<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by 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 Materials Pursuant to (S)240.14a-11(c) or (S)240.14a-12
IFX CORPORATION
-----------------------
(Exact name of Registrant as Specified in Its Charter)
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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
IFX CORPORATION
200 W. Adams Street, Suite 1460
Chicago, Illinois 60606
(312) 419-9530
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 3, 1999
To: Shareholders of IFX Corporation
The annual meeting of the shareholders of IFX Corporation will be held at
the offices of Neal, Gerber & Eisenberg, Two N. LaSalle Street, 22nd floor,
Chicago, Illinois on Wednesday, February 3, 1999 at 2:00 p.m. local time for the
following purposes:
1. to elect five directors to the Board of Directors of IFX Corporation,
one of whom will be elected subject to shareholder approval of the
transactions described in Proposal Two (Proposal One on the proxy
card);
2. to ratify the sale of 500,000 shares of common stock of IFX
Corporation to International Technology Investments, LC and the grant
to International Technology Investments, LC of a right to purchase up
to 5,500,000 additional shares of IFX Corporation common stock, and to
approve the issuance of such shares upon exercise of the right, which
transactions may result in a change of control of the Company
(Proposal Two on the proxy card);
3. to approve the IFX Corporation 1998 Stock Option and Incentive Plan
(Proposal Three on the proxy card);
4. to ratify the appointment of Arthur Andersen LLP as independent
auditors for the Company's fiscal year ending June 30, 1999 (Proposal
Four on the proxy card); and
5. to transact such other business as may properly come before the
meeting.
The close of business on December 14, 1998, has been fixed as the record
date for determining the shareholders entitled to receive notice of and to vote
at the annual meeting.
Accompanying this Notice and Proxy Statement are copies of the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1998 and the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1998, each as filed with the Securities and Exchange Commission.
BY ORDER OF THE BOARD OF DIRECTORS
Colleen M. Downes,
Secretary
January 11, 1999
Chicago, Illinois
YOUR VOTE IS IMPORTANT
IT IS IMPORTANT THAT AS MANY SHARES AS POSSIBLE BE REPRESENTED AT THE ANNUAL
MEETING. EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE DATE, SIGN, AND
PROMPTLY RETURN THE PROXY IN THE ENCLOSED ENVELOPE. YOU MAY REVOKE YOUR PROXY
AT ANY TIME BEFORE IT HAS BEEN VOTED.
<PAGE>
IFX CORPORATION
200 W. Adams Street
Suite 1460
Chicago, Illinois 60606
(312) 419-9530
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
February 3, 1999
General
Solicitation of Proxies. This statement is furnished in connection with
the solicitation of proxies to be used at the Annual Meeting of Shareholders
(the "Annual Meeting") of IFX Corporation, a Delaware corporation ("the Company"
or "IFX"), to be held on February 3, 1999 beginning at 2:00 p.m. local time, and
at any postponements or adjournments thereof, for the purposes set forth herein.
The principal executive offices of the Company are located at 200 West Adams
Street, Suite 1460, Chicago, Illinois 60606. These proxy materials, a copy of
the Company's Annual Report on Form 10-K for the year ended June 30, 1998 and a
copy of the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998 are being mailed on or about January 14, 1999 to shareholders
of record at the close of business on December 14, 1998.
The solicitation of proxies on the enclosed form is made on behalf of the
Board of Directors of the Company. As of the date of this Proxy Statement, Lee
S. Casty and International Technology Investments, LC, who collectively own
approximately 54% of the outstanding shares of common stock, par value $.02 per
share, of IFX Corporation ("Common Stock"), have contractually agreed to vote
all of their shares "FOR" approval of the proposal (Proposal Two) to ratify the
sale to International Technology Investments, LC of 500,000 shares of Common
Stock and the grant to International Technology Investments, LC of a right to
purchase an additional 5,500,000 shares of Common Stock, which may result in a
change of control of the Company, and "FOR" election to the Company's Board of
Directors of Joseph M. Matalon and Joel M. Eidelstein. ASSUMING THEY VOTE AS
INTENDED, NO FURTHER SHAREHOLDER ACTION WILL BE REQUIRED FOR APPROVAL OF
PROPOSAL TWO AND FOR THE ELECTION OF MESSRS. MATALON AND EIDELSTEIN AS
DIRECTORS.
Costs of Solicitation. The Company will pay all costs of preparing,
assembling and mailing the proxy material and will reimburse brokers, nominees
and fiduciaries for the out-of-pocket and clerical expenses incurred by them in
transmitting copies of the proxy material to the beneficial owners of shares
held of record by such persons. The Company does not intend to solicit proxies
other than by use of the mail, but certain officers and regular employees of the
Company or its subsidiaries, without additional compensation, may solicit
proxies by telephone or other means of communication.
Shareholders Entitled to Vote and Outstanding Voting Shares. Only
shareholders of record at the close of business on December 14, 1998, are
entitled to notice of the Annual Meeting and to vote at the Annual Meeting or
any postponements or adjournments thereof. Each share of Common Stock entitles
the holder to one vote on each matter submitted for a vote of the shareholders.
As of December 31, 1998, there were 6,655,539 shares of Common Stock issued and
outstanding.
Quorum and Vote Required for Approval. A simple majority of the
outstanding shares of Common Stock is required to be present, in person or by
proxy, at the Annual Meeting for there to be a quorum. Assuming the presence of
a quorum, the affirmative vote of a plurality of the shares represented at the
meeting, in person or by proxy, will be necessary for the election of directors
and the affirmative vote of a majority of the shares represented at the meeting,
in person or by proxy, will be necessary for (i) ratification of the
transactions described in Proposal
<PAGE>
Two, (ii) approval of the 1998 Stock Option and Incentive Plan, (iii)
ratification of the engagement of Arthur Andersen LLP as the Company's
independent auditors for 1999, and (iii) the taking of all other actions that
may properly come before the meeting.
Abstentions and withheld votes will be counted for purposes of determining
whether a quorum is present and will have the effect of votes against these
matters. If a broker or nominee holding shares in "street name" indicates on a
proxy that it does not have discretionary authority to vote as to a particular
proposal ("broker non-votes"), those shares will be counted for purposes of
determining a quorum but will not be treated as present and entitled to vote on
proposals set forth in the Proxy Statement or on any other matter considered at
the meeting. Lee S. Casty and International Technology Investments, LC, the
beneficial owners of an aggregate of approximately 54% of the issued and
outstanding shares of Common Stock, have contractually agreed to vote all of
their shares "FOR" approval of Proposal Two and "FOR" election to the Company's
Board of Directors of Joseph M. Matalon and Joel M. Eidelstein. Assuming they
vote as intended, no further shareholder action will be required for approval of
Proposal Two and for the election of Messrs. Matalon and Eidelstein as
directors.
Voting and Revoking Your Proxy. A shareholder signing and returning a proxy
on the enclosed form may revoke the proxy at any time before the shares subject
to it are voted at the Annual Meeting. A proxy may be revoked by notifying the
Secretary of the Company in writing of such revocation or by attending the
Annual Meeting and voting in person. All shares of Common Stock represented by
properly executed proxies will be voted at the meeting in accordance with the
directions marked on the proxies, unless such proxies previously have been
revoked. If a shareholder fails to indicate directions on the proxy with respect
to the proposals to be voted on, the proxy will be voted "FOR" the election of
each director named in these proxy materials (Proposal One) and "FOR" Proposals
Two, Three and Four. The persons named on the enclosed proxy also have
discretionary authority to vote with respect to any matters raised during the
meeting, if any, which the Company did not know, a reasonable period of time
prior to the time these proxy materials were first mailed to shareholders, would
be raised at the meeting.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of December 31, 1998, certain
information regarding the Common Stock beneficially owned by (i) each director
and each nominee for director, (ii) the Company's President, who is the only
executive officer of the Company whose compensation is required to be disclosed
in the "Executive Compensation" table contained elsewhere herein, (iii) each
person known by the Company to own more than five percent of the Common Stock of
the Company, and (iv) the executive officers and directors of the Company, as a
group.
<TABLE>
<CAPTION>
Amount and Nature of Approximate
Beneficial Percent of
Name/Address (1) Ownership Class
- ---------------- -------------------- ------------
<S> <C> <C>
Lee S. Casty.............................. 3,092,891(2) 46.5%
International Technology Investments, LC.. 500,000(3)(4) 7.5
Joseph M. Matalon......................... 500,000(5) 7.5
Burton J. Meyer........................... 314,212 4.7
Joel M. Eidelstein........................ 34,545(6) *
Colleen M. Downes......................... 0 *
Zalman Lekach............................. 1,500 *
George A. Myers........................... 733(7) *
All officers and directors as a
group (4 persons)......................... 37,645 *
</TABLE>
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_________________
(1) The address of each director and executive officer of the Company is in
care of the Company, 200 West Adams Street, Suite 1460, Chicago, Illinois
60606.
(2) Mr. Casty's address is in care of French-American Securities, Inc., 200
West Adams Street, Suite 1460, Chicago, Illinois 60606.
(3) International Technology Investments, LC ("International Technology")
acquired 500,000 shares of Common Stock on November 23, 1998 in connection
with the transactions described in Proposal Two; however, consummation of
such transactions are subject to shareholder ratification. If Proposal Two
is not approved, the Company intends to repurchase these 500,000 shares.
(4) Does not include 5,500,000 additional shares of Common Stock that
International Technology has the right to purchase (which, together with
the 500,000 shares it currently owns, would constitute approximately 49.4%
of the Common Stock issued and outstanding), which right will become
exercisable only if Proposal Two is approved. See "Proposal Two-
Ratification of Share Issuances." If Proposal Two is approved,
International Technology's purchase right will be exercisable immediately.
International Technology's address is in care of Adorno & Zeder, 2801 S.
Bayshore Drive, Suite 1600, Miami, Florida 33133.
(5) Consists of 500,000 shares of Common Stock held by International
Technology. See notes 3 and 4 above. Mr. Matalon may be deemed to be an
"affiliate" of International Technology and, accordingly, he may be deemed
to beneficially own the shares of Common Stock held by such entity.
(6) Does not include 150,000 shares of Common Stock subject to an option
granted to Mr. Eidelstein pursuant to the 1998 Stock Option and Incentive
Plan. The option to purchase 300,000 shares of Common Stock is subject to
shareholder approval of the plan and, assuming such approval is obtained,
the option will vest immediately and will be immediately exercisable with
respect to 150,000 shares of Common Stock. See "Proposal Three-Approval of
1998 Stock Option and Incentive Plan."
(7) Consists of 333.3 shares of Common Stock owned by Mr. Myers' spouse and 400
shares of Common Stock held by Mr. Myers as custodian for his minor
children.
PROPOSAL ONE
ELECTION OF DIRECTORS
Four directors will be elected at the Annual Meeting, and one additional
director will be elected if Proposal Two is approved, to serve for one year
terms expiring on the date of the 1999 Annual Meeting of Shareholders or until
their successors are duly elected and qualified. The Board of Directors has
nominated each of the persons named below, and it is the intention of the
persons named in the enclosed proxy to vote "FOR" the election of all such
nominees, each of whom has consented to serve as a director if elected. If a
nominee is unwilling or unable to serve, which the Board of Directors has no
reason to expect, the persons named in the accompanying proxy intend to vote for
the balance of those named and, if they deem it advisable, for a substitute
nominee. Lee S. Casty and International Technology, the beneficial owners of an
aggregate of approximately 54% of the issued and outstanding shares of Common
Stock, have contractually agreed to vote all of their shares "FOR" election to
the Company's Board of Directors of Joseph M. Matalon and Joel M. Eidelstein.
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<PAGE>
Nominees for Election to the Board of Directors
The following is information regarding nominees for election as directors
of the Company. Each of the nominees, other than Mr. Matalon, presently is
serving as a director of the Company.
Joel M. Eidelstein, age 31, has served as a director of the Company since
November 1990 and, since November 9, 1996, he has served as the President of the
Company. Mr. Eidelstein graduated from Brandeis University in May 1988. From
June 1988 until June 1996, he was an independent commodity futures trader and a
floor manager with Index Futures Group, Inc. Mr. Eidelstein also is the owner
and sole officer of Alerica, Inc., a general partner of Telcom.Net, L.P., an
Internet communications software development company.
Colleen M. Downes, age 35, became Chief Financial Officer and Secretary of
the Company in November 1998. She has served as a director and as the Treasurer
of the Company since February 1997, as a Vice President of the Company since
June 1998 and has been employed by the Company or its subsidiaries since January
1985. She is pursuing a bachelor's degree at DePaul University in Chicago,
Illinois.
Zalman Lekach, age 31, has served as a director of the Company since
February 1997. He is President and Chief Operating Officer of Parlux
Fragrances, Inc., an international designer, manufacturer and marketer of
fragrances ("Parlux"). He became a director and an executive officer of Parlux,
S.A., Parlux's French subsidiary, in May 1990. In May 1993, he resigned his
executive position and owned and operated a company exporting foods and
health/beauty aids to South America. In January of 1995, he rejoined Parlux as
its Chief Operating Officer and a director. In June 1996, Mr. Zalman Lekach also
assumed the position of President of Parlux.
George A. Myers, age 47, has served as a director of the Company since
November 1990. Mr. Myers, since 1981, has been managing general partner of MC
Capital, a diversified real estate company with offices in Chicago, Illinois,
Phoenix, Arizona, and San Diego, California.
Information Regarding the Nominee of International Technology
Subject to shareholder approval of Proposal Two, Joseph M. Matalon will be
elected, as International Technology's designee under the Joint Venture
Agreement, to fill the vacancy currently existing on the Board of Directors. If
Proposal Two is approved by the shareholders, Mr. Eidelstein will serve as Lee
Casty's designee under the Joint Venture Agreement. See "Proposal Two-
Ratification of Share Issuances."
Joseph M. Matalon, age 39, since January 1998 has served as the Director of
Investments and Chairman of the Finance Committee of Mechala Group Jamaica
Limited, a diversified business enterprise primarily engaged in development and
construction, manufacturing and trading and financial services. From January
1996 to December 1997, Mr. Matalon served as Executive Vice President and Chief
Operating Officer of Mechala Group Jamaica Limited and, prior thereto, he served
for 10 years as Senior Vice President of the ICD Group. Mr. Matalon is a
graduate of the London School of Economics and also serves as a director of The
Bank of Nova Scotia Jamaica Limited; Scotiabank Jamaica Trust and Merchant Bank
Limited; Cable & Wireless Jamaica; the Gleaner Company Limited; and the
Institute of Management and Production. Mr. Matalon also is Chairman of Prime
Life Assurance Company Limited and British Caribbean Insurance Company Limited.
Recommendation of the Board of Directors
The Board of Directors of the Company recommends that shareholders vote FOR
all of the nominees for election as directors.
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<PAGE>
Information Regarding the Board of Directors
Directors are elected on an annual basis. Each director of the Company
holds office until the next annual meeting of shareholders or until that
director's successors has been elected and qualified. At present, the Company's
by-laws provide for five directors; however, currently there are four persons
serving as directors, all of whom have been nominated for reelection to the
Board. Officers of the Company are elected by the Board of Directors on an
annual basis and serve until the next annual meeting of the Board of Directors
and until their successors have been duly elected and qualified. During 1998,
the Board of Directors held four meetings and took all other actions pursuant to
unanimous written consents in lieu of meetings. Each of the current directors
attended at least 75% of all meetings of the Board of Directors called during
fiscal year 1998.
Compensation of Directors
Directors are not currently compensated in connection with their duties as
directors, but may be reimbursed for expenses incurred by them in connection
with their services as directors.
Committees of the Board of Directors
The Board of Directors has a standing Audit Committee to assist the Board
in the discharge of its responsibilities. The Audit Committee meets with the
Company's independent public accountants to discuss, and reports to the Board
regarding, the scope, fees and results of the annual audit and compliance with
the Company's accounting and financial policies and internal accounting
controls. The current members of the Audit Committee are George Myers and
Zalman Lekach, each of whom is a Non-Employee Director of the Company as defined
in the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
Joel Eidelstein, who is an employee of the Company. During 1998, the Audit
Committee held three meetings and took all other actions pursuant to unanimous
written consents. Each of the directors who is a member of the Audit Committee
attended at least 75% of all meetings of the Committee called during fiscal year
1998.
The Company does not have standing nominating or compensation committees of
the Board of Directors, or committees performing similar functions. However, if
the IFX Corporation 1998 Stock Option and Incentive Plan is approved by the
shareholders pursuant to Proposal Three, the Board of Directors intends to
establish a Compensation Committee of the Board of Directors and to appoint
George Myers and Zalman Lekach as the initial members of the committee.
EXECUTIVE OFFICERS
The following individuals currently serve as executive officers of the
Company:
Joel M. Eidelstein, age 31, has served as a director of the Company since
November 1990 and, since November 9, 1996, he has served as the President of the
Company. Mr. Eidelstein graduated from Brandeis University in May 1988. From
June 1988 until June 1996, he was an independent commodity futures trader and a
floor manager with Index Futures Group, Inc. Mr. Eidelstein also is the owner
and sole officer of Alerica, Inc., a general partner of Telcom.Net, L.P., which
is an Internet communications software development company.
Colleen M. Downes, age 35, became Chief Financial Officer and Secretary of
the Company in November 1998. She has served as a director and as the Treasurer
of the Company since February 1997, as a Vice President of the Company since
June 1998 and has been employed by the Company or its subsidiaries since January
1985. She is pursuing a bachelor's degree at DePaul University in Chicago,
Illinois.
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all cash compensation paid by the Company to
its President, who is acting in a capacity similar to chief executive officer.
There were no executive officers of the Company whose compensation for fiscal
year 1998 exceeded $100,000.
<TABLE>
<CAPTION>
Year Ended
Name and Principal Position June 30 Salary Bonus
- --------------------------- ---------- ------- -----
<S> <C> <C> <C>
Joel M. Eidelstein,
President.................... 1998 $24,000 -
1997 $16,000 -
1996 $68,000 -
</TABLE>
Fiscal Year 1998 Option Grants and Exercises
No options were granted to the Company's President during fiscal year 1998.
There were no options exercised during fiscal year 1998, and the Company's
President did not hold any options as of June 30, 1998. See "Proposal Three-
Approval of 1998 Stock Option and Incentive Plan."
CERTAIN TRANSACTIONS
Effective November 30, 1985, Lee S. Casty, a principal shareholder of the
Company, made a $400,000 subordinated loan to the Company. The loan was
evidenced by a "satisfactory subordination agreement," approved by the
regulatory authorities to which the Company at that time was subject, and was
due on December 1, 1988. On March 5, 1986, the Company amended its Articles of
Incorporation to authorize 400,000 shares of Preferred Stock, par value $1.00
per share, with a 10% cumulative dividend. Thereafter, such 400,000 shares of
Preferred Stock were issued to Mr. Casty in satisfaction of the subordinated
loan. The Preferred Stock was redeemable at the option of the Company under
certain circumstances and upon payment of accrued dividends. In 1986, the
Articles of Incorporation of the Company were amended and the Preferred Stock
was redesignated "Class A Preferred Stock." On January 31, 1997, the Company
redeemed and retired the 400,000 shares of Class A Preferred Stock issued and
outstanding, for a price equal to $836,600, which constituted the aggregate par
value of such shares plus cumulative, accrued dividends. As payment, the Company
issued to Mr. Casty a promissory note in the amount of $836,600, bearing
interest at the prime rate and maturing on January 31, 1998. The Company repaid
this note in February 1998.
In January 1997, the Company paid $940,000 to Mr. Casty as payment in full
of all other notes payable to Mr. Casty (excluding the promissory note issued in
connection with the Company's redemption of its Preferred Stock). During the
fiscal years ended June 30, 1998 and 1997, the Company paid Mr. Casty
approximately $42,900 and $91,100 in interest on such notes payable.
In January 1997, the Company and French-American Securities, Inc., a
company wholly-owned by Mr. Casty, agreed to extend to January 31, 1998 all
notes payable to French-American Securities, Inc., which had an aggregate
principal amount of $5,450,000. In June and September 1997, $4,700,000 and
$750,000, respectively, of the notes payable to French-American Securities, Inc.
were repaid. During the fiscal years ended June 30, 1998 and 1997, the Company
paid French-American Securities, Inc. $11,000 and $520,000 in interest on such
notes payable.
Prior to fiscal year 1996, the Company made loans of $811,400 to C. Adam
Ltd. (successor in interest to SRC, Inc.), an entity affiliated with Mr. Casty.
The loans were evidenced by a demand note bearing interest at
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<PAGE>
8%, which rate subsequently was amended to equal the prime rate. In October
1998, this note was amended again to provide that (i) the interest rate will be
adjusted each month to equal the interest rate actually earned by the Company on
its short-term savings or money market account during the immediately preceding
month plus one-half percent, and (ii) amounts outstanding under the note may be
repaid by transfer to the Company of shares of Common Stock with an aggregate
fair market value equal to the amount outstanding. The fair market value of
shares tendered to repay the note will be valued at the average of the closing
bid and ask price of Common Stock as reported by the Nasdaq Small Cap Market (or
such other stock exchange on which the Common Stock may then be listed) on each
of the three trading days ending on the trading date immediately prior to the
delivery of the Common Stock to the Company. The Company earned interest income
of $52,400, $51,700 and $53,500 on this note during the fiscal years ended June
30, 1998, 1997 and 1996, respectively.
In November 1996, the Board of Directors granted options to purchase
250,000 shares of Common Stock to Burton J. Meyer, who then was the Company's
President, at an exercise price of $1.20 per share. The options were to expire
on June 30, 1998. In June 1998, the Company purchased these options for
$200,000 and terminated them.
The Company had an employment agreement pursuant to which Philip A. Tanzar
served as the Company's Vice President and General Counsel for annual
compensation of $138,200 for a term ending December 31, 1996. In the event that
Mr. Tanzar's employment was not extended by the Company on substantially
equivalent terms for reasons other than "good cause", the Company was obligated
to make a severance payment of $100,000 to Mr. Tanzar. Effective July 1, 1996,
Mr. Tanzar accepted employment with E.D.& F. Man International, Inc., thereby
terminating his employment contract with the Company. As an inducement for Mr.
Tanzar to accept employment with E.D.& F. Man International, Inc. and as a
settlement of his contract, the Company agreed to pay Mr. Tanzar severance of up
to $100,000 if he was terminated by E.D.& F. Man International, Inc. prior to
January 1, 1999. No such termination has occurred.
In December 1998, IFX/Telcom, Inc., a wholly-owned subsidiary of the
Company, purchased a limited partnership interest in Telcom.Net, L.P., an
Internet communications software development company that was co-founded in 1997
by Joel M. Eidelstein, the Company's President. The limited partnership
interest was purchased from Alerica, Inc., a corporation that is wholly-owned by
Mr. Eidelstein and which is a general partner of Telcom.Net, L.P. The purchase
price of such limited partnership interest was $200,000. The limited
partnership interest entitles IFX/Telcom, Inc. to receive priority distributions
up to $200,000, the amount of the Company's invested capital, plus 25% of the
profits of Telcom.Net, L.P. after all of its other partners have received
priority distributions equal to their aggregate invested capital. In addition,
the Company purchased from Alerica, Inc. an outstanding promissory note of
Telcom.Net in the principle amount of $50,000. The Board of Directors
(excluding Mr. Eidelstein, who abstained from discussion or voting) determined
that this purchase was fair and in the best interests of the Company.
The Company has guaranteed certain liabilities owned by Telcom.Net, L.P., a
limited partnership, to Qwest/LCI, International. One of the general partners of
Telcom.Net, L.P. is Alerica, Inc., a company that is wholly-owned by Joel
Eidelstein, the Company's President. There is no maximum amount payable under
this guarantee; however, the Company reasonably believes, based on the business
of the limited partnership, that its potential liability under this guarantee
will not exceed $100,000.
On November 10, 1998 the Board of Directors (excluding Mr. Eidelstein, who
abstained from discussion or voting) granted to Joel M. Eidelstein, the
President of the Company, an option to purchase 300,000 shares of Common Stock,
which constitutes approximately 4.5% of the outstanding Common Stock on the date
of grant. Effectiveness of the option is subject to obtaining shareholder
approval of the 1998 Stock Option and Incentive Plan. See "Proposal Three-
Approval of 1998 Stock Option and Incentive Plan." The option granted to Mr.
Eidelstein vested 25% on each of November 10, 1998 and January 1, 1999, and will
vest an additional 25% on each of January 1, 2000 and January 1, 2001. The
exercise price of the option is $3.00 per share and the sale price of the Common
Stock as reported by the Nasdaq Stock Market as of the date of grant was $1.75
per share.
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<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and to provide copies of
such reports to the Company and to the Nasdaq Stock Market. Based solely on a
review of the copies of such forms furnished to the Company, or written
representations that no Form 5s were required, the Company believes that all
officers, directors and 10% beneficial owners complied with all Section 16(a)
filing requirements during fiscal year 1998.
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or
the Exchange Act that might incorporate future filings, including this
proxy statement, in whole or in part, the report presented below and the
performance graph following the report shall not be incorporated by
reference into any such filings.
REPORT OF THE BOARD OF
DIRECTORS ON EXECUTIVE COMPENSATION
Historically, the Board of Directors has performed the functions typically
delegated to a compensation committee, including establishing and overseeing the
Company's compensation policy and approving salaries and annual bonuses for
senior management of the Company. Assuming the Company's 1998 Stock Option and
Incentive Plan (the "Plan") is approved by the shareholders (see "Proposal
Three"), the Board of Directors intends to establish a Compensation Committee of
the Board of Directors (the "Compensation Committee") and to appoint George
Myers and Zalman Lekach as the initial members.
Compensation Policy. The Company's compensation policy for senior
management has consisted almost exclusively of cash salaries and, from time to
time, discretionary performance bonuses. Since the Company's business has
changed significantly following the sale of its primary subsidiary, Index
Futures Group, Inc., the Board of Directors believed that offering equity
compensation to senior management of the Company would not be particularly
effective. With the adoption of the Plan, the Board of Directors is
implementing a change in the Company's compensation policy to increase the long-
term equity component which, the Board expects, will strengthen the Company's
ability to recruit, motivate and retain highly qualified individuals. The Board
of Directors believes that stock options and restricted stock, which vest over
time and will be subject to forfeiture, will better align the interests of the
Company's senior management with the interests of the Company's shareholders.
The Board also believes that substantial equity ownership by individuals in
leadership positions within the Company will help to ensure that such
individuals remain focused on building shareholder value.
Joel M. Eidelstein, the President of the Company, has authority to hire all
members of senior management of the Company and, subject to the Board of
Directors's approval, to establish the compensation to be paid to such
executives. In determining and approving the amount of annual salary and salary
increases for senior management, Mr. Eidelstein and the Board of Directors
consider factors such as the executive's contribution to the Company's operating
effectiveness and profitability; the level of responsibility, scope and
complexity of such executive's position relative to other executive management;
and the salary levels of other companies in the same industry.
Compensation of the President. The compensation paid to Joel M.
Eidelstein, the President of the Company, for the last three fiscal years is
listed in the Executive Compensation table located elsewhere in this Proxy
Statement. During fiscal years 1997 and 1998, Mr. Eidelstein accepted a
significantly reduced salary because the operations of the Company had decreased
materially following the Company's July 1996 sale of Index Futures Group, Inc.
In recognition of Mr. Eidelstein's pivotal role in evaluating the Company's
future business prospects,
-8-
<PAGE>
negotiating the transactions described in Proposal Two and managing the
Company's transition into a new line of business, the Board of Directors has
authorized an increase in Mr. Eidelstein's salary to $75,000 for fiscal year
1999.
On November 10, 1998 the Board of Directors (excluding Mr. Eidelstein, who
abstained from discussion or voting) granted to Mr. Eidelstein an option to
purchase 300,000 shares of Common Stock, which constitutes approximately 4.5% of
the outstanding Common Stock on the date of grant. Effectiveness of the option
is subject to the Company obtaining shareholder approval of the Plan. See
"Proposal Three-Approval of 1998 Stock Option and Incentive Plan." The option
granted to Mr. Eidelstein will be an incentive stock option, to the extent it
qualifies for treatment as such. The option granted to Mr. Eidelstein vested
25% on each of November 10, 1998 and January 1, 1999, and will vest an
additional 25% on each of January 1, 2000 and January 1, 2001. The exercise
price of the Option is $3.00 per share and the sale price of the Common Stock as
reported by the Nasdaq Stock Market as of the date of grant was $1.75 per share.
The Board of Directors (excluding Mr. Eidelstein) approved the option grant to
Mr. Eidelstein in recognition of his dedication to the Company during the
Company's transition in business following the July 1996 sale of Index Futures
Group, Inc. and Mr. Eidelstein's acceptance of a below-market salary during
fiscal years 1997 and 1998.
December 20, 1998
SUBMITTED BY THE BOARD OF DIRECTORS
Joel M. Eidelstein
George A. Myers
Colleen M. Downes
Zalman Lekach
-9-
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG IFX CORPORATION, THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ FINANCIAL INDEX
The graph below compares the cumulative total shareholder return on the
Common Stock since consummation of the Company's initial public offering in June
1994 with the cumulative total return of the Nasdaq Stock Market (US) and the
Nasdaq Total Return for Nasdaq Financial Stocks over the same period (assuming
the investment on June 30, 1993 of $100 in each of Common Stock, the Nasdaq
Stock Market (US) and the Nasdaq Total Return for Nasdaq Financial Stocks).
(INSERT GRAPH )
<TABLE>
<CAPTION>
Measurement Period IFX NASDAQ NASDAQ
(Fiscal year covered) CORPORATION STOCK FINANCIAL
MARKET (U.S.)
----------------------------- ----------- ------------- ---------
<S> <C> <C> <C>
Measurement Point - 6/30/93 $100 $100 $100
FYE 6/30/94 $200 $101 $113
FYE 6/30/95 $125 $135 $129
FYE 6/30/96 $125 $173 $168
FYE 6/30/97 $150 $210 $246
FYE 6/30/98 $305 $278 $319
</TABLE>
* $100 invested on 6/30/93 in Stock or Index - including reinvestment of
dividends. Fiscal year ending June 30.
TOTAL SHAREHOLDER RETURNS
(Dividends Reinvested)
<TABLE>
<CAPTION>
Annual Return Percentage
Years Ending
--------------------------------------
Company/Index Jun 94 Jun 95 Jun 96 Jun 97 Jun 98
- ------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
IFX Corporation 100 (38) 0 20 103
NASDAQ Stock Market (U.S.) 1 34 28 21 32
NASDAQ Financial Index 13 14 30 46 30
</TABLE>
<TABLE>
<CAPTION>
Base Cumulative Total Returns
Period Years Ending
--------------------------------------
Company/Index Jun 93 Jun 94 Jun 95 Jun 96 Jun 97 Jun 98
- ------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
IFX Corporation 100 200 125 125 150 305
NASDAQ Stock Market (U.S.) 100 101 135 173 210 278
NASDAQ Financial Index 100 113 129 168 246 319
</TABLE>
-10-
<PAGE>
PROPOSAL TWO
RATIFICATION OF SHARE ISSUANCES
Following is a summary description of the transactions contemplated by that
certain Subscription and Joint Venture Agreement dated as of November 23, 1998
(the "Joint Venture Agreement") among the Company, a wholly-owned indirect
subsidiary of the Company named Emerging Networks, Inc. and two significant
shareholders of the Company, International Technology Investments, LC
("International Technology") and Lee S. Casty. Pursuant to the Joint Venture
Agreement, the Company has issued 500,000 shares of Common Stock to
International Technology, has granted to International Technology the right to
purchase up to 5,500,000 additional shares of Common Stock and has agreed to
issue such additional shares of Common Stock upon International Technology's
exercise of its purchase right (collectively, the "Transactions"). The
following description of the Transactions is qualified in its entirety by
reference to the Joint Venture Agreement which was filed as an exhibit to the
Company's Current Report on Form 8-K dated November 23, 1998, as filed with the
Securities and Exchange Commission on November 24, 1998. The Board of Directors
believes that ratification of the Transactions is in the best interests of the
Company and its shareholders and unanimously recommends that the shareholders
vote "FOR" the ratification of the Transactions. ALL SHAREHOLDERS ARE URGED TO
READ THE JOINT VENTURE AGREEMENT IN ITS ENTIRETY.
Background of the Transactions
Historically, the Company's primary business was conducting a commodity
brokerage business through its subsidiary, Index Futures Group, Inc. ("Index").
On July 1, 1996, the Company sold substantially all of the brokerage accounts
maintained by Index, together with all positions, securities, and other assets
held in or for such accounts and other agreed-upon assets used in Index's
brokerage activities, for a purchase price consisting of cash earn-out payments
based upon Index's profitability during the sixty-six months following the sale.
The Company's revenues since July 1996 have consisted primarily of earn-out
payments, interest income and income from operations of the Company's majority-
owned British subsidiary, IFX Ltd., which conducts foreign exchange business as
a registrant of the British Securities and Futures Authority.
Following the sale of Index, the Company decided not to reinvest the sales
proceeds in the Company's commodities brokerage business and has been exploring
other industries and business opportunities. Based on such review, the Board of
Directors believes that the Internet and telecommunications industries present
significant opportunities for the Company's future investment and growth. In
particular, the Board of Directors believes that the market for Internet
services in Latin America presents substantial growth potential due to the
increasing demand for Internet services, current low market penetration and the
absence of any dominant regional service providers. Accordingly, the Company
intends to pursue the development of Internet services and the acquisition of
telecommunication businesses, initially in South America, with the proceeds from
the sale of Index and private equity offerings and possibly through joint
venture transactions.
During the past year, the Company engaged in discussions with a number of
third parties regarding the possibility of such parties making significant
investments in the Company or entering into a strategic partnership with the
Company. In October 1997, the Company first began to discuss the possibility of
entering into a strategic venture with International Technology to provide
Internet services in South America and other non-U.S. jurisdictions and to
pursue the acquisition of existing Internet service providers and related
businesses; however, serious discussions did not commence until May 1998. From
May 1998 through November 1998, senior management of the Company and
International Technology met on numerous occasions to evaluate various strategic
business opportunities and the manner in which the companies should pursue these
opportunities, including a possible business combination or joint venture. The
Company chose to pursue a joint venture with International Technology because of
its extensive experience and existing business relationships with participants
in the computer distribution and communications industries in Latin America.
-11-
<PAGE>
From late August 1998 until mid-November 1998, the parties drafted and
negotiated the Joint Venture Agreement. On November 10, 1998, after extensive
discussions, the Board of Directors unanimously approved the Transactions and
authorized the officers of the Company to complete negotiations and execute the
Joint Venture Agreement. The Joint Venture Agreement was signed on November 23,
1998.
Factors Considered by the Board of Directors in Approving the Transactions
The Board of Directors of the Company, by unanimous vote, has approved the
Transactions and believes that the Transactions are in the best interests of the
Company and its shareholders. In approving the Transactions (including the
grant to International Technology of the right to purchase up to 5,500,000
additional shares of Common Stock at a price of $2.00 per share), the Board of
Directors considered, among other things, the following factors:
(a) Unsatisfactory results in the Company's foreign currency trading
operations and potentially diminished returns from foreign currency trading
as a result of the introduction in 1999 of the Euro, the currency of the
European Monetary Union, have created a need for the Company to enter a new
line of business. The Board of Directors believes that the Internet and
telecommunications industries, particularly in Latin America, present
significant opportunities for the Company's future investment and growth.
(b) The Board of Directors believes that there are material potential
advantages to the Company and its shareholders from the Company's
association with International Technology, whose principals have
significant experience in the wholesale distribution of microcomputers,
networking products and related computer components throughout Latin
America. The Board of Directors believes that the Company will benefit
from the expertise and existing business relationships that International
Technology's affiliates have with respect to marketing computers and
related products in emerging markets, particularly in Latin America. As
the Company's largest shareholder (assuming International Technology
exercises its right to purchase 5,500,000 additional shares of Common
Stock), it will be in International Technology's interest to make its
resources and expertise available to the Company.
(c) Based on the Company's lengthy exploration of strategic
alternatives and its assessment of the current business climate (which
awards high premiums to Internet related ventures), the Board of Directors
believes that no other currently available potential acquisitions or joint
ventures would be more advantageous to the Company's shareholders than the
Transactions. In addition, International Technology was willing to invest
$1.0 million in the Company immediately as a sign of its commitment to the
Company.
(d) The Board of Directors decided that granting International
Technology the right to purchase up to 5,500,000 additional shares of
Common Stock at a price of $2.00 per share was appropriate because, in
November 1998 before the Board of Directors approved the Transactions, the
average closing price of the Common Stock as reported by the Nasdaq Stock
Market was below $2.00 per share and had been below $2.00 per share for
much of the prior two years. In addition, the Board of Directors believed
that any future increase in the market price of Common Stock would be
attributable principally to value added by International Technology and not
to growth experienced in the Company's historic businesses.
(e) International Technology will benefit from the Transactions
primarily to the extent that the market value of the Common Stock
increases. Although the interests of the Company's existing shareholders
will be highly diluted if International Technology exercises its right to
purchase up to 5,500,000 additional shares of Common Stock, all of the
Company's existing shareholders will participate in any increase in the
price of the Common Stock that may
-12-
<PAGE>
occur following consummation of the Transactions. Thus, the Board believes
that the interests of International Technology and the Company's other
shareholders are aligned in certain material respects.
(f) Joseph Matalon, who will be elected as a director of the Company
if the Transactions are approved, has a successful history and extensive
experience in business and as an investor in computer related companies.
Mr. Matalon is expected to provide valuable strategic oversight as the
Company enters a new line of business.
(g) The Board of Directors considered the implications of
International Technology owning approximately 49.4% of the Company's Common
Stock, on a fully diluted basis, and the conflicts of interest and
potential deterrent effect that might result from such ownership, and
determined that the benefits of the Transactions outweighed such risks.
In view of the variety of factors considered by the Board of Directors in
connection with its evaluation of the Transactions, the Board of Directors did
not assign relative weights to the individual factors considered in reaching its
determination and recommendations set forth herein. Based upon the Board of
Directors' consideration of the foregoing factors and its evaluation of the
Company's prospects as an ongoing business if the Transactions were not
consummated, the Board of Directors concluded that prospects for enhancing
shareholder value will be materially enhanced by the Transactions and that the
Transactions are in the best interests of the shareholders of the Company.
Information Regarding International Technology Investments, LC.
International Technology is a joint venture company owned and operated by
members of the Matalon family and the Shalom family. Members of the Shalom
family, including Michael Shalom, were the principals, and were actively
involved in the management, of the INTCOMEX group of companies, a privately held
group of companies based in Miami, Florida. INTCOMEX is a leading Latin
American wholesale distributor of microcomputers, networking products, mass
storage products, multimedia products, computer peripheral equipment and
computer components. INTCOMEX offers more than 1,000 products, manufactured by
more than 30 industry leading hardware manufacturers, to over 12,000 re-sellers
in the Latin American region. INTCOMEX's 1998 sales revenues are estimated to
be in excess of $230 million. In July 1998, the INTCOMEX group of companies was
sold to CHS Electronics, a Fortune 500 Company and one of the largest
distributors of computer products in Latin America.
Members of the Matalon family, including Joseph M. Matalon, are principals
of Mechala Group Jamaica Limited. Mechala Group, one of the largest
conglomerates in Jamaica, is a diversified business enterprise engaged in
development and construction, manufacturing and trading and financial services.
Mechala Group is one of the largest developers of housing and related commercial
buildings in Jamaica, the second largest distributor in Jamaica of food products
and a major distributor of hardware, pharmaceutical, personal care and other
consumer products. In addition, Mechala Group is a major provider of insurance,
investment management and other financial products and services. Meyer Matalon,
a principal of the Mechala Group and a member of the Matalon family, sits on the
boards of directors of Cable & Wireless Jamaica and of Cable and Wireless
Panama.
The Board of Directors believes that a joint venture between the Company
and International Technology is in the best interests of the shareholders of the
Company because Michael Shalom, Joseph M. Matalon and other principals of
International Technology have extensive knowledge of, and existing business
relationships with companies operating in, the Latin American computer and
peripheral distribution market and in negotiating and completing complex
financial transactions. It is the intent of the Company and International
Technology that Michael Shalom, Joseph M. Matalon and certain other principals
of International Technology will be actively
-13-
<PAGE>
involved in the management and strategic operations of the Company. The Company
believes that their involvement will be invaluable for the Company's entry into
the Internet-related and telecommunications industries.
Description of the Joint Venture Agreement
Formation of Joint Venture. Pursuant to the Joint Venture Agreement, each
of the Company and International Technology has contributed $1,000,000 to a
joint venture formed to provide Internet services, and to make investments in
Internet-related businesses, primarily in Latin America and other international
markets. No such investments have been consummated as of the date this proxy
statement was mailed. The joint venture will be conducted through Emerging
Networks, Inc., a corporation organized by the Company under the laws of the
British Virgin Islands ("ENI"). ENI is a subsidiary of IFX/EN, Inc., which is a
wholly-owned subsidiary of the Company. International Technology's $1,000,000
initial contribution to ENI was paid indirectly, through International
Technology's purchase of 500,000 shares of Common Stock from the Company at a
purchase price of $2.00 per share. Upon receipt of payment for such shares, the
Company (i) contributed the $1,000,000 purchase price it received from
International Technology, plus an additional $1,000,000 for its own account, to
IFX/EN, Inc., and (ii) caused IFX/EN, Inc. to contribute to the capital of ENI
the sum of $2,000,000. In exchange for its contribution, the Company received
500,000 shares of common stock of ENI.
It is currently contemplated that IFX and International Technology each
will contribute up to an additional $3,000,000 to the venture; however, neither
party is required to make any additional capital contributions. For each
additional $2.00 contributed to ENI's capital, (i) ENI will issue one additional
share of ENI common stock to the Company, in the case of additional
contributions made by the Company, or (ii) the Company will issue one additional
share of Common Stock to International Technology, in the case of additional
contributions made by International Technology. All contributions in excess of
the parties' initial contributions are completely discretionary; however, the
Company may be obligated to dispose of its investment in ENI, or International
Technology may be obligated to dispose of its investment in the Company, if the
Company or International Technology, respectively, has not made additional
capital contributions of at least $3,000,000 prior to the expiration of the
Purchase Right (as defined below). See "-Terms of Purchase Right."
Terms of Purchase Right. The Company also has granted to International
Technology the right, but not the obligation, to purchase up to an additional
5,500,000 shares of Common Stock for $2.00 per share, or a maximum total
purchase price of $11,000,000 (the "Purchase Right"). The number of shares of
Common Stock International Technology is entitled to purchase pursuant to the
Purchase Right will be reduced, share-for-share, by the number of shares of
Common Stock (if any) issued by the Company to International Technology in
consideration for additional capital contributions made to the joint venture by
International Technology. The Purchase Right will remain in effect for three
years, commencing in January 1999; however, if International Technology makes at
least $3,000,000 in additional capital contributions before the last day of such
three-year period, then the exercisability of the Purchase Right, in respect of
the shares of Common Stock which remain subject thereto, automatically will be
extended for an additional 24 months.
If the Purchase Right is exercised, International Technology may acquire up
to 6,000,000 shares of Common Stock (including the 500,000 shares it currently
owns) pursuant to the Joint Venture Agreement, which would constitutes
approximately 49.4% of the outstanding shares of Common Stock (including such
shares), and a "change of control" of the Company may be deemed to have
occurred. Accordingly, the Transactions are subject to the parties obtaining
all approvals, consents and other authorizations of their respective
shareholders, the Securities and Exchange Commission, the Nasdaq Stock Market,
Inc. and other applicable governmental, regulatory or administrative
authorities, if any, necessary for the grant to International Technology of the
Purchase Right and the future issuance of Common Stock upon exercise of the
Purchase Right. Each of Lee S. Casty and International Technology has
contractually agreed, in the Joint Venture Agreement, to vote all shares of
Common Stock owned by him or it "FOR" approval of Proposal Two and to use his or
its reasonable best efforts to ensure the ratification of the Joint Venture
Agreement by the shareholders of IFX.
-14-
<PAGE>
Disposition of ENI. The Joint Venture Agreement provides that, in certain
circumstances, either the Company or International Technology may be required to
sell all of its investment in ENI or in the Company, as the case may be. In the
event that (i) the Purchase Right expires before it is exercised, or
International Technology fails to make additional contributions of at least
$3,000,000, and (ii) the average trading price of the Common Stock (calculated
pursuant to the Joint Venture Agreement) as of the date the Purchase Right
expires is less than $2.00 per share, International Technology will have a
period of time during which to sell its shares of Common Stock to a bona fide
purchaser who agrees to contribute at least $3,000,000 (less any additional
contributions previously made by International Technology) to ENI. If
International Technology fails to sell its shares of Common Stock, then the
Company will be required to use its commercially reasonable efforts to sell to a
bona fide purchaser all or substantially all of the capital stock, business or
assets of ENI and to use a pro rata position of the net proceeds of such sale to
purchase all of International Technology's Common Stock. Conversely, in the
event that the Company fails to make additional capital contributions to ENI of
at least $3,000,000 before the Purchase Right expires, International Technology
will be entitled to (i) sell to the Company, and require the Company to
purchase, all shares of Common Stock owned by International Technology, and (ii)
purchase from the Company, and require the Company to sell, all of the shares of
ENI Common Stock owned by the Company.
Registration Rights. None of the shares of Common Stock issued or to be
issued to International Technology under the Joint Venture Agreement and none of
the shares of Common Stock currently owned by Lee S. Casty has been registered
under the Securities Act of 1933, as amended (the "Securities Act"). Mr. Casty
owns and, upon consummation of the Transactions, International Technology will
beneficially own more than 10% of the outstanding Common Stock. Accordingly,
each of International Technology and Mr. Casty may be deemed to be "affiliates"
of the Company (as defined in Rule 144 promulgated under the Securities Act) and
their respective abilities to publicly resell their shares will be limited. In
connection with the Transactions, the Company has agreed to register for resale,
on up to three separate occasions, all or any of the shares of Common Stock
owned by International Technology and Mr. Casty, upon a written request by
either of them. In addition, each of International Technology and Mr. Casty is
entitled to include shares of Common Stock owned by it or him (with some
limitations) in any registration requested by the other or in any registered
offering undertaken by the Company for its own account.
Board Representation. The Joint Venture Agreement entitles each of
International Technology and the Company to nominate and elect two persons to
the board of directors of ENI. In addition, for so long as the Purchase Right
remains in effect and is exercisable, each of International Technology and Lee
S. Casty are entitled to nominate one person for election to the Board of
Directors of the Company and each of them has contractually agreed to take all
actions reasonably necessary to ensure the election of such persons to the
Board. Mr. Casty's initial nominee is Joel Eidelstein and, subject to
shareholder ratification of the Transactions, International Technology's initial
nominee is Joseph M. Matalon. See "Proposal One-Election of Directors."
-15-
<PAGE>
PROPOSAL THREE
APPROVAL OF 1998 STOCK OPTION AND INCENTIVE PLAN
In November 10, 1998 the Board of Directors of the Company adopted the IFX
Corporation 1998 Stock Option and Incentive Plan (the "Plan"), subject to
shareholder approval. The purposes of the Plan are to (i) attract and retain
high quality directors, officers, employees and consultants of the Company or
any of its subsidiaries, (ii) motivate such persons to promote the long-term
success of the business of the Company and its subsidiaries, and (ii) reward
individual achievement and enable directors, officers, employees and consultants
of the Company and its subsidiaries to participate in the long-term growth and
financial success of the Company. The Board of Directors believes that approval
of the Plan is in the best interests of the Company and its shareholders. The
following summary description of the Plan is qualified in its entirety by
reference to the Plan, a copy of which is attached hereto as Appendix A.
Types of Awards. Subject to obtaining shareholder approval of the Plan, an
aggregate of 900,000 shares of Common Stock have been reserved for issuance
under the Plan pursuant to the grant of (i) incentive stock options ("ISOs")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), (ii) stock options that are not intended to qualify under
Section 422 of the Code ("NSOs" and together with ISOs, "Options") and (iii)
shares of restricted Common Stock ("Restricted Stock"). The Plan also
authorizes the award of phantom stock and stock appreciation rights ("SARs").
Shares Available. Not more than 900,000 shares of Common Stock may be
issued pursuant to awards granted under the Plan. There is no minimum number of
shares that may be granted to any participant; however, no participant in the
Plan may be granted awards in any calendar year in respect of more than 300,000
shares of Common Stock. Common Stock issued under the Plan may be authorized
but unissued shares of Common Stock, or shares that have been reacquired by the
Company and held in treasury. Upon the expiration or termination of Options or
other awards granted under the Plan, the shares of Common Stock that were
subject to such awards will be available to cover awards subsequently granted
under the Plan.
Eligible Individuals. Awards under the Plan may be granted to officers,
employees, non-employee directors, independent contractors or consultants of the
Company or any subsidiary, and to persons who, at the time an award is granted,
are not yet officers or employees of the Company or any subsidiary but to whom
an offer of employment has been extended.
Administration of the Plan. The Plan will be administered by a
compensation committee of the Board of Directors (the "Committee") comprised of
two or more directors. Each member of the Committee will qualify as an outside
or non-employee director as defined by Section 162(m) of the Code and/or the
Exchange Act to the extent such qualification is deemed necessary for the grant
of awards under the Plan to qualify for favorable tax or securities treatment
under applicable law. The members of the Committee will be appointed by the
Board of Directors and initially will consist of George Myers and Zalman Lekach.
Subject to the express provisions of the Plan, the Committee will have sole
discretion to (i) select, from time to time, which individuals are eligible to
participate in the Plan, (ii) those eligible individuals who will receive awards
under the Plan, and (iii) the form and vesting schedule of awards and the number
of shares, exercise price, manner of payment and expiration date applicable to
each award. The Committee also has authority to construe and interpret the Plan
and to establish, amend and rescind rules and regulations relating to the Plan.
Terms and Conditions of Awards. The exercise price for each award under
the Plan will be determined by the Committee at the time the award is granted
and will be specified in an option or other applicable agreement. The exercise
price of an ISO may not be less than the fair market value of the Common Stock
on the date the ISO is granted; however, the exercise price of an NSO may be
less than, equal to or greater than the fair market value of the Common Stock on
the date the NSO is granted. "Fair market value" under the Plan is determined
by the Committee, in good faith, taking into account the price of the Common
Stock as reported on the Nasdaq SmallCap
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<PAGE>
Market. The exercise price of Options granted under the Plan will be payable in
cash, by the participant's delivery to the Company of shares of Common Stock
with an aggregate Fair Market Value equal to the aggregate exercise price,
pursuant to a cashless exercise arrangement with a broker or in such other form
of consideration as the Committee may approve.
Unless otherwise determined by the Committee, awards under the Plan will be
(i) exercisable for ten years after the date of grant, (ii) vest, in specified
increments, over the three years following the date of grant, and (iii)
terminate on the earliest of (a) the participant's termination of employment
with the Company for cause, (b) 30 days after the participant's termination of
employment with the Company for any other reason, other than death or permanent
disability, and (c) one year following the participant's death or permanent
disability. Options, SARs and phantom stock granted under the Plan will be
transferable only by will or the laws of descent and distribution, or pursuant
to a qualified domestic relations order as defined in Section 414(p) of the
Code.
Specific Grants Under the Plan. Subject to obtaining shareholder approval
of the Plan, on November 10, 1998 the Board of Directors (excluding Mr.
Eidelstein) granted to Joel M. Eidelstein an Option to purchase 300,000 shares
of Common Stock, which constitutes approximately 4.5% of the outstanding Common
Stock on the date of grant. The Option granted to Mr. Eidelstein is an ISO, to
the extent it qualifies for treatment as such, with any portion of the Option
that does not qualify as an ISO being treated as an NSO. The option vested 25%
on each of November 10, 1998 and January 1, 1999, and will vest an additional
25% on each of January 1, 2000 and January 1, 2001. The exercise price of the
Option is $3.00 per share and the sale price of the Common Stock as of the date
of grant was $1.75 per share. Mr. Eidelstein currently serves as the President
and a director of the Company and has been nominated for re-election as a
director. See "Proposal One-Election of Directors." The Board of Directors
(excluding Mr. Eidelstein, who abstained from any discussion or voting) approved
the Option grant to Mr. Eidelstein in recognition of his dedication to the
Company during the Company's business transition following the July 1996 sale of
Index's business and Mr. Eidelstein's acceptance of a below-market salary during
fiscal years 1997 and 1998. See "Board of Directors Report on Executive
Compensation."
The Board of Directors has not granted any other awards under the Plan and
currently has no definitive plans to grant awards to any other specific
individuals. The grant of awards under the Plan is within the discretion of the
Committee; thus the names of individuals who may receive awards under the Plan
and the form, number of shares and exercise price applicable to any such award
currently cannot be determined.
Certain Federal Income Tax Consequences. Following is a brief summary of
the principal federal income tax consequences of awards under the Plan. This
summary is not an exhaustive description and does not describe all applicable
federal, state or local tax laws.
Incentive Stock Options. A Plan participant is not subject to federal
income tax at the time of either the grant or the exercise of an ISO. In
the year in which an ISO is exercised, however, the amount by which the
fair market value of the shares of Common Stock received upon the exercise
of an ISO exceeds the exercise price will constitute an adjustment to the
optionholder's income in computing alternative minimum taxable income.
Such adjustment could result in the imposition of, or increase the amount
of, the optionholder's "alternative minimum tax" under the Code. If an
optionholder does not dispose of such shares of Common Stock within two
years after the ISO was granted or one year after the ISO was exercised,
whichever is later (any such disposition, a "disqualifying event"), then
any gain or loss recognized upon such disposition generally will be treated
as long-term capital gain or loss. In such event, the Company will not
receive a tax deduction on either the exercise of the ISO or on the sale of
the underlying Common Stock.
If an optionholder makes a "disqualifying disposition," the
optionholder will realize ordinary income in an amount equal to the lesser
of (i) the fair market value of the ISO Stock on the date the ISO is
exercised minus the exercise price, or (ii) the sales price received by the
optionholder on the disposition
-17-
<PAGE>
of the ISO Stock minus the exercise price. In such event, the Company will
be entitled to a deduction in an amount equal to the ordinary income
realized by the optionholder. If a sale is a disqualifying disposition,
the optionholder also may realize short-term or long-term capital gain or
loss, if such shares constitute capital assets in an optionholder's hands.
The gain or loss will be measured by the difference between the fair market
value of the shares on the date of exercise of the ISO and the sales price
of the shares.
Non-Qualified Stock Options. No income is realized by an optionholder
upon the grant of an NSO. Upon the exercise of an NSO, however, the amount
by which the fair market value of the Common Stock on the date of exercise
exceeds the exercise price will be taxed as ordinary income to an
optionholder and the Company will be entitled to a deduction in an equal
amount. Such amount will not be an adjustment to income in computing
alternative minimum taxable income. Upon subsequent sales of NSO Stock, an
optionholder may realize short-term or long-term capital gain or loss,
depending upon the holding period of the shares, if such shares constitute
capital assets in an optionholder's hands. The gain or loss will be
measured by the difference between the sales price and the tax basis of the
shares sold. The tax basis for this purpose will be the sum of the
exercise price and the amount of ordinary income realized by the
optionholder as a result of such exercise.
Other Awards. No income is realized by a holder of SAR or phantom
stock at the time the SAR or phantom stock is granted; however, upon
exercise, the amount of cash or the fair market value of the shares of
Common Stock received will be taxable as ordinary income to the holder
thereof and the Company will be entitled to a deduction in an equal amount.
Section 162(m). Section 162(m) of the Code limits the deductibility
(under certain circumstances) of compensation that exceeds $1,000,000
annually that is paid by the Company to its president and to its four most
highly compensated officers (other than the president) as determined at the
end of the Company's taxable year. Section 162(m) and the proposed
regulations thereunder provide certain exclusions from the amounts included
in the $1,000,000 limitation, including compensation that is "qualified
performance-based compensation" within the meaning of the proposed
regulations. The Plan generally is intended to satisfy the requirements
set forth in the proposed regulations with respect to "qualified
performance-based compensation" with respect to Options that are
exercisable at an exercise price of not less than 100% of the fair market
value of a share of Common Stock on the date of grant. However, if an
option is exercisable at a price less than 100% of the price of a share of
Common Stock on the date of grant, the compensatory element of such NSO
(i.e., the excess of the such fair market value over the exercise price)
will not constitute "qualified performance-based compensation."
Miscellaneous. The Plan is not qualified under Section 401 of the Code.
In addition, the Plan is not subject to any of the provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
Vote Required. The Plan will be approved by the shareholders of the
Company if Proposal Three receives the affirmative vote of a majority of the
shares of Common Stock present, by person or by proxy, and entitled to vote on
the proposal. Any proxy card that is marked as abstaining from voting on
Proposal Three will be counted for purposes of determining a quorum and,
although such shares will be counted as unvoted for purposes of the proposal,
will have the effect of a vote against the proposal.
Recommendation of the Board of Directors
The Board of Directors of the Company unanimously recommends that
shareholders vote FOR Proposal Three and approval of the Plan.
-18-
<PAGE>
PROPOSAL FOUR
SELECTION OF AUDITORS
The Board of Directors has engaged Arthur Andersen LLP to audit the
financial statements of the Company for fiscal year 1999, subject to
ratification by the shareholders. Arthur Anderson LLP audited the Company's
financial statements for fiscal years 1997 and 1998. It is expected that a
representative of Arthur Andersen LLP will be present at the Annual Meeting and
will have an opportunity to make a statement, if such representative so desires,
and to respond to appropriate questions.
Recommendation of the Board of Directors
The Board of Directors of the Company unanimously recommends that
shareholders vote FOR ratification of Arthur Andersen LLP as independent
auditors.
SHAREHOLDER PROPOSALS FOR 1999 PROXY STATEMENT
Proposals by shareholders for inclusion in the Company's Proxy Statement
and form of proxy relating to the 1999 Annual Meeting of Shareholders, which is
currently scheduled to be held on December 15, 1999, should be addressed to the
Secretary, IFX Corporation, 200 West Adams Street, Suite 1460, Chicago,
Illinois, 60606, and must be received at such address no later than August 17,
1999. Upon receipt of any such proposal, the Company will determine whether or
not to include such proposal in the Proxy Statement and proxy in accordance with
applicable law. It is suggested that such proposal be forwarded by certified
mail, return receipt requested.
OTHER MATTERS TO BE ACTED UPON AT THE MEETING
The management of the Company knows of no other matters to be presented at
the meeting. Should any other matter requiring a vote of shareholders arise at
the meeting, the persons named in the proxy will vote the proxies in accordance
with their best judgement.
ANNUAL REPORT
Copies of the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1998 and the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998, each as filed with the Securities Exchange
Commission, are being mailed concurrently with, this Proxy Statement.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1998 accompanies this Proxy Statement and is incorporated into
this Proxy Statement by this reference. The Company will provide without charge
to each beneficial owner of Common Stock to whom a copy of this Proxy Statement
is delivered a copy of any or all of the information that has been incorporated
by reference in this Proxy Statement (excluding exhibits to such information).
Requests for such information should be directed to the Secretary, IFX
Corporation, 200 West Adams Street, Suite 1460, Chicago, Illinois, 60606,
telephone (312) 419-9530.
-19-
<PAGE>
Appendix A
----------
IFX CORPORATION
STOCK OPTION AND INCENTIVE PLAN
1. Preamble.
--------
IFX Corporation, a Delaware corporation (the "Company"), hereby establishes
the IFX Corporation Stock Option and Incentive Plan (the "Plan") as a means
whereby the Company may, through awards of (i) incentive stock options within
the meaning of section 422 of the Code (as herein defined), (ii) stock
appreciation rights, (iii) non-qualified stock options, (iv) restricted stock,
and (v) phantom stock:
(a) provide employees of the Company and its subsidiaries with
additional incentive to promote the success of the Company's and its
subsidiaries' businesses and encourage such employees to remain in the
employ of the Company and its subsidiaries;
(b) provide incentive for potential employees to accept employment
with the Company;
(c) provide Directors of the Company who are not otherwise employees
of the Company with additional incentive to promote the success of the
Company's business; and
(d) provide consultants and other independent contractors who provide
services to the Company with additional incentive to promote the success of
the Company's business.
The provisions of this Plan do not apply to or affect any option, stock
appreciation right, or stock heretofore or hereafter granted under any other
stock plan of the Company or any subsidiary, and all such options, stock
appreciation right or stock continue to be governed by and subject to the
applicable provisions of the plan or agreement under which they were granted.
2. Definitions.
-----------
2.01 "Board" or "Board of Directors" means the board of directors of the
Company.
2.02 "Cause" means, as determined in the sole discretion of the Board, a
Participant's (a) commission of a felony; (b) material or repeated dishonesty or
misrepresentation involving the Company or any Subsidiary; (c) serious
misconduct in the performance or non-performance of Participant's
responsibilities as an employee, Officer, Director, consultant or independent
contractor; (d) violation of a material condition of employment; (e)
unauthorized use of trade secrets or confidential information; or (f) aiding a
competitor of the Company or any Subsidiary.
2.03 "Code" means the Internal Revenue Code of 1986, as it exists now and
as it may be amended from time to time.
2.04 "Committee" means the committee comprised of two or more Directors
appointed by the Board to administer the Plan.
2.05 "Common Stock" means the common stock of the Company, $.02 par value
per share.
<PAGE>
2.06 "Company" means IFX Corporation, a Delaware corporation, and any
successor thereto.
2.07 "Director" means a member of the Board.
2.08 "Exchange Act" means the Securities Exchange Act of 1934, as it
exists now or from time to time may hereafter be amended.
2.09 "Fair Market Value" means for the relevant day:
(a) If shares of Common Stock are listed or admitted to unlisted
trading privileges on any national or regional securities exchange, the
last reported sale price, regular way, on the composite tape of that
exchange on the day Fair Market Value is to be determined;
(b) If the Common Stock is not listed or admitted to unlisted trading
privileges as provided in paragraph (a), and if sales prices for shares of
Common Stock are reported by the National Association of Securities
Dealers, Inc. Automated Quotations, Inc. National Market System ("Nasdaq
System"), then the last sale price for Common Stock reported as of the
close of business on the day Fair Market Value is to be determined, or if
no such sale takes place on that day, the average of the high bid and low
asked prices so reported and, if Common Stock is not traded on that day,
the next preceding day on which such stock was traded; or
(c) If trading of the Common Stock is not reported by the Nasdaq
System or on a stock exchange, Fair Market Value will be determined by the
Committee in its discretion based upon the best available data.
2.10 "ISO" means incentive stock options within the meaning of Section 422
of the Code.
2.11 "Naked SAR" means a SAR issued not in connection with an ISO or NSO.
2.12 "NSO" means non-qualified stock options, which are not intended to
qualify under Section 422 of the Code.
2.13 "Option" means the right of a Participant, whether granted as an ISO
or an NSO, to purchase a specified number of shares of Common Stock, subject to
the terms and conditions of the Plan.
2.14 "Option Date" means the date upon which an Option, SAR, Restricted
Stock or Phantom Stock is awarded to a Participant under the Plan.
2.15 "Option Price" means the price per share at which an Option may be
exercised.
2.16 "Participant" means an individual to whom an Option, SAR, Phantom
Stock or Restricted Stock has been granted under the Plan.
2.17 "Phantom Stock" means a hypothetical share of Common Stock issued as
phantom stock under the Plan.
2.18 "Plan" means the IFX Corporation Stock Option Plan, as set forth
herein and as from time to time amended.
-2-
<PAGE>
2.19 "Restricted Stock" means Common Stock awarded to a Participant
pursuant to this Plan and subject to the restrictions contained in Section 9.
2.20 "SAR" means a stock appreciation right. A SAR may be a Naked SAR or
a Tandem SAR.
2.21 "Securities Act" means the Securities Act of 1933, as it exists now
or from time to time may hereinafter be amended.
2.22 "Subsidiary" means any corporation or other entity of which the
majority voting power or equity interest is owned directly or indirectly by the
Company.
2.23 "Tandem SAR" means a SAR associated with and issued in connection
with an ISO or NSO.
2.24 Rules of Construction.
(a) Governing Law. The construction and operation of this Plan are
governed by the laws of the State of Delaware.
(b) Undefined Terms. Unless the context requires another meaning,
any term not specifically defined in this Plan has the meaning given to it
by the Code.
(c) Headings. All headings in this Plan are for reference only and
are not to be utilized in construing the Plan.
(d) Gender. Unless clearly appropriate, all nouns of whatever gender
refer indifferently to persons of any gender.
(e) Singular and Plural. Unless clearly inappropriate, singular
terms refer also to the plural and vice versa.
(f) Severability. If any provision of this Plan is determined to be
illegal or invalid for any reason, the remaining provisions shall continue
in full force and effect and shall be construed and enforced as if the
illegal or invalid provision did not exist, unless the continuance of the
Plan in such circumstances is not consistent with its purposes.
(g) Termination of Employment. For all purposes of this Plan, an
employee will have terminated employment with the Company when the
employee's employment relationship with the Company and all of its
subsidiaries is terminated. Additionally, with respect to consultants and
independent contractors, for all purposes of the Plan such consultant's or
independent contractor's "employment with the Company" shall be considered
terminated upon the termination of any consulting or independent contractor
agreement, or when the consultant or independent contractor no longer
performs any services for the Company.
-3-
<PAGE>
3. Stock Subject to the Plan.
-------------------------
Except as otherwise provided in Section 13, the aggregate number of shares
of Common Stock that may be issued under Options or as Restricted Stock under
this Plan may not exceed 900,000 shares of Common Stock. Reserved shares may be
either authorized but unissued shares or treasury shares, in the Board's
discretion. If any awards hereunder shall terminate or expire, as to any number
of shares, new Options, and Restricted Stock may thereafter be awarded with
respect to such shares. Except as otherwise provided in Section 13, no
Participant may be granted awards under the Plan in any calendar year in respect
of more than 300,000 shares of Common Stock.
4. Administration.
--------------
The Plan shall be administered by the Committee. In addition to any other
powers set forth in this Plan, the Committee has the exclusive authority:
(a) to construe and interpret the Plan, and to remedy any ambiguities
or inconsistencies therein;
(b) to establish, amend and rescind appropriate rules and regulations
relating to the Plan;
(c) subject to the express provisions of the Plan, to determine the
individuals who will receive awards of Options, Restricted Stock, Phantom
Stock and/or SARs, the times when they will receive them, the number of
shares to be subject to each award and the Option Price, payment terms,
payment method, and expiration date applicable to each award;
(d) to contest on behalf of the Company or Participants, at the
expense of the Company, any ruling or decision on any matter relating to
the Plan or to any awards of ISOs, NSOs, Restricted Stock, Phantom Stock
and/or SARs;
(e) generally, to administer the Plan, and to take all such steps and
make all such determinations in connection with the Plan and the awards of
ISOs, NSOs, Restricted Stock, Phantom Stock and/or SARs granted thereunder
as it may deem necessary or advisable;
(f) to determine the form in which payment of a SAR or a Phantom
Stock award granted hereunder will be made (i.e., cash, Common Stock or a
combination thereof) or to approve a participant's election to receive cash
in whole or in part in settlement of the SAR or Phantom Stock award;
(g) to determine the form in which tax withholding under Section 16
of this Plan will be made; and
(h) to amend the Plan or any Option, Restricted Stock, Phantom Stock
or SAR granted or awarded hereunder as may be necessary in order for any
business combination involving the Company to qualify for pooling-of-
interest treatment under APB No. 16.
-4-
<PAGE>
5. Eligible Participants.
---------------------
Subject to the provisions of the Plan, the Committee shall determine from
time to time (a) those employees, officers, Directors, consultants and
independent contractors of the Company or a Subsidiary, and non-employees and
non-officers to whom the Company or any Subsidiary has extended an offer of
employment, who shall be designated as Participants, and (b) the number of
Options, SARs, Restricted Stock, and Phantom Stock, or any combination thereof,
to be awarded to each such Participant; provided, however, that no ISOs or
Tandem SARs granted with respect to ISOs shall be awarded under the Plan more
than ten years after the date this Plan is adopted by the Board. In addition,
no ISOs may be awarded to a Participant who is not an employee of the Company or
a Subsidiary.
6. Terms and Conditions of Incentive Stock Options.
-----------------------------------------------
The Committee, in its discretion, may grant ISOs to any Participant under
the Plan; provided, however, that no ISOs may be granted to a Director or other
Participant who is not an employee of the Company or a Subsidiary. Each ISO
shall be evidenced by an agreement between the Company and the Participant in a
form approved by the Committee. Unless the Committee, in its discretion,
determines otherwise, each ISO agreement shall be subject to the following terms
and conditions and to such other terms and conditions as the Committee may deem
appropriate;
(a) Option Period. Each ISO will expire as of the earliest of:
(i) the date on which it is forfeited under the provisions of
Section 12;
(ii) 10 years (or five years as specified in Section 6(e)) from
the Option Date;
(iii) three months after the Participant's termination of
employment for any reason other than death; or
(iv) six months after the Participant's death.
(b) Option Price. Subject to the provisions of Section 6(e), the
Option Price per share shall be determined by the Committee at the time any
ISO is granted, and shall not be less than the Fair Market Value of the
Common Stock subject to the ISO on the Option Date.
(c) Other Option Provisions. The form of ISO authorized by the Plan
may contain such other provisions as the Committee may, from time to time,
determine; provided, however, that such other provisions may not be
inconsistent with any requirements imposed on qualified stock options under
Section 422 of the Code.
(d) Limitations on Awards. The aggregate Fair Market Value,
determined as of the Option Date, of Common Stock with respect to which
ISOs are exercisable by a Participant for the first time during any
calendar year under all ISO plans of the Company and any Subsidiary shall
not exceed $100,000.
(e) Awards to Certain Shareholders. Notwithstanding Sections 6(a) and
6(b) hereof, if an ISO is granted to a Participant who owns stock
representing more than 10% of the voting
-5-
<PAGE>
power of all classes of stock of the Company or a Subsidiary (as determined
under the Code), the exercise period specified in the ISO agreement for
which the ISO thereunder is granted shall not exceed five years from the
Option Date and the Option Price shall be at least 110% of the Fair Market
Value (as of the Option Date) of the Common Stock subject to the ISO.
7. Terms and Conditions of Non-Qualified Stock Option.
--------------------------------------------------
The Committee, in its discretion, may grant NSOs to any Participant under
the Plan. Each NSO shall be evidenced by an agreement between the Company and
the Participant in a form approved by the Committee. Unless the Committee, in
its discretion, determines otherwise, each NSO agreement shall be subject to the
following terms and conditions and to such other terms and conditions as the
Committee may deem appropriate:
(a) Option Period. Each NSO will expire as of the earliest of:
(i) the date on which it is forfeited under the provisions of
Section 12;
(ii) the date three months after the Participant's termination of
employment for any reason other than death; or
(iii) the date six months after the Participant's death.
(b) Option Price. At the time when the NSO is granted, the Committee
will fix the Option Price. The Option Price may be greater than, less than,
or equal to Fair Market Value on the Option Date, as determined in the sole
discretion of the Committee.
(c) Other Option Provisions. The form of NSO authorized by the Plan
may contain such other provisions as the Committee may from time to time
determine.
8. Terms and Conditions of Stock Appreciation Rights.
-------------------------------------------------
The Committee may, in its discretion, grant a SAR to any Participant under
the Plan. Each SAR shall be evidenced by an agreement between the Company and
the Participant, in a form approved by the Committee, and may be a Naked SAR or
a Tandem SAR. Unless the Committee, in its discretion, determines otherwise,
each SAR awarded to Participants under the Plan shall be subject to the
following terms and conditions and to such other terms and conditions as the
Committee may deem appropriate:
(a) Tandem SARs. Tandem SARs shall terminate on the same date as the
related ISO or NSO. A Tandem SAR shall be exercisable only if the Fair
Market Value of a share of Common Stock on the date of surrender exceeds
the Option Price for the related Option, and then shall be exercisable to
the extent, and only to the extent, that the related Option is exercisable.
A Tandem SAR shall entitle the Participant to whom it is granted the right
to elect, so long as such Tandem SAR is exercisable and subject to such
limitations as the Committee shall have imposed, to surrender any then
exercisable portion of his related Option, in whole or in part, and receive
from the Company in exchange, without any payment of cash (except for
applicable employee withholding taxes), that number of shares of Common
Stock having an aggregate Fair Market Value on the date of surrender equal
to the product of (i) the excess of the Fair Market Value of a share of
Common Stock on the date of surrender over the per share Option Price, and
(ii) the number of shares of Common Stock subject to such Option or portion
-6-
<PAGE>
thereof which is surrendered. Any Option or portion thereof which is
surrendered shall no longer be exercisable. The Committee, in its sole
discretion, may allow the Company to settle all or part of the Company's
obligation arising out of the exercise of a Tandem SAR by the payment of
cash equal to the aggregate Fair Market Value of the shares of Common Stock
which the Company would otherwise be obligated to deliver.
(b) Naked SARs. Naked SARs shall terminate as provided in the
Participant's SAR agreement. The Committee may at the time of granting any
Naked SAR add such conditions and limitations to the Naked SAR as it shall
deem advisable, including but not limited to, limitations on the period
within which the Naked SAR shall be exercisable and the maximum amount of
appreciation to be recognized with regard to such Naked SAR.
(c) Other Conditions. If a Participant is subject to Section 16(a)
and Section 16(b) of the Exchange Act, the Committee may at any time add
such additional conditions and limitations to such SAR which the Committee,
in its discretion, deems necessary or desirable in order to comply with
Section 16(a) or Section 16(b) of the Exchange Act and the rules and
regulations issued thereunder, or in order to obtain any exemption
therefrom.
9. Terms and Conditions of Restricted Stock Awards.
-----------------------------------------------
The Committee, in its discretion, may grant Restricted Stock to any
Participant under the Plan. Each grant of Restricted Stock shall be evidenced
by an agreement between the Company and the Participant in a form approved by
the Committee. Unless the Committee, in its discretion, determines otherwise,
all shares of Common Stock awarded to Participants under the Plan as Restricted
Stock shall be subject to the following terms and conditions and to such other
terms and conditions as the Committee may deem appropriate:
(a) Restricted Period. Shares of Restricted Stock awarded to
Participants may not be sold, transferred, pledged or otherwise encumbered
before they vest. Subject to the provisions of subparagraphs (b) and (c)
below and any other restrictions imposed by law, certificates evidencing
shares of Restricted Stock that vest will be transferred to the Participant
or, in the event of his death, to the beneficiary or beneficiaries
designated by writing filed by the Participant with the Committee for such
purpose or, if none, to his estate.
(b) Forfeitures. A Participant shall forfeit all unpaid accumulated
dividends and all shares of Restricted Stock which have not vested prior to
the date that his employment with the Company is terminated for any reason.
(c) Certificates Deposited With Company. Each certificate issued in
respect of shares of Restricted Stock awarded under the Plan shall be
registered in the name of the Participant and deposited with the Company.
Each such certificate shall bear the following (or a similar) legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) relating to Restricted Stock contained in the IFX Corporation
Stock Option Plan and an agreement entered into between the registered
owner and IFX Corporation. Copies of such Plan and agreement are on file
at the principal office of IFX Corporation."
-7-
<PAGE>
(d) Shareholder Rights. Subject to the foregoing restrictions, each
Participant shall have all the rights of a shareholder with respect to his
shares of Restricted Stock including, but not limited to, the right to vote
such shares.
(e) Dividends. On each Common Stock dividend payment date, each
Participant shall receive an amount equal to the dividend paid on that date
on a share of Common Stock, multiplied by his number of shares of
Restricted Stock.
10. Terms and Conditions of Phantom Stock.
-------------------------------------
The Committee may, in its discretion, award Phantom Stock to any
Participant under the Plan. Each award of Phantom Stock shall be evidenced by
an agreement between the Company and the Participant. The Committee may at the
time of awarding any Phantom Stock add such additional conditions and
limitations to the Phantom Stock as it shall deem advisable, including, but not
limited to, the right for Participants to receive dividends equivalent to those
paid on Common Stock, limitations on the period or periods within which the
Phantom Stock may be surrendered, and the maximum amount of appreciation to be
recognized with regard to such Phantom Stock. An award of Phantom Stock shall
entitle the Participant to whom it is awarded the right to elect, so long as
such Phantom Stock is vested and subject to such limitations as the Committee
shall have imposed, to surrender any then vested portion of the Phantom Stock,
in whole or in part, and receive from the Company in exchange therefor the Fair
Market Value on the date of surrender of the Common Stock to which the
surrendered Phantom Stock relates in cash or in shares of Common Stock as the
Committee may determine. If a Participant is subject to Section 16(a) and
Section 16(b) of the Exchange Act, the Committee may at any time add such
additional conditions and limitations to such Phantom Stock which, in its
discretion, the Committee deems necessary or desirable in order to comply with
Section 16(a) or Section 16(b) of the Exchange Act and the rules and regulations
promulgated thereunder, or in order to obtain any exemption therefrom.
11. Manner of Exercise of Options.
-----------------------------
To exercise an Option in whole or in part, a Participant, any permitted
transferee of a Participant or, after his death, a Participant's executor or
administrator must give written notice to the Committee, stating the number of
shares to which he intends to exercise the Option. The Company will issue the
shares with respect to which the Option is exercised upon payment in full of the
Option Price. The Option Price may be paid (i) in cash, (ii) in shares of
Common Stock having an aggregate Fair Market Value, as determined on the date of
delivery, equal to the Option Price, or (iii) by delivery of irrevocable
instructions to a broker to promptly deliver to the Company the amount of sale
or loan proceeds necessary to pay for all Common Stock acquired through such
exercise and any tax withholding obligations resulting from such exercise. The
Option Price may be paid in shares of Common Stock which were received by the
Participant upon the exercise of one or more Options. The Option Price may be
paid in shares of Common Stock which were received by the Participant as an
award of Restricted Stock under the Plan. The Option Price may be paid by
surrender of Tandem SARs equal to the Option Price.
12. Vesting.
-------
(a) A Participant may not exercise an Option, surrender a SAR or Phantom
Stock or transfer, pledge or dispose of any Restricted Stock until it has become
vested. The portion of an Option, SAR or Phantom Stock award or Restricted
Stock that is vested depends upon the period that has elapsed since
-8-
<PAGE>
the Option Date. Unless the Committee establishes a different vesting schedule
at the time an Option is granted or the Restricted Stock, SAR or Phantom Stock
is awarded, all Options granted under this Plan, Restricted Stock, SARs and
Phantom Stock awarded under this Plan shall vest according to the following
schedule:
<TABLE>
<CAPTION>
Period Elapsed Cumulative Vested Percentage
------------------------------ ----------------------------
<S> <C>
First Anniversary of Option Date 25%
Second Anniversary of Option Date 50%
Third Anniversary of Option Date 75%
Fourth Anniversary of Option Date 100%
</TABLE>
Except as provided below, if a Participant's employment with the Company or its
Subsidiaries is terminated, for any reason, such Participant automatically
forfeits any Options, Restricted Stock, SARs and/or Phantom Stock that are not
yet vested. A transfer of employment from the Company to a Subsidiary or
affiliate, or vice versa, is not a termination of employment for purposes of
this Plan. Unless the Committee in its sole discretion specifically waives the
application of this sentence, then notwithstanding the vesting schedule
contained herein or in the Participant's agreement, if the Participant's
employment, or if a Director, his membership on the Board, is terminated for
Cause, all Options, SARs, Restricted Stock and/or Phantom Stock granted or
awarded to the Participant will be immediately cancelled and forfeited by the
Participant upon delivery to him of notice of such termination.
(b) If it determines that special circumstances exist, the Committee, in
its sole discretion, may accelerate the time in which an award under the Plan
vests, even if, under its existing terms, such award would not then be
exercisable.
13. Adjustments to Reflect Changes in Capital Structure.
---------------------------------------------------
If there is any change in the corporate structure or shares of the Company,
the Board of Directors may, in its discretion, make any adjustments necessary to
prevent accretion, or to protect against dilution, in the number and kind of
shares authorized by the Plan and, with respect to outstanding Options,
Restricted Stock, Phantom Stock and/or SARs, in the number and kind of shares
covered thereby and in the applicable Option Price; provided, however, no
adjustment will be made for the issuance of preferred stock or the conversion of
convertible preferred stock. For the purpose of this Section 13, a change in
the corporate structure or shares of the Company includes, without limitation,
any change resulting from a recapitalization, stock split, stock dividend,
consolidation, rights offering, spin-off, reorganization, or liquidation and any
transaction in which shares of Common Stock are changed into or exchanged for a
different number or kind of shares of stock or other securities of the Company
or another corporation.
14. Non-Transferability of Options, SARs and Phantom Stock.
------------------------------------------------------
The Options and SARs granted or Phantom Stock awarded under the Plan are
not transferable, voluntarily or involuntarily, other than by will or the laws
of descent and distribution, or to the extent permissible under Section 422 of
the Code, pursuant to a qualified domestic relations order as defined in Section
414(p) of the Code; provided, however, that the Compensation Committee, in its
discretion, may permit Options to be transferrable by a Participant to members
of such Participant's immediate family or to family trusts, partnerships and
other entities comprised solely of the Participant or members of the
Participant's immediate family.
-9-
<PAGE>
15. Rights as Shareholder.
---------------------
No Common Stock may be delivered upon the exercise of any Option until full
payment of the Option Price has been made and all income tax withholding
requirements thereon have been satisfied. A Participant has no rights
whatsoever as a shareholder with respect to any shares covered by an Option
until the date of the issuance of a stock certificate for the shares. A
Participant who has been granted SARs or Phantom Stock shall have no rights
whatsoever as a shareholder with respect to such SARs or Phantom Stock.
16. Withholding Tax.
---------------
The Company shall have the right to withhold or to require a Participant to
remit to the Company, in cash or shares of Common Stock, with respect to any
payments made to Participants under the Plan, any taxes required by law to be
withheld because of such payments. Subject to the consent of the Committee with
respect to (a) the exercise of an NSO, (b) the lapse of restrictions on
Restricted Stock, (c) a "disqualifying disposition" of an ISO, as determined
pursuant to the Code, or (d) the issuance of any other stock award under the
Plan, a Participant may make an irrevocable election (an "Election") to (i) have
shares of Common Stock otherwise issuable withheld, or (ii) tender back to the
Company shares of Common Stock received pursuant to (a), (b), or (d), or (iii)
deliver back to the Company pursuant to (a), (b), or (d) previously acquired
shares of Common Stock having a Fair Market Value sufficient to satisfy all or
part of the Participant's estimated tax obligations. Such Election must be made
by a Participant prior to the date on which the relevant tax obligation arises.
The Committee may disapprove of any Election, may suspend or terminate the right
to make Elections, or may provide with respect to any award under this Plan that
the right to make Elections shall not apply to such award.
17. No Right To Employment.
----------------------
Participation in the Plan will not give any Participant a right to be
retained as an employee of the Company or any subsidiary, or any right or claim
to any benefit under the Plan, unless the right or claim has specifically
accrued under the Plan.
18. Amendment of the Plan.
---------------------
The Committee may from time to time amend or revise the terms of this Plan
in whole or in part and may without limitation, adopt any amendment deemed
necessary, subject only to applicable laws, regulations and the rules and
regulations of the Nasdaq Stock Exchange or any national stock exchange upon
which the Common Stock may be listed; provided, however, that (a) except as
provided in Section 4(h), no change in any award previously granted to a
Participant may be made that would impair the rights of the Participant without
the Participant's consent, or (b) no amendment may extend the period during
which a Participant may exercise an ISO beyond the period set forth in Section
6(a)(ii) or 6(e). Approval of the Company's shareholders to any amendment under
part (c)(i) shall require a favorable vote by the majority of the shares of the
Company's Common Stock and preferred stock voting separately as a class, and to
all other amendments requiring shareholder approval shall require a vote of the
majority of the shares of the Company's Common Stock and preferred stock voting
together as one class, present in person or by proxy at a duly held shareholders
meeting or by written consent. If any amendment requiring shareholder approval
for the Committee to act under part (c) of the previous sentence is made
subsequent to the first registration of any class of equity securities by the
Company under Section 12 of
-10-
<PAGE>
the Exchange Act, such shareholder approval shall be solicited as described in
Section 19. All amendments shall be in writing and consented to by a majority
of the members of the Committee.
19. Shareholder Approval.
--------------------
Continuance of the Plan shall be subject to approval by the shareholders of
the Company within 12 months before or after the date the Plan is adopted by the
Committee. If such shareholder approval is obtained at a duly held
shareholder's meeting, it may be obtained by the affirmative vote of the holders
of a majority of the shares of Common Stock present at the meeting or
represented and entitled to vote thereon.
20. Conditions Upon Issuance of Shares.
----------------------------------
An Option shall not be exercisable, a share of Common Stock shall not be
issued pursuant to the exercise of an Option, and Restricted Stock shall not be
awarded until such time as the Plan has been approved by the Shareholders of the
Company and unless the award of Restricted Stock, exercise of such Option and
the issuance and delivery of such share pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act,
the Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares of Common stock may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance. As a condition to the exercise of an
Option, the Company may require the person exercising such Option to represent
and warrant at the time of any such exercise that the Common Stock is being
purchased only for investment and without any present intention to sell or
distribute such shares if, in the opinion of counsel for the Company, such a
representation is required by any of the aforementioned relevant provisions of
law.
21. Effective Date and Termination of Plan.
--------------------------------------
(a) Effective Date. This Plan is effective as of the later of the date of
its adoption by the Committee, or the date it is approved by the shareholders of
the Company, pursuant to Section 18.
(b) Termination of the Plan. The Committee may terminate the Plan at any
time with respect to any shares that are not then subject to Options or
Restricted Stock. Termination of the Plan will not affect the rights and
obligations of any Participant with respect to Options, SARs, Phantom Stock or
Restricted Stock awarded before termination.
-11-
<PAGE>
REVOCABLE PROXY REVOCABLE PROXY
IFX CORPORATION
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Joel Eidelstein and Colleen M. Downes, or
either of them, with full power of substitution, as proxies of the undersigned,
with all the powers that the undersigned would possess if personally present to
cast all votes that the undersigned would be entitled to vote at the annual
meeting of shareholders of IFX Corporation (the "Company") to be held on January
21, 1999, at the offices of Neal, Gerber & Eisenberg, Two N. LaSalle Street,
Suite 2200, Chicago, IL 60602 at 2:00 p.m. Central Standard Time, and any and
all adjournments and postponements thereof (the "Annual Meeting"), including
(without limiting the generality of the foregoing) to vote and act as follows on
the reverse side.
This proxy will be voted at the annual meeting or any adjournments or
postponements thereof as specified. IF NO SPECIFICATIONS ARE MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF EACH OF NOMINEES FOR DIRECTORS NAMED ON THE
REVERSE SIDE AND FOR EACH OF THE PROPOSALS DESCRIBED IN THE POLICY STATEMENT.
This proxy hereby revokes all prior proxies given with respect to the shares of
the undersigned.
(Continued and to be signed on reverse side.)
<PAGE>
IFX CORPORATION
PLEASE MARK VOTE IN BOX IN THE FOLLOWING MANNER USING DARK INK ONLY [X]
<TABLE>
<CAPTION>
<C> <S> <C> <C> <C>
1. Approval of the transactions described in For Against Abstain
Proposal One, which may result in a change of [__] [__] [__]
control of the Company
For All
2. Election of Directors: Withhold Except Those
Nominees: Joel Eidelstein, Zalman Lekach, George Authority Whose Name
Myers, Colleen Downes and, subject to shareholder For All For All Appears Below
approval of the Transactions described in [__] [__] _____________
Proposal One, Joseph M. Matalon. _____________
_____________
3. Approval of the adoption of the 1998 Stock Option For Against Abstain
and Incentive Plan [__] [__] [__]
4. Ratification of the appointment of Arthur For Against Abstain
Andersen LLP as the Company's independent auditor [__] [__] [__]
for fiscal year 1999
5. The persons named in this proxy also may vote, in
their discretion, upon such other matters as may
properly come before the meeting or any
adjournment thereof.
</TABLE>
Please complete, sign and mail this proxy promptly in the enclosed envelope. No
postage is required for mailing in the United States.
Dated:________________, 1998
Signature(s)
IMPORTANT: Please date this proxy and sign exactly as your name appears on this
proxy. If shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give title as
such. If a corporation, please sign in full corporate name by president, or
authorized officer. If a partnership, please sign in partnership name by
authorized person.
<PAGE>
Admission Ticket
ANNUAL MEETING
OF
IFX CORPORATION
Thursday, January 21, 1999
2:00 p.m. Local Time
Neal, Gerber & Eisenberg
Two North LaSalle Street, Suite 2200
Chicago, IL 60602
=============================================================
Agenda
Election of Directors
Approval of Share Issuances
Approval of 1998 Stock Option and Incentive Plan
Ratification of Independent Auditors
=============================================================
