Darr Aley 120,394 1,760,763 36,983 540,882
Stephen George 120,394 1,760,763 36,983 540,882
------- --------- ------ -------
TOTAL 601,029 6,923,599 184,627 2,126,833
TOTAL VALUE $3,638,084 $21,458,719 $142,163 $1,637,661
</TABLE>
Following the completion of the merger, Messrs. Spink, Uphoff, Darr
Aley and George joined the Board of Directors. Subsequently, Mr. Spink resigned
from the Board of Directors during the first quarter of 2000 and Mr. Uphoff
resigned from the Board of Directors in May 2000.
The unvested shares of capital stock listed above were intended to vest
ratably on a monthly basis over periods ranging from 24 months to 48 months
based on the individual stockholder's continued employment or engagement as a
consultant with the Company.
Following the merger with Strategicus Partners, the securities issued
in the merger were recapitalized in several stages as follows:
o In September 1999, the Company issued 2,898,788 shares of Common
Stock in exchange for all 4,831,312 issued and outstanding shares of
Series A Preferred Stock. Of this amount, Messrs. Spink, Uphoff, Aley
and George received a total of 1,386,876 shares of Common Stock
valued at $6,012,738 in exchange for the cancellation of all of their
2,311,460 shares of Series A Preferred Stock.
32
<PAGE>
o On August 31, 1999, each of Messrs. Uphoff, Darr Aley and George
agreed to immediately cancel all of their 6,255,876 unvested shares
of Common Stock valued at $37,927,669 (consisting of 5,282,289
unvested shares of Common Stock pursuant to the merger with
Strategicus Partners, and 973,587 unvested shares of Common Stock in
the Series A Preferred Stock described above) in exchange for options
to purchase a total of 6,255,876 shares of Common Stock valued at
$11,889,024. Each of these options has an exercise price of $1.00 per
share and will be subject to the same vesting provisions that applied
to the unvested shares of Common Stock as described in the merger
agreement with Strategicus Partners.
o During September 1999, each of Messrs. Uphoff, Aley, George and Panzo
agreed to surrender options to purchase 180,000 shares of Common
Stock valued at $646,884. On September 13, 1999, Mr. Spink agreed to
cancel 180,000 of his unvested shares of Common Stock valued at
$1,148,727.
o During January 2000, each of Messrs. Uphoff, Aley and George agreed
to surrender options to purchase 1,217,876 shares of Common Stock
valued at $4,376,803.
o During May 2000, each of Messrs. Uphoff and Aley agreed to surrender
options to purchase 355,000 shares of Common Stock. During May 2000,
Mr. George agreed to surrender options to purchase 305,000 shares of
Common Stock.
Recapitalized as set forth above, the securities which the Company
issued pursuant to the merger with Strategicus Partners were issued and
outstanding as of July 28, 2000, as follows:
<TABLE>
<CAPTION>
Vested Shares of Options to Purchase
Name Common Stock Shares of Common Stock
---- ---------------- ----------------------
<S> <C> <C>
Douglas Spink 431,041 -0-
Barry Uphoff 142,584 332,416
Darr Aley 142,584 332,416
Stephen George 142,584 382,416
------- -------
TOTAL 858,793 1,047,248
======= =========
</TABLE>
The table set forth above does not reflect 1,616,835 unvested shares of
Common Stock which the Company believes are subject to surrender by Mr. Spink
following his termination "for cause."
33
<PAGE>
Loans Made in Connection With The Merger With Strategicus Partners
In May 1999, Strategicus Partners made a loan to Mr. Spink in the
principal amount of $310,000. This amount was extended to Mr. Spink to provide
funds for expenses which he incurred in connection with the start-up of
metacat.com, Inc. This transaction was structured as a loan to induce Mr. Spink
to remain a Company employee for at least one year. The loan accrues interest at
a simple rate of 9% per annum. The repayment of the principal amount of this
loan plus all accrued interest was originally due on July 12, 1999 but was
subsequently extended to July 30, 1999. Upon the completion of the merger with
Strategicus Partners, the Company entered into an employment agreement with Mr.
Spink in which the Company agreed not to take any actions to demand repayment or
to collect this loan during the term of the employment agreement so long as the
Company does not terminate Mr. Spink's employment for "cause," death or
disability (as such terms are defined in the employment agreement) and the
Company agreed to forgive the principal amount plus all accrued interest related
to this loan if Mr. Spink remained an employee of the Company on the first
anniversary of his employment. On January 21, 2000, the Company sent Mr. Spink
written notice terminating his employment agreement for "cause", effective
October 19, 1999. Accordingly, the Company intends to take legal action to
obtain repayment of the principal amount of this loan plus all accrued interest
thereon. In addition, in July 1999, Strategicus Partners made an advance to Mr.
Spink in the principal amount of approximately $185,000. The Company intends to
take legal action to obtain repayment of this advance.
In June 1999, the Company extended a loan to Mr. Darr Aley in the
principal amount of $267,000. This amount was extended to Mr. Aley as an
inducement for him to leave his prior employment. This transaction was
structured as a loan to induce Mr. Aley to remain the Company's consultant for
the duration of his engagement. The repayment of the principal amount of this
loan plus all accrued interest was originally due on July 12, 1999 but was
subsequently extended to July 30, 1999. Upon the completion of the merger with
Strategicus Partners, the Company entered into a consulting agreement with Mr.
Aley in which the Company agreed not to take any actions to demand repayment or
to collect this loan during the term of the consulting agreement. The Company
also agreed to forgive Mr. Aley's obligation to repay a portion of this loan if
he remains engaged as a consultant to the Company on each of the first three
anniversaries of the date of his consulting agreement.
34
<PAGE>
Personal Investments of Members of The Management Team in The Affiliate
Companies
Members of the management team have made personal investments in some
of the affiliate companies. As of July 28, 2000, members of the Company's
management team either own or have in the past owned the following equity
interests in the affiliate companies:
<TABLE>
<CAPTION>
Name Affiliate company Equity Interest
---- ----------------- ---------------
<S> <C> <C>
Andrew P. Panzo YesAsia, Inc. 12,000 shares of Common Stock
Barry Uphoff (former director) YesAsia, Inc. 12,000 shares of Common Stock
Darr Aley YesAsia, Inc. 12,000 shares of Common Stock
Darr Aley College 411, Inc. 50,000 stock options
Stephen George YesAsia, Inc. 12,000 shares of Common Stock
Stephen George College 411, Inc. 37,500 stock options
Thomas Aley Swapit.com Inc. 30,072 shares of Common Stock
Lee Hansen YesAsia, Inc. 3,430 shares of Series B preferred
Douglas Spink (former director) YesAsia, Inc. 12,000 shares of Common Stock
Douglas Spink (former director) WebModal, Inc. 400 shares of Common Stock
</TABLE>
Contribution of Shares of Swapit.com, Inc. Common Stock From Thomas Aley
In November 1999, the Company purchased a 10% equity ownership interest
in Swapit.com, Inc. for $500,000. Thomas Aley, Executive Vice President,
Business Development, was a founder of this company and owned 1,140,000 shares
of its common stock as of the date the Company completed its purchase of this
equity ownership interest. In connection with this transaction, Mr. Aley has
agreed to contribute 1,109,928 of these shares of Swapit.com's common stock to
the Company. Upon the completion of this transaction, the Company will own
approximately 30% of Swapit.com's issued and outstanding common stock.
35
<PAGE>
PROPOSAL 6
PROPOSAL TO APPROVE THE GRANTING OF INCENTIVE STOCK OPTIONS
UNDER THE AMENDED AND RESTATED 2000 STOCK INCENTIVE PLAN AND TO
QUALIFY THE PLAN FOR THE SECTION 162(m) EXEMPTION
Effective as of June 1, 2000 (with amendments effective as of July 31,
2000), the Board of Directors of the Company adopted and implemented (and
recommended for submission to the stockholders for their approval) the Amended
and Restated 2000 Stock Incentive Plan (the "Plan"). The Plan provides for the
granting of incentive stock options, non-qualified stock options and restricted
stock awards.
The purposes of the Plan are to: (i) better align the interests of
stockholders with the interest of officers, directors and key employees of the
Company and its subsidiaries by creating a direct linkage between participants'
rewards and the performance of the Company and its subsidiaries; (ii) encourage
stock ownership and proprietary interests in the Company stock; and (iii) assist
the Company and its subsidiaries in attracting and retaining highly competent
directors and key employees vital to its success.
Executive officers and directors of the Company are eligible to receive
awards under the Plan and therefore have a personal interest in the adoption of
the Plan.
Summary of the Plan
The following general description is a summary of the Plan. The
complete text appears as Exhibit D to the Proxy Statement and the following
description is qualified in its entirety by reference to Exhibit D.
Term
The Plan became effective on June 1, 2000. The Plan has no fixed
expiration date.
Administration
The Plan is to be administered by the full Board of Directors or by a
committee of the Board (the Board of Directors or the committee shall
hereinafter be referred to as the "Plan Administrator"). The Plan Administrator
has the exclusive authority to make awards under the Plan and to make
interpretations and determinations involving the Plan.
Participation and Types of Awards
Employees, officers and directors of the Company and its subsidiaries
are currently eligible to receive non-qualified stock options, restricted stock
awards, and, upon approval of the Proposal by stockholders, will be eligible to
receive incentive stock options within the meaning of Section 422 of the Code.
In addition, advisors and consultants who perform services for the Company are
eligible to receive non-qualified stock options under the Plan.
36
<PAGE>
Shares Subject to the Plan
The number of shares of Common Stock which may be issued pursuant to
the Plan is 5,000,000. All of the shares of Common Stock may be awarded in the
form of stock options or stock awards, however, on or after the date that the
Proposal has been approved by stockholders, pursuant to Section 162(m) of the
Code, stock options with respect to no more than 1,000,000 shares of Common
Stock may be granted to any one individual participant during any one calendar
period. In addition, the following shares are available for issuance under the
Plan: (i) any shares of Common Stock that are forfeited or otherwise not
issuable under the Plan; (ii) any shares of Common Stock tendered in
satisfaction of tax withholding or other obligations relating to proposed awards
under the Plan; and (iii) shares of Common Stock repurchased by the Company that
have been designated for allocation to the Plan.
Stock Options
Stock options granted under the Plan may be exercised for a period of
up to ten (10) years from the date of grant. The Company may not grant incentive
stock options pursuant to the Plan at exercise prices which are less than the
fair market value of Common Stock on the date of grant. The term of an incentive
stock option granted under the Plan to a stockholder owning more than 10% of the
issued and outstanding Common Stock may not exceed five (5) years and the
exercise price of an incentive stock option granted to such stockholder may not
be less than 110% of the fair market value of Common Stock on the date of grant.
Stock Awards
The Plan Administrator may grant stock awards to any officer, employee
or consultant of the Company or any subsidiary. A stock award entitles the
recipient to acquire shares of Common Stock subject to such restrictions and
conditions as the Plan Administrator may determine at the time of grant.
Conditions may be based on continuing employment (or other business
relationship) and/or achievement of pre-established performance goals and
objectives.
Upon execution of a written instrument setting forth the stock award
and paying any applicable purchase price, a participant shall have the rights of
a stockholder with respect to the Common Stock subject to the stock award,
including, but not limited to the right to vote and receive dividends with
respect thereto; provided, however, that shares of Common Stock subject to stock
awards that have not vested shall be subject to the restrictions on
transferability described in below. Unless the Plan Administrator otherwise
determines, certificates evidencing the stock awards shall remain in the
possession of the Company until such Common Stock is vested as provided below.
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The Plan Administrator at the time of grant shall specify the date or
dates and/or the attainment of pre-established performance goals, objectives and
other conditions on which Common Stock shall become vested, subject to such
further rights of the Company or its assigns as may be specified in the
instrument evidencing the stock award. If the participant or the Company, as the
case may be, fails to achieve the designated goals or the participant's
relationship with the Company is terminated prior to the expiration of the
vesting period, the participant shall forfeit all shares of Common Stock subject
to the stock award which have not then vested. Unvested Common Stock may not be
sold, assigned transferred, pledged or otherwise encumbered or disposed of
except as specifically provided in the Plan or in the written instrument
evidencing the stock award.
Stock Adjustments
In the event of any stock dividend or split, recapitalization,
reorganization, merger, or other change in the capitalization of the Company, or
similar event affecting the Company's Common Stock, the Plan Administrator will,
as it deems equitable, adjust the number of shares that may be available under
the Plan or the terms or number of shares pertaining to any outstanding award.
Change in Control
Unless otherwise provided in a participant's option agreement or in a
written employment or other agreement, the Plan provides that, in the event the
Plan is terminated as a result of or following a "change in control" (as defined
in the Plan), all vested options then outstanding at the time of such Plan
termination may be exercised for a period of thirty (30) days from the date of
notice of the proposed termination. In such event, all participants shall be
credited with an additional six (6) months of service for the purpose of any
otherwise unvested options. Upon a change in control in which the Plan is either
assumed or otherwise not subject to termination, if during the remaining term of
such a participant's options, the participant is terminated other than for
cause, the participant will also be credited with an additional six (6) months
of service; however, in the event of a termination for cause, all options shall
immediately terminate.
Amendment and Termination
The Board of Directors may alter, amend, suspend or discontinue the
Plan, provided that no such action shall deprive any person without such
person's consent of any rights theretofore granted pursuant to the Plan.
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Tax Withholding
Whenever shares are to be issued or cash is to be paid under the Plan,
under circumstances in which the Plan Administrator believes that any federal,
state or local tax withholding will be imposed, the Company shall have the right
to require the participant to remit to the Company an amount sufficient to
satisfy federal, state and local tax withholding requirements. Such withholding
requirements may be paid (i) in cash; (ii) in the discretion of the Plan
Administrator, through the delivery to the Company of previously-owned shares of
Common Stock having an aggregate fair market value equal to the tax obligation
provided that the previously owned shares delivered in satisfaction of the
withholding obligations must have been held by the participant for at least six
(6) months; (iii) in the discretion of the Plan Administrator, through an
election to have the Company withhold shares of Common Stock otherwise issuable
to the participant having an aggregate fair market value equal to the tax
obligation; or (iv) in the discretion of the Plan Administrator, through a
combination of the procedures set forth in subsections (i)-(iii) above.
Federal Income Tax Consequences
Nonqualified Options
Under the current applicable provisions of the Code, the recipient of
an option will not pay any tax at the time of grant provided that the exercise
price of the option is equal to or greater than fair market value of the Common
Stock on the date of grant. When a non-qualified option is exercised, any excess
of the fair market value of the affected shares over the total option price of
those shares will be treated for federal tax purposes as ordinary income. Any
profit or loss realized on the sale or exchange of any share actually received
will be treated as a capital gain or loss. If the fair market value on the date
of exercise of the shares with respect to which the option was exercised exceeds
the exercise price, the Company is entitled to deduct that amount.
Incentive Stock Options
With respect to an ISO, no taxable gain or loss generally will be
recognized when the option is granted or exercised. ISOs exercised more than
three months after termination of employment will be taxed in the same manner as
non-qualified options described above. Generally, when an ISO is exercised, the
spread between the fair market value and the exercise price will be an item of
tax preference for purposes of the alternative minimum tax.
If the shares acquired when an ISO is exercised are held for at least
two years from the grant of the options and one year from the exercise of the
options, any gain or loss realized upon their sale will be treated as long-term
capital gain or loss. In such a case, the Company will not be entitled to a
deduction. If the shares are not held for the two-year and one-year periods,
ordinary income will be recognized in an amount equal to the difference between
the exercise price and the fair market value of the common stock on the date the
option was exercised. The Company will be entitled to a deduction equal to the
amount of any ordinary income recognized in this manner. If the shares are not
held for the one year period and the amount realized upon sale is less than the
grant price, the difference will be a capital loss.
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Reasons for Proposal
Although the Plan has been adopted by the Board of Directors and is
presently in effect, under applicable federal tax rules stockholder approval is
required in order to grant ISOs and to qualify for the exemption provided under
Section 162(m) of the Code. Section 162(m) provides that no deduction shall be
allowed for applicable employee remuneration to the extent that remuneration
exceeds $1,000,000 in any taxable year. Should this Proposal not be approved by
the stockholders, the Plan will continue to remain in full force and effect but
will be limited to the extent that ISOs may not be granted and the Company may
not qualify under 162(m) of the Code.
VOTE TO REQUIRED FOR APPROVAL
The affirmative vote of a majority of the shares entitled to vote at
the meeting is required for approval of this Proposal. An abstention or failure
to vote on this Proposal is not an affirmative vote, and therefore will have the
same effect as a negative vote on this Proposal at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF
THE GRANTING OF ISOs UNDER THE PLAN AND THE QUALIFICATION OF
THE PLAN FOR THE 162(m) EXEMPTION
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PROPOSAL 7
RATIFICATION OF THE COMPANY'S INDEPENDENT AUDITORS
KPMG, LLP has been selected by the Board of Directors to serve as the
independent auditors for the Company for the fiscal year ending December 31,
2000. Representatives of KPMG, LLP are expected to be present at the Meeting to
make a statement if they so desire and will be available to respond to
appropriate questions.
The Board of Directors shall consider the selection of another
accounting firm to serve as the Company's independent auditors in the event that
the stockholders do not approve the selection of KPMG, LLP as the Company's
independent auditors.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the shares entitled to vote at
the Meeting is required for ratification of KPMG, LLP as the Company's
independent auditors for the fiscal year ending December 31, 2000. An abstention
or failure to vote on this Proposal is not an affirmative vote; and therefore,
will have the same effect as a negative vote on this Proposal at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF
KPMG, LLP AS THE COMPANY'S INDEPENDENT AUDITORS
FOR THE 2000 FISCAL YEAR.
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OTHER MATTERS
The Board of Directors does not know of any other matter which is
intended to be brought before the Meeting, but if such matter is presented, the
persons named in the enclosed proxy intend to vote the same according to their
best judgment.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's officers and directors, and persons who
own more than ten percent (10%) of a class of the Company's equity securities
registered under the Exchange Act to file reports of ownership on Form 3 and
changes in ownership on Form 4 or 5 with the Securities and Exchange Commission
(the "SEC"). Such officers, directors and ten percent (10%) stockholders are
also required by SEC rules to furnish the Company with copies of all forms that
they file pursuant to Section 16(a). Based solely on its review of copies of
forms filed pursuant to Section 16(a) of the Exchange Act, and written
representations from certain reporting persons, the Company believes that all
Section 16(a) filing requirements during the fiscal year ended December 31, 1999
applicable to the Company's officers, directors and ten percent (10%)
stockholders were complied with in a timely fashion them, except for a Form 3
for Douglas Spink. Mr. Spink was a member of the Board of Directors until he
resigned from this position on March 8, 2000. Based solely upon the Company's
review of Forms 3 submitted to the Company pursuant to Rule 16a-3(e) promulgated
under the Securities Exchange Act of 1934, as amended, it is the Company's
belief that Mr. Spink has failed to file on a timely basis a Form 3 with the
SEC.
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DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
The Company currently intends to hold its 2001 Annual Meeting of
Stockholders in June 2001 and to mail proxy statements relating to such meeting
in April 2001. In order for proposals of stockholders to be considered for
inclusion in the proxy statement and form of proxy relating to the Company's
2001 Annual Meeting of Stockholders, such proposals must be received by the
Company no later than January 1, 2000 and must otherwise be in compliance with
all applicable laws and regulations.
By Order of the Board of Directors
/s/ Andrew P. Panzo
-----------------------------------
Andrew P. Panzo
Chairman of the Board
Dated: August 3, 2000
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APPENDIX 1
AUDIT COMMITTEE CHARTER
Net Value Holdings, Inc. Audit Committee Charter
I. Audit Committee Purpose
The Audit Committee is appointed by the Board of Directors of Net Value
Holdings, Inc. (the "Company") to assist the Board in fulfilling its
oversight responsibilities. The Audit Committee's primary duties and
responsibilities are to:
o Monitor the integrity of the Company's financial reporting process
and systems of internal controls regarding finance, accounting, and
legal compliance.
o Monitor the independence and performance of the Company's
independent auditors and internal auditing department.
o Provide an avenue of communication among the independent auditors,
management, the internal auditing department, and the Board of
Directors.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it has direct
access to the independent auditors as well as anyone in the
organization. The Audit Committee has the ability to retain, at the
Company's expense, special legal, accounting, or other consultants or
experts it deems necessary in the performance of its duties.
II. Audit Committee Composition and Meetings
Audit Committee members shall meet the applicable independence and
experience requirements, in effect from time to time, of The NASDAQ
Stock Market ("NASDAQ"), The American Stock Exchange ("AMEX") or such
other applicable stock exchange or association on which the Company's
common stock is then listed. The Audit Committee shall be comprised of
three or more directors as determined by the Board. All members of the
Committee shall have a basic understanding of finance and accounting
and be able to read and understand fundamental financial statements,
and at least one member of the Committee shall have accounting or
related financial management expertise.
Audit Committee members shall be appointed by the Board. If an Audit
Committee Chair is not designated or present, the members of the
Committee may designate a Chair by majority vote of the Committee
membership.
The Committee shall meet at least four times annually, or more
frequently as circumstances dictate. The Audit Committee Chair shall
prepare and/or approve an agenda in advance of each meeting. Audit
Committee members may attend meetings in person, by telephone
conference or similar communications equipment, or as otherwise
permitted by law. The Committee should meet privately in executive
session at least annually with management, the director of the internal
auditing department, the independent auditors, and as a committee to
discuss any matters that the Committee or each of these groups believe
should be discussed.
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III. Audit Committee Responsibilities and Duties
Review Procedures
1. Review and reassess the adequacy of this Charter at least annually.
Submit the Charter to the Board of Directors for approval and have
the document published in accordance with applicable Securities and
Exchange Commission ("SEC"), NASDAQ or AMEX regulations, whichever
exchange is applicable.
2. Review the Company's annual audited financial statements prior to
filing or distribution. Review should include discussion with
management and independent auditors of major issues regarding
accounting principles, practices, and judgments that could
significantly affect the Company's financial statements.
3. In consultation with management, the independent auditors, and the
internal auditors, consider the integrity of the Company's
financial reporting processes and controls. Discuss any significant
financial risk exposures and the steps management has taken to
monitor, control, and report such exposures. Review significant
findings prepared by the independent auditors and the internal
auditing department together with management's responses.
4. This is clearly a best practice however most company's have the
audit committee review the 10Q before filing not before earnings
release. Review with financial management and the independent
auditors the Company's quarterly financial results prior to the
release of earnings and the Company's quarterly financial
statements prior to filing or distribution. Discuss any significant
changes to the Company's accounting principles and any items
required to be communicated by the independent auditors in
accordance with Statement on Auditing Standards No. 61 ("SAS 61")
(see item 9). The Chair of the Committee may represent the entire
Audit Committee for purposes of this review.
Independent Auditors
5. The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors. The Audit Committee shall
review the independence and performance of the auditors and
annually recommend to the Board of Directors the appointment of the
independent auditors or approve any discharge of auditors when
circumstances warrant.
6. Why wouldn't management keep this relationship. Approve the fees
and other significant compensation to be paid to the independent
auditors.
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7. On an annual basis, the Committee should review and discuss with
the independent auditors all significant relationships they have
with the Company that could impair the auditors' independence.
8. Not necessary in our circumstance. Review the independent auditors
audit plan - discuss scope, staffing, reliance upon management, and
internal audit and general audit approach.
9. Prior to releasing the year-end earnings, discuss the results of
the audit with the independent auditors. Discuss certain matters
required to be communicated to audit committees in accordance with
SAS 61.
10. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied
in its financial reporting.
Internal Audit Department and Legal Compliance
11. Delete, not applicable. Review the budget, plan, changes in plan,
activities, organizational structure, and qualifications of the
internal audit department, as needed.
12. Delete, not applicable. Review the appointment and performance of,
and any decision to replace, the senior internal audit executive.
13. Delete, not applicable. Review significant reports prepared by the
internal audit department together with management's response and
follow-up to these reports.
14. On at least an annual basis, review with the Company's counsel, any
legal matters that could have a significant impact on the
organization's financial statements, the Company's system for
monitoring compliance with applicable laws and regulations,
including response to any material inquiries received from
regulators or governmental agencies.
Other Audit Committee Responsibilities
15. Annually prepare a report to shareholders as required by the
Securities and Exchange Commission. The report will be included in
the Company's annual proxy statement as required by the applicable
rules of the SEC, NASDAQ or AMEX.
16. Perform any other activities consistent with this Charter, the
Company's by-laws, and governing law, as the Committee or the Board
deems necessary or appropriate.
17. Periodically report to the Board of Directors on significant
results of the foregoing activities.
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Scope of Duties
18. While the Audit Committee has the responsibilities and powers set
forth in this Charter, it is not the duty of the Audit Committee to
plan, direct or conduct audits, or to determine whether the
Company's financial statements are complete and accurate and are in
accordance with generally accepted accounting principles. This is
the responsibility of management and the independent auditors. Nor
is it the duty of the Audit Committee to conduct investigations, to
resolve disagreements, if any, between management and the
independent auditors or to assure compliance with laws and
regulations and any internal rules or codes of conduct of the
Company.
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EXHIBIT A
FORM OF CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF INCORPORATION
OF
NET VALUE HOLDINGS, INC.
RESOLVED, that Article Fourth, Section 1 of the Certificate of
Incorporation of the Company, as amended to date, be restated in its entirety to
read:
1. The name of the corporation is:
"Stonepath Group, Inc."
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EXHIBIT B
FORM OF CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF INCORPORATION
OF
NET VALUE HOLDINGS, INC.
RESOLVED, that Article Fourth, Section 11 of the Certificate of
Incorporation of the Company be included in its entirety to read:
11. Board of Directors.
(a) Numbers, Elections And Terms. Except as otherwise fixed by or
pursuant to provisions hereof relating to the rights of the holders of
any class or series of stock having a preference over Common Stock as
to dividends or upon liquidation to elect additional Directors under
specified circumstances, the number of Directors of the Corporation
shall be fixed from time to time by affirmative vote of a majority of
the Directors then in office. The Directors, other than those who may
be elected by the holders of any classes or series of stock having a
preference over the Common Stock as to dividends or upon liquidation,
shall be classified, with respect to the time for which they severally
hold office, into three class, as nearly equal in number as possible,
as shall be provided in the manner specified in the Bylaws of the
corporation, one class to be originally elected for a term expiring at
the annual meeting of stockholders to be held in 2001, another class to
be originally elected for a term expiring as the annual meeting of
stockholders to be held in 2002, and another class to be originally
elected for a term expiring at the annual meeting of stockholders to be
held in 2003, with each class to hold office until its successor is
elected and qualified. At each annual meeting of the stockholders of
the Corporation after fiscal year 2000, the successors of the class of
Directors whose term expires at that meeting shall be elected to hold
office for a term expiring at the annual meeting of stockholders held
in the third year following the year of their election.
(b) Newly Created Directorships And Vacancies. Except as otherwise
fixed by or pursuant to provisions hereof relating to the rights of the
holders of any class or series of stock having a preference over Common
Stock as to dividends or upon liquidation to elect additional Directors
under specified circumstances, newly created directorships resulting
from any increase in the number of directors and any vacancies on the
Board of Directors resulting from death, resignation, disqualification,
removal or other cause shall be filled by the affirmative vote of a
majority of the remaining Directors then in office, even though less
than a quorum of the Board of Directors. Any Director elected in
accordance with the preceding sentence shall hold office for the
remainder of the full term of the class of Directors in which the new
directorship was created or the vacancy occurred and until such
Director's successor shall have been elected and qualified. No decrease
in the number of Directors constituting the Board of Directors shall
shorten the term of any incumbent director.
(c) Removal. Except as otherwise fixed by or pursuant to provisions
hereof relating to the rights of the holders of any class or series of
stock having a preference over common stock as to dividends or upon
liquidation to elect additional Directors under specified
circumstances, any Director may be removed from office only for cause
and only by the affirmative vote of the holders of two-thirds of the
combined voting power of the then outstanding shares of stock entitled
to vote generally in the election of Directors, voting together as a
single class.
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EXHIBIT C
FORM OF CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF INCORPORATION
OF
NET VALUE HOLDINGS, INC.
RESOLVED, that Article Fourth, Section 4 of the Certificate of
Incorporation of the Company, as amended to date, be restated in its entirety to
read:
4. The authorized capital stock of the Corporation shall
consist of 120,000,000 shares of which 20,000,000 shall be Preferred
Stock, with a par value of $.001 per share, and 100,000,000 shall be
Common Stock, with a par value of $.001 per share, and the voting
powers, designations, preferences and relative, participating, optional
or other special qualifications, limitations or restrictions thereof
are set forth hereinafter:
(a) The Preferred Stock may be issued in one or more
series, each of which shall be distinctively designated, shall rank
equally and shall be identical in all respects except as otherwise
provided in subsection (b) of this section 4.
(b) Authority is hereby vested in the Board of
Directors to issue from time to time the Preferred Stock of any series
and to state in the resolution or resolutions providing for the
issuance of shares of any series the voting powers, if any,
designations, preferences and relative, participating, optional or
other special rights, and the qualifications, limitations or
restrictions of such series to the full extent now or hereafter
permitted by the law of the State of Delaware in respect of the matters
set forth in the following clauses (i) to (viii) inclusive:
(i) The number of shares to constitute such
series, and the distinctive designations thereof;
(ii) The voting powers, full or limited, if any,
of such series;
(iii) The rate of dividends payable on shares of
such series, the conditions on which and the times when such dividends
are payable, the preference to, or the relation to, the payment of the
dividends payable on any other class, classes or series of stock,
whether cumulative or non-cumulative and, if cumulative, the date from
which dividends on shares of such series shall be cumulative.
(iv) The redemption price or prices, if any, and
the terms and conditions on which shares of such series shall be
redeemable;
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(v) the requirement of any sinking fund or funds
to be applied to the purchase or redemption of shares of such series
and, if so, the amount of such fund or funds and the manner of
application;
(vi) The rights of shares of such series upon the
liquidation of, dissolution or winding up of, or upon any distribution
of the assets, the Corporation;
(vii) The rights, if any, of the holders of
shares of such series to convert such shares into, or to exchange such
shares for shares of any other class, classes or series of stock and
the price or prices or the rates of exchange and the adjustments at
which such shares shall be convertible or exchangeable, and any other
terms and conditions of such conversion or exchange; and
(viii) any other preferences and relative,
participating, optional or other special rights of shares of such
series, and qualifications, limitations or restrictions including,
without limitation, any restriction on an increase in the number of
shares of any series theretofore authorized and any qualifications,
limitations or restrictions of rights or powers to which shares of any
future series shall be subject.
(c) The number of authorized shares of Preferred
Stock may be increased or decreased by the affirmative vote of the
holders of a majority of the votes of all classes of voting securities
of the Corporation without a class vote of the Preferred Stock, or any
series thereof, except as otherwise provided in the resolution or
resolutions fixing the voting rights of any series of the Preferred
Stock.
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EXHIBIT D
AMENDED AND RESTATED 2000 STOCK INCENTIVE PLAN
NET VALUE HOLDINGS, INC.
AMENDED AND RESTATED 2000 STOCK INCENTIVE PLAN
Section 1. General Purpose of the Plan; Definitions. The purpose of the Plan is
to provide officers, employees, directors and consultants of Net Value Holdings,
Inc. (the "Company") and other members of the Participating Company Group the
opportunity to receive stock options and stock awards and thereby acquire a
proprietary interest in the Company. It is anticipated that providing such
persons with a direct stake in the Company's welfare will assure a closer
identification of their interests with those of the Company's stockholders,
thereby encouraging the participants to contribute materially to the growth and
development of the Company and strengthening their desire to remain with the
Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Exchange Act of 1934, as amended.
"Award" or "Awards," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options and Stock Awards.
"Board" means the Board of Directors of the Company.
"Cause" means (a) with respect to an individual who is party to a
written agreement with a Participating Company which contains a definition of
"cause" or "for cause" or words of similar import for purposes of termination of
Service thereunder by the Participating Company, "cause" or "for cause" as
defined in such agreement; (b) in all other cases (i) any violation of a law,
rule or regulation other than minor traffic violations, including without
limitation, any violation of the Foreign Corrupt Practices Act; (ii) a breach of
fiduciary duty for personal profit; (iii) fraud, dishonesty or other acts of
misconduct in the rendering of services on behalf of the Company or relating to
the employee's employment; (iv) misconduct by the employee which would cause the
Company to violate any state or federal law relating to sexual harassment or
age, sex or other prohibited discrimination or any violation of written policy
of the Company or any successor entity adopted in respect to such law; (v)
failure to follow Company work rules or the lawful instructions (written or
otherwise) of the Board of Directors of the Company or a responsible executive
to whom the employee directly or indirectly reports, provided compliance with
such directive was reasonably within the scope of the employee's duties and the
employee was given notice that his or her conduct could give rise to termination
and such conduct is not, or could not be cured, within ten (10) days thereafter;
or (vi) any violation of a confidentiality or non-competition agreement or
patent assignment agreement or any agreement relating to the Company's
protection of intellectual property rights.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"Effective Date" means the date on which the Plan is approved by the
Board as set forth in Section 18.
"Fair Market Value" of the Stock on any given date means (i) if the
Stock is listed on any established stock exchange or a national market system,
including without limitation the National Market or SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable; (ii) if the Stock is regularly traded on the
Nasdaq OTC Bulletin Board Service, or a comparable automated quotation system,
its Fair Market Value shall be the mean between the high bid and low asked
prices for the Stock on the last market trading day prior to the day of
determination; or (iii) in the absence of an established market for the Stock,
the Fair Market Value thereof shall be determined in good faith by the Plan
Administrator.
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"Incentive Stock Option" means any Stock Option designated and
qualified as an "incentive stock option" as defined in Section 422 of the Code.
"Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
"Option" or "Stock Option" means any Option to purchase shares of Stock
granted pursuant to Section 6.
"Option Period" means the period commencing on the grant date of an
Option and ending on the last day of the term of such Option as established
pursuant to Section 8.2.
"Participating Company" means the Company or any or Subsidiary
Corporation or any other member of the Participating Company Group.
"Participating Company Group" means, at any point in time, any
Participating Company or all corporations collectively which are then
Participating Companies.
"Service" means a participant's employment or service with any member
of the Participating Company Group, whether in the capacity of an employee,
officer, director or a consultant. The participant's Service shall not be deemed
to have terminated merely because of a change in the Participating Company for
which the participant renders such Service, provided that there is no
interruption or termination of the participant's Service. Furthermore, a
participant's Service with the Participating Company Group shall not be deemed
to have terminated if the participant takes any military leave, sick leave, or
other bona fide leave of absence approved by a Participating Company; provided,
however, that if any such leave exceeds ninety (90) days, on the ninety-first
(91st) day of such leave the participant's Service shall be deemed to have
terminated unless the participant's right to return to Service with the
Participating Company is guaranteed by statute or contract.
"Stock" means the Common Stock, par value $.001 per share, of the
Company, subject to adjustments pursuant to Section 11.
"Stock Award" means any award granted pursuant to Section 9.
"Subsidiary" means any, whether now or hereafter existing, corporation
or other entity (other than the Company) in any unbroken chain of corporations
or other entities, beginning with the Company, if each of the corporations or
entities owns stock or other interests possessing 50% or more of the economic
interest or the total combined voting power of all classes of stock or other
interests in one of the other corporations or entities in the chain, whether now
or hereafter existing.
Section 2. Administration. The Plan shall be administered by the full Board of
Directors of the Company or a committee of such Board of Directors comprised of
two or more "Non-Employee Directors" within the meaning of Rule 16b-3(a)(3)
promulgated under the Act (the "Plan Administrator"). Subject to the provisions
of the Plan, the Plan Administrator is authorized to:
(a) construe the Plan and any Award under the Plan;
(b) select the directors, officers, employees and consultants of any
Participating Company to whom Awards may be granted;
(c) determine the number of shares of Stock to be covered by any Award;
(d) determine and modify from time to time the terms and conditions,
including restrictions, of any Award and to approve the form of written
instrument evidencing Awards;
(e) accelerate at any time the exercisability or vesting of all or any
portion of any Award and/or to include provisions in Awards providing for such
acceleration;
(f) impose limitations on Awards, including limitations on transfer and
repurchase provisions;
(g) extend the exercise period within which Stock Options may be
exercised; and
(h) determine at any time whether, to what extent, and under what
circumstances Stock and other amounts payable with respect to an Award shall be
deferred either automatically or at the election of the participant and whether
and to what extent the Company shall pay or credit amounts constituting interest
(at rates determined by the Plan Administrator) or dividends or deemed dividends
on such deferrals.
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The determination of the Plan Administrator on any such matters shall be
conclusive.
Section 3. Delegation of Authority to Grant Awards. The Plan Administrator, in
its discretion, may delegate to one or more executive officers of the Company
all or part of the Plan Administrator's authority and duties with respect to
granting Awards and all references in the Plan to the "Plan Administrator" shall
include such executive officers to the extent they are acting pursuant to such
delegation. The Plan Administrator may revoke or amend the terms of such a
delegation at any time, but such revocation shall not invalidate prior actions
of the executive officers that were consistent with the terms of the Plan.
Section 4. Eligibility. Awards may only be granted to employees, directors, and
consultants with any member of the Participating Company Group. For purposes of
the foregoing sentence, "employees," "directors" and "consultants" shall include
prospective employees, prospective directors and prospective consultants to whom
Awards are granted in connection with written offers of an employment or other
service relationship with a Participating Company.
Section 5. Shares Subject to the Plan. The number of shares of Stock which may
be issued pursuant to the Plan shall be 5,000,000. For purposes of the foregoing
limitation, the shares of Stock underlying any Awards which are forfeited,
canceled, reacquired by the Company, satisfied without the issuance of Stock or
otherwise terminated (other than by exercise) shall be added back to the number
of shares of Stock available for issuance under the Plan. Stock to be issued
under the Plan may be either authorized and unissued shares or shares held in
treasury by the Company. Notwithstanding the foregoing, on and after the date
that the Plan is subject to Section 162(m) of the Code, Stock Options with
respect to no more than 1,000,000 shares of Stock may be granted to any one
individual participant during any one calendar year period.
Section 6. Stock Options. Options granted pursuant to the Plan may be either
Options which are Incentive Stock Options or Non-Qualified Stock Options.
Incentive Stock Options and Non-Qualified Stock Options shall be granted
separately hereunder. The Plan Administrator, shall determine whether and to
what extent Options shall be granted under the Plan and whether such Options
granted shall be Incentive Stock Options or Non-Qualified Stock Options;
provided, however, that: (i) Incentive Stock Options may be granted only to
employees of the Company or any Subsidiary that is a "subsidiary corporation"
within the meaning of Section 424(f) of the Code; and (ii) No Incentive Stock
Option may be granted following the tenth anniversary of the Effective Date of
the Plan. The provisions of the Plan and any Stock Option Agreement pursuant to
which Incentive Stock Options shall be issued shall be construed in a manner
consistent with Section 422 of the Code (or any successor provision) and rules
and regulations promulgated thereunder.
Section 7. ISO Fair Market Value Limitation. To the extent that Options
designated as Incentive Stock Options (granted under all stock option plans of
the Participating Company Group, including the Plan) become exercisable by a
participant for the first time during any calendar year for Stock having a Fair
Market Value greater than One Hundred Thousand Dollars ($100,000), the portion
of such Options which exceeds such amount shall be treated as Non-Qualified
Stock Options. For purposes of this Section 7, Options designated as Incentive
Stock Options shall be taken into account in the order in which they were
granted, and the Fair Market Value of Stock shall be determined as of the time
the Option with respect to such Stock is granted. If the Code is amended to
provide for a different limitation from that set forth in this Section 7, such
different limitation shall be deemed incorporated herein effective as of the
amendment date and with respect to such Options as required or permitted by such
amendment to the Code. If an Option is treated as an Incentive Stock Option in
part and as a Nonstatutory Stock Option in part by reason of the limitation set
forth in this Section 7, the participant may designate which portion of such
Option the participant is exercising. In the absence of such designation, the
participant shall be deemed to have exercised the Incentive Stock Option portion
of the Option first. Separate certificates representing each such portion shall
be issued upon the exercise of the Option.
Section 8. Terms of Options. Each Option granted under the Plan shall be
evidenced by an agreement between the Company and the person to whom such Option
is granted (the "Option Agreement") and shall be subject to the following terms
and conditions:
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8.1 Exercise Price. Subject to adjustment as provided in
Section 11 of this Plan, the price at which each share covered by an Option may
be purchased shall be determined in each case by the Plan Administrator;
provided, however, that such price shall not, in the case of an Incentive Stock
Option, be less than the Fair Market Value of the underlying Stock at the time
the Option is granted. If a participant owns (or is deemed to own under
applicable provisions of the Code and rules and regulations promulgated
thereunder) more than ten percent (10%) of the combined voting power of all
classes of the stock of the Company and an Option granted to such participant is
intended to qualify as an Incentive Stock Option, the Option price shall be no
less than 110% of the Fair Market Value of the Stock covered by the Option on
the date the Option is granted.
8.2 Exercise Period. Options shall be exercisable at such time
or times, or upon such event or events, and subject to such terms, conditions,
performance criteria, and restrictions as shall be determined by the Plan
Administrator and set forth in the Option Agreement evidencing such Option;
provided, however, that (i) no Option shall be exercisable after the expiration
of ten (10) years after the date of grant of such Option, (ii) no Incentive
Stock Option granted to a participant who owns more than 10% of the combined
voting power of all classes of stock of the Company (or any parent or subsidiary
of the Company) shall be exercisable after the expiration of five (5) years
after the date of grant of such Option, and (iii) no Option granted to a
prospective employee, prospective consultant or prospective director may become
exercisable prior to the date on which such person commences Service with the
Participating Company. Subject to the foregoing, unless otherwise specified by
the Option Agreement evidencing the Option, any Option granted hereunder shall
have a term of ten (10) years from the effective date of grant of the Option.
8.3 Effect of Termination of Service. Unless otherwise
provided in such participant's Option Agreement:
(i) Death. If a participant shall cease to perform
Service as a result of such participant's death, any
Options then exercisable shall be exercisable until
the earlier to occur of one year anniversary of the
participant's death or the expiration of the Option
Period and only by the participant's personal
representative or persons entitled thereto under the
participant's will or the laws of descent and
distribution.
(ii) Termination of Service. If a participant shall cease
to perform Service to any member of the
Participating Company Group, all Options to which
the participant is then entitled to exercise may be
exercised until the earlier to occur of the three
month anniversary of the participant's termination
of Service or the expiration of the Option Period
or, if such termination was due to disability or
retirement (as hereinafter defined), until the
earlier to occur of the one year anniversary of the
participant's termination of Service or the
expiration of the Option Period. Notwithstanding the
foregoing, in the event that any termination of
Service shall be for "Cause" (as defined herein) or
the participant voluntarily terminates his or her
Service, then any and all Options held by such
participant shall forthwith terminate. For purposes
of the Plan, "retirement" shall mean the termination
of employment with the Participating Company Group,
other than for Cause, at any time under
circumstances which would entitle such participant
to other retirement benefits provided by the
Participating Company to whom the participant was
providing Service immediately prior to the
termination of Service or such other circumstances
that the Plan Administrator concludes should be
deemed a retirement.
(iii) Limitation on Shares. The Option may not be
exercised for more shares (subject to adjustment as
provided in Section 11) after the termination of the
participant's Service than the participant was
entitled to purchase thereunder at the time of the
termination of such relationship.
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<PAGE>
8.4 Payment of Exercise Price. The Option exercise price of
each share purchased pursuant to an Option shall be paid in full at the time of
each exercise (the "Payment Date") of the Option (i) in cash; (ii) by delivering
to the Company a notice of exercise with an irrevocable direction to a
broker-dealer registered under the Act to sell a sufficient portion of the
shares and deliver the sale proceeds directly to the Company to pay the exercise
price; (iii) in the discretion of the Plan Administrator, through the delivery
to the Company of previously-owned shares of Common Stock having an aggregate
Fair Market Value equal to the Option exercise price of the shares being
purchased pursuant to the exercise of the Option; provided, however, that shares
of Common Stock delivered in payment of the Option price must have been held by
the participant for at least six (6) months in order to be utilized to pay the
Option price; (iv) in the discretion of the Plan Administrator, by an election
to have the Company withhold shares otherwise issuable to the participant having
a Fair Market Value equal to the Option exercise price of the shares being
purchased pursuant to the exercise of the Option; or (v) in the discretion of
the Plan Administrator, through any combination of the payment procedures set
forth in subsections (i)-(iv)
8.5 Nontransferability of Options. No Option shall be
assignable or transferable other than by the laws of descent and distribution.
During the lifetime of the participant, an Option shall be exercisable only by
the participant or, in the event of the participant's incapacity, by the
participant's legal guardian or legal representative.
Section 9. Stock Awards.
(a) The Plan Administrator may grant Stock Awards to any officer,
employee or consultant with any member of the Participating Company
Group. A Stock Award entitles the recipient to acquire shares of
Stock subject to such restrictions and conditions as the Plan
Administrator may determine at the time of grant ("Stock Award").
Conditions may be based on continuing employment (or other business
relationship) and/or achievement of pre-established performance
goals and objectives.
(b) Upon execution of a written instrument setting forth the Stock
Award and paying any applicable purchase price, a participant shall
have the rights of a shareholder with respect to the Stock subject
to the Stock Award, including, but not limited to the right to vote
and receive dividends with respect thereto; provided, however, that
shares of Stock subject to Stock Awards that have not vested shall
be subject to the restrictions on transferability described in
Section 9(d) below. Unless the Plan Administrator shall otherwise
determine, certificates evidencing the Stock Awards shall remain in
the possession of the Company until such Stock is vested as
provided in Section 9(c) below.
(c) The Plan Administrator at the time of grant shall specify the date
or dates and/or the attainment of pre-established performance
goals, objectives and other conditions on which Stock shall become
vested, subject to such further rights of the Company or its
assigns as may be specified in the instrument evidencing the Stock
Award. If the participant or the Company, as the case may be, fails
to achieve the designated goals or the participant's relationship
with the Company is terminated prior to the expiration of the
vesting period, the participant shall forfeit all shares of Stock
subject to the Stock Award which have not then vested.
(d) Unvested Stock may not be sold, assigned transferred, pledged or
otherwise encumbered or disposed of except as specifically provided
herein or in the written instrument evidencing the Stock Award.
Section 10. Tax Withholding.
(a) Whenever shares of Stock or Options are to be issued or cash is to
be paid under the Plan, under circumstances in which the Plan
Administrator believes that any federal, state or local tax
withholding may be imposed, the Company or Subsidiary, as the case
may be, shall have the right to require the participant to remit to
the Company or Subsidiary, as the case may be, an amount sufficient
to satisfy the minimum federal, state and local tax withholding
requirements prior to the delivery of any certificate for shares or
any proceeds; provided, however, that in the case of a participant
who receives an Award of Stock under the Plan which is not fully
vested, the participant shall remit such amount on the first
business day following the Tax Date. The "Tax Date" for purposes of
this Section 10 shall be the date on which the amount of tax to be
withheld is determined. If a participant makes a disposition of
Stock acquired upon the exercise of an Incentive Stock Option
within either two years after the Option was granted or one year
after its exercise by the participant, the participant shall
promptly notify the Company and the Company shall have the right to
require the participant to pay to the Company an amount sufficient
to satisfy federal, state and local tax withholding requirements.
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<PAGE>
(b) A participant who is obligated to pay the Company an amount
required to be withheld under applicable tax withholding
requirements may pay such amount (i) in cash; (ii) in the
discretion of the Plan Administrator, through the delivery to the
Company of previously-owned shares of Stock having an aggregate
Fair Market Value on the Tax Date equal to the tax obligation
provided that the previously owned shares delivered in satisfaction
of the withholding obligations must have been held by the
participant for at least six (6) months; (iii) in the discretion of
the Plan Administrator, through an election to have the Company
withhold shares of Stock otherwise issuable to the participant
having a Fair Market Value on the Tax Date equal to the amount of
tax required to be withheld, or (iv) in the discretion of the Plan
Administrator, through a combination of the procedures set forth in
subsections (i), (ii) and (iii) of this Section 10(b).
(c) An election by a participant to have shares of Stock withheld to
satisfy federal, state and local tax withholding requirements
pursuant to Section 10(b) must be in writing and delivered to the
Company prior to the Tax Date.
Section 11. Adjustment of Number and Price of Shares.
Any other provision of the Plan notwithstanding:
(a) If, through or as a result of any merger, consolidation, sale of
all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split or other similar transaction, the
outstanding shares of Stock are increased or decreased or are
exchanged for a different number or kind of shares or other
securities of the Company, or additional shares or new or different
shares or other securities of the Company or other non-cash assets
are distributed with respect to such shares of Stock or other
securities, the Plan Administrator shall make an appropriate or
proportionate adjustment in (i) the number of Stock Options that
can be granted to any one individual participant, (ii) the number
and kind of shares or other securities subject to any then
outstanding Awards under the Plan, and (iii) the price for each
share subject to any then outstanding Stock Options under the Plan,
without changing the aggregate exercise price (i.e., the exercise
price multiplied by the number of shares) as to which such Stock
Options remain exercisable. The adjustment by the Plan
Administrator shall be final, binding and conclusive.
(b) In the event that, by reason of a corporate merger, consolidation,
acquisition of property or stock, separation, reorganization or
liquidation, the Board of Directors shall authorize the issuance or
assumption of a stock Option or stock Options in a transaction to
which Section 424(a) of the Code applies, then, notwithstanding any
other provision of the Plan, the Plan Administrator may grant an
Option or Options upon such terms and conditions as it may deem
appropriate for the purpose of assumption of the old Option, or
substitution of a new Option for the old Option, in conformity with
the provisions of Code Section 424(a) and the rules and regulations
thereunder, as they may be amended from time to time.
(c) No adjustment or substitution provided for in this Section 11 shall
require the Company to issue or to sell a fractional share under
any Option Agreement or share award agreement and the total
adjustment or substitution with respect to each stock Option and
share award agreement shall be limited accordingly.
(d) In the case of (i) the dissolution or liquidation of the Company,
(ii) a merger, reorganization or consolidation in which the Company
is acquired by another person or entity (other than a holding
company formed by the Company), (iii) the sale of all or
substantially all of the assets of the Company to an unrelated
person or entity, or (iv) the sale of all of the stock of the
Company to a unrelated person or entity (in each case, a
"Fundamental Transaction"), the Plan and all Awards granted
hereunder shall terminate, unless provision is made in connection
with the Fundamental Transaction for the assumption of the Awards
heretofore granted, or the substitution of such Awards with new
awards of the successor entity, with appropriate adjustment as to
the number and kind of shares and, if appropriate, the per share
exercise price as provided in Subsections (a) and (b) of this
Section 11. In the event of such termination and in the event the
Board does not provide for the Cash Payment described in Subsection
(e) of this Section each participant shall be notified of such
proposed termination and permitted to exercise for a period of at
least 15 days prior to the date of such termination all Options
held by such participant which are then exercisable.
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(e) In the event that the Company shall be merged or consolidated with
another corporation or entity, other than a corporation or entity
which is an "affiliate" of the Company. under the terms of which
holders of Stock of the Company will receive upon consummation
thereof a cash payment for each share of Stock of the Company
surrendered pursuant to such Business Combination (the "Cash
Purchase Price"), the Board of Directors may provide that all
outstanding Options shall terminate upon consummation of such
transaction and each participant shall receive, in exchange
therefor, a cash payment equal to the amount (if any) by which (i)
the Cash Purchase Price multiplied by the number of shares of Stock
of the Company subject to outstanding Options held by such
participant exceeds (ii) the aggregate exercise price of such
Options.
Section 12. Change in Control.
(a) Unless otherwise provided in such participant's Option Agreement,
agreements relating to Stock Awards or in a written employment or
other agreement directly addressing the same subject matter as
addressed below, in the event that the Plan is terminated as a
result of or following a Change in Control (as defined herein), all
vested Options and Stock Awards then outstanding at the time of
such Plan termination may be exercised for a period of thirty (30)
days from the date of notice of the proposed termination. In such
event, all participants shall be credited with an additional six
(6) months of service for the purpose of any otherwise unvested
Options and Stock Awards. Upon a Change in Control in which the
Plan is either assumed or otherwise not subject to termination, if
during the remaining term of such a participant's Options or Stock
Awards, the participant is terminated other than for Cause, the
participant will, at the time of such termination, be credited with
an additional six (6) months of service for the purpose of any
otherwise unvested Options and Stock Awards; however, in the event
of a termination for Cause, all Options shall immediately terminate
and all unvested portions of Stock Awards shall immediately
terminate.
(b) As used herein, a "Change in Control" shall be deemed to have
occurred if: (i) any "person" (as such term is used in Section
13(d) and 14(d) of the Exchange Act) acquires "beneficial
ownership" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing
fifty percent (50%) or more of the voting power of the then
outstanding securities of the Company except where the acquisition
is approved by the Board; or (ii) if the Company is to be
consolidated with or acquired by another entity in a merger or
other reorganization in which the holders of the outstanding voting
stock of the Company immediately preceding the consummation of such
event, shall, immediately following such event, hold, as a group,
less than a majority of the voting securities of the surviving or
successor entity or in the event of a sale of all or substantially
all of the Company's assets or otherwise.
(c) Notwithstanding anything in the Plan to the contrary, the
acceleration of vesting and exercisability provided by Subsection
(a) of this Section shall not occur in the event that such
acceleration would make the transaction causing the Change in
Control to be ineligible for pooling of interests accounting
treatment and, in the absence of such acceleration, the transaction
would qualify for such treatment and the Company intends to use
such treatment with respect to such transaction.
Section 13. No Right to Future Employment. Nothing contained in the Plan nor in
any Award agreement shall confer upon any participant any right with respect to
the continuance of employment by the Company nor interfere in any way with the
right of the Company to terminate his employment or change his compensation at
any time.
Section 14. Amendment and Discontinuance. The Board of Directors may alter,
amend, suspend or discontinue the Plan, provided that no such action shall
deprive any person without such person's consent of any rights theretofore
granted pursuant hereto
Section 15. Compliance with Section 16. With respect to persons subject to
Section 16 of the Act, transactions under this Plan are intended to comply with
all applicable conditions of Rule 16b-3 (or its successor rule and shall be
construed to the fullest extent possible in a manner consistent with this
intent). To the extent that any Award fails to so comply, it shall be deemed to
be modified to the extent permitted by law and to the extent deemed advisable by
the Plan Administrator in order to comply with Rule 16b-3.
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Section 16. Compliance with Governmental Regulations. Notwithstanding any
provision of the Plan or the terms of any agreement entered into pursuant to the
Plan, the Company shall not be required to issue any shares of Stock hereunder
prior to registration of the shares subject to the Plan under the Securities Act
of 1933 or the Act, if such registration shall be necessary, or before
compliance by the Company or any participant with any other provisions of either
of those acts or of regulations or rulings of the Securities and Exchange
Commission thereunder, or before compliance with other federal and state laws
and regulations and rulings thereunder, including the rules any applicable
exchange or of the Nasdaq Stock Market. The Company shall use its best efforts
to effect such registrations and to comply with such laws, regulations and
rulings forthwith upon advice by its counsel that any such registration or
compliance is necessary.
Section 17. Participation by Foreign Nationals. The Plan Administrator may, in
order to fulfill the purposes of the Plan and without amending the Plan, modify
grants to foreign nationals or United States citizens employed abroad in order
to recognize differences in local law, tax policy or custom.
Section 18. Effective Date of Plan - Shareholder Approval. The Plan was approved
by the Board and became effective on June 1, 2000. Those provisions of the Plan
that for federal tax purposes require approval of the stockholders of the
Company (i.e., the granting of incentive stock options) shall not become
effective until adopted by the stockholders, however, the Company reserves the
right to grant Incentive Stock Options provided stockholder approval is secured
within one (1) year from the date thereof. In the event Incentive Stock Options
are granted and Stockholder approval is not timely secured, such Options shall
remain in full force and effect, however, shall automatically convert to
Non-Qualified Options.
Section 19. Governing Law. The Plan shall be governed by the internal laws of
the State of Delaware without giving effect to its choice of law provisions.
Unless otherwise provided in an Option Agreement or Award Agreement, Awards
shall be governed by the same laws as the Plan.
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NET VALUE HOLDINGS, INC.
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Andrew P. Panzo and Lee C. Hansen and each of
them proxies with power to appoint a substitute and hereby authorizes either of
them to represent and to vote all shares of Common Stock of Net Value Holdings,
Inc. held of record by the undersigned as of July 28, 2000 at the Annual Meeting
of Stockholders of Net Value Holdings, Inc. to be held on September 25, 2000 and
at any adjournment(s) or postponement(s) thereof, and to vote as directed on the
reverse side of this form and, in their discretion, upon such other matters not
specified as may come before said meeting.
You are encouraged to specify your choice by marking the appropriate box (SEE
REVERSE SIDE), but you need not mark any box if you wish to vote in accordance
with the Board of Directors' recommendations.
THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD
------------------------------------------------------------------------
SEE REVERSE SIDE
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<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL AMENDMENTS TO THE
CERTIFICATE OF INCORPORATION, FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR, FOR
THE APPROVAL OF THE GRANTING OF ISOs UNDER THE PLAN AND THE QUALIFICATION OF THE
PLAN FOR THE SECTION 162(m) EXEMPTION, AND FOR THE RATIFICATION OF KPMG, LLP AS
INDEPENDENT AUDITORS FOR NET VALUE HOLDINGS, INC. FOR THE 2000 FISCAL YEAR.
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1. Proposal 1
Amendment to the Certificate of Incorporation FOR AGAINST ABSTAIN
to change name of Company. [ ] [ ] [ ]
2. Proposal 2
Amendment to the Certificate of Incorporation FOR AGAINST ABSTAIN
to provide for the classification of the [ ] [ ] [ ]
Board of Directors.
3. Proposal 3
Amendment to the Company's Certificate of FOR AGAINST ABSTAIN
Incorporation to Increase the Number of [ ] [ ] [ ]
Authorized Shares of Common Stock from
50,000,000 to 100,000,000.
4. Proposal 4
Amendment to the Company's Certificate of FOR AGAINST ABSTAIN
Incorporation to Increase the Number of [ ] [ ] [ ]
Authorized Shares of Preferred Stock from
10,000,000 to 20,000,000.
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
5. Proposal 5
Election of Directors FOR WITHHELD
Andrew P. Panzo [ ] [ ]
Lee C. Hansen
Darr Aley
Stephen George
Vote withheld from the following nominee(s):
____________________________________________
____________________________________________
____________________________________________
6. Proposal 6
Approval of the Granting of ISOs under the FOR AGAINST ABSTAIN
Plan and the Qualification of the Plan for the [ ] [ ] [ ]
Section 162(m) Exemption.
7.
Proposal 7
Ratification of the appointment of KPMG, LLP as FOR AGAINST ABSTAIN
Independent Auditors for the Company. [ ] [ ] [ ]
PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY IN THE
ENCLOSED ENVELOPE. NO POSTAGE REQUIRED IF MAILED IN THE
UNITED STATES.
NOTE: Please sign name(s) exactly as printed hereon.
Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or
guardian, please give full title as such.
SIGNATURE(S)____________________________________________
________________________________________________________
________________________________________________________
___________________________________________________,2000
DATE
</TABLE>
62
