<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ___ )
Filed by the Registrant [ X ] Filed by a Party Other than the Registrant [ ]
Check the appropriate box:
[ X ] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12
VirtualFund.com, Inc.
(Name of Registrant as Specified in its Charter)
VirtualFund.com, Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] ...$125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] ...$500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] ...Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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 of other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
4)......Proposed maximum aggregate value of transaction:
Set forth the amount on which the filing fee is calculated and state
how it was determined.
[ ] 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 of 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>
[LOGO OF VIRTUALFUND.COM]
October 27, 2000
Dear Shareholders:
Please come to our 2000 Annual Meeting. The Annual Meeting will be held on
Tuesday, January 9, 2001 at 4:00 p.m. at the Minneapolis Marriott Southwest,
5801 Opus Parkway, Minnetonka, MN 55343.
This proxy statement describes the matters that management of VirtualFund.com,
Inc. intend to present to the shareholders at the Annual Meeting. Accompanying
this proxy statement is VirtualFund.com, Inc.'s report on Form 10-K for fiscal
2000 and a form of proxy. These proxy materials are first being sent to
shareholders on or about December 1, 2000.
This year, to make it easier for you to vote, we have arranged for you to
deliver your proxy by mail, telephone or through the Internet. If you vote
through the Internet this year, you can choose to receive next year's proxy
materials on-line rather than in the mail. You can change your vote at any time
before the Annual Meeting or revoke your proxy and vote at the Annual Meeting in
person. Instructions for voting are included in this proxy statement.
I look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ Melvin L. Masters
Melvin L. Masters
Chief Executive Officer
<PAGE>
VIRTUALFUND.COM, INC.
---------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 9, 2001
---------------
To the Shareholders:
Notice is hereby given that the Annual Meeting of Shareholders of
VirtualFund.com, Inc. (the "Company") will be held at 4:00 p.m. on Tuesday,
January 9, 2001 at the Minneapolis Marriott Southwest, 5801 Opus Parkway,
Minnetonka, MN 55343, for the following purposes:
1. To elect two directors to serve for three-year terms, or until their
successors have been duly elected and qualified.
2. To approve an amendment to the Articles of Incorporation to change the
name of the Company from VirtualFund.com, Inc. to VirtualFund, Inc.
3. To transact such other business as may properly come before the
meeting, or any adjournment thereof.
Holders of record of common stock at the close of business on November 10, 2000,
are entitled to notice of and to vote upon all matters at the Annual Meetings.
We encourage you to take part in the affairs of the Company either in person or
by executing and returning the enclosed proxy.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Melvin L. Masters
Melvin L. Masters
Chief Executive Officer
Eden Prairie, Minnesota
October 27, 2000
--------------------------------------------------------------------------------
If you are unable to attend this meeting, you are urged to date and sign the
enclosed Proxy and return it in the postage-paid envelope enclosed herewith for
your convenience, or to vote by phone or on the Internet as described in this
document and on the proxy form.
--------------------------------------------------------------------------------
<PAGE>
VIRTUALFUND.COM, INC.
7100 Shady Oak Road
Eden Prairie, MN 55344
PROXY STATEMENT FOR ANNUAL MEETING
OF SHAREHOLDERS
To Be Held January 9, 2001
The 2000 Annual Meeting of Shareholders of VirtualFund.com, Inc. will be held on
January 9, 2001, at the Minneapolis Marriott Southwest, 5801 Opus Parkway,
Minnetonka, MN 55343, beginning promptly at 4:00 p.m., local time. The enclosed
proxy statement and the accompanying materials are being sent to shareholders of
the Company as part of a solicitation for proxies for use at the 2000 Annual
Meeting of Shareholders. The solicitation for proxies is being made by
management of the Company. By delivering the enclosed proxy card, you will
appoint Melvin L. Masters and Timothy N. Thurn as your agents and proxies to
vote your shares of common stock at the Annual Meeting. In this proxy statement,
"proxy holders" refers to Mr. Masters and Mr. Thurn in their capacity as your
agents and proxies.
The accompanying form of proxy for use at the meeting and any adjournments
thereof is solicited by the Board of Directors of the Company and may be revoked
by written notice to the Chief Executive Officer of the Company at any time
prior to its exercise, by voting in person at the meeting, or by giving a later
dated proxy to the Chief Executive Officer of the Company at any time before
voting. Shares represented by a proxy will be voted in the manner directed by
the holder of such shares or, if no direction is provided, the proxy will vote
in favor of the nominated directors and for the proposals set forth in the
Notice of Meeting.
If your shares are held by a broker, a proxy card has been sent to the broker.
You may have received this proxy statement directly from your broker, together
with instructions directing the broker how to vote your shares. Unless your
broker appoints you as its proxy, you will have no right to vote shares in
person at the meeting. If you do not give your broker instructions or
discretionary authority to vote your shares on one or more of the proposals, but
your broker returns the proxy card indicating such lack of authority, your
shares will be "broker non-votes" with respect to the proposals for which the
broker does not have authority to vote. Broker non-votes will be counted as
present for purposes of determining a quorum, but will not be counted as shares
entitled to vote. As a result, broker non-votes will have no effect on whether
the proposals presented to the meeting are passed. Abstention from any proposal
set forth in the Notice of Meeting is treated as a vote against such proposal.
All expenses in connection with the solicitation of this proxy will be paid by
the Company. In addition to solicitation by mail, officers, directors and
regular employees of the Company, who will receive no extra compensation for
their services, may solicit proxies by telephone, telegraph or personal calls.
VOTING SECURITIES AND PRINCIPAL HOLDERS
Only the holders of the Company's common stock whose names appear of record on
the Company's books at the close of business on November 10, 2000 are entitled
to vote at the Annual Meeting. Each share of such Common Stock entitles the
holder thereof to one vote upon each matter to be voted upon.
Proposal 1: ELECTION OF DIRECTORS
The Board of Directors is divided into three classes pursuant to the Articles
and Bylaws of the Company; directors are elected for staggered terms of three
years, with approximately one-third of the directors to be elected each year.
The Bylaws of the Company also currently provide that in the event of any
vacancy on the Board of Directors occurring during the year, the vacant
directorship may be filled by the vote of the remaining directors for the
remainder of the unexpired term. There are currently five members of the Board
of Directors.
<PAGE>
At this Annual Meeting the term of two directors will expire. The Board of
Directors has nominated Edward S. Adams and Steven Fisher to three-year terms
ending in the year 2003, or until their successors are duly elected and
qualified.
The proxy holder will vote for the election of the nominees described above,
unless authority to vote is withheld. The nominees have agreed that they are
willing to serve as directors; however, if anyone is unable to serve, the proxy
may be voted for such other person as the proxy holder shall, in his discretion,
determine.
The following table sets forth information, as of June 30, 2000, concerning the
directors of the Company:
<TABLE>
<CAPTION>
Year
Became
Name, Age, Positions, Principal Occupations, Directorships Director
---------------------------------------------------------- --------
<S> <C>
Directors whose current terms expire at the fiscal year 2000 annual meeting
Stephen Fisher, age 44, is the Senior Strategist for RSPNetwork, Inc., a wholly 1999
owned subsidiary of the Company. Mr. Fisher has held this position since
December 1998. RSPNetwork is a systems integrator specializing in Internet
hosting, integration and support services. From 1992 to 1998, Mr. Fisher was
President and Chief Executive Officer of TEAM Technologies, which was acquired
by the Company in 1998.
Edward S. Adams, age 36, has been Associate Dean for Academic Affairs, Julius E. 1999
Davis Chair and Professor of Law and Co-Director for the Center for Business Law
and Entrepreneurial Studies at the University of Minnesota School of Law since
1992. Mr. Adams is also a principal in Jon Adams Financial Company, LLP, in
Wayzata, Minnesota, where he assists e-commerce entities in raising venture
capital.
Directors whose current terms expire at the fiscal year 2001 annual meeting
Melvin L. Masters, age 46, co-founded the Company in February, 1986 and has been 1989
Chairman, Chief Executive Officer and President of the Company since May 1989.
Mr. Masters is also the sole shareholder, director and CEO of TimeMasters, Inc.,
a company established in 1986 for the purpose of property management, which has
additional investments in the fields of wireless voice/data communications, and
various Internet services.
Timothy R. Duoos, age 43, was President and Chief Executive Officer of Lyndale 1999
Garden Center, Inc. in Minneapolis from October 31, 1986 until 2000. Mr. Duoos
also held a part-time position as Chairman of the Board and Chief Executive
Officer of Sunbelt Nursery Group, Inc. ("Sunbelt") based in Fort Worth, Texas,
from November 1994 through May 1998, and President from October 1997 through May
1998. He served as a part-time consultant to Sunbelt from May 1998 to December
1998. Mr. Duoos served as a Director of Pinnacle Financial, Inc., a privately
held company from June 1996 through June 1997. Mr. Duoos is currently
self-employed.
Directors whose current terms expire at the fiscal year 2002 annual meeting
Roger Wikner; age 57, joined the investment firm of Miller & Schroeder in 1968. 1999
At the time the firm was sold in 1997, Mr. Wikner was Chief Executive Officer
and President, and was the principal shareholder. At Miller & Schroeder, Mr.
Wikner was responsible for developing healthcare, housing and commercial
financing programs. Since 1998, Mr. Wikner has been a principal of Aviation
Charter/Beech Transportation.
Vacancies; On August 7, 2000, Mr. Darris McCord, whose term would have expired 1999
in 2002, resigned as a director of the Company. No replacement has been
appointed as of the date of this proxy statement.
</TABLE>
2
<PAGE>
Information Regarding the Board and Its Committees
In fiscal 2000 the Board of Directors met in person or telephonically twelve
times. All directors attended at least seventy-five percent (75%) of the
meetings. The Board of Directors has: (i) an Audit Committee composed of Mr.
Masters, Mr. Wikner, Mr. Duoos and Mr. Adams; (ii) a Stock Option Committee
composed of Mr. Adams and Mr. Wikner; (iii) a Compensation Committee composed of
Mr. Masters, Mr. Duoos and Mr. Adams; and (iv) an Indemnification and Litigation
Committee composed of Mr. Wikner, Mr. Adams and Mr. Masters. There is no
nominating committee.
The Audit Committee is responsible for recommending engagement of the Company's
independent auditors, reviewing the scope of the audit, evaluating the comments
made by the independent auditor with respect to accounting procedures and
internal controls and determining whether to bring such comments to the
attention of Company management, and reviewing the internal accounting
procedures and controls with the Company's financial and accounting staff. The
Indemnification and Litigation Committee is charged with reviewing and
determining the right to indemnification of officers and directors who may be
defendants in litigation and to provide Company direction regarding the
management of certain corporate litigation. The Audit Committee, Stock Option
Committee, Indemnification and Litigation Committee, and Compensation Committee
each met once in fiscal 2000.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE ELECTION AND
CONFIRMATION OF THE NOMINATED DIRECTORS. THE PROXY HOLDER WILL VOTE IN FAVOR OF
SUCH NOMINEES, UNLESS OTHERWISE DIRECTED. AN AFFIRMATIVE VOTE OF THE HOLDERS OF
A MAJORITY OF THE SHARES OF THE COMMON STOCK REPRESENTED AT THE MEETING IS
REQUIRED FOR ELECTION AND CONFIRMATION OF THE NOMINEES AS DIRECTORS.
The following table sets forth, as of August 31, 2000, certain information with
respect to beneficial share ownership by the directors, individually; by all
persons known to management to own more than 5% of the Company's outstanding
Common Stock, individually; and by all executive officers and directors as a
group. Except as otherwise indicated, the shareholders listed below have sole
investment and voting power with respect to their shares.
<TABLE>
<CAPTION>
Number of Beneficially Percent of Shares
Name of Beneficial Owner Owned Shares Outstanding
------------------------ ------------ -----------
<S> <C> <C>
Melvin L. Masters (1) 3,419,607 17.8%
3213 South Duluth Avenue
Sioux Falls, SD 57105
Sihl-Zurich Paper Mill on Sihl, AG (2) 2,742,858 14.9%
Giesshubel Strasse 15
CH 8046
Zurich, Switzerland
Stephen Fisher (3) 503,758 3.0%
Robert J. Wenzel (4) 404,300 2.3%
Timothy N. Thurn (5) 78,999 *
Danny J. Vatland (6) 146,500 *
Roger Wikner (7) 50,000 *
Timothy Duoos (8) 27,000 *
Edward Adams (9) 25,000 *
All officers and directors as a group (8 persons) (10) 4,655,164 23.4%
* Less than 1%
</TABLE>
3
<PAGE>
(1) Includes 329,000 shares and 100,000 warrants owned by Mr. Masters directly.
This also includes 720,368 shares and warrants to purchase 1,392,239 shares
owned by TimeMasters, Inc., a corporation owned by Mr. Masters; 70,000 shares
and warrants to purchase 200,000 shares owned by Mr. Masters' spouse; 20,000
shares owned by Mr. Masters' children, and 88,000 shares and warrants to
purchase 500,000 shares owned by Masters Trust I, a trust for the benefit of Mr.
Masters' children. Mr. Masters disclaims beneficial ownership of the shares
owned by his spouse, Masters Trust I, and the Masters children.
(2) Includes warrants to purchase 1,371,429 shares.
(3) Includes 488,758 shares of convertible voting Preferred Stock issued to Mr.
Fisher in the Company's acquisition of K&R Technical Services in December 1998
and converted to 488,758 shares of common stock on February 17, 2000. Also
includes 15,000 shares issuable to Mr. Fisher under options which are
exercisable or will become exercisable within 60 days.
(4) Includes 92,500 shares issuable to Mr. Wenzel under options which are
exercisable or will become exercisable within 60 days and warrants to purchase
300,000 shares of stock. Also includes 11,800 shares held as trustee for four
education trusts for which Mr. Wenzel serves as trustee.
(5) Includes 25,000 shares issuable to Mr. Thurn under options which are
exercisable or will become exercisable within 60 days.
(6) Includes 146,500 shares issuable to Mr. Vatland under options which are
exercisable or will become exercisable within 60 days.
(7) Includes 50,000 shares issuable to Mr. Wikner under options which are
exercisable or will become exercisable within 60 days.
(8) Includes 25,000 shares issuable to Mr. Duoos under options which are
exercisable or will become exercisable within 60 days and 2,000 additional
shares owned personally by Mr. Duoos.
(9) Includes 25,000 shares issuable to Mr. Adams under options which are
exercisable or will become exercisable within 60 days.
(10) Includes 379,000 shares issuable under options which are exercisable or
will become exercisable within 60 days and warrants to purchase 2,492,239
shares.
EXECUTIVE OFFICERS
The following table sets forth information, as of June 30, 2000, regarding the
executive officers of the Company:
Name Age Positions
---- --- ---------
Melvin L. Masters 46 Chief Executive Officer, President and Chairman
of the Board
Robert J. Wenzel 49 Chief Operating Officer
Danny J. Vatland 37 Chief Technical Officer
Timothy N. Thurn 44 Chief Financial Officer, Treasurer
Steven Fisher 44 Senior Strategist, RSPNetwork, Inc.
Mr. Wenzel has been Chief Operating Officer of the Company since October 1991
and has been President of ColorSpan Corporation, the Company's principal
operating subsidiary of its Digital Graphics Business Unit ("DGBU"), since
October 1989. The Company sold the DGBU in June 2000 to MacDermid Incorporated
("MacDermid"). Since May 2000, Mr. Wenzel has been leading the product
development and sales teams of the Company and of B2BXchange, Inc., a wholly
owned subsidiary of the Company focused on providing Internet
business-to-business software, tools and services. Mr. Wenzel also has operating
oversight responsibilities for RSPNetwork, Inc.
Mr. Vatland assumed the duties of Chief Technology Officer in April 2000. From
1994 until 1999, Mr. Vatland was Vice President of Research and Development for
ColorSpan Corporation. He joined the Company in 1989 and moved to the Internet
Services Business Unit in July 1999. Mr. Vatland has an Electrical Engineering
degree from Michigan Technological University.
4
<PAGE>
Mr. Thurn, who assumed the duties of Chief Financial Officer in April 2000, has
been Treasurer of the Company since June 1989. He was Treasurer of ColorSpan
Corporation from March 1987 until June 2000. Mr. Thurn has experience as both a
public and private accountant. Mr. Thurn is a Certified Public Accountant (CPA)
and Certified Management Accountant (CMA).
Officers of the Company are elected annually by the Board of Directors. All of
the current officers have been re-elected to serve in the same positions for the
coming year.
Compliance with Section 16(a) of the Securities Exchange Act
Under federal securities laws, the Company's directors and officers, and any
beneficial owner of more than 10 percent of a class of equity securities of the
Company, are required to report their ownership of the Company's equity
securities and any changes in such ownership to the Securities and Exchange
Commission (the "Commission") and the securities exchange on which the equity
securities are registered. Specific due dates for these reports have been
established by the Commission, and the Company is required to disclose in its
Form 10-K any delinquent filing of such reports and any failure to file such
reports.
Based upon its review of Forms 3, 4, and 5 and any amendments thereto furnished
to the Company pursuant to Section 16 of the Securities Exchange Act of 1934.
Forms 4 and 5 for Mr. Masters were filed late, but have been filed. A Form 5 for
Sihl-Zurich Paper Mill on Sihl, AG is expected to be filed shortly.
AUDIT COMMITTEE
The Audit Committee has adopted a new Audit Committee charter as required by
Nasdaq and will publish this charter as part of its Definitive Proxy Statement
to be mailed to shareholders on or about December 1, 2000.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
One of the primary goals in setting compensation policies is to maintain
competitive, progressive programs to attract, retain and motivate high caliber
executives, and maximize the financial success of the Company by appropriately
rewarding such individuals for their achievements. Another goal is to provide an
incentive to executives to focus efforts on long-term strategic goals for the
Company by closely aligning their financial interests with stockholder
interests. To attain these goals the Company's executive compensation program
was designed to include base salary, incentive bonuses and long-term incentives
in the form of stock options.
Base Salary. Salaries for executives are reviewed by the Compensation Committee
on a periodic basis and may be increased (or decreased) at any time based on:
(1) the Compensation Committee's evaluation of the individual's performance; and
(2) the Company's financial condition. Increases in median competitive pay
levels are a secondary factor.
Compensation of the Company's Chief Executive Officer is set by the Board of
Directors as a whole, with Mr. Masters abstaining. The annual compensation for
the Chief Executive Officer was set at $250,000 in 1994. On March 12, 1997, Mr.
Masters, Mr. Wenzel and Mr. Vatland, along with two other non-officer members of
management, voluntarily offered to decrease their salaries to $175,000 until
Company performance improved, or as agreed upon with the Compensation Committee.
As of the end of fiscal year 2000, the Board of Directors adjusted the salary of
the Chief Executive Officer to $400,000 per year, retroactive to January 1,
2000. Through an oral agreement, a continuing review of the CEO compensation
package is currently underway. This review is due, in part, to the on-going
changes in the Company's operating structure. Warrants which are held by Mr.
Masters; his affiliates, including TimeMasters; family members; and
corresponding beneficial owners may be affected by this review.
5
<PAGE>
As of the end of the fiscal year, the Company adjusted Mr. Wenzel's salary to
$250,000 per year, retroactive to January 1, 2000. Through an oral agreement,
the Company is conducting a continuing review of Mr. Wenzel's compensation
package. This review is due, in part, to the on-going changes in the Company's
operating structure.
Annual Incentive. The Company did not establish a cash incentive plan for its
executive officers for fiscal 2000. The Compensation Committee may pay bonuses
at year end based on an evaluation of performance of the individual during the
fiscal year. The Compensation Committee's determination at such times is
discretionary and normally is based primarily on overall Company performance and
the contribution of each individual to such performance. Currently, there is no
specific formula established prior to the time such incentive compensation is
allocated to the individual officer.
Cash incentives were incurred for two executive officers, Robert Wenzel and
Stephen Fisher, during fiscal year 2000.
Long Term Incentives. The Company believes that significant incentives should be
provided to executive officers to maximize Shareholder value. Even though such
officers may hold substantial positions in the Company's common stock, such
incentives can be provided by benefit awards that are based on the appreciation
of such common stock. The Company currently sometimes grants warrants to
purchase the Company's common stock at a fixed price; or stock options that
become exercisable over a period of time. This process is administered by the
Stock Option Committee, which is composed of Mr. Adams and Mr. Wikner. Warrants
and stock options are granted at the prevailing market value and will only have
value if the Company's stock price increases. Generally, stock option grants may
vest in equal amounts over eight years, with some special programs vesting over
shorter periods. Generally executives must be employed by the Company at the
time of vesting in order to exercise the stock option.
The Committee determines the number of options to be granted based on the
expected value of an individual's contribution, or to reflect historical
contributions.
In November 1999, the Board entered into an oral agreement with Mr. Masters,
which included the following: Warrants to purchase 1,000,000 common shares in
the Company at $2.00 per share. These warrants may be converted, at Mr. Masters'
option, on a 1:1 basis to what was then B2BXchange, Inc. and has now been split
into B2BXchange, Inc. and RSPNetwork, Inc. Additional discussions with the
Company's Board of Directors are underway regarding the treatment of the
conversion option underlying these warrants and how they may convert to equity
interests in the two separate Company subsidiaries. The convertibility of the
warrants, which originally carried a $0.25 exercise price for what was then
B2BXchange, Inc., is dependent upon the occurrence of certain events including,
but not limited to, a spinout/public financing and/or divestiture of what was
B2BXchange, Inc. at the time of the grant. This subsidiary has subsequently been
split into two wholly owned subsidiaries. Warrant grants include certain
piggyback registration rights. A continuing review of the CEO compensation
package is currently underway which may have a direct bearing on the
convertibility of these warrants into warrants of one or both subsidiaries.
Warrants which are held by Mr. Masters; his affiliates, including TimeMasters;
family members; and corresponding beneficial owners may be affected by this
review.
On November 11, 1999 the Company entered into an oral agreement with Robert
Wenzel for 300,000 warrants in the Company at $2.00 per share. These warrants
may be converted, at Mr. Wenzel's option, on a 1:1 basis to what was then
B2BXchange, Inc. and has now been split into B2BXchange, Inc. and RSPNetwork,
Inc. Additional discussions with the Company's Board of Directors are underway
regarding the treatment of the conversion option underlying these warrants and
how they may convert to equity interests in the two separate Company
subsidiaries. The convertibility of the warrants, which originally carried a
$0.25 exercise price for what was then B2BXchange, Inc., is dependent upon the
occurrence of certain events including, but not limited to, a spinout/public
financing and/or divestiture of what was B2BXchange, Inc. at the time of the
grant. The warrant grant includes certain piggyback registration rights.
The Compensation Committee
Melvin Masters
Ed Adams
Tim Duoos
6
<PAGE>
INFORMATION REGARDING EXECUTIVE COMPENSATION
The following table sets forth the cash and noncash compensation for each of the
last three fiscal years awarded to or earned by our Chief Executive Officer and
our other four most highly compensated executive officers whose salary and bonus
earned in the fiscal year ended June 30, 2000 exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
========================= ======= ================================= ================================== ===========
Annual compensation Long term compensation
--------------------------------- ----------------------------------
Awards
=========================
Other Securities
annual Restricted Underlying Payouts/ All other
Name and principal Year Salary ($) Bonus ($) compen- stock Options/ LTIP compen
position sation award(s) Warrants/ payouts -sation
($) ($) SARs (#) ($) ($)
========================= ======= =========== ========== ========== ============ ============ ======== ===========
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Melvin L. Masters 2000 $278,125 - - - 1,000,000 - $10,434
Chief Executive Officer 1999 175,000 - - - - - 9,494
1998 175,000 - - - - - 8,904
========================= ======= =========== ========== ========== ============ ============ ======== ===========
Robert J. Wenzel 2000 $209,375 $10,000 - - 300,000 - -
Chief Operating Officer 1999 175,000 - - - - - -
1998 175,000 - - - - - -
------------------------- ------- ----------- ---------- ---------- ------------ ------------ -------- -----------
Danny J. Vatland 2000 $175,000 - - - - - -
Chief Technical Officer 1999 175,000 - - - - - -
1998 175,000 - - - - - -
------------------------- ------- ----------- ---------- ---------- ------------ ------------ -------- -----------
Stephen Fisher 2000 $155,769 $248,250 - - - - -
Senior Strategist 1999 150,000 155,750 - - 240,000 - -
RSPNetwork, Inc. 1998 # - - - - - -
------------------------- ------- ----------- ---------- ---------- ------------ ------------ -------- -----------
Timothy N. Thurn 2000 $100,000 - - - - - -
Chief Financial Officer 1999 100,000 - - - 120,000 - -
1998 100,000 - - - - - -
========================= ======= =========== ========== ========== ============ ============ ======== ===========
</TABLE>
# Became executive officer during fiscal 1999. Fiscal 1999 figures include
compensation earned at K&R Technical Services, Inc. prior to its acquisition
by RSPNetwork, Inc.
1 Premiums for life insurance where the Company is not the beneficiary.
Stock Options
The Company maintains two Stock Option Plans pursuant to which executive
officers, other employees and certain non-employees providing services to the
Company may receive options to purchase the Company's common stock. These plans
are the 1990 Restated Stock Option Plan (as amended May 19, 1991) and the 1996
Stock Incentive Plan. Options can no longer be granted under the 1990 Restated
Stock Option Plan.
The following table summarizes grants of stock options and warrants during
fiscal 2000 to the Chief Executive Officer and the Executive Officers named in
the Summary Compensation Table:
7
<PAGE>
<TABLE>
<CAPTION>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
======================================================================================= ============================
Potential Realizable
Value at Assumed Annual
Individual Grants Rates of Stock Price
Appreciation for Option
Term
============================ ============== ============= ============== ============== ============== =============
% of Total
Options/
Options/ Warrants/
Warrants/ SARs Granted
Name SARs to Employees Exercise or
Granted in Fiscal Base Price Expiration
(#) Year ($/Share) Date 5% ($) 10% ($)
---------------------------- -------------- ------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Melvin L. Masters 1,000,000 30.4% $2.00 November 2009 $1,257,800 $3,187,400
---------------------------- -------------- ------------- -------------- -------------- -------------- -------------
Robert J. Wenzel 300,000 9.1% $2.00 November 2009 $377,340 $956,220
---------------------------- -------------- ------------- -------------- -------------- -------------- -------------
</TABLE>
The following table summarizes exercises of stock options during fiscal 2000 by
the Executive Officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
AGGREGATE OPTION/SAR EXERCISES IN 2000 FISCAL YEAR AND FY-END OPTION/SAR VALUES
==================================== ================== ================= =================== =======================
Number of Value of unexercised
unexercised in-the-money
options/warrants/ options/warrants/SARs
SARs at FY-end at FY-end ($)
Name Shares acquired Value realized (#) exercisable / exercisable/
on exercise (#) ($) unexercisable unexercisable (1)
------------------------------------ ------------------ ----------------- ------------------- -----------------------
<S> <C> <C> <C> <C>
Melvin L. Masters -0- -0- 1,000,000 / -0- $406,000 / -0-
------------------------------------ ------------------ ----------------- ------------------- -----------------------
Robert J. Wenzel -0- -0- 392,500 / 172,500 $142,230 / 390
------------------------------------ ------------------ ----------------- ------------------- -----------------------
Danny J. Vatland -0- -0- 146,500 / 177,500 $13,104 / -0-
------------------------------------ ------------------ ----------------- ------------------- -----------------------
Stephen Fisher -0- -0- 15,000 / 225,000 $12,240 / $183,600
------------------------------------ ------------------ ----------------- ------------------- -----------------------
Timothy N. Thurn -0- -0- 25,000 / 145,000 -0- / 101,220
==================================== ================== ================= =================== =======================
</TABLE>
(1) Represents the difference between the closing price of the Company's common
stock on June 30, 2000 and the exercise price of the options.
Long-Term Incentive Plan Awards
Other than the Stock Option Plans reported on above, the Company does not
maintain any long-term incentive plans.
Director Compensation
For fiscal year 2000, there was no plan for cash compensation to non-employee
directors. All directors were reimbursed for their expenses incurred in
attending meetings. Roger Wikner, Edward S. Adams, and Timothy Duoos acted as
consultants to the Company during fiscal year 2000. Consulting fees of $36,000
were incurred by each for services provided during the fiscal year. The Company
granted Messrs. Adams, Duoos and Wikner 100,000 stock options, vesting over a
four year period for consulting services. The Company believes that the
consulting arrangements with Messrs. Adams, Duoos and Wikner reflect the
appropriate market value of these services which each performs and are
comparable to that which would be available from other similar consultants who
are not affiliated.
8
<PAGE>
Employment Agreements
At June 30, 2000, the Company had employment agreements, some of which are
subject to continuing review, with Messrs. Masters, Wenzel, Vatland, Thurn, and
Fisher which renew automatically on an annual basis unless terminated by either
party by written notice prior to the renewal date. The agreements provide for
continuation payments equal to 36 months pay for Mr. Masters and Mr. Fisher upon
termination of employment in certain circumstances including change of control.
Such agreements provide for 12 months pay for Mr. Wenzel, Mr. Vatland and Mr.
Thurn upon termination of employment in certain circumstances, including change
of control. As of June 30, 2000 minimum salary levels were set at $400,000 for
Mr. Masters; $250,000 for Mr. Wenzel; $175,000 for Mr. Vatland; and $100,000 for
Mr. Thurn.
The Company is engaged in ongoing negotiations with Mr. Masters and Mr. Wenzel
regarding amendment or replacement of their employment agreements.
Compensation Committee Interlocks and Insider Participation
The Chief Executive Officer of the Company, Melvin L. Masters, is a member of
the Compensation Committee. Mr. Masters' compensation is set by the Board of
Directors as a whole with Mr. Masters abstaining.
Certain Relationships and Related Transactions
We have the following arrangements with certain directors, executive officers or
five percent shareholders:
(1) The Company leases space which it currently occupies in Shady View I & II,
from Grandchildren's Realty Alternative Management Program I, LP ("GRAMPI"), a
Minnesota limited partnership. The general partner of GRAMPI is TimeMasters,
Inc. ("TMI"), a Minnesota corporation that is wholly owned by Melvin L. Masters.
One of the limited partners of GRAMPI is the Masters Trust I, of which Ralph
Rolen, a former director of the Company, was Trustee at the time of the
negotiations and of which the minor children of Mr. Masters are the
beneficiaries. The Company retained the services of an outside law firm as well
as an independent commercial real estate brokerage firm in negotiating the
lease. The Company leases 178,774 square feet of space under this agreement
which had an initial term of fifteen years (expiring December 31, 2010) and a
monthly base rate as of August 31, 2000 of $110,232 rent and $49,240 for real
estate taxes and common area maintenance; there are no renewal options. The base
rate escalates periodically over the term of the lease. Rent expense including
real estate taxes and common area maintenance under this lease was $1,844,000 in
fiscal 2000. Under the related party leases, the Company leases 146,570 square
feet (of which 58,800 square feet is currently being sublet to MacDermid
Incorporated ("MacDermid"), who purchased the assets of the DGBU in June 2000,
under a transition plan. Another 32,204 square feet is being sublet to MacDermid
until July 2005, with a right to extend under March 31, 2007. Both the Company
and MacDermid are also required to pay their pro-rata share of property taxes,
utilities and essentially all other operating expenses.
(2) Under a Use Indemnification Agreement and certain related Board of
Directors' actions, the Company has the right to sponsor business and
business-related occasions at facilities owned by Melvin L. Masters and/or
Masters Trust I (a trust for Mr. Masters' children) and/or Mr. Masters' spouse
and/or TimeMasters, Inc and/or GRAMPI. In addition, we occasionally use an
airplane owned by a company controlled by Mr. Masters, for business-related
travel. The Company indemnifies the owners against loss or damage beyond
available insurance, reimburse out-of-pocket expenses, and pay a usage charge
based on what management believes are market rates or below.
(3) In June 1998, the Company loaned $250,000 to GRAMPI. The note was personally
guaranteed by Mr. Masters, was secured by certain shares of the Company's common
stock owned by GRAMPI, and bore interest at the Prime Rate plus 2.0%. In
September 1999, the principal balance of the note, which was originally due
February 25, 1999, was combined with additional borrowing during fiscal 1999 by
Mr. Masters into a new $500,000 non interest bearing note from Mr. Masters that
was due September 1, 2000. During fiscal 1999, Mr. Masters and TMI borrowed an
additional $375,472. This additional borrowing was combined in September 1999
with $97,505 that was owed to the Company by TMI at June 30, 1998 into a second
note from Mr. Masters of $472,977 that was payable September 1, 2000 and bears
interest at 9.75%. In August 1999 Mr. Masters borrowed an additional $200,000
pursuant to a note that was payable September 1, 2000 and bears interest at
9.75%. All three notes are secured by a Deed of Trust encumbering certain real
9
<PAGE>
property located in the state of Montana that is owned by GRAMPI. Total
principal and accrued interest due from Mr. Masters at June 30, 2000 was
$1,405,285. These notes remain outstanding. In October 2000, the Board of
Directors, with Mr. Masters' abstaining, approved a loan to GRAMPI for $430,000
to be paid back during calendar 2001 or as approved by the Board of Directors.
This loan will bear interest at the rate imputed by the U.S. Internal Revenue
Service for loans between related parties and is guaranteed by Mr. Masters
personally.
(4) Prior to the Company's acquiring K&R Technical Services ("K&R"), K&R had
loaned $281,217 to TEAM Property Management. This note was among the assets the
Company acquired when it acquired K&R. The note, which bears interest at 9% was
due September 1, 2000, and had an outstanding balance of $329,982 at June 30,
1999. As of August 31, 2000, the outstanding balance on this was $109,994.
(5) The Company leases space that it currently occupies in Cedar Falls, Iowa
from TEAM Property Management Company, a company that is controlled by Stephen
Fisher and two other VirtualFund.com shareholders, who were previously
principals in TEAM Technologies. The amount of this lease is $16,854 per month.
The total paid during the fiscal year ended June 30, 2000 was $201,000.
(6) The Company assumed a note receivable of $114,849 from Stephen Fisher when
the Company purchased K&R Technical Services, Inc. The note is due June 18, 2001
and accrued interest at 9%. This note was paid in July 2000.
Each of the foregoing transactions was approved by a disinterested majority of
our Board of Directors, by shareholders, or by both. We believe that each such
transaction is on terms at least as favorable to us as could have been obtained
from an unaffiliated entity.
PERFORMANCE GRAPH
The following table compares the cumulative total return on the common stock of
the Company for the last five years with the Nasdaq Composite Index and with an
index of computer corporations listed on Nasdaq, in each case assuming an
investment of $100 on June 30, 1995 and the reinvestment of all dividends:
[Performance Graph appears here]
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
6/30/95 12/29/95 6/30/96 12/31/96 6/30/97 12/31/97 6/30/98 12/31/98 6/30/99 12/31/99 6/30/00
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ US INDEX $ 100 $ 113 $ 128 $ 140 $ 156 $ 171 $ 206 $ 241 $ 296 $ 448 $ 437
-------------------------------------------------------------------------------------------------------------------------------
NASDAQ COMPUTER INDEX $ 100 $ 123 $ 142 $ 164 $ 179 $ 199 $ 290 $ 431 $ 540 $ 914 $ 994
-------------------------------------------------------------------------------------------------------------------------------
VFND STOCK PRICE $ 100 $ 107 $ 87 $ 107 $ 38 $ 86 $ 87 $ 39 $ 30 $ 92 $ 46
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
Proposal 2: AMENDMENT TO THE ARTICLES OF INCORPORATION TO CHANGE THE CORPORATE
NAME TO VirtualFund, Inc.
On October 19, 2000, the Board of Directors approved a resolution to change the
name of VirtualFund.com, Inc. to VirtualFund, Inc., subject to approval of the
shareholders of the Company. The Board of Directors believes the name change
will more closely reflect the expanded focus of the Company. The proposed name
change reflects the technology alliance, development and investment
opportunities that the Company is exploring.
SHAREHOLDER PROPOSALS FOR THE
2001 ANNUAL MEETING OF SHAREHOLDERS
To be considered for inclusion in next year's Proxy Statement, shareholder
proposals must be received at VirtualFund.com's principal executive offices no
later than the close of business on August 15, 2001.
For any proposal that is not submitted for inclusion in next year's proxy
statement (as described in the preceding paragraph) but is instead sought to be
presented directly at next year's annual meeting, Securities and Exchange
Commission rules permit management to vote proxies in its discretion if (a) the
Company receives notice of the proposal before the close of business on August
15, 2001 and advises stockholders in next year's proxy statement about the
nature of the matter and how management intends to vote on such matter, or (b)
does not receive notice of the proposal prior to the close of business on August
15, 2001.
Notices of intention to present proposals at the 2001 Annual Meeting should be
addressed to Chief Financial Officer, VirtualFund.com, Inc., 7100 Shady Oak
Road, Eden Prairie, Minnesota 55344. The Company reserves the right to reject,
rule out of order, or take other appropriate action with respect to any proposal
that does not comply with these and other applicable requirements.
DELIVERY AND REVOCABILITY OF PROXIES
This year, you may vote your shares by delivering a proxy in one of the
following ways:
o BY MAIL. You may mark the enclosed proxy card and mail it in
the enclosed postage-prepaid envelope.
o BY TELEPHONE. You may call from the United States toll free -
1-800-240-6326. Use any touch-tone telephone to vote your
proxy 24 hours a day, 7 days a week. You will be prompted to
enter your 3-digit Company number and your 7-digit Control
Number which is located on the proxy card. Follow the simple
instructions the Voice provides you.
o BY INTERNET. You may access the website
http://www.eproxy.com/vfnd/. You will need to enter your
Control Number and then follow the prompts.
If you deliver your proxy by telephone or electronically, please do not mail the
enclosed proxy card. If you deliver your proxy and change your mind before the
Annual Meeting, you may revoke your proxy by delivering notice that you wish to
revoke your proxy or by delivering another proxy with a later date. You may vote
your shares by attending the meeting in person but, if you have delivered a
proxy before the Annual Meeting, you must revoke it before the Annual Meeting
begins. Attending the meeting will not automatically revoke your previously
delivered proxy.
The Internet voting procedure is designed to authenticate Shareholders'
identities and to allow Shareholders to vote their shares and confirm that their
instructions have been properly recorded. Shareholders voting via the Internet
should understand that there may be costs associated with electronic access,
such as usage charges from Internet access providers and telephone companies,
that would be borne by the Shareholder.
11
<PAGE>
AUDITORS
KPMG LLP was the auditor for the year ended June 30, 2000, and has been selected
as auditors for the year ending June 30, 2001. A representative of KPMG is
expected to attend the annual meeting with the opportunity to make a statement
and/or respond to appropriate questions from shareholders present at the
meeting. Deloitte & Touche, LLP audited the books and accounts of the Company
for the years ended June 30, 1998 and 1999.
OTHER MATTERS
The Board of Directors of the Company knows of no other matters which may come
before the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Melvin L. Masters
Melvin L. Masters
Chief Executive Officer
Eden Prairie, Minnesota
October 27, 2000
12
<PAGE>
VIRTUALFUND.COM, INC.
ANNUAL MEETING OF STOCKHOLDERS
Tuesday, January 9, 2001
4:00 p.m.
Minneapolis Marriott Southwest
5801 Opus Parkway
Minnetonka, MN 55343
VirtualFund.com, Inc.
[VIRTUALFUND.COM LOGO] 7100 Shady Oak Road, Eden Prairie, MN 55344 proxy
--------------------------------------------------------------------------------
This proxy is solicited by the Board of Directors for use at the Annual Meeting
on January 9, 2001.
The shares of stock you hold in your account or in a dividend reinvestment
account will be voted as you specify below.
If no choice is specified, the proxy will be voted "FOR" Item 1.
By signing the proxy, you revoke all prior proxies and appoint Melvin L. Masters
and Timothy N. Thurn, and both of them, with full power of substitution, to vote
your shares on the matters shown on the matters shown on the reverse side and
any other matters which may come before the Annual Meeting and all adjournments.
See reverse for voting instructions
<PAGE>
--------------------
COMPANY #
--------------------
There are three ways to vote your Proxy
Your telephone or Internet vote authorizes the Named Proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
VOTE BY PHONE - TOLL FREE - 1-800-240-6326 - QUICK *** EASY *** IMMEDIATE
o Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week.
o You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which is located above.
o Follow the simple instructions the Voice provides you.
VOTE BY INTERNET - www.eproxy.com/vfnd/ - QUICK *** EASY *** IMMEDIATE
o Use the Internet to vote your proxy 24 hours a day, 7 days a week.
o You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which is located above to obtain your records and create an
electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to VirtualFund.com, Inc., c/o Shareowner Servicessm,
P.O. Box 64873, St. Paul, MN 55164-0873.
If you vote by Phone or Internet, Please do not mail your Proxy Card.
Please detach here
--------------------------------------------------------------------------------
The Board of Directors Recommends a Vote FOR item 1.
<TABLE>
<S> <C> <C> <C> <C>
1. Election of directors: 01 Director - Stephen Fisher Vote FOR Vote AGAINST Vote WITHHELD
02 Director - Edward S. Adams all nominees all nominees from all nominees
2. Approve Amendment to Articles of Incorporation Vote FOR Vote AGAINST Vote WITHHELD
changing company name from VirtualFund.com, Inc.
to VirtualFund, Inc.
</TABLE>
(Instructions: To withhold authority to vote for/confirm the
appointment of any indicated nominee, write the number(s) of the
nominee(s) in the box provided to the right.)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL.
---
Address Change? Mark Box Date
Indicate changes below: --------------------------------------
Signature(s) in Box
Please sign exactly as your name(s) appear
on Proxy. If held in joint tenancy, all
persons must sign. Trustees, administrators,
etc. should include title and authority.
Corporations should provide full name or
corporation and title of authorized officer
signing the proxy.
