<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
707 Skokie Boulevard, 5th Floor
Northbrook, Illinois 60062
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 9, 2001
To our Stockholders:
We are notifying you that the Annual Meeting of Stockholders of IFX
Corporation will be held at the offices of Neal, Gerber & Eisenberg, Two North
LaSalle Street, 22nd Floor, Chicago, IL 60602 at 10:00 a.m. local time for the
following purposes:
1. to elect seven directors to the Board of Directors;
2. to approve an amendment to the Company's 1998 Stock Option and
Incentive Plan to increase the number of shares of Common Stock
available for issuance under the Option Plan;
3. to ratify the appointment of Ernst & Young LLP as independent
auditors for the Company's fiscal year ending June 30, 2001; and
4. to transact such other business as may properly come before the
meeting.
Each of these matters is described in further detail in the enclosed
proxy statement. We have also enclosed a copy of our Annual Report on Form 10-K
for the fiscal year ending June 30, 2000. Only stockholders of record at the
close of business on December 15, 2000 are entitled to vote at the meeting or
any postponement or adjournment of the meeting. A complete list of these
stockholders will be available at our principal executive offices prior to the
meeting.
Please use this opportunity to take part in IFX's affairs by voting your
shares. Whether or not you plan to attend the meeting, please complete the
enclosed proxy card and return it in the envelope provided as promptly as
possible. Your proxy can be withdrawn by you at any time before it is voted.
By Order Of The Board Of Directors
Colleen M. Downes,
Secretary
December 22, 2000
Chicago, Illinois
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ABOUT THE MEETING........................................................................ 1
What is the purpose of the annual meeting?.......................................... 1
What are IFX's voting recommendations?.............................................. 1
Who is entitled to vote?............................................................ 1
What constitutes a quorum?.......................................................... 2
How do I vote?...................................................................... 2
Can I vote by telephone or electronically?.......................................... 2
Can I change my vote after I return my proxy card?.................................. 2
What vote is required to approve each item?......................................... 2
What happens if additional proposals are presented at the meeting?.................. 3
Who will bear the costs of soliciting votes for the meeting?........................ 3
STOCK OWNERSHIP.......................................................................... 4
PROPOSAL ONE: ELECTION OF DIRECTORS...................................................... 5
PROPOSAL TWO: APPROVAL OF AMENDMENT TO INCREASE THE NUMBER
OF SHARES AVAILABLE FOR ISSUANCE UNDER THE OPTION PLAN.............................. 7
PROPOSAL THREE: RATIFICATION OF THE ENGAGEMENT OF ERNST & YOUNG.......................... 11
BOARD STRUCTURE AND COMPENSATION......................................................... 11
Board of Directors.................................................................. 11
Compensation of Directors........................................................... 12
Committees of the Board of Directors................................................ 12
Report of the Audit Committee....................................................... 12
Compensation Committee Interlocks and Insider Participation......................... 13
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION........................... 13
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG IFX
CORPORATION, THE NASDAQ STOCK MARKET (U.S.) INDEX AND
INDUSTRY INDICES.................................................................... 14
EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION............................................ 17
Summary Compensation Table.......................................................... 17
Employment and Change of Control Agreements......................................... 17
Option Grants and Exercises in Fiscal Year 2000..................................... 20
Individual Grants................................................................... 21
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE................................ 21
CERTAIN TRANSACTIONS................................................................... 21
STOCKHOLDER PROPOSALS FOR 2001 PROXY STATEMENT......................................... 23
OTHER MATTERS TO BE ACTED UPON AT THE MEETING.......................................... 23
</TABLE>
ii
<PAGE>
IFX CORPORATION
707 Skokie Boulevard, 5th Floor
Northbrook, Illinois 60062
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
January 9, 2001
The Board of Directors of IFX Corporation ("IFX" or the "Company") is
asking for your proxy for use at the annual meeting of stockholders of IFX to be
held on Thursday, January 9, 2001 at 10:00 a.m. local time and at any
postponements or adjournments of the meeting. The meeting will be held at the
office of Neal, Gerber & Eisenberg, Two North LaSalle Street, 22/nd/ Floor,
Chicago, Illinois 60602. We are initially mailing this proxy statement and the
enclosed proxy to stockholders of IFX on or about December 22, 2000. The
principal executive offices of the Company are located at 707 Skokie Blvd., 5th
Floor, Northbrook, IL 60062.
ABOUT THE MEETING
What is the purpose of the annual meeting?
At our annual meeting, stockholders will act upon the matters outlined
in the accompanying notice of meeting, including the election of seven
directors, the amendment to the Option Plan and the ratification of Ernst &
Young as our auditors.
What are IFX's voting recommendations?
Our Board of Directors recommends that you vote your shares "FOR" each
of the nominees to the Board, "FOR" the amendment of the Plan and "FOR" the
ratification of Ernst & Young as our auditors.
Who is entitled to vote?
Only stockholders of record at the close of business on December 15,
2000 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 to be voted on. Each share
of the Company's Series A Preferred Stock (the "Preferred Stock") entitles the
holder to one vote for each share of Common Stock into which the holder's
Preferred Stock is convertible on the record date. For all matters submitted to
stockholders for a vote except for directors, the holders of the Preferred Stock
vote with the holders of Common Stock as a single class. The Preferred Stock
voting as a single class elects one director (in addition to the directors
elected by the holders of Common Stock). Holders of the Preferred Stock do not
otherwise vote for the directors of the Company. The holders of Preferred Stock
have elected Charles W. Moore as a director.
IFX, the Casty Grantor Subtrust, Joel M. Eidelstein, Lee S. Casty,
International Technology Investments, LC, Michael Shalom, and UBS Capital
Americas III , L.P. and UBS Capital LLC (together, "UBS Capital") have entered
into a Stockholders' Agreement dated as of June 15, 2000, as amended. Under the
Stockholders' Agreement, UBS Capital, International Technology and the Casty
Grantor Subtrust have agreed to vote their shares of Common Stock to elect to
the Board of Directors one person nominated by UBS Capital (currently, Mark O.
Lama), one person nominated by International Technology (currently, Michael
Shalom), one individual nominated by Joel M. Eidelstein (currently, Joel
1
<PAGE>
M. Eidelstein), and one individual nominated jointly by Mr. Eidelstein and
International Technology (currently, Zalman Lekach).
As of December 15, 2000, there were 14,118,602 shares of Common Stock
issued and outstanding and 2,030,869 shares of Preferred Stock issued and
outstanding. As of such date, the issued and outstanding Preferred Stock was
convertible into 2,030,869 shares of Common Stock.
What constitutes a quorum?
If a majority of the shares of Common Stock outstanding on the record
date and a majority of the outstanding shares of Preferred Stock at the record
date are present at the annual meeting, either in person or by proxy, we will
have a quorum at the meeting, permitting the conduct of business at the meeting.
As of the record date, we had approximately 14,118,602 shares of Common Stock
outstanding and entitled to vote and 2,030,869 shares of Preferred Stock
outstanding and entitled to vote. Any shares represented by proxies that are
marked to abstain from voting on a proposal will be counted as present for
purposes of determining whether we have a quorum. If a broker, bank, custodian,
nominee or other record holder of IFX Common Stock indicates on a proxy that it
does not have discretionary authority to vote certain shares on a particular
matter, the shares held by that record holder (referred to as "broker
non-votes") will also be counted as present in determining whether we have a
quorum.
How do I vote?
You may vote in person at the annual meeting or you may vote by proxy by
signing, dating and mailing the enclosed proxy card. If you vote by proxy, the
individuals named on the card as proxy holders will vote your shares in the
manner you indicate. If you sign and return the card without indicating your
instructions, your shares will be voted "FOR":
. The election of the seven nominees for director,
. The amendment to our Option Plan, and
. The ratification of Ernst & Young as our auditors.
Can I vote by telephone or electronically?
No.
Can I change my vote after I return my proxy card?
Yes. Even after you have submitted your proxy, you may change your vote
at any time before the proxy is exercised at the annual meeting by delivering to
the Secretary of IFX a written notice of revocation or a properly signed proxy
bearing a later date, or by attending the annual meeting and voting in person
(although attendance at the meeting will not cause your previously granted proxy
to be revoked unless you specifically so request).
What vote is required to approve each item?
Director nominees must receive the affirmative vote of a plurality of
the shares represented at the meeting, meaning that the seven nominees for
director with the most votes will be elected. The amendment of our Option Plan
and the ratification of Ernst & Young requires the affirmative vote of a
majority of the combined shares of Common Stock and Preferred Stock represented
at the meeting.
2
<PAGE>
Abstentions and broker non-votes will not be counted for purposes of determining
whether an item has received the requisite number of votes for approval.
What happens if additional proposals are presented at the meeting?
Other than the matters described in this proxy statement, we do not
expect any additional matters to be presented for a vote at the annual meeting.
If you vote by proxy, your proxy grants the persons named as proxy holders the
discretion to vote your shares on any additional matters properly presented for
a vote at the meeting.
Who will bear the costs of soliciting votes for the meeting?
IFX will bear the entire cost of the solicitation of proxies from its
stockholders. In addition to the mailing of these proxy materials, the
solicitation of proxies or votes may be made in person, by telephone or by
electronic communication by our directors, officers and employees, who will not
receive any additional compensation for such solicitation activities. We will
also reimburse brokerage houses and other custodians, nominees and fiduciaries
for their reasonable out-of-pocket expenses for forwarding proxy and
solicitation materials to our stockholders. Except as described above, IFX does
not presently intend to solicit proxies other than by mail
3
<PAGE>
STOCK OWNERSHIP
The following table sets forth information regarding beneficial
ownership of the outstanding common stock of the Company as of December 15, 2000
by (a) each of our directors and executive officers, (b) all of our directors
and executive officers as a group and (c) each person known by the Company to
own more than five percent of the Common Stock of the Company.
<TABLE>
<CAPTION>
Amount and Nature of Approximate Percent of
Name / Address (1) Beneficial Ownership Class
<S> <C> <C>
Michael Shalom 4,510,201 (2) 31.95 %
Joel Eidelstein 383,245 (3) 2.71 %
Jose Leiman 105,997 (4) *
Zalman Lekach 89,268 (5) *
Burton J. Meyer 365,412 (6) 2.59 %
George A. Myers 7,333 (7) *
Casty Grantor Subtrust(8) 3,060,282 21.68 %
International Technology Investments, 4,500,000 31.87 %
LC(10)
Mark Lama(11) 3,530,869 (12) 25.01 %
Charles Moore(11) 3,530,869 (12) 25.01 %
UBS Capital Americas III(11) 3,530,869 (12) 25.01 %
--------------------------------------------------------------------------------------------
ALL EXECUTIVE OFFICERS AND 8,992,325 63.69 %
DIRECTORS AS A GROUP
</TABLE>
* Less than one percent.
(1) The business address for Joel Eidelstein, Zalman Lekach, Michael Shalom,
Burton Meyer, and George Myers is in care of IFX, 707 Skokie Blvd., 5th
Floor, Northbrook, IL 60062.
(2) Includes 10,201 shares subject to an option which is currently
exercisable and 4,500,000 shares of Common Stock held by International
Technology. Mr. Shalom may be deemed to be an affiliate of International
Technology and, accordingly, Mr. Shalom may be deemed to beneficially
own the shares of Common Stock held by such entity.
(3) Includes 351,750 shares of Common Stock subject to an option granted to
Mr. Eidelstein pursuant to the IFX 1998 Stock Option and Incentive Plan,
which option currently is exercisable.
(4) Consists of 105,997 shares of Common Stock that Mr. Leiman may acquire
upon exercise of currently exercisable options granted to him pursuant
to our Option Plan.
(5) Includes 84,942 shares of Common Stock that Mr. Lekach may acquire upon
exercise of currently exercisable options granted to him pursuant to our
Option Plan.
(6) Includes 100,000 shares of Common Stock that Mr. Meyer may acquire upon
exercise of an option granted to him by Lee S. Casty, which option
currently is exercisable and 600 shares of Common Stock that Mr. Meyer
may acquire upon exercise of an option granted to him by the Company,
which option is currently exercisable. Also includes 237,812 shares of
Common Stock that Mr. Meyer owns jointly with his spouse and 27,000
shares of Common Stock owned by Mr. Meyer's Individual Retirement
Account.
4
<PAGE>
(7) Consists of 6,733 shares of Common Stock held on behalf of Mr. Myers'
minor children under the Uniform Gifts to Minors Act, and 600 shares of
Common Stock that Mr. Myers may acquire upon exercise of an option
granted to him by the Company, which option is currently exercisable.
(8) The Casty Grantor Subtrust's address is 2 North LaSalle, Suite 2200,
Chicago, IL 60602.
(9) ITI's address is in care of Adorno & Zeder, 2801 S. Bayshore Drive,
Suite 1600, Miami, Florida 33133.
(10) The address of Mark Lama, Charles Moore and UBS Capital Americas III is
299 Park Avenue, New York, New York 10171.
(11) 2,030,869 of these shares are preferred shares which are convertible on
a one-for-one basis into Common Stock, including 176,544 preferred
shares owned by UBS Capital LLC, an affiliate of UBS Capital Americas
III. Mark Lama and Charles Moore as principals of an affiliate of UBS
Capital Americas may be deemed to beneficially own the shares held by
UBS. Mark Lama and Charles Moore disclaim such ownership.
PROPOSALS TO BE VOTED ON
PROPOSAL ONE:
ELECTION OF DIRECTORS
Seven directors will be elected at the Annual Meeting to serve for one-
year terms. The Board of Directors has nominated and urges you to vote "FOR" the
election of the seven nominees listed below. In the event a nominee is not
available to serve for any reason when the election occurs, it is intended that
the proxies will be voted for the election of the other nominees and may be
voted for any substitute nominee. The Board of Directors has no reason to
believe that any of the nominees will not be a candidate or, if elected, will be
unable or unwilling to serve as a director. In no event will the proxies be
voted for a greater number of persons then the number of nominees named.
UBS Capital, International Technology and the Casty Grantor Subtrust,
the beneficial owners of an aggregate of approximately 78.56% of the shares of
Common Stock, have contractually agreed to vote all of their shares "FOR"
election to the Company's Board of Directors of Mark O. Lama, Charles Moore,
Michael Shalom, Joel Eidelstein and Zalman Lekach and have indicated to the
Company their intent to vote "FOR" election of the other nominees.
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 presently is serving as a
director of the Company.
Joel M. Eidelstein, 33, 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 a principal
shareholder of ePagos, Inc., an Internet communications software development
company in which IFX owns an interest.
5
<PAGE>
Michael Shalom, 29, was elected as IFX's Chief Executive Officer on
September 8, 1999 and has served as a director of Emerging Networks, Inc., a
subsidiary of IFX, since November 1998. Prior to July 1999, Mr. Shalom was a
principal of, and was actively involved in the management of the INTCOMEX group
of companies, which group is a Latin American wholesale distributor of
microcomputers, networking products, mass storage products, multimedia products,
computer peripheral equipment and computer components. Mr. Shalom is also a
principal at ITI.
Zalman Lekach, 33, has served as a director of the Company since
February 1997. Mr. Lekach has served as the Company's Vice President of Mergers
and Acquisitions since May 24, 1999 and, since February 2000, as the Company's
Chief Operating Officer. Prior to joining IFX, Mr. Lekach served as President
and Chief Operating Officer of Parlux Fragrances, Inc., an international
designer, manufacturer and marketer of fragrances ("Parlux") from 1995 until
December 1998. He became a director and an executive officer of Parlux, S.A.,
Parlux's French subsidiary, in May 1990. Mr. Lekach received a B.A. from Cornell
University.
George A. Myers, 50, has served as a director of the Company since
November 1990. Mr. Myers has been managing general partner of MC Capital, a
diversified real estate company with offices in Chicago, Illinois, Phoenix,
Arizona, and San Diego, California since 1981.
Burton J. Meyer, 53, has served as a director of the Company since May
1999. Mr. Meyer previously served as director of the Company from August 1986
until July 1, 1996 and as President of the Company from July 1987 until July 1,
1996. Mr. Meyer served as an Executive Vice President of E.D. & F. Man
International, an international futures and conglomerate brokerage, from July
1996 to June 30, 2000.
Mark O. Lama, 39, was elected to the board of directors IFX in June 2000
and Tutopia in August 2000. Mr. Lama is a principal of UBS Capital Americas
which manages $1.5 billion in private equity commitments dedicated to
investments in North and South America, including investments in the
telecommunications, software, and Internet sectors. Prior to joining UBS Capital
Americas in 1998, he worked in the U.S. and Latin America groups of Chase
Capital Partners (a private equity firm), the Banking and Corporate Finance
Group of Chemical Bank and the Emerging Markets group at Salomon Brothers, Inc.
Mr. Lama holds an M.B.A. from Harvard Business School, a B.S. from Columbia
University and a B.A. from Colgate University.
Charles W. Moore, 34, was elected to the board of directors of IFX in
June 2000 and Tutopia in August 2000. Mr. Moore has been elected to serve as the
Preferred Stock Director. Mr. Moore is partner of UBS Capital Americas which
manages $1.5 billion in private equity commitments dedicated to investments in
North and South America, including investments in the telecommunications,
software, and Internet sectors. In this role, Mr. Moore has senior
responsibility for all telecommunications-related investments of UBS Capital
Americas. Prior to joining UBS Capital, Mr. Moore invested for Greenwich Street
Capital Partners, LP from November 1994 to March 1997 and prior thereto worked
at Morgan Stanley & Co. in their investment banking division. Other boards of
directors on which Mr. Moore serves include: Aduronet, Ltd. (London, UK);
WorkNet Communications (St. Louis, MO); Netstream Communications (Roseville,
CA); eYak, Inc. (Boston, MA); PF.Net (Reston, VA); Netrail, Inc.(Atlanta, GA);
Dynamicsoft, Inc. (East Hanover, NJ); and Tutopia.com, Inc., (Miami, FL Pan-
Latin ISP), a former subsidiary of the Company. Mr. Moore is a graduate of the
University of Michigan and the University of Chicago Graduate School of
Business.
Our Board recommends that you vote "FOR" all of the nominees for
election as directors.
6
<PAGE>
PROPOSAL TWO:
APPROVAL OF AMENDMENT TO INCREASE
THE NUMBER OF SHARES AVAILABLE FOR ISSUANCE
UNDER THE OPTION PLAN
The Board of Directors, subject to obtaining stockholder approval, has
adopted an amendment to the 1998 IFX Stock Option and Incentive Plan (the
"Option Plan") to increase the number of shares of Common Stock reserved for
issuance from 1,800,000 shares to 3,900,000 shares and recommends that the
stockholders approve such amendment. As of December 15, 2000, awards covering
1,800,000 shares of Common Stock had been granted and were outstanding under the
Option Plan. An additional 647,667 shares of Common Stock had been granted under
the Option Plan subject to approval of this Proposal Two.
The Option Plan was adopted by the Board of Directors on November 10,
1998 and approved by the stockholders of IFX on February 3, 1999. The Option
Plan was amended by the stockholders on November 9, 1999 to increase the number
of shares reserved for issuance from 900,000 to 1,800,000. The shares reserved
for issuance under the Option Plan may be issued in the form of incentive stock
options ("ISOs"), as defined in Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), stock options that are not intended to qualify
under Section 422 of the Code ("NSOs") and shares of restricted Common Stock
("Restricted Stock"). The Option Plan also authorizes the award of phantom stock
and stock appreciation rights ("SARs"). The purposes of the Option Plan are to
(a) attract and retain high quality directors, officers, employees and
consultants of the Company or any of its subsidiaries, (b) motivate such persons
to promote the long-term success of the business of the Company and its
subsidiaries, and (c) 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 the number of shares currently
available under the Option Plan will be insufficient to achieve the purposes of
the Option Plan, as stated above, during the next twelve to eighteen months. The
Board believes that the grant of equity incentives as a significant component of
compensation are standard and expected in the Internet industry. Accordingly,
the Board recommends an increase in the number of shares reserved for issuance
under the Option Plan from 1,800,000 shares to 3,900,000 shares. UBS, the owners
of approximately 25.01% of the Company's Preferred Stock, have contractually
agreed to vote all of their shares "FOR" the amendment to the Option Plan.
If this Proposal Two is approved, Section 3 of the Option Plan would
read as follows:
"3. Stock Subject to the Option 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 3,900,000 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 Option Plan in any calendar year in
respect of more than 300,000 shares of Common Stock."
7
<PAGE>
The Company's ability to attract and retain qualified employees could be
impeded if additional shares are not available for grant under the Option Plan.
In addition, the Company generally grants Options to key employees of businesses
acquired by the Company.
The following is a summary description of the material features of the
Option Plan.
Administration. The Option Plan is administered by the Board's
Compensation Committee. Each member of the Compensation Committee qualifies as
an outside or non-employee director as defined by Section 162(m) of the Code
and/or the Securities Exchange Act of 1934 to the extent necessary for the grant
of awards under the Option Plan to qualify for favorable tax or securities
treatment. Subject to the express provisions of the Option Plan, the
Compensation Committee has sole discretion to select which individuals are
eligible to participate in the Option Plan, who will receive awards under the
Option Plan, and the pricing and vesting schedule of awards. The Compensation
Committee also has authority to interpret the Option Plan and to establish,
rules and regulations relating to the Option Plan.
Eligibility. Awards under the Option Plan may be granted to officers,
employees, non-employee directors, independent contractors or consultants of the
Company or any subsidiary, and to persons to whom an offer of employment has
been extended. Currently, not more than 1,800,000 shares of Common Stock may be
issued pursuant to awards granted under the Option Plan; however, if Proposal
Two is approved, the maximum number of shares that may be issued under the
Option Plan will be increased to 3,900,000 shares. There is no minimum number of
shares that may be granted to any participant; however, no participant in the
Option 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 Option 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 Option Plan, the shares
of Common Stock that were subject to such awards will be available to cover
awards subsequently granted under the Option Plan.
Exercise Price of Options. The exercise price for each award under the
Option Plan is determined by the Compensation 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, there are no restrictions
on the exercise price of an NSO. "Fair market value" under the Option Plan is
determined by the Compensation Committee, in good faith, taking into account the
price of the Common Stock as reported on the Nasdaq SmallCap Market.
Terms of Options. The exercise price of Options granted under the Option
Plan is payable in cash, by the participant's delivery to the Company of shares
of Common Stock with a fair market value equal to the exercise price, pursuant
to a cashless exercise arrangement with a broker or in such other form of
consideration as the Compensation Committee may approve.
Exercise of Awards. Unless otherwise determined by the Compensation
Committee, awards under the Option Plan are exercisable for ten years after the
date of grant, and vest, in specified increments, over the three years following
the date of grant. Awards terminate (a) if the participant's employment with the
Company is terminated 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, or (c) one year following the participant's death or
permanent disability. Options, SARs and phantom stock are not transferred except
by will or inheritance law, or pursuant to a qualified domestic relations order
as defined in Section 414(p) of the Code.
8
<PAGE>
Certain Federal Income Tax Consequences. Following is a brief summary of the
principal federal income tax consequences of awards under the Option 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 on
the exercise of an ISO exceeds the exercise price will constitute an
adjustment to the option holder's income in computing alternative
minimum taxable income. Such adjustment could result in the imposition
of, or increase the amount of, the option holder's "alternative minimum
tax" under the Code. If an option holder 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, 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 option holder makes a "disqualifying disposition," the
option holder 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 option holder on the disposition 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
option holder. If a sale is a disqualifying disposition, the option
holder also may realize short-term or long-term capital gain or loss, if
such shares constitute capital assets in an option holder'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 option
holder 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 option holder 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 option holder 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 option holder'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 option holder 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
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
its proposed regulations 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 Option Plan generally is intended to satisfy
the requirements set forth in the proposed regulations with respect to
"qualified performance-based compensation"
9
<PAGE>
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 Option Plan is not qualified under Section 401 of the
Code. In addition, the Option Plan is not subject to any of the provisions of
the Employee Retirement Income Security Act of 1974, as amended.
Summary of Awards
From November 10, 1998 through December 15, 2000, the following awards have
been granted under the Option Plan:
IFX 1998 STOCK OPTION AND INCENTIVE PLAN AWARDS
Number of Shares
of Common Stock
Name and Position Subject to Options
----------------- ------------------
Michael F. Shalom, CEO 30,000
Joel M. Eidelstein, President 600,000
Jose Leiman, CFO 227,500
Zalman Lekach 374,167
All Current Executive Officers as a Group 1,231,667/(1)/
Non-Executive Officer Employees 1,215,000/(2)/
__________
(1) Includes 371,667 shares of Common Stock granted as options subject to
stockholder approval of Proposal Two.
(2) Includes 275,000 shares of Common Stock granted as options subject to
stockholder approval of Proposal Two.
Because the value of the options depends upon the market value, from time
to time, of the underlying shares of Common Stock, the Company is unable to
readily determine the value of such option grants.
Michael Shalom, Joel Eidelstein and Zalman Lekach have all been granted
options which are subject to stockholders approval of this proposal.
Recommendation of the Board of Directors
The Board of Directors of the Company unanimously recommends that
stockholders vote FOR the amendment to the Option Plan to increase the number of
shares available for issuance under the Option Plan.
10
<PAGE>
PROPOSAL THREE:
RATIFICATION OF THE ENGAGEMENT OF
ERNST & YOUNG
Ernst & Young LLP audited the Company's financial statements for fiscal
year 2000. The Board of Directors has engaged Ernst & Young LLP to audit the
financial statements of the Company for fiscal year 2001, subject to
ratification by the stockholders.
On July 1, 1999, IFX filed a Current Report on Form 8-K with the Securities
and Exchange Commission to disclose that it had dismissed Arthur Andersen LLP
and appointed Ernst & Young LLP as its independent auditors for the fiscal year
ending June 30, 1999. The decision to dismiss Arthur Andersen LLP was not based
upon any disagreement between IFX and Arthur Andersen LLP on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure. The reports of Arthur Andersen LLP as of and for the fiscal
years ended June 30, 1998 and 1997 did not contain an adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or application of accounting principles. During the registrant's
fiscal years ended June 30, 1998 and 1997, and during the subsequent interim
periods prior to June 28, 1999, there were no (i) disagreements between the
registrant and Arthur Andersen LLP on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure which
disagreements, if not resolved to the satisfaction of Arthur Andersen LLP, would
have caused it to make reference to the subject matter of the disagreement in
connection with its reports on the registrant's financial statements, or (ii)
"reportable events" within the meaning of Item 304(a)(1)(v) of Regulation S-K
promulgated under the Securities Act of 1933, as amended.
It is expected that a representative of Ernst & Young LLP will be available
during 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
stockholders vote FOR ratification of Ernst & Young LLP as independent auditors.
BOARD STRUCTURE AND COMPENSATION
Board of Directors
Directors are elected on an annual basis. Each director of the Company
holds office until the next annual meeting of stockholders or until that
director's successor has been elected and qualified. The number of directors
that constitute the full board is fixed from time to time by resolution of the
Board of Directors. On June 15, 2000, the Board of Directors increased the
number of members of the Board to seven members and elected Charles Moore, Mark
Lama and Michael Shalom to fill the vacancies created by this increase and by
the resignations of Colleen M. Downes and Joseph Matalon. There are seven
persons currently serving as directors, all of whom have been nominated for
reelection to the Board. During fiscal year 2000, the Board of Directors held
14 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 during fiscal year 2000 called during the
time he or she served.
11
<PAGE>
Compensation of Directors
Directors do not receive cash compensation in connection with their duties
as directors, but may be reimbursed for expenses incurred by them in connection
with their services as directors.
The Company grants stock options under our Directors Stock Option Plan to
each director who is not an IFX employee. Under this plan, we grant each non-
employee director an option to buy 450 shares of our Common Stock when the
director is first elected and an option to buy an additional 450 shares of
Common Stock at each annual meeting until he or she is no longer a director. If
a director serves on a committee of the board, he or she is granted an
additional option to buy 75 shares for each year of service. The exercise price
for the options is equal to 100% of the fair market value of our Common Stock on
the date of grant. The options cannot be exercised until six months after the
date of grant. Each option terminates on the earlier of a director's termination
for cause, one year after a director's death, or ten years from the date of
grant. Burton J. Meyer and George A. Myers were each granted an option to buy
600 shares of Common Stock, as of November 9, 1999. Mr. Eidelstein, Mr. Lekach
and Mr. Shalom, as employees, did not receive any options under the plan.
Committees of the Board of Directors
The Board of Directors has a standing Audit Committee and Compensation
Committee to assist the Board in the discharge of its responsibilities. The
current members of the Audit Committee are George Myers, Burton J. Meyer and
Mark O. Lama. All members of the Audit Committee are independent as defined by
Rule 4200(a)(15) of the NASD Listing Rules. The Audit Committee held no meetings
during fiscal year 2000 and the Compensation Committee held one meeting which
was attended by all of its members.
The Compensation Committee develops and oversees the Company's compensation
policy and approve salaries and annual bonuses for senior management of the
Company. The Compensation Committee currently consists of George Myers, Burton
J. Meyer and Charles W. Moore.
Report of the Audit Committee
The Audit Committee of the Board of Directors is composed of three
independent directors and operates under a written charter adopted by the
Board of Directors (attached as an appendix to this Proxy Statement). The
Audit Committee recommends to the Board of Directors, subject to
stockholder ratification, the selection of the Company's independent
accountants.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent accountants are responsible
for performing an independent audit of the Company's consolidated financial
statements in accordance with generally accepted auditing standards and to
issue a report thereon. The Audit Committee's responsibility is to monitor
and oversee these processes.
In this context, the Audit Committee has met and held discussions with
management and the independent accountants. Management represented to the
Audit Committee that the Company's consolidated financial statements were
prepared in accordance with generally accepted accounting principles, and
the Audit Committee has reviewed and discussed the consolidated financial
statements with management and the independent accountants. The Audit
Committee discussed with the independent accountants matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with
Audit Committees).
12
<PAGE>
The Company's independent accountants also provided to the Audit
Committee the written disclosures required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and the
Audit Committee discussed with the independent accountants the firm's
independence.
Based on the Audit Committee's discussion with management and the
independent accountants and the Audit Committee's review of the
representation of management and the report of the independent accountants
to the Audit Committee, the Audit Committee recommended that the Board of
Directors include the audited consolidated financial statements in the
Corporation's Annual Report on Form 10-K for the fiscal year ended June 30,
2000 filed with the Securities and Exchange Commission.
SUBMITTED BY THE AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS
George A. Myers
Burton J. Meyer
Mark O. Lama
Compensation Committee Interlocks and Insider Participation
The current members of the compensation committee are George A. Myers,
Burton J. Meyer and Charles W. Moore. Mr. Meyer previously served as an officer
of IFX from 1987 to June 1996.
On July 1, 1996, IFX sold assets to E.D.& F. Man International, Inc.
Burton J. Meyer, a director of IFX and a member of IFX's Compensation Committee,
served as Executive Vice President of E.D.& F. Man International, Inc. from July
1996 to June 30, 2000.
Mr. Moore is a partner of UBS Capital Americas, LLC, an affiliate of UBS
Capital Americas III, L.P. and UBS Capital LLC, which together purchased $25
million of IFX Preferred Stock in June and July 2000 and $20 million of
preferred stock in Tutopia.com, Inc. in August 2000. Until August 31, 2000,
Tutopia was a subsidiary of IFX. IFX currently owns a minority interest in
Tutopia. Mr. Moore has an investment interest in UBS and thus may benefit from
both sides of transactions involving UBS and IFX-related entities.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Director, among other things,
develops and oversee the Company's compensation policy and approve salaries and
annual bonuses for senior management of the Company. The Compensation Committee
currently consists of George A. Myers, Burton J. Meyer and Charles W. Moore.
The Company's compensation policy for senior management historically
consisted almost exclusively of cash salaries and, from time to time,
discretionary performance bonuses. In fiscal year 1999, the Board of Directors
implemented a change in the Company's compensation policy to add a significant
long-term equity component to the compensation paid to its senior management.
The Board's goal was to strengthen the Company's ability to recruit, motivate
and retain highly-qualified individuals. The Compensation Committee believes
that stock options and restricted stock, which vest over time and will be
subject to forfeiture, better align the interests of the Company's senior
management with the interests of the Company's stockholders. The Compensation
Committee also believes that substantial
13
<PAGE>
equity ownership by individuals in leadership positions within the Company will
help to ensure that such individuals remain focused on building stockholder
value.
In reviewing annual salary, salary increases and equity compensation for
individual executive officers, including the chief executive officer, the
Compensation Committee consider various factors, such as the executive's
contribution to the Company's operating effectiveness and profitability; the
executive's achievement of pre-established goals and performance targets; 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.
December 22, 2000
SUBMITTED BY THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS
George A. Myers
Burton J. Meyer
Charles W. Moore
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG IFX CORPORATION, THE NASDAQ STOCK MARKET (U.S.) INDEX
AND INDUSTRY INDICES
IFX's primary business was providing commodity brokerage services until
July 1996 when we sold substantially all of these assets. From July 1996
through February 1999, IFX's revenues consisted primarily of payments and
earnings related to these discontinued operations. The Nasdaq Financial Stocks
Index provides an appropriate basis for historical comparison.
In November 1998, the Company started its Internet business in Latin
America. On an ongoing basis we will compare the Company's performance to the
cumulative total return of MG Industry Group 850 Internet Service Providers.
14
<PAGE>
The graph below compares the cumulative total shareholder return on the
Common Stock since the Company's fiscal year ended June 1995 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, 1995 of $100 in each of Common Stock, the Nasdaq Stock Market (US) and the
Nasdaq Total Return for Nasdaq Financial Stocks).
<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
<S> <C> <C> <C> <C> <C> <C>
1995 1996 1997 1998 1999 2000
------------------------------------------------------------------------------------------------------------------------
IFX Corporation $100.00 $100.00 $139.99 $243.93 $2,367.24 $1,487.52
------------------------------------------------------------------------------------------------------------------------
NASDAQ Financial Index 100.00 130.20 190.68 247.97 255.55 201.31
------------------------------------------------------------------------------------------------------------------------
NASDAQ Market Index-U.S. Cos. 100.00 128.39 156.14 205.51 295.62 436.92
------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
The graph below compares on a quarterly basis the cumulative total
shareholder return on the Common Stock since the Company's fiscal year ended
June 1999 with the cumulative total return of the Nasdaq Stock Market (US) and
the Total Return for MG Industry Group Internet Service Providers over the same
period (assuming the investment on June 30, 1999 of $100 in each of Common
Stock, the Nasdaq Stock Market (US) and the MG Industry Group Internet Service
Providers).
<TABLE>
<CAPTION>
Fiscal Quarter Ended
-------------------------------------------------------------------------------------------------------------------
6/30/1999 9/30/1999 12/31/1999 3/31/2000 6/30/2000
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
IFX Corporation $100.00 $124.66 $179.05 $190.54 $62.84
-------------------------------------------------------------------------------------------------------------------
Internet Service Providers 100.00 94.19 142.54 145.10 91.82
-------------------------------------------------------------------------------------------------------------------
NASDAQ Market Index-U.S. Cos. 100.00 102.48 151.46 169.99 147.80
-------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Exchange
Act that might incorporate future filings, including this proxy statement, in
whole or in part, the report presented above and the performance graph following
the report shall not be incorporated by reference into any such filings.
EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION
The following table presents the total compensation paid or accrued during
fiscal years 2000, 1999 and 1998 to each of our executive officers.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long Term
Compensation Compensation
------------- ------------
Year Securities
Name and Principal Ended Underlying Options
------------------
Position June 30 Salary Bonus
-------- -------
($) ($) (#)
-------- -------- ------------------
<S> <C> <C> <C> <C>
Michael F. Shalom, CEO 2000 $162,500 $ 50,000 30,000
1999 -- -- --
1998 -- -- --
Joel M. Eidelstein, 2000 $150,000 $ 50,000 300,000
President 1999 $ 50,000 -- 300,000
1998 $ 24,000 -- --
Jose Leiman, CFO 2000 $225,000 $ 25,000 227,500
1999 -- -- --
1998 -- -- --
Zalman Lekach, COO 2000 $151,200 $225,000 374,167
1999 $ 24,600 -- --
1998 -- --
</TABLE>
We refer you to "Election of Directors" above for biographies of Joel
Eidelstein, Michael Shalom and Zalman Lekach. Jose Leiman, age 40, has served as
Chief Financial Officer of the Company since August 1, 1999. From March 1996 to
June 1999, Mr. Leiman was a CPA and tax attorney with Ernst & Young LLP, an
international accounting firm. Prior to joining Ernst & Young LLP, Mr. Leiman
was an attorney with Dewey Ballantine LLP, an international law firm. Mr. Leiman
has also worked as a CPA with Price Waterhouse Coopers.
Employment and Change of Control Agreements
Mr. Eidelstein serves as the President of the Company pursuant to a three-
year employment agreement which commenced on January 1, 2000. The term of the
employment agreement is subject to automatic extensions unless notified
otherwise by either the Company or Mr. Eidelstein. Mr. Eidelstein's base salary
is $225,000 per year for the year 2000 and $250,000 per year thereafter. He is
eligible to receive a $50,000 bonus per year if certain performance criteria are
met. If Mr. Eidelstein is involuntarily
17
<PAGE>
terminated during the term of the employment agreement (except for cause) he
receives a lump sum amount of accrued but unpaid salary and a pro-rata bonus and
all of his options immediately vest. He also receives an amount equal to the
product of the number of whole and fractional years remaining until the end of
the employment agreement's term multiplied by his annualized current salary plus
bonus for the prior year. If Mr. Eidelstein is terminated within two years after
a "Change of Control", he receives an amount equal to the product of the number
of whole and fractional years remaining until the end of the employment
agreement's term multiplied by three times his annualized current salary and
highest previous annual bonus. The agreement prohibits Mr. Eidelstein from
disclosing confidential information regarding the Company, and during the period
of his employment with the Company and for one year thereafter, being involved
in any capacity with any business competitive with the Company in the United
States, Latin America or in any other market in which the Company is then
conducting business.
Mr. Shalom serves as the Chief Executive Officer of the Company pursuant to
a three-year employment agreement which commenced on January 1, 2000. The term
of the employment agreement is subject to automatic extensions unless notified
otherwise by either the Company or Mr. Shalom. Mr. Shalom's base salary is
$225,000 per year for the year 2000 and $250,000 per year thereafter. He is
eligible to receive a $50,000 bonus per year if certain performance criteria are
met. If Mr. Shalom is involuntarily terminated during the term of the employment
agreement (except for cause) he receives a lump sum amount of accrued but unpaid
salary and a pro-rata bonus and all of his options immediately vest. He also
receives an amount equal to the product of the number of whole and fractional
years remaining until the end of the employment agreement's term multiplied by
his annualized current salary plus bonus for the prior year. If Mr. Shalom is
terminated within two years after a "Change of Control", he receives an amount
equal to the product of the number of whole and fractional years remaining until
the end of the employment agreement's term multiplied by three times his
annualized current salary and highest previous annual bonus. The agreement
prohibits Mr. Shalom from disclosing confidential information regarding the
Company, and during the period of his employment with the Company and for one
year thereafter being involved in any capacity with any business competitive
with the Company in the United States, Latin America or in any other market in
which the Company is then conducting business.
Under the agreements of Messrs. Eidelstein and Shalom, a "Change of
Control" is defined as occurrence of any one of the following events: (a) any
consolidation, merger or other similar transaction involving IFX, if IFX is not
the continuing or surviving corporation, or which contemplates that all or
substantially all of the business and/or assets of IFX will be controlled by
another corporation; (b) any sale, lease, exchange or transfer (in one
transaction or series of related transactions) of all or substantially all of
the assets of IFX; (c) approval by the stockholders of IFX of any plan or
proposal for the liquidation or dissolution of IFX, unless such plan or proposal
is abandoned within 60 days following such approval; (d) the acquisition by any
"person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934), or two or more Persons acting in concert, of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 25% or more of the outstanding shares of voting stock of IFX; provided,
--------
however, that for purposes of the foregoing, "person" excludes Lee S. Casty,
-------
International Technology Investments, LC or any of their Affiliates, any
underwriter purchasing shares of IFX with the intent of reselling them, or any
sale to GEM (or its affiliates); or (e) if, during any period of 24 consecutive
calendar months commencing on the date of this Agreement, those individuals (the
"Continuing Directors") who either (i) were directors of IFX on the first day of
--------------------
each such period, or (ii) subsequently became directors of IFX and whose actual
election or initial nomination for election subsequent to that date was approved
by a majority of the Continuing Directors then on the board of directors of IFX,
cease to constitute a majority of the board of directors of IFX.
Mr. Leiman serves as the Chief Financial Officer of the Company pursuant to
an employment agreement which commenced on July 1, 1999 and terminates on June
30, 2001. Mr. Leiman's base salary is $225,000 per year. He is eligible to
receive a bonus based on the discretion of the Board of Directors.
18
<PAGE>
If Mr. Leiman is involuntarily terminated during the term of the employment
agreement (except for cause) he receives a lump sum amount of all remaining base
salary until the end of the term and all of his options immediately vest. In the
event of a "Change of Control", he receives a lump sum amount equal to twice his
annual base salary and his options become exercisable immediately prior to the
date of the Change of Control. A "Change of Control" is defined as (i) the
dissolution or liquidation of IFX, (ii) either (A) the occurrence of a merger or
consolidation, or (B) a transaction in which IFX becomes a subsidiary of another
corporation, and in either case, in which the voting securities of IFX which are
outstanding immediately prior thereto do not continue to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting securities of IFX or such
surviving entity immediately after such merger or consolidation, (iii) such time
that Lee S. Casty and his affiliates and International Technology and its
affiliates own less than one-third of the outstanding voting securities of IFX,
(iv) an acquisition by a person or entity of voting securities of IFX entitling
such person to the same voting power (or greater voting power) as held by Lee S.
Casty and International Technology combined, or (v) the sale of all or
substantially all of the assets of the Employer. The agreement prohibits Mr.
Leiman from disclosing confidential information regarding the Company, and
during the period of his employment with the Company and for one year thereafter
(unless he is involuntarily terminated without cause) being involved in any
capacity with any business competitive with the Company in the United States,
Latin America or in any other market in which the Company is then conducting
business.
Mr. Lekach serves as the Chief Operating Officer of the Company pursuant to
an employment agreement dated as of May 24, 1999, as amended on April 1, 2000.
The agreement terminates on May 23, 2001 but is automatically extended for a
period of two years unless prior notice is given by either party. Mr. Lekach's
current base salary is $185,000 per year and shall be increased to $200,000 per
year on December 1, 2000. If Mr. Lekach is involuntarily terminated during the
term of the employment agreement (except for cause) he receives all of his
remaining base salary for the entire length of the term and all of his options
immediately vest. The agreement prohibits Mr. Lekach from disclosing
confidential information regarding the Company, and during the period of his
employment with the Company and for one year thereafter (unless he is
involuntarily terminated without cause) being involved in any capacity with any
business competitive with the Company in the United States, Latin America or in
any other market in which the Company is then conducting business.
19
<PAGE>
Option Grants and Exercises in Fiscal Year 2000
The following table sets forth information with respect to options that
were granted in fiscal year 2000 to our executive officers.
<TABLE>
<CAPTION>
Option Grants Table
Option Grants in Fiscal Year 2000
---------------------------------
Number of Percent of
Securities Total Options Exercise Potential Realizable Value at
Underlying Granted To Price Assumed Annual Rates
Options Employees In Expiration Of Stock Price Appreciation
Name Granted Fiscal Year ($/Share) Date for Option Term
---- ------- ---------- --------- ---- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
0% 5% 10%
-- -- ---
Michael F. 12,892 1% 8.75 01/01/2010 298,128 556,559 953,047
Shalom
17,108 1% 8.75 06/12/2010 46,512 169,905 359,216
Joel M. 128,924 7% 8.75 01/01/2010 2,981,368 5,565,761 9,530,766
Eidelstein
171,076 9% 8.75 06/12/2010 465,113 1,699,013 3,592,075
Jose Leiman 33,333 2% 12.00 07/01/2009 210,415 594,296 1,183,250
15,000 1% 15.00 07/01/2009 49,688 222,436 487,468
33,333 2% 15.00 07/01/2009 110,416 494,297 1,083,252
33,334 2% 18.00 07/01/2009 10,417 394,309 983,282
12,500 1% 20.00 12/01/2009 -- 141,952 374,119
42,975 2% 8.75 01/01/2010 116,812 1,855,268 3,176,947
57,025 3% 8.75 06/12/2010 155,037 566,334 1,197,351
Zalman Lekach 15,000 1% 15.00 05/24/2009 51,563 225,490 492,331
8,308 - 8.75 07/01/2009 79,445 175,125 321,917
19,134 1% 8.75 10/01/2009 263,093 533,839 949,221
12,500 1% 20.00 12/01/2009 -- 141,952 374,119
19,225 1% 8.75 01/01/2010 444,578 829,960 1,421,217
128,924 7% 8.75 01/01/2010 2,981,368 5,565,761 9,530,766
171,076 9% 8.75 06/12/2010 465,010 1,699,013 3,592,075
</TABLE>
(1) Options that expire on June 12, 2010 are subject to stockholder approval of
additional options under the stock option plan.
(2) The amounts shown in these columns are the result of calculations at
assumed annual rates required by the SEC and are not intended to forecast
possible future appreciation, if any, of the price of the Company's Common
Stock. The Company did not use an alternative formula for a grant date
valuation, as the Company is not aware of any formula that will determine
with reasonable accuracy a present value based on future unknown or
volatile factors.
20
<PAGE>
The following table sets forth information with respect to options to
purchase shares of the Company's Common Stock that were granted in fiscal year
2000 to each of the executive officers named in the Summary Compensation Table
above. No stock appreciation rights ("SARs") were granted to any of the persons
listed on the table below during fiscal year 2000. No stock options were
exercised by any of our directors or executive officers during fiscal year 2000.
Individual Grants
-----------------
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised
Options/SARs at
---------------
Shares Acquired on June 30, 2000
------------------ -------------
Name Exercise Value Realized ($) Exercisable/Unexercisable
---- -------- ------------------ -------------------------
<S> <C> <C> <C>
Michael F. Shalom 0 0 0 / 30,000
Joel M. Eidelstein 0 0 201,000 / 399,000
Jose Leiman 0 0 39,102 / 188,398
Zalman Lekach 0 0 14,546 / 359,621
</TABLE>
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 the Company's Common Stock, to
file with the Securities and Exchange Commission reports of ownership and
changes in ownership 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 reports
furnished to the Company, or written representations that no reports on Form 5
were required, the Company believes that all officers, directors and 10%
beneficial owners complied with all Section 16(a) filing requirements during
fiscal year 2000, except for Burton G. Meyer, George A. Meyers, Joel M.
Eidelstein, Mike Shalom and Jose Leiman, each of whom filed one late report
required to be filed on Form 5, and Zalman Lekach, who has filed one late report
required to be filed on Form 5 and one late report required to be filed on Form
4.
CERTAIN TRANSACTIONS
C. Adams Note Receivable. Prior to fiscal year 1996, FX Chicago, Inc. made
loans of $611,400 to C. Adam Ltd. (successor in interest to SRC, Inc.), an
entity affiliated with Lee Casty, a then significant stockholder of IFX. The
loans were evidenced by a demand note bearing interest at 8%, which rate
subsequently was amended to equal the prime rate. On May 10, 2000, the amounts
outstanding under the note were repaid by transferring to FX Chicago, Inc.
31,480 shares of IFX Common Stock with an aggregate fair market value equal to
the amount outstanding. The fair market value of shares tendered to repay the
note were valued at the average of the closing bid and ask price of Common Stock
as reported by the Nasdaq SmallCap Market on each of the three trading days
ending on the trading date immediately prior to the delivery of the Common Stock
to FX Chicago, Inc. The Company earned interest income of $29,800, $39,400 and
$52,400 on this note, on a consolidated basis, during the fiscal years ended
June 30, 2000, 1999, and 1998, respectively.
21
<PAGE>
Loans to ePagos, Inc. During fiscal year 1999, the Company made a short-
term loan to ePagos, Inc. (formerly Telcom.Net, L.P.) in the amount of $50,000
and paid expenses of approximately $65,000 on their behalf. As of June 30, 2000,
all amounts owed to the Company had been collected. Joel Eidelstein, President
of the Company, indirectly owns a minority interest in ePagos. IFX currently
owns approximately 17% of ePagos' stock on a fully-diluted basis.
International Technology Investments. Each of Joseph M. Matalon, a former
director of the Company, and Michael Shalom, the Company's Chief Executive
Officer, is an affiliate of International Technology Investments, LC
("International Technology" or "ITI"). In November 1998, IFX entered into an
agreement with International Technology in which International Technology
contributed $1 million to IFX and International Technology received 500,000
shares of Common Stock from IFX, at a price of $2.00 per share, for its
contribution and the option to acquire 5.5 million IFX shares. As of the date of
this report, International Technology has contributed $12 million in additional
capital to IFX in exchange for 6,000,000 additional shares of Common Stock from
IFX, at a purchase price of $2.00 per share.
In January 2000, in connection with the exercise of its options to purchase
IFX shares, International Technology issued a note to the Company in the
principal amount of $4,950,000, with an interest rate of 7%. The note was repaid
in its entirety in May 2000.
Facilito.com IFX owns approximately a 49.9% interest in Facilito, a company
which provides e-commerce solutions. The remaining 50.1% interest in Facilito is
held by The Intcomex Group. The Intcomex Group is owned by family members of
Michael Shalom, IFX's Chief Executive Officer. Facilito intends to source a
significant portion of its merchandise for its e-commerce sales from Intcomex.
In addition, during April 2000, IFX entered into an agreement with Facilito in
which it agreed to provide Facilito with web referrals from its Tutopia
customers and network services in exchange for certain fees.
Yupi Shares. Pursuant to an Amended and Restated Stock Purchase Agreement,
dated as of June 12, 2000, between IFX Online, Inc., a subsidiary of the
Company, and Lee Casty, a then significant stockholder of IFX, IFX Online sold a
part of its shares of Yupi Preferred Stock to Mr. Casty for a total purchase
price of $5 million. The proceeds were used for the Company's working capital.
The exact number of Yupi preferred shares to be transferred by IFX to Mr. Casty
will be fixed upon the initial public offering of Yupi shares, or, in the
absence of a Yupi public offering, then upon the occurrence of certain other
valuation events, but in no event will the number of shares be fixed later than
February 24, 2001.
Tutopia.com, Inc. On August 31, 2000, an entity controlled by Lee Casty,
purchased approximately 2,317,500 preferred shares of Tutopia.com, Inc. in
exchange for $4.9 million. At the time of this transaction, IFX controlled
approximately 85% of the Tutopia.com, Inc. stock.
UBS Capital Americas. Mr. Moore is a director and Mr. Lama a principal of
UBS Capital Americas, LLC, an affiliate of UBS Capital Americas III, L.P. and
UBS Capital LLC, which together purchased $25 million of IFX Preferred Stock in
June and July 2000 and $15 million of preferred stock in Tutopia.com, Inc., a
former subsidiary of IFX, in August 2000. Mr. Moore and Mr. Lama have an
investment interest in UBS and thus may benefit from transactions between UBS on
the one hand and IFX and its subsidiaries on the other.
IFX's Legal Counsel. Scott J. Bakal is the trustee of the Casty Grantor
Subtrust, which owns 22.94% of the outstanding stock of IFX (assuming the
conversion of the preferred shares to common shares). Mr. Bakal is a partner in
the law firm of Neal, Gerber & Eisenberg which provides legal services on a
regular basis to IFX.
22
<PAGE>
Tutopia Share Purchases. During the past fiscal year, James Casty, a trust
established for Scott Casty, and Nikrey Investment Group LP, a company
substantially all of which is owned by Ronald Casty, purchased shares of Class B
Common Stock of Tutopia at a price of $3.00 per share. James Casty, Scott Casty
and Ronald Casty are brothers of Lee Casty, who was then a significant
stockholder of IFX. The purchases were made pursuant to a private placement of
$4,500,000 of Class B Common Stock of Tutopia. James Casty purchased 53,333
shares in the offering; the trust benefiting Scott Casty purchased 53,333
shares; and Nikrey purchased 26,667 shares. Additionally, on August 31, 2000,
James Casty purchased 53,591 shares of preferred stock of Tutopia. The purchase
was made pursuant to a private placement of $20,000,000 of preferred stock of
Tutopia.
The Company believes that all transactions disclosed above have been, and
the Company's board of directors intends that any future transactions with its
officers, directors, affiliates or principal stockholders will be, on terms that
are no less favorable to the Company than those that are obtainable in arm's
length transactions with unaffiliated third parties.
STOCKHOLDER PROPOSALS FOR 2001 PROXY STATEMENT
Proposals by stockholders for inclusion in the Company's Proxy Statement
and form of proxy relating to the 2001 Annual Meeting of Stockholders, which is
currently scheduled to be held on November 9, 2001, should be addressed to the
Secretary, IFX Corporation, 707 Skokie Blvd., 5/th/ Floor, Northbrook, Illinois
60062, and must be received at such address no later than July 6, 2001.
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 stockholders arise at
the meeting, the persons named in the proxy will vote the proxies in accordance
with their best judgment.
23
<PAGE>
Appendix to Proxy Statement
---------------------------
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF IFX CORPORATION
---------------------------------------------------------------------------
I. Purpose
-------
The primary function of the Audit Committee (the "Committee") of the Board
of Directors of IFX Corporation (the "Corporation") is to assist the Board of
Directors in fulfilling its oversight responsibilities by:
. Serving as an independent and objective party to monitor the
Corporation's financial reporting processes and internal control systems;
. Reviewing and appraising the audit efforts of the Corporation's
independent accountants and internal auditors; and
. Providing an open avenue of communication among the Corporation's
independent accountants, financial and senior management, internal auditors and
Board of Directors.
The Committee will primarily fulfill these responsibilities by carrying out the
activities enumerated in Section III of this Charter.
II. Composition
-----------
The Committee shall be comprised of three or more directors as determined
by the Board, each of whom shall be independent directors, and free from any
relationship that, in the opinion of the Board, would interfere with the
exercise of his or her independent judgment as a member of the Committee. All
members of the Committee shall have a working familiarity with basic finance and
accounting practices, and at least one member of the Committee shall have
accounting or related financial management expertise.
III. Responsibilities and Duties
---------------------------
To fulfill its responsibilities and duties, the Audit Committee will:
1. Hold such regular meetings as may be necessary and such special
meetings as may be called by the Chairman of the Committee or at
the request of the independent accountants;
2. Review and update, as necessary, the Committee's Charter
annually;
3. Instruct the independent accountants that they are ultimately
accountable to the Board of Directors and the Committee;
4. Recommend to the Board of Directors the independent accountants
to be nominated, approve the compensation of the independent
accountants, and review and approve the discharge of the
independent accountants;
24
<PAGE>
5. Review and concur in the appointment, replacement, reassignment,
or dismissal of the director of internal auditing;
6. Confirm and assure the independence of the internal auditors and
the independent accountants, including a review of management
consulting services and related fees provided by the independent
accountants;
7. Meet with the independent accountants and financial management to
review the scope of the proposed audit for the current year and
the audit procedures to be utilized and, at the conclusion of the
annual audit, review with the independent accountants and
financial management:
(a) The Corporation's audited financial statements and
related footnotes;
(b) The independent accountants' audit of the financial
statements and their report thereon;
(c) Any significant changes required in the independent
accountants' audit plan;
(d) Any serious difficulties or disputes with
management encountered during the course of the audit; and
(e) Other matters related to the conduct of the audit
which are to be communicated to the Committee under
generally accepted auditing standards.
8. Review with the independent accountants, the internal auditors
and financial and accounting personnel the adequacy and
effectiveness of the accounting and financial controls of the
Corporation and elicit any recommendations for the improvement of
such controls.
9. Discuss with the independent accountants and financial management
their qualitative judgments about the appropriateness, not just
the acceptability, of accounting principles and financial
disclosure practices used and, particularly, the degree of
aggressiveness or conservatism of such practices;
10. Review the internal audit function of the Corporation, including
the proposed audit plans for the coming year and the coordination
of such plans with the independent accountants;
11. Receive, on a periodic basis, a summary of findings from
completed internal audits;
12. Provide sufficient opportunity for the internal auditors and
independent accountants to meet with the Committee without
members of management present to discuss any matters that the
Committee or these groups believe should be discussed privately;
13. Review accounting and financial human resources and succession
planning within the Corporation;
14. Conduct or authorize investigations into any matters within the
Committee's scope of responsibilities, and retain independent
counsel, accountants, or others to assist it in the conduct of
any such investigation;
25
<PAGE>
15. Report through its Chairman to the Board of Directors following
the meetings of the Audit Committee; and
16. Maintain minutes or other records of meetings of the Audit
Committee.
26
<PAGE>
IFX CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
[ ]
1. Election of Directors:
Nominees: 01-Michael Shalom, 02-Joel M. Eidelstein,
03-Zalman Lekach, 04-George A. Myers, 05-Burton J.
Meyer, 06-Mark O. Lama and 07-Charles W. Moore.
FOR ALL
(Except
FOR WITHHOLD Nominee(s)
ALL ALL written below)
( ) ( ) ( )
--------------------------------------------------------
2. Approval of amendment to the IFX 1998 Stock Option
and Incentive Plan (the "Option Plan") to increase the
number of shares available for issuance under the Option
Plan.
FOR AGAINST ABSTAIN
( ) ( ) ( )
3. Ratification of the appointment of Ernst & Young LLP
as the Company's independent auditor for fiscal year
2001.
FOR AGAINST ABSTAIN
( ) ( ) ( )
4. 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.
Please complete, sign and mail this proxy promptly in the
enclosed envelope. No postage is required for mailing in the
United States.
Dated:________________________, 200_
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.
--------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
REVOCABLE REVOCABLE
PROXY PROXY
IFX CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Joel M. 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 stockholders of IFX Corporation (the "Company") to
be held on January 9, 2001, at the offices of Neal, Gerber & Eisenberg, Two
North LaSalle Street, 22nd Floor, Chicago, IL 60602 at 10:00 a.m. local time,
and any and all adjournments and postponements thereof, 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 the nominees for directors named on
the reverse side and for each of the proposals described in the proxy 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.)
--------------------------------------------------------------------------------
