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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 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 240.14a-11 or 14a-12
E4L, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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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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E4L, INC.
15821 VENTURA BOULEVARD
5TH FLOOR
LOS ANGELES, CALIFORNIA 91436
August 23, 1999
DEAR FELLOW STOCKHOLDER:
You are cordially invited to attend the annual meeting of stockholders (the
"Stockholders' Meeting") of e4L, Inc. ("e4L") to be held on September 30, 1999
at 10:00 a.m., local time at the Radisson Valley Center Hotel, 15433 Ventura
Boulevard, Sherman Oaks, California.
At the Stockholders' Meeting, you will be asked to consider and vote upon
the election of seven members of the Board of Directors. You will also be asked
to consider and approve an amendment to the Company's 1991 Stock Option Plan
increasing the number of shares of Common Stock available for awards thereunder
by 500,000 shares. Last, you will be asked to consider and approve Ernst & Young
LLP as e4L's independent auditors for the fiscal year ending March 31, 2000. Our
Annual Report to Stockholders for the fiscal year ended March 31, 1999
accompanies this Proxy Statement.
We look forward to seeing you at the Stockholders' Meeting and we strongly
urge your favorable vote on the proposals in the Proxy Statement. Whether or not
you are planning to attend, we urge you to return the enclosed proxy at your
earliest convenience.
Sincerely,
[SIGNATURE]
Stephen C. Lehman
Chairman of the Board
and Chief Executive Officer
<PAGE>
E4L, INC.
15821 VENTURA BOULEVARD
5TH FLOOR
LOS ANGELES, CALIFORNIA 91436
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 30, 1999
To the Stockholders of e4L, Inc. ("e4L" or the "Company"):
The annual meeting of stockholders (the "Stockholders' Meeting") of e4L will
be held on September 30, 1999, at 10:00 a.m., local time at the Radisson Valley
Center Hotel, 15433 Ventura Boulevard, Sherman Oaks, California, for the
following purposes:
- To consider and vote upon the election of seven members of the Board of
Directors;
- To consider and vote upon a proposal to amend the Company's 1991 Stock
Option Plan to increase the number of shares of Common Stock available for
awards thereunder by 500,000 shares;
- To consider and vote upon a proposal to ratify the appointment of Ernst &
Young LLP as the Company's independent auditors for the fiscal year ending
March 31, 2000; and
- To transact such other business as may properly come before the
Stockholders' Meeting and any or all adjournments or postponements
thereof.
THE BOARD OF DIRECTORS OF E4L RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
DIRECTORS NOMINATED HEREIN, FOR APPROVAL OF THE AMENDMENT TO THE COMPANY'S 1991
STOCK OPTION PLAN, AND FOR RATIFICATION OF ERNST & YOUNG LLP AS E4L'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING MARCH 31, 2000.
The Board of Directors of e4L has fixed the close of business on August 19,
1999 as the record date for determining the stockholders entitled to receive
notice of and to vote at the Stockholders' Meeting and at any and all
adjournments or postponements thereof.
Management welcomes your attendance at the Stockholders' Meeting. Whether or
not you expect to attend the Stockholders' Meeting in person, you are requested
to complete, sign, date and promptly return the enclosed proxy in the
accompanying postage-paid envelope. The prompt return of your proxy will save
expenses involved in further communication. Your proxy will not affect your
right to vote in person if you attend the Stockholders' Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
[SIGNATURE]
DANIEL M. YUKELSON
SECRETARY
Los Angeles, California
August 23, 1999
YOUR VOTE IS IMPORTANT.
TO VOTE YOUR SHARES, PLEASE SIGN, DATE AND COMPLETE THE ENCLOSED PROXY
AND MAIL IT PROMPTLY IN THE ENCLOSED, POSTAGE PAID RETURN ENVELOPE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
VOTING AT THE SPECIAL MEETING; REVOCATION OF PROXIES................................... 1
ADDITIONAL INFORMATION................................................................. 2
SOLICITATION OF PROXIES................................................................ 2
PROPOSAL I
ELECTION OF DIRECTORS.................................................................. 4
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES.................................. 7
PROPOSAL II
APPROVAL OF AMENDMENT TO THE COMPANY'S 1991 STOCK OPTION PLAN.......................... 9
PROPOSAL III
RATIFICATION OF APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS................ 12
SECURITY OWNERSHIP OF MANAGEMENT....................................................... 13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS........................................ 14
EXECUTIVE COMPENSATION................................................................. 15
COMPENSATION OF DIRECTORS.............................................................. 22
REPORT OF THE COMPENSATION/STOCK OPTION COMMITTEE OF THE BOARD OF DIRECTORS ON
EXECUTIVE COMPENSATION............................................................... 23
COMPARATIVE STOCK PERFORMANCE GRAPH.................................................... 26
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS................................... 26
OTHER STOCKHOLDER MATTERS.............................................................. 28
STOCKHOLDER PROPOSALS AND NOMINATIONS OF DIRECTORS FOR THE COMPANY'S NEXT ANNUAL
MEETING OF STOCKHOLDERS.............................................................. 28
OTHER BUSINESS......................................................................... 28
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE................................ 28
INDEPENDENT AUDITORS................................................................... 28
ANNUAL REPORT TO STOCKHOLDERS.......................................................... 28
</TABLE>
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E4L, INC.
15821 VENTURA BOULEVARD
5TH FLOOR
LOS ANGELES, CALIFORNIA 91436
------------------------
PROXY STATEMENT
------------------------
The enclosed proxy is solicited by the Board of Directors of e4L, Inc.
("e4L" or the "Company"), a Delaware corporation, for use at the annual meeting
of stockholders (the "Stockholders' Meeting") of the Company to be held on
September 30, 1999 at 10:00 a.m., local time, at the Radisson Valley Center
Hotel, 15433 Ventura Boulevard, Sherman Oaks, California, or any adjournments or
postponements thereof. This Proxy Statement and accompanying proxy are first
being mailed to the Company's stockholders on or about August 23, 1999.
VOTING AT THE SPECIAL MEETING; REVOCATION OF PROXIES
The Company's Board of Directors has fixed the close of business on August
19, 1999 as the record date (the "Record Date") for determining the stockholders
entitled to notice of and to vote at the Stockholders' Meeting. As of the Record
Date there were (i) 32,719,417 shares of common stock, par value $.01 per share
("Common Stock") issued and outstanding, each of which is entitled to one vote
as to all matters to be acted upon at the Stockholders' Meeting; (ii) 5,000
shares of Series B Convertible Preferred Stock, par value $.01 per share (the
"Series B Preferred Stock") issued and outstanding, each of which is entitled to
14.8 votes per share as to all matters to be voted upon at the Stockholders'
Meeting, except the election of the seven Directors, as to which the holders of
the Series B Preferred Stock shall have no voting rights; and (iii) 20,000
shares of Series E Convertible Preferred Stock, par value $.01 per share (the
"Series E Preferred Stock" and, together with the Series B Preferred Stock,
collectively called the "Voting Preferred Stock"), each of which is entitled to
666 votes per share as to all matters to be voted upon at the Stockholders'
Meeting. The presence, in person or by properly executed proxy, of the holders
of a majority of the Common Stock and the Voting Preferred Stock entitled to
vote at the Stockholders' Meeting is necessary to constitute a quorum at the
Stockholders' Meeting. Only stockholders of record at the close of business on
the Record Date will be entitled to vote at the Stockholders' Meeting or any
adjournments or postponements thereof.
Shares of Common Stock and Voting Preferred Stock represented at the
Stockholders' Meeting in person or by proxy will be counted for the purposes of
determining whether a quorum is present at the Stockholders' Meeting. Shares
which abstain from voting as to a particular matter will be treated as shares
that are present and entitled to vote at the Stockholders' Meeting for purposes
of determining whether a quorum exists, but will not be counted as votes cast on
such matter. Abstentions, therefore, will have the same effect as votes against
approval of the proposals set forth in this Proxy Statement. If a broker or
nominee holding stock in "street name" indicates on a proxy that it does not
have discretionary authority to vote as to a particular matter ("broker
non-votes"), those shares will be treated as present and entitled to vote at the
Stockholders' Meeting for purposes of determining whether a quorum exists, but
will not be counted as votes cast on such matter.
Except with respect to the election of Directors, on all matters presented
to the Company's stockholders for a vote at the Stockholders' Meeting, the
Common Stock and the Voting Preferred Stock will vote as a single class. The
holders of Common Stock do not have cumulative voting rights in connection with
the election of Directors. All shares of Common Stock and Voting Preferred Stock
which are entitled to vote and are represented at the Stockholders' Meeting by
properly executed proxies received prior to or at the Stockholders' Meeting, and
not revoked, will be voted at the Stockholders' Meeting in accordance with the
instructions indicated on such proxies. If no instructions
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are indicated (other than in the case of broker non-votes), such proxies will be
voted for approval and adoption of the proposals set forth in this Proxy
Statement.
The Board of Directors does not intend to bring any matter before the
Stockholders' Meeting other than the matters specifically referred to in the
notice of the Stockholders' Meeting, nor does the Board of Directors know of any
other matter which anyone else proposes to present for action at the
Stockholders' Meeting. However, if any other matter is properly brought before
the Stockholders' Meeting, the persons named in the accompanying proxy or their
duly constituted substitutes acting at the Stockholders' Meeting will be deemed
authorized to vote or otherwise act thereon in accordance with their judgment on
such matter. Proxies indicating a vote against the proposals contained herein
may not be voted by the persons marked in the accompanying proxy or their duly
constituted substitutes for adjournment of the Stockholders' Meeting for the
purpose of giving management additional time to solicit votes to approve such
proposals.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of the Company, at or before the taking of a vote at the
Stockholders' Meeting, a written notice of revocation bearing a later date than
the proxy, (ii) duly executing a later dated proxy relating to the same shares
and delivering it to the Secretary of the Company before the taking of a vote at
the Stockholders' Meeting or (iii) attending the Stockholders' Meeting and
voting in person (although attendance at the Stockholders' Meeting will not in
and of itself constitute a revocation of a proxy). Any written notice of
revocation or subsequent proxy should be sent to e4L, Inc., 15821 Ventura
Boulevard, 5th Floor, Los Angeles, California 91436, Attention: Corporate
Secretary, or hand delivered to the Secretary of e4L at or before the taking of
the vote at the Stockholders' Meeting.
Enclosed herewith are WHITE proxy card(s) for use by holders of the
Company's Common Stock and/or WHITE proxy card(s) with a BLUE STRIPE for use by
the holder of the Series B Preferred Stock and/or WHITE proxy card(s) with a
GREEN STRIPE for use by the holders of the Series E Preferred Stock. Properly
executed proxies will be voted in accordance with the instructions therein. In
the absence of instruction, the shares of Common Stock or Voting Preferred Stock
represented at the Stockholders' Meeting by the enclosed proxy will be voted FOR
each of the proposals set forth herein.
ADDITIONAL INFORMATION
A copy of the Company's Annual Report for the fiscal year ended March 31,
1999 accompanies this Proxy Statement and the Company will furnish without
charge to any stockholder, upon written or oral request, any other documents
filed by the Company pursuant to the Securities Exchange Act of 1934 (the
"Exchange Act"). Requests for such documents should be addressed to Daniel M.
Yukelson, Executive Vice President/Finance and Chief Financial Officer of e4L,
Inc., 15821 Ventura Boulevard, 5th Floor, Los Angeles, California 91436,
telephone number (818) 461-6400. Documents filed by the Company pursuant to the
Exchange Act may be reviewed and/or obtained through the Securities and Exchange
Commission's (the "SEC") Electronic Data Gathering Analysis and Retrieval
System, which is publicly available through the SEC's Web site
(http://www.sec.gov).
SOLICITATION OF PROXIES
All expenses of the Company's solicitation of proxies for the Stockholders'
Meeting will be borne by the Company. In addition to solicitation by use of the
mails, proxies may be solicited from e4L stockholders by directors, officers and
employees of e4L in person or by telephone, telegram or other means of
communication. Such directors, officers and employees will not be additionally
compensated, but may be reimbursed for reasonable out-of-pocket expenses in
connection with such solicitation. The Company reserves the right to retain a
proxy solicitation firm for assistance in connection with the solicitation of
proxies for the Stockholders' Meeting, should the Board of Directors deem such
action
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prudent. Arrangements will also be made with brokerage houses, custodians,
nominees and fiduciaries for forwarding of proxy solicitation materials to
beneficial owners of shares held of record by such brokerage houses, custodians,
nominees and fiduciaries, and the Company will reimburse such brokerage houses,
custodians, nominees and fiduciaries for their reasonable expenses incurred in
connection therewith.
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PROPOSAL I
ELECTION OF DIRECTORS
The By-Laws of the Company provide that the Board of Directors shall be
composed of three to eleven Directors, with such number to be fixed by the Board
of Directors from time to time. The Board of Directors has currently fixed the
number of Directors of the Company at seven. Therefore, the Company is
nominating seven Directors for election at the Stockholders' Meeting. Each of
the seven Directors to be elected at the Stockholders' Meeting will be elected
by the holders of the Common Stock and Voting Preferred Stock, with the
exception of the Series B Preferred Stock, which has no voting rights with
respect to the election of Directors.
Set forth below is certain information with respect to the persons nominated
for election by the Board of Directors. With respect to each such person, such
information includes his age, the period, if any, during which he has served as
a Director of the Company and his principal occupation and employment during at
least the past five years. All nominees are currently Directors of the Company.
Unless otherwise specified on the enclosed proxy card, each proxy received from
the holders of shares of Common Stock and Voting Preferred Stock entitled to
vote will be voted for the election as Directors of the seven nominees named
below as nominees to serve until the next annual meeting of stockholders and
until a successor in office shall be duly elected and qualified. Each of the
nominees has consented to be named as a nominee in this Proxy Statement and to
serve as a Director if elected. Should any nominee become unable or unwilling to
accept his nomination or election, the persons named in the enclosed proxy will
vote for the election of a nominee designated by the Board of Directors.
VOTE REQUIRED FOR APPROVAL
The seven Directors are required to be elected by a plurality of the votes
cast as to the subject Board of Directors seat. Votes may be cast in favor of or
withheld for any or all of the appropriate nominees. Unless otherwise instructed
by a record holder submitting a proxy, the persons named in a proxy will vote
the shares represented thereby for the election of all such appropriate
nominees. Abstentions and broker non-votes will not be counted toward a
nominee's achievement of a plurality and thus will have no effect on the outcome
of the election of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE
NOMINEES LISTED BELOW.
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The following persons have been nominated for election as Directors:
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
<TABLE>
<CAPTION>
NAME DESCRIPTION
- ----------------------------- ------------------------------------------------------------
<S> <C>
Stuart D. Buchalter (1)(2)... Stuart D. Buchalter, age 61, has been Of Counsel with the
California law firm of Buchalter, Nemer, Fields & Younger, a
Professional Corporation since August 1980. From August 1980
to June 1993, he served as Chairman of the Board of
Directors and Chief Executive Officer of Standard Brands
Paint Company, Inc. ("Standard Brands"), a paint retailer
and manufacturer. Mr. Buchalter completed his undergraduate
studies at the University of California at Berkeley, and
earned an LLB at Harvard University Law School. Mr.
Buchalter is a director of Authentic Fitness Corp., an
athletic apparel manufacturer, Earl Scheib, Inc., an
automotive painting company, Faroudja, Inc., a television
image enhancement company, and City National Corp., the
holding company for City National Bank. He is also
Vice-Chairman of the Board of Trustees of Otis College of
Art and Design. He has served as a Director of e4L since
October 1998.
Robert W. Crawford (3)....... Robert W. Crawford, age 58, is currently engaged as a
management consultant and since January 1987, he has been an
executive of Premiere Radio Networks, Inc. ("Premiere"), a
producer and distributor of network radio programs and
services. Since July 1984, Mr. Crawford has also been
President of Pro Active Management, Inc. From March 1983
until July 1997, Mr. Crawford served as Chairman of Crystal
Springs Water Company. Mr. Crawford earned his undergraduate
degree in foreign affairs and a bachelor of science in
business administration from the University of Nevada at
Reno. He is a certified public accountant and is a member of
the American Institute of Certified Public Accountants. He
has served as a Director of e4L since October 1998.
John W. Kirby................ John W. Kirby, age 40, has served as President of e4L since
March 1998 and as President of Quantum Television (formerly
d/b/a DirectAmerica Corporation) since e4L's acquisition of
DirectAmerica Corporation in October 1995. Mr. Kirby also
served as Executive Vice President of e4L from October 1995
until March 1998. Mr. Kirby previously served as Chairman of
the Board, Chief Executive Officer and President of
California Production Group, Inc. ("CAPG") from January 1991
until e4L's acquisition of CAPG in October 1995. Mr. Kirby
has served as a Director of e4L since March 1998.
</TABLE>
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<TABLE>
<CAPTION>
NAME DESCRIPTION
- ----------------------------- ------------------------------------------------------------
<S> <C>
Stephen C. Lehman (1)........ Stephen C. Lehman, age 47, has served as Chief Executive
Officer and Chairman of the Board of Directors of e4L since
October 1998. From August 1998 until October 1998, Mr.
Lehman was Acting Chief Executive Officer of e4L. Prior
thereto, from its formation in January 1987 until August
1998, Mr. Lehman served as President, Chief Executive
Officer and Chairman of the Board of Premiere. From 1984 to
1987, Mr. Lehman was President of Stephen Lehman
Productions, a radio syndication company, while also serving
as an on-air personality at KIIS-AM and FM/Los Angeles. From
1982 to 1984, he specialized in building radio networks for
independent radio syndicates. From 1980 to 1981, Mr. Lehman
was National Sales Manager for Innerview Radio Networks.
From 1976 to 1980, Mr. Lehman was president of a promotional
advertising agency. Mr. Lehman graduated cum laude from the
University of Nevada at Las Vegas, with a degree in
Communications. Mr. Lehman is also a Director of Video City,
Inc, a video retailer. Mr. Lehman has served as a Director
of e4L since August 1998.
David E. Salzman (2)(3)...... David E. Salzman, age 55, has served as Co-Chief Executive
Officer of Quincy Jones-David Salzman Entertainment, a
television, motion picture, music and interactive content
joint venture with Time-Warner Entertainment, since its
formation in 1993. Mr. Salzman has also served as Chief
Executive Officer of David Salzman Enterprises, a
television, film, live events and new media content
producer, since June 1998. Mr. Salzman was a Director of
Premiere from July 1995 to April 1997 and a Director of
Lorimar Telepictures from April 1986 to January 1989. Mr.
Salzman holds a bachelor of arts degree from Brooklyn
College and a masters degree from Wayne State University. He
has served as a Director of e4L since October 1998.
Andrew M. Schuon (2)(3)...... Andrew M. Schuon, age 34, has served as Executive Vice
President/ General Manager of Warner Brothers Music, a
division of Time Warner Entertainment, Inc., since March
1998. He served as Executive Vice President of Programming
for MTV Music Television, a unit of Viacom, Inc. ("MTV")
from November 1995 through May 1998. From May 1992 until
November 1995, Mr. Schuon served in various capacities at
MTV, starting as Vice President/Music, Programming and
Promotion. From 1989 until 1992, Mr. Schuon served as the
program director of radio station KROQ-FM in Los Angeles,
California. Mr. Schuon attended the University of Nevada.
Mr. Schuon was a Director of Premiere from January 1997
until July 1997 and is currently a Director of Hot Topic,
Inc. and FTM Media, Inc. He has served as a Director of e4L
since August 1998.
</TABLE>
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<TABLE>
<CAPTION>
NAME DESCRIPTION
- ----------------------------- ------------------------------------------------------------
<S> <C>
Eric R. Weiss (1)............ Eric R. Weiss, age 41, has served as Vice Chairman and Chief
Operating Officer of e4L since October 1998. Prior thereto,
Mr. Weiss served as a Director of Premiere from January 1997
until August 1997. During 1996, Mr. Weiss served as Chairman
and Chief Executive Officer of After MidNite Entertainment,
Inc, a privately held producer and distributor of network
radio programs and services. From 1986 until 1995, Mr. Weiss
served as an executive officer of Westwood One, Inc., a
producer and distributor of network radio programs and
services serving as Executive Vice President and Vice
President/Business and Legal Affairs. Mr. Weiss completed
his undergraduate studies at Rutgers University where he was
elected Phi Beta Kappa and graduated with honors. Mr. Weiss
received his Juris Doctorate from George Washington
University's National Law Center. Mr. Weiss has served as a
Director of e4L since August 1998.
</TABLE>
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(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation/Stock Option Committee.
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
BOARD OF DIRECTORS. During the fiscal year ended March 31, 1999, there were
11 meetings of the Board of Directors and one action by unanimous written
consent as permitted by Delaware law. All nominees attended at least 75% of the
meetings held during their terms as Directors. e4L's Board of Directors has,
among others, an Executive Committee, an Audit Committee and a
Compensation/Stock Option Committee. Each such committees met at least once
during the fiscal year ended March 31, 1999. All committee members attended at
least 75% of all committee meetings held during their terms as members of such
committees.
EXECUTIVE COMMITTEE. The Executive Committee was constituted in October
1998 and is composed of Messrs. Lehman (Chairperson), Weiss and Buchalter. This
Committee has general responsibility and authority to manage the operations and
affairs of e4L between meetings of the full Board of Directors, subject to
direction and oversight by the Board of Directors. The Executive Committee met
once during the year ended March 31, 1999.
AUDIT COMMITTEE. The Audit Committee is currently composed of three
non-employee Directors. The current members of the Audit Committee are Messrs.
Buchalter, Schuon (Chairperson) and Salzman. This committee meets with e4L's
independent public accountants to review the scope and results of auditing
procedures and e4L's accounting policies and controls. The Audit Committee also
provides general oversight with respect to the accounting principles employed in
e4L's financial reporting. The Audit Committee met once during the year ended
March 31, 1999 and also took action by unanimous written consent on two
occasions.
COMPENSATION/STOCK OPTION COMMITTEE. The Compensation Committee is composed
of three non-employee Directors. The current members of the Compensation/Stock
Option Committee are Messrs. Crawford (Chairperson), Salzman and Schuon. The
Compensation/Stock Option Committee determines and reviews executive
compensation matters, including the compensation of e4L's Chief Executive
Officer, and administers the terms and provisions of e4L's stock option plans.
The Compensation/Stock Option Committee met four times during the year ended
March 31, 1999.
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EXECUTIVE OFFICERS
Set forth below is information regarding the executive officers of e4L who
are not nominees for the Board of Directors.
<TABLE>
<S> <C>
Daniel M. Yukelson........... Daniel M. Yukelson, age 36, has served as Executive Vice
President/Finance and Chief Financial Officer, and Secretary
of e4L since October 1998. Since November 1996, Mr. Yukelson
has served as Senior Vice President/Finance and Chief
Financial Officer and Secretary of Premiere. From June 1995
until November 1996, Mr. Yukelson served as Vice President
and Chief Financial Officer of Premiere. From December 1993
until June 1995, Mr. Yukelson served as Assistant Vice
President and Controller of Wherehouse Entertainment, Inc.
and during 1993 he served as Vice President/ Finance and
Chief Financial Officer of Standard Brands. Prior thereto,
from 1985 to 1993, Mr. Yukelson served in various positions
with Ernst & Young LLP, e4L's independent auditors, last
serving as a Senior Manager in the Restructuring and
Reorganization Practice. Mr. Yukelson earned his
undergraduate degree in business administration at the
California State University at Northridge. He is a Certified
Public Accountant.
Anthony M. Vercillo.......... Anthony M. Vercillo, age 43, has served as Executive Vice
President, Global Operations of e4L since May 1999. From
November 1998 until May 1999, Mr. Vercillo served as Senior
Vice President, Global Operations of e4L. Prior thereto,
from August 1998 until November 1998, Mr. Vercillo served as
a consultant to senior management of e4L. Prior to joining
e4L, from January 1991 until November 1998, Mr. Vercillo was
President and Chief Executive Officer of IFMC, Inc., a
management consulting firm. Mr. Vercillo earned his
undergraduate degree at Caldwell University and his masters
in business administration at United States International
University.
</TABLE>
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PROPOSAL II
APPROVAL OF AMENDMENT TO THE COMPANY'S 1991 STOCK OPTION PLAN
At the Stockholders' Meeting, there will be presented to the stockholders a
proposal increasing the number of shares covered by the 1991 Stock Option Plan,
as heretofore amended (the "1991 Option Plan"), by 500,000 shares. Previously,
stockholders have approved a total of 7,365,000 shares of Common Stock for
issuance under the 1991 Option Plan.
The Board of Directors has amended the 1991 Option Plan, subject to
stockholder approval, to provide for an additional 500,000 shares of Common
Stock. The Board of Directors believes that the 1991 Option Plan has played a
key role in assisting the Company in the recruitment, retention and motivation
of employees, directors and independent contractors who are in a position to
make contributions to the Company's progress. The 1991 Option Plan offers
significant incentives to the employees, directors and independent contractors
of the Company by enabling such individuals to acquire e4L's Common Stock
thereby increasing their proprietary interest in the growth and success of the
Company. The Board of Directors has determined that appropriate incentives, such
as those available pursuant to the 1991 Option Plan, benefit the Company and,
therefore increase the value of the Company for the benefit of all of its
stockholders. While it is expected that a modest number of shares of Common
Stock will become available to the Company due to forfeiture, the Board of
Directors believes that the existing shares of Common Stock available for awards
under the 1991 Option Plan are insufficient to meet the corporate goals of the
Company.
The Company currently has only approximately 898,000 shares of Common Stock
available for awards under the 1991 Option Plan. The total proposed increase in
the 1991 Option Plan's authorized share reserve is for 500,000 shares, which is
less than 2.0% of the total number of shares of e4L Common Stock currently
outstanding.
This amendment will not be effective unless and until stockholder approval
is obtained, and will not change the 1991 Option Plan except as stated above.
SUMMARY DESCRIPTION OF THE 1991 OPTION PLAN, AS IT APPLIES TO PROPOSAL II.
In July 1996 the Board adopted and the stockholders of the Company approved
the most recent amendments to the Company's 1991 Option Plan. As in effect, the
1991 Option Plan provides for the granting of options intended to qualify as
incentive stock options ("ISOs") as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), nonqualified stock options
("NQSOs") (ISOs and NQSOs, collectively, the "Stock Options"), restricted stock,
and stock appreciation rights ("SARs"). Effective July 15, 1999, the Board of
Directors adopted a further amendment and restatement to the 1991 Option Plan,
subject to receipt of stockholder approval at the Stockholders' Meeting. The
1991 Option Plan as adopted by the Board of Directors is set forth as Annex A to
this Proxy Statement. The description of the 1991 Option Plan contained herein
is qualified in its entirety by reference to such Annex A.
GENERAL. Employees eligible for participation in the 1991 Option Plan
include key employees, independent contractors and consultants who perform
services for the Company or a subsidiary company, and non-employee directors
("Eligible Participants"). Only Eligible Participants who are officers or other
employees of the Company or a subsidiary company are eligible to receive ISOs.
All Eligible Participants are eligible to receive NQSOs, restricted stock and
SARs. No Eligible Participant may be granted Stock Options for more than
1,000,000 shares in any one taxable year of the Company. Under the terms of the
current 1991 Option Plan, options to purchase 7,365,000 shares of Common Stock
are available for issuance. Approval of the proposed amendment to the 1991
Option Plan would increase the maximum number of shares of Common Stock that
would be issuable under the 1991 Option Plan by an additional 500,000 shares to
7,865,000 shares.
9
<PAGE>
ADMINISTRATION. The 1991 Option Plan is administered by a committee (the
"Committee") of the Board of Directors consisting of not less than two persons
who are "disinterested persons" under Rule 16b-3 of the Exchange Act and
"outside directors" under Section 162(m) of the Code. The Committee has full
power to administer and interpret the 1991 Option Plan. The Company's
Compensation Committee serves as the "Committee" for the 1991 Option Plan.
THE SHARES. Each of the Stock Options will be granted for a term of ten
years from the date of grant, subject to earlier termination on the optionee's
death, disability or termination of employment or other relationship with the
Company. The Stock Options are subject to vesting, which commences on the date
of grant and ends on the date or dates determined by the Committee. In the event
of a change of control, as defined in the 1991 Option Plan, all options granted
become immediately vested and exercisable. The Stock Options are not assignable
or otherwise transferrable except by will or the laws of descent and
distribution and, if permitted under Rule 16b-3 of the Exchange Act and the
Committee, pursuant to a qualified domestic relations order as defined under the
Code or Title I of ERISA. The exercise price of the Stock Option is payable in
cash, or, with the consent of the Committee, by delivering shares of Common
Stock already owned by the optionee, by a combination of cash and shares, or by
delivering a note approved by the Committee at the time of grant. Shares subject
to Stock Options granted under the 1991 Option Plan which lapse or terminate may
again be granted under the 1991 Option Plan. The Committee may offer to exchange
new options for existing options, with the shares subject to the existing
options being again available for grant under the 1991 Option Plan.
AMENDMENTS. The Committee has the full authority to amend the 1991 Option
Plan, except that stockholder approval is required to (i) increase the number of
shares available for the 1991 Option Plan, (ii) materially increase the benefits
accruing to optionees, (iii) materially modify the eligibility requirements for
options granted under the 1991 Option Plan, (iv) increase the number of shares
for which any optionee may be granted Stock Options, or (v) modify the
provisions for determining fair market value under the 1991 Option Plan. The
1991 Option Plan terminates on July 15, 2009, the tenth anniversary of its
effective date.
FEDERAL INCOME TAX CONSEQUENCES. The federal income tax consequences of an
optionee's participation in the 1991 Option Plan are complex and subject to
change. The following discussion is only a summary of the general rules
applicable to Stock Options.
The tax consequences of a Stock Option depend on whether the Stock Option is
an ISO or a NQSO. An optionee will not recognize income at the time of a grant
or exercise of an ISO and the Company may not deduct the related expense at
those times. However, for purposes of the alternative minimum tax, the
difference between the exercise price and the fair market value of the stock
will be included in alternative minimum tax income. The optionee has a taxable
event only upon a later sale or disposition of the stock acquired pursuant to
the exercise of the ISO. The tax treatment of the disposition of the stock will
depend on when the optionee disposes of the stock. An optionee who disposes of
stock acquired pursuant to the exercise of an ISO within one year from the date
of exercise or within two years of the date of grant will recognize ordinary
income equal to the difference between the ISO's exercise price and the lesser
of the fair market value of the stock on the date of exercise or the date of
disposition and capital gain to the extent that the amount received on
disposition exceeds such fair market value on the date of exercise. To the
extent that an optionee recognizes ordinary income pursuant to the preceding
sentence, the Company is allowed a deduction for federal income tax purposes in
like amount in the year of disposition. An optionee who disposes of stock after
a date that is both two years after the grant and one year after its exercise
will recognize capital gain equal to the difference between the amount received
on disposition and the adjusted basis in the stock.
A different set of rules govern NQSOs. There are no federal income tax
consequences to the optionee or the Company upon the grant of NQSOs. Upon
exercise of a NQSO, the optionee will
10
<PAGE>
recognize ordinary income in the amount by which the fair market value of the
Stock Option exceeds the exercise price of the Stock Option. The Company is
allowed a deduction for federal income tax purposes equal to the amount of
ordinary income recognized by the optionee at the time of exercise of NQSOs. The
optionee's holding period for purposes of determining whether any subsequently
realized gain or loss will be long-term or short-term will begin at the time the
optionee recognizes ordinary income. If, at the time of issuance of the option
shares, the optionee is subject to the restrictions of Section 16(b) of the
Exchange Act, then the optionee generally will recognize ordinary income as of
the later of (i) the date of exercise, or (ii) the expiration of six months from
the date of option grant, based upon the difference between the fair market
value of the option shares at such time and the exercise price.
SECTION 162(M). Under Section 162(m) of the Code, the Company may be
precluded from claiming a federal income tax deduction for total remuneration in
excess of $1,000,000 paid to the chief executive officer or to any of the other
four most highly compensated officers in any one year. Total remuneration would
include amounts received upon the exercise of Stock Options granted after
February 17, 1993. An exception does exist, however, for "performance-based"
remuneration, including amounts received upon the exercise of Stock Options
pursuant to a plan approved by stockholders that meets certain requirements. The
Option Plan is intended to make option grants thereunder meet the requirements
of "performance-based" remuneration.
VOTE REQUIRED FOR APPROVAL
The proposal to approve the issuance and grants of up to 500,000 additional
shares of Common Stock under the 1991 Option Plan requires the affirmative vote
of a majority of shares present in person or represented by proxy at the
Stockholders' Meeting for its approval. Abstentions may be specified on the
proxy and will be considered present at the Stockholders' Meeting, but will not
be counted as affirmative votes. Abstentions, therefore, will have the practical
effect of voting against the proposal because the affirmative vote of a majority
of the shares present at the Stockholders' Meeting is required to approve the
proposal. Broker non-votes will not be voted or have any effect on Proposal II.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL II.
11
<PAGE>
PROPOSAL III
RATIFICATION OF APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has, subject to the ratification by the stockholders,
appointed Ernst & Young LLP, independent auditors, to audit the financial
statements of the Company for the fiscal year ending March 31, 2000. Ernst &
Young LLP has audited the financial statements of the Company for each of the
seven fiscal years ended March 31, 1999. Representatives of Ernst & Young LLP
are expected to be present at the Stockholders' Meeting, will have the
opportunity to make a statement if they desire to do so and are expected to be
available to respond to appropriate questions from those attending the
Stockholders' Meeting.
VOTE REQUIRED FOR APPROVAL
The proposal to ratify the appointment of Ernst & Young LLP requires the
affirmative vote of the majority of shares present in person or represented by
proxy at the Stockholders' Meeting for its approval. Abstentions may be
specified on the proposal and will be considered present at the Stockholders'
Meeting, but will not be counted as affirmative votes. Abstentions, therefore,
will have the practical effect of voting against the proposal because the
affirmative vote of a majority of the shares present at the Stockholders'
Meeting is required to approve the proposal. Broker non-votes will not be voted
or have any effect on Proposal III.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL III.
12
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
On July 31, 1999, there were outstanding and entitled to vote approximately
32,659,688 shares of Common Stock, 5,000 shares of Series B Preferred Stock
(each share of which is entitled to 14.8 votes on all non-election matters), and
20,000 shares of Series E Preferred Stock (each share of which is entitled to
666 votes on all matters). The following table sets forth certain information at
August 1, 1999 with respect to the beneficial ownership of shares of Common
Stock by (i) each of the members of the Board of Directors, (ii) each executive
officer of e4L and (iii) all Directors and executive officers of e4L as a group.
The address for each person listed in the following table is 15821 Ventura
Boulevard, 5(th) Floor, Los Angeles, California, 91436.
NUMBER OF ISSUED AND OUTSTANDING
SHARES OF STOCK OWNED
<TABLE>
<CAPTION>
TOTAL NUMBER OF SHARES PERCENT OF COMMON PERCENT OF
OF COMMON STOCK STOCK TOTAL
BENEFICIALLY BENEFICIALLY VOTING
NAME OWNED(2)(3) OWNED(4)(5) POWER(4)(6)
- ---------------------------------------------------------- ---------------------- ----------------- -----------
<S> <C> <C> <C>
Stephen C. Lehman......................................... 5,068,093 13.4% 9.9%
Eric R. Weiss (7)......................................... 1,778,399 5.2% 3.7%
John W. Kirby............................................. 957,564 2.9% 2.1%
Daniel M. Yukelson........................................ 580,656 1.7% 1.2%
Stuart D. Buchalter....................................... 5,000 * *
Robert W. Crawford........................................ 5,000 * *
David E. Salzman.......................................... 672,073 2.0% 1.4%
Andrew M. Schuon.......................................... 46,623 * *
All executive officers and Directors as a group (8
persons)................................................ 9,113,408 22.0% 16.6%
</TABLE>
- ------------------------
* Less than 1%.
(1) To e4L's knowledge, except as noted below, each Director and executive
officer listed above has sole voting and investment power (with his spouse,
in certain circumstances) with respect to all shares indicated as
beneficially owned by such Director or executive officer.
(2) Includes shares which may be acquired upon the exercise of immediately
exercisable outstanding employee stock options in accordance with Rule 13d-3
under the Exchange Act as follows: Mr. Lehman: 125,000; Mr. Weiss: 62,500;
Mr. Kirby: 330,000; Mr. Yukelson: 25,000; Mr. Crawford: 5,000; Mr. Salzman:
5,000; and Mr. Schuon: 5,000.
(3) Includes shares which may be acquired upon the exercise of immediately
exercisable warrants in accordance with Rule 13d-3 under the Exchange Act as
follows: Mr. Lehman: 2,010,641; Mr. Weiss: 494,017; Mr. Kirby: 12,579; Mr.
Yukelson: 311,303; Mr. Salzman: 27,010; and Mr. Schuon: 1,768.
(4) All percentages are rounded to the nearest tenth of a percent.
(5) Based on 32,659,688 shares issued and outstanding as of July 31, 1999, as
determined in accordance with Rule 13d-3.
(6) Based on 46,067,093 shares issued and outstanding as of July 31, 1999,
including all shares of Common Stock owned and all shares of Common Stock
issuable upon conversion of Series B Preferred Stock and Series E Preferred
Stock owned, but not including options to purchase Common Stock or warrants
exercisable into Common Stock.
(7) Includes shares of Common Stock held by the Eric R. Weiss Charitable
Remainder Trust.
13
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information at July 31, 1999 with
respect to each person, known by e4L to beneficially own more than 5% of the
Common Stock as determined in accordance with Rule 13d-3. The information set
forth below is derived, without independent investigation on the part of e4L,
from the most recent filings made by such persons on Schedule 13D and Schedule
13G pursuant to Rule 13d-3. Capital Ventures International owns shares of Series
D Convertible Preferred Stock and warrants which may, in certain circumstances,
be converted into or exercised for a number of shares of Common Stock in excess
of 4.9% of the number of outstanding shares of Common Stock.
<TABLE>
<CAPTION>
TOTAL NUMBER
OF SHARES OF PERCENT PERCENT OF
COMMON STOCK COMMON STOCK TOTAL
COMMON PREFERRED BENEFICIALLY BENEFICIALLY VOTING
STOCK(2) STOCK OWNED(3) OWNED(4)(5) POWER(4)(6)
---------- ----------- -------------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Gruber & McBaine Capital Management, L.L.C.
(7)........................................... 88,401 2,633.1 2,079,903 6.0% 4.3%
Attention: Jon D. Gruber
Lagunitas Partners, L.P.
GMJ Investments, L.P.
50 Osgood Place Penthouse
San Francisco, California 94133
Jacor Communications Company (8).............. 3,672,138 6,971.0 8,319,472 20.3% 15.3%
50 East River Center Boulevard,
12th Floor
Covington, Kentucky 41011
Safeguard Scientifics, Inc. (9)............... 3,672,260 -- 3,672,260 10.3% 7.5%
800 The Safeguard Building
435 Devon Park Drive
Wayne, Pennsylvania 19087
</TABLE>
- ------------------------
(1) To e4L's knowledge, except as otherwise indicated in the footnotes to this
table, each of the persons named in this table has sole voting and
investment power with respect to all shares of Common Stock reported as
beneficially owned by such person.
(2) In accordance with Rule 13d-3, includes shares which may be acquired upon
the exercise of immediately exercisable outstanding stock options and
warrants and upon conversion of Series D Preferred Stock.
(3) In accordance with Rule 13d-3, includes shares of Common Stock issuable upon
the conversion of Series B Preferred Stock and Series E Preferred Stock.
(4) All percentages are rounded to the nearest tenth of a percent.
(5) Based on 32,659,688 shares issued and outstanding as of July 31, 1999, as
determined in accordance with Rule 13d-3.
(6) Based on 46,067,093 shares issued and outstanding as of July 31, 1999, which
assumes conversion of all outstanding shares of Voting Preferred Stock, as
determined in accordance with Rule 13d-3.
(7) Based on information contained in Schedule 13D dated November 3, 1998.
Gruber and McBaine Capital Management, L.L.C. (the "LLC") is an investment
adviser. Messrs. Gruber & McBaine are the managers of the LLC. Lagunitas
Partners, L.P. and GMJ Investments, L.P. are investment limited
partnerships. LLC is the general partner of the investment limited
partnerships.
(8) Based on information contained in a Schedule 13D dated November 2, 1998.
Jacor Communications Company is a wholly-owned subsidiary of Clear Channel
Communications, Inc.
(9) Based on information contained in a Schedule 13G dated November 18, 1998
filed by Safeguard Scientifics, Inc. ("Safeguard") on December 31, 1998. All
shares listed as beneficially owned by Safeguard are held in the name of
Safeguard Scientifics (Delaware), Inc. ("SSD"). SSD is a wholly owned
subsidiary of Safeguard. Safeguard and SSD each have shared voting and
investment power with respect to such shares.
14
<PAGE>
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the cash compensation
and certain other components of the compensation received by (i) Stephen C.
Lehman, Chairman of the Board of Directors and Chief Executive Officer of e4L,
(ii) Robert N. Verratti, former Chief Executive Officer of e4L, and (iii) the
other three most highly compensated executive officers of e4L who were executive
officers of e4L as of March 31, 1999 for each of the fiscal years ended March
31, 1999, 1998 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION -----------------------------
----------------------------------------------------- SECURITIES
FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) OPTIONS COMPENSATION(3)
- ------------------------------------------- ----------- ---------- --------- ----------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Stephen C. Lehman (4)(5)................... 1999 $ 272,917 0 $ 1,250 125,000 0
Chairman of the Board and
Chief Executive Officer
Robert N. Verratti (6)..................... 1999 $ 150,000 0 4,200 0 0
Former Chief Executive Officer 1998 $ 247,860 0 $ 9,000 700,000 0
John W. Kirby.............................. 1999 $ 325,000 $ 75,000 $ 9,600 0 $ 194,566
President 1998 $ 312,500 $ 37,500 $ 9,600 300,000 $ 7,840
1997 $ 300,000 0 $ 7,200 30,000 $ 32,255
Eric R. Weiss (4)(7)....................... 1999 $ 223,476 0 $ 1,250 62,500 0
Vice Chairman of the Board and Chief
Operating Officer
Daniel M. Yukelson (4)(8).................. 1999 $ 130,641 0 $ 1,250 25,000 0
Executive Vice President/Finance and Chief
Financial Office, and Secretary
</TABLE>
- ------------------------
(1) Bonuses (which consist of cash payments) have been included in the year
earned, portions of which were actually paid in the following fiscal year.
(2) Automobile allowance.
(3) Amounts for fiscal year 1999 consist of: a payment by e4L of $3,380 on
behalf of Mr. Kirby on account of supplemental life insurance premiums and
the forgiveness of $191,186 of debt owed by Mr. Kirby to e4L. Amounts for
fiscal year 1998 consist of: a payment by e4L of $7,840 on behalf of Mr.
Kirby on account of supplemental life insurance premiums. Amounts for fiscal
year 1997 consist of a payment by e4L of $5,530 on behalf of Mr. Kirby on
account of supplemental life insurance premiums, $25,000 on behalf of Mr.
Kirby for moving expenses and $1,725 for Mr. Kirby's use of a company
automobile.
(4) From August 11, 1998 until February 28, 1999, Messrs. Lehman, Weiss and
Yukelson were compensated pursuant to a Consulting Agreement between e4L and
TMC. Pursuant to the terms of the Consulting Agreement, TMC received $80,000
per month, a five-year option to purchase up to 212,500 shares of Common
Stock at an exercise price of $1.32 per share and warrants to purchase up to
3,762,500 shares of Common Stock at exercise prices ranging from $1.32 per
share to $3.00 per share. Pursuant to the Consulting Agreement, Messrs.
Lehman, Weiss and Yukelson received $231,250, $190,184 and $111,891,
respectively.
(5) Mr. Lehman was appointed acting Chief Executive Officer in August 1998 and
Chairman of the Board of Directors and Chief Executive Officer in October
1998.
15
<PAGE>
(6) Mr. Verratti joined e4L in May 1997 and served as e4L's Chief Executive
Officer until August 1998, at which time Stephen C. Lehman was named acting
Chief Executive Officer of e4L. In connection with Mr. Verratti's waiver of
certain rights to severance, options to purchase 450,000 shares of Common
Stock were repriced from $4.75 per share to $2.00 per share and the
exercisability of options to purchase 700,000 shares of Common Stock was
extended for one additional year to three years from the date of the
termination of Mr. Verratti's employment with e4L in October 1998.
(7) Mr. Weiss was appointed Vice Chairman of the Board of Directors and Chief
Operating Officer in October 1998.
(8) Mr. Yukelson was appointed Executive Vice President/Finance and Chief
Financial Officer, and Secretary in October 1998.
16
<PAGE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
CONSULTING AGREEMENT WITH TEMPORARY MEDIA CO., LLC
Pursuant to a Consulting Agreement, e4L engaged Temporary Media Co., LLC
("TMC") for the period commencing August 11, 1998 to provide executive
management consulting services to e4L. Consulting services were provided by
current executive officers Messrs. Lehman, Weiss and Yukelson. The Consulting
Agreement was terminated on February 28, 1999 in connection with the execution
of employment agreements by each of Messrs. Lehman, Weiss and Yukelson. Under
the terms of the Consulting Agreement, effective as of the execution of the
Consulting Agreement on August 11, 1998, Mr. Lehman was designated Acting Chief
Executive Officer of e4L, with the duties, responsibilities and authority
associated with that office. As compensation for the consulting services
pursuant to the Consulting Agreement, e4L paid TMC the sum of $80,000 per month
and granted to TMC (i.) a five-year option to purchase up to 212,500 shares of
Common Stock, subject to certain vesting requirements, at an exercise price of
$1.32 per share; and (ii.) warrants to purchase up to 3,762,500 shares of Common
Stock, at exercise prices ranging from $1.32 per share to $3.00 per share.
1,000,000 of the TMC Warrants were to be utilized to retain and attract
personnel to e4L and neither TMC nor its affiliates are permitted to exercise
such warrants.
e4L reimbursed TMC for reasonable and actual out-of-pocket business expenses
incurred by TMC in performance of its responsibilities under the Consulting
Agreement. e4L also indemnified TMC against all losses, claims, damages,
liabilities and expenses to which TMC may have become liable arising out of
TMC's acting for e4L pursuant to the Consulting Agreement, provided that e4L
would not be held liable to the extent any loss, claimed damage, liability or
expense is found to have resulted from TMC's gross negligence, bad faith,
material breach of the Consulting Agreement, actions outside the scope of the
authority granted to TMC or in contravention of specific instructions from the
Board of Directors.
STEPHEN C. LEHMAN, CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE
OFFICER.
In addition to the compensation Mr. Lehman received pursuant to the
Consulting Agreement described above, Mr. Lehman is currently compensated
pursuant to an Employment Agreement entered into with e4L. On January 29, 1999,
e4L entered into an Employment Agreement with Mr. Lehman pursuant to which Mr.
Lehman serves as Chairman of the Board and Chief Executive Officer of e4L from
March 1, 1999 through October 22, 2001 at an annual minimum base salary of
$500,000. In addition to the base salary payable pursuant to the Employment
Agreement, provided e4L is profitable on an Earnings before depreciation,
amortization, income taxes and interest expense ("EBITDA") basis, Mr. Lehman is
entitled to receive a bonus in an amount to be determined by the Compensation
Committee of the Board of Directors or the Board of Directors. Mr. Lehman is
also entitled to participate in all group medical and dental, hospitalization,
health and accident, group life, travel, disability or similar plans or programs
of e4L, and 401(k) and stock purchase programs and any other programs that e4L
provides to other executives of e4L. Mr. Lehman is also entitled to certain
fringe benefits, including personal financial and legal counseling, not to
exceed the sum of $10,000 annually, and an automobile allowance of $15,000 per
annum. Pursuant to the Employment Agreement, Mr. Lehman is eligible to
participate in e4L's qualified and non-qualified stock option plan(s). To the
extent that Mr. Lehman is granted stock options, such stock options shall have
an exercise price equal to the closing price of e4L's Common Stock on the date
of grant, be exercisable for ten years, and vest on a schedule to be determined
by the Compensation Committee of the Board of Directors or the Board of
Directors, but in no event shall such vesting period be more than three years.
In the event of a Constructive Termination of the Employment Agreement (as
defined in the Employment Agreement), e4L will be required to pay Mr. Lehman
2.99 times Mr. Lehman's base salary in effect on the date of such Constructive
Termination. If Mr. Lehman's employment is
17
<PAGE>
terminated either by Mr. Lehman's voluntary action or "For Cause" (as defined in
the Employment Agreement), e4L will pay Mr. Lehman's base salary that has
accrued as of the date of termination, in addition to any bonus owed and accrued
vacation pay. In the event of a Change of Control (as defined in the Employment
Agreement), and if either (i.) the Change of Control results in the termination
of Mr. Lehman's employment during the first 180 days after such Change of
Control, or (ii.) following a Change of Control, e4L or any successor to e4L
fails to assume, in writing, all obligations of e4L to perform the Employment
Agreement, e4L shall pay Mr. Lehman 2.99 times Mr. Lehman's base salary in
effect at the time of such Change of Control. In the event Mr. Lehman's
employment is terminated as a result of a Change of Control or Constructive
Termination, and the aggregate of all payments or benefits made or provided to
Mr. Lehman under the Employment Agreement constitute a Parachute Payment (as
defined by the Internal Revenue Code of 1986, as amended), e4L shall pay to Mr.
Lehman an additional amount equal to 100% of the Excise Tax (as defined in the
Employment Agreement) on the Parachute Payment.
Pursuant to the Employment Agreement, e4L has agreed to indemnify Mr. Lehman
to the maximum extent permitted by law and to pay Mr. Lehman's expenses
(including legal fees) in respect of Mr. Lehman's right to indemnification under
the Employment Agreement, subject to a later determination as to Mr. Lehman's
ultimate right to receive such payment.
ROBERT N. VERRATTI, FORMER CHIEF EXECUTIVE OFFICER.
In January 1998, e4L entered into an amended and restated employment
agreement with Mr. Verratti pursuant to which Mr. Verratti was employed as Chief
Executive Officer of e4L, at an annual minimum salary of $200,000. In October
1998, following consummation of the Transaction, Mr. Verratti's employment with
e4L was terminated. During Mr. Verratti's tenure with e4L, Mr. Verratti was
entitled to participate in e4L's Management Incentive Plan and its other
executive compensation programs. e4L also maintained $1,000,000 of insurance for
Mr. Verratti, which was payable to the beneficiaries designated by Mr. Verratti.
Mr. Verratti also received an automobile allowance. Pursuant to Mr. Verratti's
original employment agreement with e4L, Mr. Verratti was granted options to
purchase 700,000 shares of Common Stock at an exercise price of $4.75 per share.
Under the terms of Mr. Verratti's employment agreement, upon consummation of
the Transaction, Mr. Verratti could have elected to receive a cash payment in
the amount of $600,000. In August 1998, Mr. Verratti agreed to waive the benefit
of such provision and to relinquish the position of Chief Executive Officer to
Mr. Lehman pending consummation of the Transaction. In exchange for such waiver
and Mr. Verratti's agreement to terminate his employment with e4L upon
consummation of the Transaction, 450,000 options to purchase Common Stock at an
exercise price of $4.75 per share held by Mr. Verratti were repriced at $2.00
per share and the term of 700,000 stock options was extended for one additional
year to three years from the date of termination of his employment with e4L.
ERIC R. WEISS, VICE CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF OPERATING
OFFICER.
In addition to the compensation Mr. Weiss received pursuant to the
Consulting Agreement described above, Mr. Weiss is currently compensated
pursuant to an Employment Agreement. On January 29, 1999, e4L entered into an
Employment Agreement with Mr. Weiss pursuant to which Mr. Weiss serves as Vice
Chairman of the Board of Directors and Chief Operating Officer of e4L from March
15, 1999 through October 22, 2001 at an annual minimum base salary of $387,000.
In addition to the base salary payable pursuant to the Employment Agreement,
provided e4L is profitable on an EBITDA basis, Mr. Weiss is entitled to receive
a bonus in an amount to be determined by the Compensation Committee of the Board
of Directors or the Board of Directors. Mr. Weiss is also entitled to
participate in all group medical and dental, hospitalization, health and
accident, group life, travel, disability or similar plans or programs of e4L,
and 401(k) and stock purchase programs and any other programs that e4L provides
to other executives of e4L. Mr. Weiss is also entitled to certain fringe
18
<PAGE>
benefits, including personal financial and legal counseling, not to exceed the
sum of $10,000 annually, and an automobile allowance of $15,000 per annum.
Pursuant to the Employment Agreement, Mr. Weiss is eligible to participate in
e4L's qualified and non-qualified stock option plan(s). To the extent that Mr.
Weiss is granted stock options, such stock options shall have an exercise price
equal to the closing price of e4L's Common Stock on the date of grant, be
exercisable for ten years, and vest on a schedule to be determined by the
Compensation Committee of the Board of Directors or the Board of Directors, but
in no event shall such vesting period be more than three years.
In the event of a Constructive Termination of the Employment Agreement (as
defined in the Employment Agreement), e4L will be required to pay Mr. Weiss 2.99
times Mr. Weiss' base salary in effect on the date of such Constructive
Termination. If Mr. Weiss' employment is terminated either by Mr. Weiss'
voluntary action or For Cause (as defined in the Employment Agreement), e4L will
pay Mr. Weiss' base salary that has accrued as of the date of termination, in
addition to any bonus owed and accrued vacation pay. In the event of a Change of
Control (as defined in the Employment Agreement), and if either (i) the Change
of Control results in the termination of Mr. Weiss' employment during the first
180 days after such Change of Control, or (ii) following a Change of Control,
e4L or any successor to e4L fails to assume, in writing, all obligations of e4L
to perform the Employment Agreement, e4L shall pay Mr. Weiss 2.99 times Mr.
Weiss' base salary in effect at the time of such Change of Control. In the event
Mr. Weiss' employment is terminated as a result of a Change of Control or
Constructive Termination, and the aggregate of all payments or benefits made or
provided to Mr. Weiss under the Employment Agreement constitute a Parachute
Payment (as defined by the Internal Revenue Code of 1986, as amended), e4L shall
pay to Mr. Weiss an additional amount equal to 100% of the Excise Tax (as
defined in the Employment Agreement) on the Parachute Payment.
Pursuant to the Employment Agreement, e4L has agreed to indemnify Mr. Weiss
to the maximum extent permitted by law and to pay Mr. Weiss' expenses (including
legal fees) in respect of Mr. Weiss' right to indemnification under the
Employment Agreement, subject to a later determination as to Mr. Weiss' ultimate
right to receive such payment.
JOHN W. KIRBY, PRESIDENT.
On March 20, 1998 e4L entered into an employment agreement with Mr. Kirby
pursuant to which Mr. Kirby serves as President of e4L and Quantum Television at
an annual minimum base salary of $325,000. In addition to the base salary
payable pursuant to the agreement, Mr. Kirby is entitled to receive a minimum of
$75,000 per annum in bonuses, which $75,000 is advanced pro rata during the
year. Under the terms of the agreement, the increased base salary and bonus were
deemed to have commenced as of October 1997. Mr. Kirby is not entitled to
participate in e4L's Management Incentive Plan, the DirectAmerica Bonus Plan and
e4L's other executive compensation plans; in lieu thereof, he is eligible to
participate in e4L's Production Bonus Program. e4L reimburses Mr. Kirby for
premiums associated with up to $1,000,000 of insurance on the life of Mr. Kirby,
which is payable to beneficiaries designated by Mr. Kirby; and, pays Mr. Kirby
an automobile allowance of $9,600 per annum. Pursuant to this employment
agreement, Mr. Kirby was granted options to purchase up to 300,000 shares of
Common Stock. The options were immediately exercisable at a price of $2.69 per
share. Such options expire on January 28, 2008. Mr. Kirby's employment agreement
expired on September 30, 1998. e4L is presently in negotiations with Mr. Kirby
regarding an extension of his employment agreement. While e4L believes it will
be able to reach an agreement with Mr. Kirby upon mutually agreeable terms, its
ability to do so is not certain.
DANIEL M. YUKELSON, EXECUTIVE VICE PRESIDENT AND FINANCE, CHIEF FINANCIAL
OFFICER, AND SECRETARY.
In addition to the compensation Mr. Yukelson received pursuant to the
Consulting Agreement described above, Mr. Yukelson is currently compensated
pursuant to an Employment Agreement
19
<PAGE>
entered into with e4L. On January 29, 1999, e4L entered into an Employment
Agreement with Mr. Yukelson pursuant to which Mr. Yukelson serves as Executive
Vice President/Finance, Chief Financial Officer and Secretary of e4L from March
1, 1999 through October 22, 2001 at an annual minimum base salary of $225,000.
In addition to the base salary payable pursuant to the Employment Agreement,
provided e4L is profitable on an EBITDA basis, Mr. Yukelson is entitled to
receive a bonus in an amount to be determined by the Compensation Committee of
the Board of Directors or the Board of Directors. Mr. Yukelson is also entitled
to participate in all group medical and dental, hospitalization, health and
accident, group life, travel, disability or similar plans or programs of e4L,
and 401(k) and stock purchase programs and any other programs that e4L provides
to other executives of e4L Mr. Yukelson is also entitled to certain fringe
benefits, including personal financial and legal counseling, not to exceed the
sum of $10,000 annually, and an automobile allowance of $15,000 per annum.
Pursuant to the Employment Agreement, Mr. Yukelson is eligible to participate in
e4L's qualified and non-qualified stock option plan(s). To the extent that Mr.
Yukelson is granted stock options, such stock options shall have an exercise
price equal to the closing price of e4L's Common Stock on the date of grant, be
exercisable for ten years, and vest on a schedule to be determined by the
Compensation Committee of the Board of Directors or the Board of Directors, but
in no event shall such vesting period be more than three years.
In the event of a Constructive Termination of the Employment Agreement (as
defined in the Employment Agreement), e4L will be required to pay Mr. Yukelson
2.99 times Mr. Yukelson's base salary in effect on the date of such Constructive
Termination. If Mr. Yukelson's employment is terminated either by Mr. Yukelson's
voluntary action or For Cause (as defined in the Employment Agreement), e4L will
pay Mr. Yukelson's base salary that has accrued as of the date of termination,
in addition to any bonus owed and accrued vacation pay. In the event of a Change
of Control (as defined in the Employment Agreement), and if either (i.) the
Change of Control results in the termination of Mr. Yukelson's employment during
the first 180 days after such Change of Control, or (ii.) following a Change of
Control, e4L or any successor to e4L fails to assume, in writing, all
obligations of e4L to perform the Employment Agreement, e4L shall pay Mr.
Yukelson 2.99 times Mr. Yukelson's base salary in effect at the time of such
Change of Control. In the event Mr. Yukelson's employment is terminated as a
result of a Change of Control or Constructive Termination, and the aggregate of
all payments or benefits made or provided to Mr. Yukelson under the Employment
Agreement constitute a Parachute Payment (as defined by the Internal Revenue
Code of 1986, as amended), e4L shall pay to Mr. Yukelson an additional amount
equal to 100% of the Excise Tax (as defined in the Employment Agreement) on the
Parachute Payment.
Pursuant to the Employment Agreement, e4L has agreed to indemnify Mr.
Yukelson to the maximum extent permitted by law and to pay Mr. Yukelson's
expenses (including legal fees) in respect of Mr. Yukelson's right to
indemnification under the Employment Agreement, subject to a later determination
as to Mr. Yukelson's ultimate right to receive such payment.
20
<PAGE>
STOCK OPTIONS GRANTED DURING FISCAL 1999
The following table sets forth certain information concerning options to
purchase Common Stock of e4L granted to the executive officers named in the
Summary Compensation Table in the fiscal year ended March 31, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
NUMBER OF OPTIONS PRICE APPRECIATION
SECURITIES GRANTED TO FOR OPTION TERM (1)
UNDERLYING EMPLOYEES IN EXERCISE EXPIRATION ---------------------
NAME OPTIONS GRANTED FISCAL YEAR PRICE DATE 5% 10%
- ------------------------------- ------------------- ------------- --------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Stephen C. Lehman.............. 125,000(2) 11.7% $ 1.32/sh 8/11/03 $ 45,000 $ 101,250
Robert N. Verratti............. -- -- -- -- -- --
Eric R. Weiss.................. 62,500(2) 5.9% $ 1.32/sh 8/11/03 $ 22,500 $ 50,625
John W. Kirby.................. -- -- -- -- -- --
Daniel M. Yukelson............. 25,000(2) 2.3% $ 1.32/sh 8/11/03 $ 9,000 $ 20,250
</TABLE>
- ------------------------
(1) The exercise price of each stock option was equal to the market price of the
Common Stock on the date of grant. The actual value, if any, an option
holder may realize will be a function of the extent to which the stock price
exceeds the exercise price on the date the option is exercised and also will
depend on the option holder's continued employment through the vesting
period. The actual value to be reached by the option holder may be greater
or less than the values estimated in this table.
(2) Options granted to TMC in connection with a consulting agreement between e4L
and TMC.
The following table sets forth certain information concerning the exercise
in the fiscal year ended March 31, 1999 of options to purchase Common Stock of
e4L by the executive officers named in the Summary Compensation Table and the
unexercised options to purchase Common Stock of e4L held by such individuals at
March 31, 1999. Year-end values are based upon the closing market price per
share of e4L's Common Stock on March 31, 1999 of $8.375.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FY-END (#) AT FY-END (#)(1)
ACQUIRED ON VALUE -------------------------------- --------------------------------
NAME EXERCISE REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ----------- ------------ ----------- ------------------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Robert N. Verratti............. 450,000 $ 1,468,750 250,000 0 $ 906,250 0
</TABLE>
- ------------------------
(1) Values are calculated by subtracting the exercise price from the fair market
value as of the exercise date or fiscal year end, as appropriate. Values are
reported before any taxes associated with exercise or subsequent sale of the
underlying stock. The closing market price of e4L's Common Stock on March
31, 1999 was $8.375.
21
<PAGE>
The following table sets forth certain information concerning the repricing
of options for the ten-year period ending on March 31, 1999.
10-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
MARKET PRICE OF EXERCISE ORIGINAL OPTION
NUMBER OF STOCK AT TIME PRICE TERM REMAINING
SECURITIES OF AT TIME OF NEW AT DATE OF
UNDERLYING REPRICING OR REPRICING OR EXERCISE REPRICING
NAME DATE OPTIONS REPRICED AMENDMENT AMENDMENT PRICE OR AMENDMENT
- ------------------------- --------- ------------------- --------------- ------------- --------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Robert N. Verratti,...... 8/12/98 450,000 $ 4.75/sh $ 4.75/sh $ 2.00/sh 9 years, 159 days
Former Chief Executive
Officer
</TABLE>
COMPENSATION/STOCK OPTION COMMITTEE REPORT ON OPTION REPRICING FOR THE FISCAL
YEAR ENDED MARCH 31, 1999
At a meeting of the Board of Directors held on July 10, 1998 to approve the
terms of the Transaction, the Board of Directors approved an agreement with Mr.
Verratti, the then current Chief Executive Officer of e4L, pursuant to which Mr.
Verratti agreed to waive the provision in his employment agreement which would
have entitled Mr. Verratti to receive a cash payment in the amount of $600,000
upon consummation of the Transaction. In consideration of such waiver, along
with Mr. Verratti's agreement to relinquish the position of Chief Executive
Officer to Mr. Lehman pending consummation of the Transaction, and to terminate
his employment with e4L upon consummation of the Transaction, options to
purchase 450,000 shares of Common Stock at an exercise price of $4.75 per share
were repriced to $2.00 per share. In addition, the exercise period of all of Mr.
Verratti's 700,000 stock options was extended for one additional year to three
years from the date of termination of Mr. Verratti's employment by e4L.
The Board of Directors believed that the repricing of such stock options, in
lieu of the cash payment described above, benefited e4L's stockholders in light
of the financial position of e4L at the time of the Transaction. It is important
to note that the undersigned members of e4L's current Compensation/Stock Option
Committee of the Board of Directors did not participate in the negotiations
and/or determinations made by e4L's prior Compensation Committee and Board of
Directors with respect to Mr. Verratti.
The Compensation Committee of e4L is comprised of the following members:
Robert W. Crawford (Chairman)
David E. Salzman
Andrew M. Schuon
COMPENSATION OF DIRECTORS
Each Director who is not an employee of e4L is granted an equity retainer
consisting of options to purchase 15,000 shares of e4L Common Stock pursuant to
the 1991 Stock Option Plan upon such Directors' appointment or election to the
Board of Directors. The options vest over a three year period, with 5,000
options vesting on the date of grant and 5,000 options vesting at the end of
each of years two and three following such Director's appointment or election to
the Board of Directors. Each of Messrs. Buchalter, Crawford, Salzman and Schuon
were granted such options on October 23, 1998 at an exercise price of $3.47 per
share, which approximated the closing price of e4L's Common Stock on such date.
In addition to the equity retainer, each Director receives $500 per meeting
attended in person and $250 per committee meeting attended in person, such fees
to be paid only in the event that e4L achieves pre-tax profits for two
consecutive quarters. During the fiscal year ended March 31, 1999, e4L incurred
expenses of approximately $129,000 for Directors' fees, all of which represents
payments to non-employee Directors for expenses incurred prior to the
Transaction.
22
<PAGE>
REPORT OF THE COMPENSATION/STOCK OPTION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The following report shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except in the event that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
statutes.
e4L's executive compensation program is administered by the
Compensation/Stock Option Committee, which is composed of three non-employee
members of the e4L's Board of Directors: Robert W. Crawford, David E. Salzman
and Andrew M. Schuon. The Compensation/Stock Option Committee reviews,
recommends and approves changes to the Company's compensation policies and
benefits programs, administers the Company's stock option plan, including
approving stock option grants, and otherwise seeks to ensure that the Company's
compensation philosophy is consistent with the Company's best interests and is
properly implemented.
Compensation determinations for executive officers that are subject to the
provisions of Internal Revenue Code 162(m) are independently reviewed by the
Compensation/Stock Option Committee.
This report covers the compensation of the Chief Executive Officer and other
executive officers for the year ended March 31, 1999, e4L's most recently
completed fiscal year, as required under applicable rules of the Securities and
Exchange Commission.
COMPENSATION PHILOSOPHY AND REVIEW
Following the consummation of the investment transaction during fiscal year
ending March 31, 1999, pursuant to which a new management team and Board of
Directors assumed control of e4L, the Board of Directors constituted a
Compensation/Stock Option Committee which formulated a philosophy for
compensation of executive officers.
The Company's compensation philosophy for executive officers serves two
principal purposes: (i) to provide a total compensation package for executive
officers that is competitive and enables the Company to attract and retain key
executive and employee talent needed to accomplish the Company's business
objectives and (ii) to directly link compensation to improvements in Company
performance and increases in stockholder value as measured principally by the
trading price of the Company's Common Stock.
In determining compensation levels for the fiscal year ended March 31, 1999,
the Compensation/ Stock Option Committee relied upon publicly available
compensation information and informal survey information obtained by management
with respect to other direct marketing and Internet-related companies. The
Compensation/Stock Option Committee did not determine it necessary to, and did
not attempt to, specifically analyze compensation levels at companies included
in the index under the caption, "Performance Graph."
ELEMENTS OF CHIEF EXECUTIVE OFFICER AND OTHER OFFICER COMPENSATION
Mr. Verratti served as the Company's Chief Executive Officer from April 1997
until August 1998. Mr. Verratti's compensation package and employment agreement
are described above under "Employment Contracts, Termination of Employment and
Change-in-Control Arrangements."
Effective August 11, 1998, in connection with the execution of the Stock
Purchase Agreement pursuant to which an investor group led by Mr. Lehman
acquired operational control of e4L, Mr. Lehman became Acting Chief Executive
Officer of e4L. From August 11, 1998 until February 28, 1999, Mr. Lehman,
together with Messrs. Weiss and Yukelson, were compensated pursuant to the terms
of the Temporary Media Co., LLC Consulting Agreement described under "Employment
Contracts,
23
<PAGE>
Termination of Employment and Change-in-Control Arrangements." Effective at that
time, Mr. Lehman entered into the Employment Agreement described under
"Employment Contacts, Termination of Employment and Change-in-Control
Arrangements.
The Company's executive compensation consists primarily of salary, health
insurance and similar perquisites, and stock option awards. The Company
emphasizes the award of stock options and does not generally make use of cash
incentive bonuses. The Compensation/Stock Option Committee believes that in the
highly competitive, emerging markets in which the Company operates, equity-based
compensation provides the greatest incentive for outstanding executive
performance and the greatest alignment of management and stockholder long-term
interests.
OFFICER SALARIES. The Compensation/Stock Option Committee reviews each
senior executive officer's salary annually. In determining the appropriate
salary levels, the Compensation/Stock Option Committee considers, among other
factors, the officer's scope of responsibility, prior experience, past
accomplishments, and data on prevailing compensation levels in relevant markets
for executive talent.
The Compensation/Stock Option Committee did not increase the salary of any
of its executive officers during the fiscal year ended March 31, 1999. Any
future salary increase would be based upon, among other factors, the
Compensation/Stock Option Committee's assessment of the executive officer with
respect to the performance and increase in his or her responsibilities
associated with the changes in the Company's business strategies. In reviewing
executive officer performance, the Compensation/ Stock Option Committee also
assesses the number of Company achievements, including positive trends in
quarterly revenues and EBITDA, the completion of significant strategic projects,
business alliances and relationships, and the ability to successfully recruit
and hire other key employees.
The Compensation/Stock Option Committee believes that the base salary levels
of the executive officers, including Mr. Lehman, are at or below the median of
base salary levels for comparable companies considered in the information
reviewed by the Compensation/Stock Option Committee.
STOCK OPTION GRANTS. As noted above, the Company has relied substantially
on long-term equity compensation as the principal means of compensating and
providing incentive to its executive officers and other employees. It is the
Company's practice to set option exercise prices for officers at not less than
100% of the fair market value of the Common Stock on the date of grant.
Accordingly, the value of the stockholders' investment in the Company must
appreciate before an optionee receives any financial benefit from the option.
Options are generally granted for a term of ten years. Options granted to
executive officers generally provide that they are not exercisable until one
year after the date of grant, at which time they become exercisable on the
cumulative basis at a maximum annual rate of 25% of the total number of shares
underlying the option grant. During the fiscal year ended March 31, 1999,
Messrs. Lehman, Weiss and Yukelson received options pursuant to the consulting
agreement between e4L and TMC. See "Stock Options Granted During Fiscal 1999."
In determining the size of the stock option grant, the Compensation/Stock
Option Committee considers various subjective factors primarily relating to the
responsibilities of the individual officers, and also to their expected future
contributions and the number of shares owned by the officer or which continue to
be subject to vesting under outstanding options. In addition, the
Compensation/Stock Option Committee examines the level of equity incentives held
by each officer relative to the other officers' equity positions and their
tenure, responsibilities, experience, and value to the Company. As part of its
compensation review during the fiscal year ending March 31, 1999, the
Compensation/Stock Option Committee approved the grant of options to Anthony M.
Vercillo for 75,000 shares of Common Stock.
Because of the Company's potential additional growth that may result from
acquisitions of other companies and businesses, the Board of Directors has
approved an amendment to increase by an aggregate 500,000 shares, the number of
shares of Common Stock that may be issued pursuant to the
24
<PAGE>
exercise of options granted under the Company's 1991 Stock Option Plan. The
Company is seeking approval of this amendment by the stockholders at the
Stockholders' Meeting. See "Proposal No. II, Amendment to the Company's 1991
Stock Option Plan."
POLICY ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the U.S. Internal Revenue Code limits the tax
deductibility by a corporation of compensation in excess of $1 million paid to
the Chief Executive Officer and any other of its four most highly compensated
executive officers. However, compensation which qualifies as "performance-based"
is excluded from the $1 million limit if, among other requirements, the
compensation is payable only upon attainment of pre-established, objective
performance goals under a plan approved by stockholders.
The Compensation/Stock Option Committee does not presently expect total cash
compensation payable for salaries to exceed the $1.0 million limit for any
individual executive officer. Having considered the requirements of Section
162(m), the Compensation/Stock Option Committee believes that stock option
grants to date meet the requirement that such grants be "performance-based" and
are, therefore, exempt from the limitations on deductibility. The
Compensation/Stock Option Committee will continue to monitor the compensation
levels potentially payable under the Company's cash compensation programs, but
intends to retain the flexibility necessary to provide total cash compensation
in line with competitive practice, the Company's compensation philosophy, and
the Company's best interests.
25
<PAGE>
COMPARATIVE STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
Common Stock with the cumulative total stockholder return of (i) the S&P
SmallCap 600 Index, and (ii) an index of four companies in the Company's peer
group (the "Peer Group Index"), assuming an investment of $100 on March 31, 1994
in each of the Common Stock of the Company, the companies comprising the S&P
SmallCap 600 Index and the companies comprising the Peer Group Index. The
companies in the Peer Group Index are Fingerhut Companies, Inc., Home Shopping
Network, Inc., Hanover Direct, Inc. (formed September 1993 and formerly known as
Horn & Hardart Company) and Lillian Vernon Corporation.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOTAL SHAREHOLDER RETURN
<S> <C> <C> <C>
DOLLARS
YEARS ENDING
E4L INC S&P SMALLCAP 600 INDEX PEER GROUP
1994 100 100 100
1995 93.94 105.28 52.52
1996 200.00 138.12 53.91
1997 103.03 149.71 56.89
1998 30.30 221.09 121.17
1999 101.52 178.80 207.11
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------------------
3/94 3/95 3/96 3/97 3/98 3/99
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
e4L, Inc................. 100 93.94 200.00 103.03 30.30 101.52
Peer Group............... 100 52.52 53.91 56.89 121.17 207.11
S&P SmallCap 600......... 100 105.28 138.12 149.71 221.09 178.80
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Set forth below is a description concerning transactions which may not
otherwise be described herein by and between e4L and/or its affiliates, and
other persons or entities affiliated with e4L or its affiliates. e4L is of the
view that each of such transactions was on terms no less favorable to e4L than
would otherwise have been available to e4L in transactions with unaffiliated
third parties, if available at all.
26
<PAGE>
TMC CONSULTING AGREEMENT
In connection with the transaction pursuant to which Mr. Lehman and his
management group assumed operational control of e4L (the "Transaction") e4L
entered into the Consulting Agreement with TMC pursuant to which TMC provided
executive management services to e4L through February 1999. Pursuant to the
terms of the Consulting Agreement, Messrs. Lehman, Weiss and Yukelson provided
at least an aggregate of 100 hours per week of management services to e4L. Mr.
Lehman, Mr. Weiss (through an entity controlled by Mr. Weiss) and Mr. Yukelson
were members of TMC during the period that such consulting services were
rendered. See "Employment Contracts, Termination of Employment and
Change-in-Control Arrangements."
BROADCAST.COM AGREEMENT
On August 23, 1998, e4L entered into an exclusive services agreement with
Broadcast.com pursuant to which Broadcast.com has agreed to provide complete
Internet broadcasting services for e4L's direct response television programming.
Pursuant to the terms of the service agreement, e4L is required to pay
Broadcast.com (i) an advance fee of $250,000, (ii) a monthly fee of $41,666 for
three months; (iii) a monthly fee of $83,333 for the remaining eighteen months
of the agreement, and (iv) certain programming and encoding fees. Mark Cuban is
the Chief Executive Officer of Broadcast.com and was also a member of the
investor group which assumed operational control of e4L in October 1998 in
connection with the Transaction. The agreement was ratified by the unanimous
vote of the disinterested members of the Board of Directors.
IFMC, INC. CONSULTING AGREEMENT
In August 1998, e4L entered into a consulting agreement with IFMC, Inc.
("IFMC") a consulting firm of which Anthony M. Vercillo, e4L's current Executive
Vice President, Global Operations, is the sole shareholder. The consulting
agreement was terminated in November 1998 in connection with the hiring of Mr.
Vercillo by e4L, however, e4L utilized IFMC's services subsequent to termination
of the agreement in March 1999. During fiscal year 1999, e4L paid an aggregate
of $66,800 in fees to IFMC.
ALIGNE, INC. CONSULTING AGREEMENT
Aligne, Inc., an information systems consulting firm which is affiliated
with Safeguard Scientifics, Inc., provided information systems consulting
services to e4L through November 1998. e4L paid an aggregate of $250,000 during
the fiscal year ended March 31, 1999.
LEGAL SERVICES
Stuart D. Buchalter is Of Counsel to the California law firm of Buchalter,
Nemer, Fields and Younger, which from time to time provides legal services to
e4L.
William Goldstein, a Director of e4L during the fiscal year ended March 31,
1999, is a partner at the Philadelphia, Pennsylvania law firm of Drinker, Biddle
& Reath, LLP, which provided legal services to e4L during the fiscal year ended
March 31, 1999.
MANAGEMENT INDEBTEDNESS
In March 1998, e4L entered into an employment agreement with John W. Kirby,
pursuant to which Mr. Kirby serves as the President of e4L. The terms of the
agreement included the forgiveness of a loan, including accrued interest, in the
amount of $191,186 and the issuance of a new $545,000 loan to Mr. Kirby. The new
loan bears interest at a rate equal to the Prime rate plus 1 1/2% per annum and
is due May 30, 2000. Such funds were used by Mr. Kirby for personal purposes. As
collateral for the
27
<PAGE>
indebtedness, Mr. Kirby has pledged 100,000 shares of Common Stock to e4L. As of
March 31, 1999, principal and accrued interest thereon of approximately $600,000
was outstanding under such note.
Such amount represents the largest aggregate amount of indebtedness
outstanding since the issuance of the promissory note. Mr. Kirby also held an
allowance from e4L in the amount of $18,000, bearing no interest, which was
advanced to him for personal reasons in November 1995. Mr. Kirby also acts as
surety for debt owing to e4L in principal and accrued interest of approximately
$42,176 which was outstanding as of March 31, 1999.
OTHER STOCKHOLDER MATTERS
STOCKHOLDER PROPOSALS AND NOMINATIONS OF DIRECTORS FOR THE COMPANY'S NEXT
ANNUAL MEETING OF STOCKHOLDERS
Any stockholder who intends to present a proposal for consideration at the
Company's next annual meeting of stockholders intended to occur on or about
August 31, 2000 must, submit his proposal to the Company on or before May 2,
2000 in order to have the Company consider the inclusion of such proposal in the
Company's Proxy Statement and form of proxy relating to such annual meeting.
Reference is made to Rule 14a-8 under the Exchange Act for information
concerning the content and form of such proposal and the manner in which such
proposal must be made.
Nominations for election to the Board of Directors at the Company's next
annual meeting may be made only in writing by a stockholder entitled to vote at
such annual meeting and must be addressed to the Corporate Secretary, e4L, Inc.
15821 Ventura Boulevard, 5th Floor, Los Angeles, California 91436, who will
forward such information to the Board of Directors. Nominations must be received
by the Secretary on or before May 2, 2000, and must be accompanied by the
written consent of the nominee. Nominations should also be accompanied by a
description of the nominee's business or professional background and otherwise
contain the information required by Schedule 14A of the Exchange Act.
OTHER BUSINESS
The Board of Directors is not aware of any other matters that may be brought
before the Stockholders' Meeting. If other matters not now known come before the
Stockholders' Meeting, the persons named in the accompanying form of proxy or
their substitutes will vote such proxy in accordance with their judgment.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires e4L's directors, certain of its
officers and persons who own more than ten percent (10%) of e4L's Common Stock
(collectively the "Reporting Persons") to file reports of ownership and changes
in ownership with the Securities and Exchange Commission (the "Commission") and
to furnish e4L with copies of these reports.
Based on e4L's review of the copies of these reports received by it, and
representations received from Reporting Persons, e4L believes that, all filings
required to be made by the Reporting Persons for the period April 1, 1998
through March 31, 1999 were made on a timely basis.
INDEPENDENT AUDITORS
Representatives of Ernst & Young LLP are expected to be present at the
Stockholders' Meeting, will have the opportunity to make a statement if they
desire to do so, and are expected to be available to respond to appropriate
questions.
ANNUAL REPORT TO STOCKHOLDERS
A copy of the Company's Annual Report to Stockholders on Form 10-K for the
fiscal year ended March 31, 1999 (the "Annual Report") which contains copies of
the Company's audited financial statements is being sent to stockholders with
this Proxy Statement. The Annual Report shall not be deemed proxy solicitation
material.
28
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ANNEX A
E4L, INC.
AMENDED AND RESTATED STOCK OPTION PLAN
(AS LAST AMENDED EFFECTIVE JULY 15, 1999, SUBJECT TO STOCKHOLDER APPROVAL)
The purpose of the Amended and Restated Stock Option Plan (the "Plan") of
e4L, Inc. (the "Company") is to promote the interests of the Company by
providing incentives to (i) designated officers and other employees of the
Company or a Subsidiary Corporation (as defined herein), (ii) non-employee
members of the Company's Board of Directors (the "Board") and (iii) independent
contractors and consultants (who may be individuals or entities) who perform
services for the Company, to enable the Company to attract and retain them and
to encourage them to acquire a proprietary interest, or to increase their
proprietary interest, in the Company. The Company believes that the Plan will
cause participants to contribute materially to the growth of the Company,
thereby benefiting the Company's stockholders. For purposes of the Plan, the
terms "Parent Corporation" and "Subsidiary Corporation" shall have the meanings
set forth in subsections (e) and (f) of Section 424 of the Internal Revenue Code
of 1986, as amended (the "Code").
1. ADMINISTRATION
(a) The Plan shall be administered and interpreted by a committee of the
Board (the "Committee") consisting of not less than two persons, all of whom
shall be "disinterested persons" as defined under Rule 16b-3 under the
Securities Exchange Act of 1934 (the "Exchange Act") or any successor provisions
and "outside directors" for purposes of Section 162(m) of the Code. The
Committee shall have the sole authority to determine (i) who is eligible to
receive Grants (as defined in Section 2 below) under the Plan, (ii) the type,
size and terms of each Grant under the Plan (subject to Section 4 below), (iii)
the time when each Grant will be made and the duration of any exercise or
restriction period; (iv) any restrictions on resale applicable to the shares to
be issued or transferred pursuant to the Grant; and (v) any other matters
arising under the Plan. The Committee may, if it so desires, base any of the
foregoing determinations upon the recommendations of management of the Company.
The Committee shall have full power and authority to administer and interpret
the Plan and to adopt or amend such rules, regulations, agreements and
instruments as it may deem appropriate for the proper administration of the
Plan. The Committee's interpretations of the Plan and all determinations made by
the Committee pursuant to the powers vested in it hereunder shall be conclusive
and binding on all persons having any interests in the Plan or in any Grants
under the Plan. No person acting under this subsection shall be held liable for
any action or determination made in good faith with respect to the Plan or any
Grant under the Plan.
(b) Each member of the Committee shall be indemnified and held harmless by
the Company against any cost or expense (including counsel fees) reasonably
incurred by him or her, or liability (including any sum paid in settlement of a
claim with the approval of the Company) arising out of any act or omission to
act in connection with the Plan, unless arising out of such member's own fraud
or bad faith, to the extent permitted by applicable law. Such indemnification
shall be in addition to any rights of indemnification the members may have as
directors or otherwise under the Certificate of Incorporation or By-Laws of the
Company, any agreement of stockholders or disinterested directors or otherwise.
2. GRANTS
Incentives under the Plan shall consist of Incentive Stock Options (as
defined in Section 5(b) below), Nonqualified Stock Options (as defined in
Section 5(b) below), Restricted Stock Grants (as defined in Section 6 below) or
SARs (as defined in Section 7 below) (hereinafter collectively referred to as
"Grants"). All Grants shall be subject to the terms and conditions set forth
herein and to such other terms and conditions of any nature as long as they are
not inconsistent with the Plan as the Committee deems appropriate and specifies
in writing to the participant (the "Grant Letter"). The
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Committee shall approve the form and provisions of each Grant Letter. Grants
under any section of the Plan need not be uniform as among the participants
receiving the same type of Grant, and Grants under two or more sections of the
Plan may be combined in one Grant Letter.
3. SHARES SUBJECT TO THE PLAN
(a) The aggregate number of shares of the Common Stock, par value $.01
("Common Stock"), of the Company that may be issued or transferred under the
Plan is 7,865,000, subject to adjustment pursuant to Section 3(b) below. Such
shares may be authorized but unissued shares or reacquired shares. If and to the
extent that options granted under the Plan terminate, expire or are canceled
without having been exercised (including shares cancelled as part of an exchange
of Grants), or if any shares of restricted stock are forfeited, the shares
subject to such Grant shall again be available for subsequent Grants under the
Plan.
(b) If any change is made to the Common Stock (whether by reason of merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
combination of shares, or exchange of shares or any other change in capital
structure made without receipt of consideration), then unless such event or
change results in the termination of all outstanding Grants under the Plan, the
Committee shall preserve the value of the outstanding Grants by adjusting the
maximum number and class of shares issuable under the Plan to reflect the effect
of such event or change in the Company's capital structure, and by making
appropriate adjustments to the number and class of shares, the exercise price of
each outstanding option and otherwise, except that any fractional shares
resulting from such adjustments shall be eliminated by rounding any portion of a
share equal to .500 or greater up, and any portion of a share equal to less than
.500 down, in each case to the nearest whole number.
4. ELIGIBILITY FOR PARTICIPATION
Officers and other employees of the Company or a Subsidiary Corporation,
non-employee members of the Board, and independent contractors and consultants
who perform services for the Company shall be eligible to participate in the
Plan (hereinafter referred to individually as an "Eligible Participant", and
collectively as the "Eligible Participants"). Only Eligible Participants who are
officers or other employees of the Company or a Subsidiary Corporation shall be
eligible to receive Incentive Stock Options. All Eligible Participants shall be
eligible to receive Nonqualified Stock Options, Restricted Stock Grants and
SARs. The Committee shall select from among the Eligible Participants those who
will receive Grants (the "Grantees") and shall determine the number of shares of
Common Stock subject to each Grant. The maximum number of shares of Common Stock
for which any Grantee may be granted options under this Plan in any one taxable
year of the Company shall not exceed 1,000,000 shares. The Committee may, if it
so desires, base any such selections or determinations upon the recommendations
of management of the Company. Nothing contained in the Plan shall be construed
to limit in any manner whatsoever the right of the Company to grant rights or
options to acquire Common Stock or awards of Common Stock otherwise than
pursuant to the Plan.
5. STOCK OPTIONS
(a) Number of Shares. The Committee, in its sole discretion, shall determine
the number of shares of Common Stock that will be subject to each option.
(b) Type of Option and Option Price.
(1) The Committee may grant options qualifying as incentive stock
options within the meaning of Section 422 of the Code ("Incentive Stock
Options") and other stock options ("Nonqualified Stock Options") in
accordance with the terms and conditions set forth herein, or may grant any
combination of Incentive Stock Options and Nonqualified Stock Options
(hereinafter referred to collectively as "Stock Options"). The option price
per share of an
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Incentive Stock Option shall be the fair market value (as defined herein) of
a share of Common Stock on the date of grant. If the Grantee of an Incentive
Stock Option is the owner of Common Stock (as determined under section
424(d) of the Code) who possesses more than 10% of the total combined voting
power of all classes of stock of the Company or a Parent Corporation or
Subsidiary Corporation, the option price per share in the case of an
Incentive Stock Option shall not be less than 110% of the fair market value
of a share of Common Stock on the date of grant.
(2) For all valuation purposes under the Plan, the fair market value of
a share of Common Stock shall be determined in accordance with the following
provisions.
(A) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange but is traded in the over-the-counter
market (but not on the Nasdaq National Market segment of The Nasdaq Stock
Market), the fair market value shall be the mean between the last
reported bid and asked prices of one share of Common Stock on the date in
question in the over-the-counter market, as such prices are reported by
the National Association of Securities Dealers through its Nasdaq system
or any successor system. If there are no reported bid and asked prices on
the date in questions, then the mean between the last reported bid and
asked prices on the next preceding date for which such quotations exist
shall be determinative of fair market value. If the Common Stock is
traded over-the-counter on the Nasdaq National Market segment of The
Nasdaq Stock Market, the fair market value shall be the closing selling
price of one share of Common Stock on the date in question as such price
is reported by the National Association of Securities Dealers through
such system or any successor system. If there is no reported closing
selling price for the Common Stock on the date in question, then the
closing selling price on the next preceding date for which such quotation
exists shall be determinative of fair market value.
(B) If the Common Stock is at the time listed or admitted to trading
on any stock exchange, then the fair market value shall be the closing
selling price of one share of Common Stock on the date in question on the
stock exchange determined by the Committee to be the primary market for
the Common Stock, as such prices are officially quoted on such exchange.
If there is no reported closing selling price of Common Stock on such
exchange on the date in question, then the fair market value shall be the
closing selling price on the next preceding date for which such quotation
exists.
(C) If the Common Stock is at the time neither listed nor admitted to
trading on any stock exchange nor traded in the over-the-counter market
(or, if the Committee determines that the value as determined pursuant to
Section 5(b)(2)(A) or (B) above does not reflect fair market value), then
the Committee shall determine fair market value after taking into account
such factors as it deems appropriate.
(c) Exercise Period. The Committee shall determine the option exercise
period of each Stock Option. The exercise period shall not exceed ten years from
the date of grant. Notwithstanding any determinations by the Committee regarding
the exercise period of any Stock Option, all outstanding Stock Options shall
become immediately exercisable upon a Change of Control of the Company (as
defined in Section 9 below).
(d) Vesting of Options and Restrictions on Shares. The vesting period for
Stock Options shall commence on the date of grant and shall end on the date or
dates, or upon the happening of the events or events, as determined by the
Committee, that shall be specified in the Grant Letter. The Committee may impose
upon the shares of Common Stock issuable upon the exercise of a Stock Option
such restrictions as it deems appropriate and specifies in the Grant Letter.
During any period in which such restrictions apply, the provisions of Section
6(d) below shall be applicable to such shares, and the Committee, in such
circumstances as it deems equitable, may determine that all such restrictions
shall lapse. Notwithstanding any other provision of the Plan, all outstanding
Stock Options
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shall become immediately exercisable upon a Change of Control of the Company (as
defined in Section 9 below).
(e) Manner of Exercise. A Grantee may exercise a Stock Option by delivering
a duly completed notice of exercise to the Committee, together with payment of
the option price. Such notice may include instructions authorizing the Company
to deliver the certificates representing the shares of Common Stock issuable
upon the exercise of such Stock Option to any designated registered broker or
dealer ("Designated Broker"). Such instructions shall designate the account into
which the shares are to be deposited. The Grantee may tender such notice of
exercise, which has been properly executed by the Grantee, and the
aforementioned delivery instructions to any Designated Broker.
(f) Termination of Employment, Disability or Death.
(1) If a Grantee ceases to be an Eligible Participant for any reason
(other than, in the case of an individual, the death of such individual) any
Stock Option which is otherwise exercisable by the Grantee shall terminate
unless exercised within three months after the date on which the Grantee
ceases to be an Eligible Participant (or within such other period of time,
which may be longer or shorter than three months, as may be specified in the
Grant Letter), but in any event no later than the date of expiration of the
option exercise period, except that in the case of an individual Grantee who
is disabled within the meaning of section 105(d)(4) of the Code, such period
shall be one year rather than three months (except as otherwise provided in
the Grant Letter).
(2) Except to the extent more liberal terms are set forth in a Grant
Letter, in the event of the death of an individual Grantee while he or she
is an Eligible Participant or within not more than three months after the
date on which the Grantee ceases to be an Eligible Participant (or within
such other period of time, which may be longer or shorter than three months,
as may be specified in the Grant Letter), any Stock Option which was
otherwise exercisable by the Grantee at the date of death may be exercised
by the Grantee's personal representative at any time prior to the expiration
of one year from the date of death, but in any event no later than the date
of expiration of the option exercise period.
(g) Satisfaction of Option Price. The Grantee shall pay the option price in
full at the time of exercise in cash, or, with the consent of the Committee in
its sole discretion, by delivering shares of Common Stock already owned by the
Grantee and having a fair market value on the date of exercise equal to the
option price or a combination of cash and shares of Common Stock; provided,
however, that in lieu of payment in full in such manner, a Grantee may with the
approval of the Board in its sole discretion, be entitled to pay for the shares
purchased upon exercise of the Stock Option by payment to the Company in cash or
by certified or bank check a sum equal at least to the par value of the Common
Stock, with the remainder of the purchase price satisfied by the issuance of an
interest bearing promissory note or notes, in a form and having terms, including
rate of interest, satisfactory to the Board in its sole discretion. The Grantee
shall also pay the amount of withholding tax due, if any, at the time of
exercise. Shares of Common Stock shall not be issued or transferred upon any
purported exercise of a Stock Option until the option price and the withholding
obligation are fully paid.
(h) Limits on Incentive Stock Options. Each Grant of an Incentive Stock
Option shall provide that:
(1) the Stock Option is not transferable by the Grantee, except, in the
case of an individual Grantee, by will or the laws of descent and
distribution;
(2) the Stock Option is exercisable only by the Grantee, except as
otherwise provided herein or in the Grant Letter in the event of the death
of an individual Grantee;
(3) the aggregate fair market value of the Common Stock on the date of
the Grant with respect to which Incentive Stock Options are exercisable for
the first time by a Grantee during any
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calendar year under the Plan and under any other stock option plan of the
Company shall not exceed $100,000; and
(4) unless the Grantee could otherwise transfer Common Stock issued
pursuant to the Stock Option without incurring liability under Section 16(b)
of the Exchange Act, at least six months must elapse from the date of
acquisition of the Stock Option until the date of disposition of the Common
Stock issued upon exercise thereof.
6. RESTRICTED STOCK GRANTS
The Committee may issue shares of Common Stock to an Eligible Participant
pursuant to an incentive or long range compensation plan, program or contract
approved by the Committee (a "Restricted Stock Grant"). The following provisions
are applicable to Restricted Stock Grants:
(a) General Requirements. Shares of Common Stock issued pursuant to
Restricted Stock Grants will be issued in consideration for cash or services
rendered having a value, as determined by the Board, at least equal to the
par value thereof. All conditions and restrictions imposed under each
Restricted Stock Grant, and the period of years during which the Restricted
Stock Grant will remain subject to such restrictions, shall be set forth in
the Grant Letter and designated therein as the "Restriction Period." All
restrictions imposed under any Restricted Stock Grant shall lapse on such
date or dates as the Committee may approve until the restrictions have
lapsed as to 100% of the shares, except that upon a Change of Control of the
Company, all restrictions on the transfer of the shares which have not been
forfeited prior to such date shall immediately lapse. In addition, the
Committee, in circumstances that it deems equitable, may determine as to any
or all Restricted Stock Grants, that all the restrictions shall lapse,
notwithstanding any Restriction Period.
(b) Number of Shares. The Committee, in its sole discretion, shall
determine the number of shares of Common Stock that will be granted in each
Restricted Stock Grant.
(c) Requirement of Relationship with Company. If the Grantee's
relationship with the Company (as an employee, non-employee member of the
Board, independent contractor or consultant, as the case may be) terminates
during the period designated in the Grant Letter as the Restriction Period,
the Restricted Stock Grant shall terminate as to all shares covered by the
Grant as to which restrictions on transfer have not lapsed, and such shares
shall be immediately returned to the Company. The Committee may, in its sole
discretion, provide for complete or partial exceptions to the provisions of
this Section 6(c).
(d) Restrictions on Transfer and Legend on Stock Certificate. During the
Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the shares of Common Stock to which such Restriction
Period applies except to a Successor Grantee pursuant to Section 8 below.
Each certificate representing a share of Common Stock issued or transferred
under a Restricted Stock Grant shall contain a legend giving appropriate notice
of the restrictions in the Grant. The Grantee shall be entitled to have the
legend removed from the stock certificate or certificates representing any such
shares as to which all restrictions have lapsed.
7. STOCK APPRECIATION RIGHTS
(a) General Provisions. The Committee may grant stock appreciation rights
("SARs") to any Grantee in tandem with any Stock Option, for all or a portion of
the applicable Stock Option, either at the time the Stock Option is granted or
at any time thereafter while the Stock Option remains outstanding.
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(b) Number of SARs. The number of SARs granted to a Grantee which shall be
exercisable during any given period of time shall not exceed the number of
shares of Common Stock which the Grantee may purchase upon the exercise of the
related Stock Option during such period. Upon the exercise of a Stock Option,
the SARs relating to the Common Stock covered by the Stock Option shall
terminate. Upon the exercise of any SARs, the related Stock Option shall
terminate to the extent of an equal number of shares of Common Stock.
(c) Settlement Amount. Upon a Grantee's exercise of some or all of the
Grantee's SARs, the Grantee shall receive in settlement of such SARs an amount
equal to the stock appreciation (as defined herein) for the number of SARs
exercised, payable in cash, Common Stock or a combination thereof. The "stock
appreciation" for an SAR is the difference between the option price specified
for the related Stock Option and the fair market value of the underlying Common
Stock on the date of exercise of the SAR.
(d) Settlement Election. Upon the exercise of any SARs, the Grantee shall
have the right to elect the portions of the settlement amount that the Grantee
desires to receive in cash and shares of Common Stock, respectively. For
purposes of calculating the number of shares of Common Stock to be received upon
settlement, shares of Common Stock shall be valued at their fair market value on
the date of exercise of the SARs. Notwithstanding the foregoing, the Committee
shall have the right (i) to disapprove a Grantee's election to receive such
settlement in whole or in part in cash, and to require that shares of Common
Stock be delivered in lieu of cash or (ii) to require that settlement be made in
cash if the Company does not or may not in the future have sufficient shares
authorized for issuance. If shares of Common Stock are to be received upon
exercise of an SAR, cash shall be delivered in lieu of any fractional share.
(e) Exercise. An SAR is exercisable only during the period when the Stock
Option to which it is related is also exercisable. No SAR may be exercised, in
whole or in part, by any person who is subject to Section 16 of the Exchange Act
except in accordance with Rule 16b-3(e) under the Exchange Act.
8. TRANSFERABILITY OF OPTIONS AND GRANTS
Only a Grantee (or, in the case of an individual Grantee, his or her
authorized legal representative) may exercise rights under a Grant. No
individual Grantee may transfer those rights except by will or by the laws of
descent and distribution or, if permitted under Rule 16b-3 of the Exchange Act
and by the Committee in its sole discretion, pursuant to a qualified domestic
relations order as defined under the Code or Title I of ERISA or the rules
thereunder. Upon the death of an individual Grantee, the personal representative
or other person entitled to succeed to the rights of the Grantee ("Successor
Grantee") may exercise such rights. A Successor Grantee shall furnish proof
satisfactory to the Company of such person's right to receive the Grant under
the Grantee's will or under the applicable laws of descent and distribution.
9. CHANGE OF CONTROL OF THE COMPANY
As used herein, a "Change of Control" shall be deemed to have taken place
if: (i) any Person (including any individual, firm, corporation, partnership or
other entity except the Company or any employee benefit plan of the Company or
of any Affiliate or Associate (each as defined in Rule 12b-2 under the Exchange
Act), any Person or entity organized, appointed or established by the Company
for or pursuant to the terms of any such employee benefit plan), together with
all Affiliates and Associates of such Person, shall become the beneficial owner
in the aggregate of 20% or more of the Common Stock of the Company then
outstanding, except that no "Change of Control" shall be deemed to occur during
any period in which any such Person, and its Affiliates and Associates, are
bound by the terms of a standstill agreement under which such parties have
agreed not to acquire more than 30% of the Common Stock of the Company then
outstanding or to solicit proxies; or (ii) during any 24 month
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period, individuals who at the beginning of such period constituted the Board
cease for any reason to constitute a majority thereof, unless the election, or
the nomination for election by the Company's stockholders, of at least 75% of
the directors who were not directors at the beginning of such period was
approved by a vote of at least 75% of the directors in office at the time of
such election or nomination who were directors at the beginning of such period.
10. CERTAIN CORPORATE CHANGES
(a) Sale or Exchange of Assets, Dissolution or Liquidation or Merger or
Consolidation Where the Company Does Not Survive. If all or substantially all of
the assets of the Company are to be sold or exchanged, the Company is to be
dissolved or liquidated, or the Company is a party to a merger or consolidation
with another corporation in which the Company will not be the surviving
corporation, then, at least ten days prior to the effective date of such event,
the Company shall give each Grantee with any outstanding Grants written notice
of such event. Each such Grantee shall thereupon have the right to exercise in
full any installments of such Grants not previously exercised (whether or not
the right to exercise such installments has accrued pursuant to such Grants),
within ten days after such written notice is sent by the Company. Any
installments of such Grants not so exercised shall thereafter lapse and be of no
further force or effect.
(b) Merger or Consolidation Where the Company Survives. If the Company is a
party to a merger or consolidation in which the Company will be the surviving
corporation, then the Committee may, in its sole discretion, elect to give each
Grantee with any outstanding Grants written notice of such event. If such notice
is given, each such Grantee shall thereupon have the right to exercise in full
any installments of such Grants not previously exercised (whether or not the
right to exercise such installments has accrued pursuant to such Grants), within
ten days after such written notice is sent by the Company. Any installments of
such Grants not so exercised shall thereafter lapse and be of no further force
or effect.
11. STOCKHOLDER APPROVAL
This Plan is subject to and no Options shall be exercisable hereunder until
after approval by holders of a majority of the shares of the stock of the
Company present or represented by a proxy in a separate vote at a duly held
meeting of the stockholders of the Company within twelve months after the date
of the adoption of the Plan by the Board. If the Plan, as herein amended, is not
so approved by stockholders, the Plan as previously approved shall continue in
effect.
12. APPROVAL BY OUTSIDE DIRECTORS
This Plan is subject to and no Options shall be exercisable hereunder until
after approval by a compensation committee (the "Compensation Committee") of the
Board of Directors which is comprised solely of two or more directors ("Outside
Directors") who are (i) not presently employees of the Company (or related
entities); (ii) not former employees still receiving compensation for prior
services (other than benefits under a tax-qualified pension plan); (iii) not
officers of the Company (or related entities) at any time; and (iv) not
currently receiving compensation for personal services in any capacity other
than as a director.
13.AMENDMENT AND TERMINATION OF THE PLAN
(a) Amendment. The Board may amend or terminate the Plan at any time,
subject to the following limitations:
(1) the approval by the stockholders of the Company and approval by the
Compensation Committee shall be required in respect of any amendment that
(A) materially increases the benefits accruing to Eligible Participants
under the Plan, (B) increases the aggregate number of
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shares of Common Stock that may be issued or transferred under the Plan
(other than by operation of Section 3(b) above), (C) increases the maximum
number of shares of Common Stock for which any Grantee may be granted
options under this Plan; (D) materially modifies the requirements as to
eligibility for participation in the Plan; or (E) modifies the provisions
for determining the fair market value of a share of Common Stock; and
(2) the Board shall not amend the Plan if such amendment would cause the
Plan, any Grant or the exercise of any right under the Plan to fail to
comply with the requirements of Rule 16b-3 under the Exchange Act, or if
such amendment would cause the Plan or the Grant or exercise of an Incentive
Stock Option to fail to comply with the requirements of Section 422 of the
Code including, without limitation, a reduction of the option price set
forth in Section 5(b) above or an extension of the period during which an
Incentive Stock Option may be exercised as set forth in Section 5(c) above.
(b) Termination of Plan. The Plan shall terminate on the tenth anniversary
of its effective date (as set forth in Section 20 below) unless earlier
terminated by the Board or unless extended by the Board with the approval of the
stockholders.
(c) Termination and Amendment of Outstanding Grants. A termination or
amendment of the Plan that occurs after a Grant is made shall not result in the
termination or amendment of the Grant unless the Grantee consents or unless the
Committee acts under Section 21(b) below. The termination of the Plan shall not
impair the power and authority of the Committee with respect to an outstanding
Grant. Whether or not the Plan has terminated, an outstanding Grant may be
terminated or amended under Section 21(b) below or may be amended by agreement
of the Company and the Grantee which is consistent with the Plan.
(d) Employees in Foreign Countries. The Board shall have the authority to
adopt such modifications, procedures and subplans as may be necessary or
desirable to comply with provisions of the laws of foreign countries in which
the Company or its Subsidiaries may operate to assure the viability of benefits
from Grants made to participants employed in such countries and to meet the
objectives of the Plan.
14. FUNDING OF THE PLAN
The Plan shall be unfunded. The Company shall not be required to establish
any special or separate fund or to make any other segregation of assets to
assure the payment of any Grants under the Plan. In no event shall interest be
paid or accrued on any Grant, including unpaid installments of Grants.
15. RIGHTS OF ELIGIBLE PARTICIPANTS
Nothing in the Plan shall entitle any Eligible Participant or other person
to any claim or right to any Grant under the Plan. Neither the Plan nor any
action taken hereunder shall be construed as giving any Eligible Participant or
Grantee any rights to be retained by the Company in any capacity, whether as an
employee, non-employee member of the Board, independent contractor, consultant
or otherwise.
16. WITHHOLDING OF TAXES
The Company shall have the right to deduct from all Grants paid in cash any
federal, state or local taxes required by law to be withheld with respect to
such Grants paid in cash. In the case of Grants paid in Common Stock, the
Company shall have the right to require the Grantee to pay to the Company the
amount of any taxes which the Company is required to withhold in respect of such
Grants or to take whatever action it deems necessary to protect the interests of
the Company in respect
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of such tax liabilities, including, without limitation, withholding a portion of
the shares of Common Stock otherwise deliverable pursuant to the Plan. The
Company's obligation to issue or transfer shares of Common Stock upon the
exercise of a Stock Option or SAR or the acceptance of a Restricted Stock Grant
shall be conditioned upon the Grantee's compliance with the requirements of this
section to the satisfaction of the Committee.
17. AGREEMENTS WITH GRANTEES
Each Grant made under the Plan shall be evidenced by a Grant Letter
containing such terms and conditions as the Committee shall approve.
18. REQUIREMENTS FOR ISSUANCE OF SHARES
No Common Stock shall be issued or transferred under the Plan unless and
until all applicable legal requirements have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Stock Option, Restricted Stock Grant or SAR on the Grantee's undertaking in
writing to comply with such restrictions on any subsequent disposition of the
shares of Common Stock issued or transferred thereunder as the Committee shall
deem necessary or advisable as a result of any applicable law, regulation or
official interpretation thereof, and certificates representing such shares may
be legended to reflect any such restrictions.
19. HEADINGS
The section headings of the Plan are for reference only. In the event of a
conflict between a section heading and the content of a section of the Plan, the
content of the section shall control.
20. EFFECTIVE DATES
(a) Effective Date of the Plan. The Plan shall be effective as of July 15,
1999, subject to the approval of the Company's stockholders within 12 months
after such effective date.
(b) Effectiveness of Section 16 Provisions. The provisions of the Plan that
refer to, or are applicable to persons subject to, Section 16 of the Exchange
Act shall be effective, if at all, upon the registration of the Common Stock
under the Exchange Act, and shall remain in effect thereafter for so long as the
Common Stock is registered under the Exchange Act.
21. MISCELLANEOUS
(a) Substitute Grants. The Committee may make a Grant to an employee, a
non-employee director, or an independent contractor or consultant of another
corporation, if such person shall become an Eligible Participant by reason of a
corporate merger, consolidation, acquisition of stock or property,
reorganization or liquidation involving the Company or a Subsidiary Corporation
and such other corporation. Any such Grant shall be made in substitution for a
stock option or restricted stock grant granted by the other corporation
("Substituted Stock Incentives"), but the terms and conditions of the substitute
Grant may vary from the terms and conditions required by the Plan and from those
of the Substituted Stock Incentives. The Committee shall prescribe the
provisions of the substitute Grants.
(b) Compliance with Law. The Plan, the exercise of Grants and the
obligations of the Company to issue or transfer shares of Common Stock under
Grants shall be subject to all applicable laws and required approvals by any
governmental or regulatory agencies. With respect to persons subject to Section
16 of the Exchange Act, it is the intent of the Company that the Plan and all
transactions under the Plan shall comply with all applicable conditions of Rule
16b-3 or any successor provisions under the Exchange Act. The Committee may
revoke any Grant if it is contrary to law or modify any Grant to bring it into
compliance with any valid and mandatory government regulations. The
A-9
<PAGE>
Committee may also adopt rules regarding the withholding of taxes on payments to
Grantees. The Committee may, in its sole discretion, agree to limit its
authority under this section.
(c) Ownership of Stock. A Grantee or Successor Grantee shall have no rights
as a stockholder with respect to any shares of Common Stock covered by a Grant
until the shares are issued or transferred to the Grantee or Successor Grantee
on the stock transfer records of the Company.
A-10
<PAGE>
e4L, INC.
COMMON STOCK PROXY
This Proxy is solicited on behalf of the Board of Directors
I hereby constitute and appoint Daniel M. Yukelson and Bruce M. Goodman,
and each of them acting individually, my true and lawful agents and proxies,
with full power of substitution in each, to vote all shares of Common Stock held
of record by me at the Meeting of Stockholders of e4L, Inc. to be held on
September 30, 1999 and any adjournments or postponements thereof. I direct said
proxies to vote as specified on the reverse side.
Unless otherwise specified, all shares will be voted for the election of
all nominees listed and for each of the proposal to be acted upon at the
Meeting. This Proxy also delegated discretionary authority to vote with respect
to any other business which may properly come before the Meeting or any
adjournment or postponement thereof.
Please mark, sign, date and return the Proxy Card promptly.
[Reverse Side]
1. Proposal I, Election of Directors
To withhold authority to vote for
FOR all nominees listed (except WITHHOLD any individual nominee, strike
as indicated to the contrary AUTHORITY a line through the nominee's
below) name listed below:
/ / / /
Stuart D. Buchalter David E. Salzman
Robert W. Crawford Andrew M. Schuon
John W. Kirby Eric R. Weiss
Stephen C. Lehman
2. Proposal II, to approve an amendment to the Company's 1991 Stock Option
Plan to increase the number of shares of Common Stock available for awards by
500,000 shares.
FOR AGAINST ABSTAIN
/ / / / / /
3. Proposal III, to ratify the Board of Directors' appointment of Ernst &
Young LLP, independent auditors, as auditors for the Company for the fiscal year
ending March 31, 2000.
FOR AGAINST ABSTAIN
/ / / / / /
The undersigned hereby revokes all previous proxies for the
Meeting and acknowledges receipt of the Notice of
Meeting and Proxy Statement of e4L, Inc.
Date: , 1999
----------------------------------
---------------------------------------------
---------------------------------------------
By:
------------------------------------------
NOTE: Please sign this proxy exactly as name(s) appear in address.
When signing as attorney-in-fact, executor, administrator,
trustee or guardian, please add your title as such.
<PAGE>
e4L, INC.
SERIES B CONVERTIBLE PREFERRED STOCK PROXY
This Proxy is Solicited on Behalf of the Board of Directors
I hereby constitute and appoint Daniel M. Yukelson and Bruce M. Goodman,
and each of them acting individually, my true and lawful agents and proxies,
with full power of substitution in each, to vote all shares of Series B
Convertible Preferred Stock held of record by me at the Meeting of Stockholders
of e4L, Inc. to be held on September 30, 1999 and any adjournments or
postponements thereof. I direct said proxies to vote as specified on the reverse
side.
Unless otherwise specified, all shares will be voted for the election of
all nominees listed and for each of the proposal to be acted upon at the
Meeting. This Proxy delegates discretionary authority to vote with respect to
any other business which may properly come before the Meeting or any adjournment
or postponement thereof.
Please mark, sign, date and return the Proxy Card promptly.
[Reverse Side]
1. Proposal I, to approve an amendment to the Company's 1991 Stock Option
Plan to increase the number of shares of Common Stock available for awards by
500,000 shares.
FOR AGAINST ABSTAIN
/ / / / / /
2. Proposal II, to ratify the Board of Directors' appointment of Ernst &
Young LLP, independent auditors, as auditors for the Company for the fiscal year
ending March 31, 2000.
FOR AGAINST ABSTAIN
/ / / / / /
The undersigned hereby revokes all previous proxies for the
Meeting and acknowledges receipt of the Notice of
Meeting and Proxy Statement of e4L, Inc.
Date: , 1999
----------------------------------
---------------------------------------------
---------------------------------------------
By:
------------------------------------------
NOTE: Please sign this proxy exactly as name(s) appear in address.
When signing as attorney-in-fact, executor, administrator,
trustee or guardian, please add your title as such.
<PAGE>
e4L, INC.
SERIES E CONVERTIBLE PREFERRED STOCK PROXY
This Proxy is Solicited on Behalf of the Board of Directors
I hereby constitute and appoint Daniel M. Yukelson and Bruce M. Goodman,
and each of them acting individually, my true and lawful agents and proxies,
with full power of substitution in each, to vote all shares of Series E
Convertible Preferred Stock held of record by me at the Meeting of Stockholders
of e4L, Inc. to be held on September 30, 1999 and any adjournments or
postponements thereof. I direct said proxies to vote as specified on the reverse
side.
Unless otherwise specified, all shares will be voted for the election of
all nominees listed and for each of the proposal to be acted upon at the
Meeting. This Proxy delegates discretionary authority to vote with respect to
any other business which may properly come before the Meeting or any adjournment
or postponement thereof.
Please mark, sign, date and return the Proxy Card promptly.
[Reverse Side]
1. Proposal I, Election of Directors
To withhold authority to vote for
FOR all nominees listed (except WITHHOLD any individual nominee, strike
as indicated to the contrary AUTHORITY a line through the nominee's
below) name listed below:
/ / / /
Stuart D. Buchalter David E. Salzman
Robert W. Crawford Andrew M. Schuon
John W. Kirby Eric R. Weiss
Stephen C. Lehman
2. Proposal II, to approve an amendment to the Company's 1991 Stock Option
Plan to increase the number of shares of Common Stock available for awards by
500,000 shares.
FOR AGAINST ABSTAIN
/ / / / / /
3. Proposal III, to ratify the Board of Directors' appointment of Ernst &
Young LLP, independent auditors, as auditors for the Company for the fiscal year
ending March 31, 2000.
FOR AGAINST ABSTAIN
/ / / / / /
The undersigned hereby revokes all previous proxies for the
Meeting and acknowledges receipt of the Notice of
Meeting and Proxy Statement of e4L, Inc.
Date: , 1999
----------------------------------
---------------------------------------------
---------------------------------------------
By:
------------------------------------------
NOTE: Please sign this proxy exactly as name(s) appear in address.
When signing as attorney-in-fact, executor, administrator,
trustee or guardian, please add your title as such.
