<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:
[ ] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ X ] 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:
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4)......Date Filed:
<PAGE>
PRESS RELEASE
FROM: VirtualFund.com, Inc.
CONTACT: Dennis B. McGrath
McGrath Buckley Communications Counseling
651-646-4115
FOR IMMEDIATE RELEASE
VIRTUALFUND SETS SHAREHOLDER MEETING DATE,
ELECTS NEW BOARD CHAIR, NAMES ACTING CEO
MINNEAPOLIS, Jan. 18, 2001. VirtualFund.com, Inc., (NASDAQ: VFND) today
announced a scheduled date for a special meeting of shareholders, the
appointment of additional officers, and commencement of litigation asking that
it be released from long term real estate leases with a company owned by its
former CEO and president, Melvin Masters.
In a letter to VirtualFund shareholders dated today, (a copy of the shareholder
letter follows this release) the company announced that its Board of Directors
has scheduled a special meeting of shareholders for April 19. The letter further
advises shareholders that a meeting purportedly called by Masters for February
13 is not validly called and will not be considered properly held, as it
contravenes Minnesota law and the Company's bylaws.
VirtualFund directors have elected Roger Wikner as Chairman of the Board.
Wikner, a retired business executive, has been a member of the VirtualFund board
since 1999. He replaces former board chair Melvin Masters. Tim Duoos has
resigned as Vice Chair, but continues as a director.
Directors have also appointed Douglass E. Coy, as VirtualFund's new acting CEO.
Coy, a successful turnaround management consultant, heads a diversified
corporate restructuring and management consulting firm based in Minneapolis. He
has been involved in the restructuring and revitalization of local, regional and
national companies.
-more-
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VirtualFund - Page 2.
The directors also announced that Stephen Fisher, President and COO of
RSPNetwork and a VirtualFund director, has been given the additional position of
Chief Executive Officer of RSPNetwork. RSPNetwork, a wholly-owned subsidiary
based in Cedar Falls, Iowa, is a regional systems integrator specializing in
Internet hosting, integration and support services.
On January 10, 2001, VirtualFund and ColorSpan Corporation, a wholly-owned
subsidiary of VirtualFund, filed a complaint in Hennepin County District Court
against its former CEO, Melvin Masters, and a limited partnership controlled by
Masters, seeking to void ColorSpan's lease of space in an Eden Prairie business
complex owned by the limited partnership, on the grounds that the lease was
unfair, unreasonable, and unduly benefited Masters, in violation of Masters'
fiduciary duties to VirtualFund and ColorSpan. The complaint also seeks the
return of the profits realized by Masters as a result of his self-dealing in the
Eden Prairie lease and other real estate transactions with VirtualFund and its
subsidiaries.
Additional Information
VirtualFund.com, Inc. ("VirtualFund") may solicit proxies from its shareholders
in connection with any action to remove and/or elect members to the company's
board of directors. Before distributing forms of proxy to VirtualFund's
shareholders in connection with any such solicitation, VirtualFund will file
proxy materials (a proxy statement and related documents) with the U.S.
Securities and Exchange Commission (the "SEC") containing information regarding
the participants in any such solicitation.
Investors and shareholders are urged to read the proxy materials carefully when
they are available. The proxy materials will contain important information about
VirtualFund, the proxy solicitation, and related matters. Investors and
shareholders will be able to obtain copies of the proxy materials free of charge
through the web site maintained by the SEC at http://www.sec.gov.
In addition to the proxy materials, VirtualFund has filed annual, quarterly and
current reports, proxy statements and other information with the SEC. You may
read and copy any reports, statements and other information filed by VirtualFund
at the SEC public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549 or at the SEC's other public reference rooms in New York, New York and
Chicago, Illinois. Please call the SEC at 1.800.SEC.0330 for further information
on the hours and locations of the public reference rooms. VirtualFund's filings
are also available to the public from commercial document retrieval services and
at the web site maintained by the SEC at http://www.sec.gov.
Shareholders and investors may also obtain copies of documents VirtualFund has
filed with the SEC free of charge from VirtualFund by requesting them in writing
or by telephone at the following address: VirtualFund.com, Inc., 6462 City West
Parkway, Suite 175, Eden Prairie, Minnesota 55344, Attention: Joseph P. Beckman,
Esq., phone: (952) 943 3236.
<PAGE>
Information Concerning Participants
VirtualFund, its directors, executive officers, certain other members
of management and employees, agents and nominees may be deemed to be
participants in any solicitation of its shareholders. VirtualFund filed a
preliminary proxy statement with the SEC on October 30, 2000 in anticipation of
an Annual Meeting of Shareholders on January 9, 2001. While the Annual Meeting
scheduled for January 9, 2001 has been cancelled, we make reference to certain
information contained in the preliminary proxy statement. Information concerning
VirtualFund's directors, executive officers and certain other employees is set
forth in VirtualFund's preliminary proxy statement filed with the SEC on October
30, 2000 and will be contained in any Proxy Statement filed by VirtualFund in
connection with the removal and/or election of members of the company's board of
directors.
As of January 15, 2001, based upon their most recent reports filed with
the SEC, VirtualFund's officers and directors beneficially own, as a group,
4,433,415 shares of VirtualFund common stock, representing approximately 24.2%
of the shares outstanding. Melvin L. Masters, VirtualFund's former Chief
Executive Officer and President, has reported on his most recent filing with the
SEC that he beneficially owns 3,419,607 of those shares, representing
approximately 19.2% of the shares outstanding.
VirtualFund's preliminary proxy statement filed with the SEC on October
30, 2000 and any Proxy Statement relating to the removal and/or election of
members of the company's board of directors are, or will be, available to the
public from commercial document retrieval services and at the web site
maintained by the SEC at http://www.sec.gov.
In addition to any solicitations that may be made by any of the
above-referenced persons, VirtualFund has retained Innisfree M&A Incorporated to
act as its advisor and provide proxy solicitation services, for which it will
receive customary compensation. Employees of Innisfree M&A Incorporated may
communicate in person, by telephone or otherwise with persons who are
shareholders of VirtualFund.
Cautionary Factors That May Affect Future Results
Certain statements contained in this document and other written and
oral statements made from time to time by VirtualFund do not relate strictly to
historical or current facts. As such, they are considered "forward-looking
statements" which provide current expectations or forecasts of future events.
Such statements can be identified by the use of terminology such as
"anticipate," "believe," "estimate," "expect," "intend," "may," "could,"
"possible," "plan," "project," "should", "will," "forecast" and similar words or
expressions. VirtualFund's forward-looking statements generally relate to its
growth strategies, financial results, product development and sales efforts. One
must carefully consider forward-looking statements and understand that such
statements involve a variety of risks and uncertainties, known and unknown, and
may be affected by inaccurate assumptions, including, among others, those
statements made which relate to any future operating results and mergers and
acquisitions activity. Consequently, no forward-looking statement can be
guaranteed and actual results may vary materially.
<PAGE>
VirtualFund undertakes no obligation to update any forward-looking
statement, but investors are advised to consult any further disclosures by the
company on this subject in its filings with the Securities and Exchange
Commission, especially on Forms 10-K, 10-Q and 8-K (if any), in which the
company discusses in more detail various important factors that could cause
actual results to differ from expected or historic results. VirtualFund notes
these factors as permitted by the Private Securities Litigation Reform Act of
1995. It is not possible to foresee or identify all such factors. As such,
investors should not consider any list of such factors to be an exhaustive
statement of all risks, uncertainties or potentially inaccurate assumptions.
<PAGE>
January 18, 2001
Dear Shareholder:
We are writing to you as the majority of your Board of Directors to
brief you on the events that have transpired since early November, and the
actions we are taking to protect your interests. To say we are deeply distressed
by the actions of the Company's former CEO, Mel Masters, would be a serious
understatement.
History. Last June, following the sale of the Company's laser printing
business to MacDermid, Masters told the Board that his intent was to use the
proceeds from that sale to build a B2Bxchange capability for small and
medium-sized companies. Masters assured the Board that the cash from the
MacDermid sale would be sufficient to fund this new direction for three years
and perhaps longer if the Company successfully managed its "burn rate" and
received revenues from the B2Bxchange. He told the Board he believed such
revenues would begin during late 2000 or early in 2001.
In early November, the Board was informed that VirtualFund was
consuming funds rapidly, that there were operational inconsistencies, and that
several corporate officers had questions about the viability of the Company's
business strategy. On November 13, the Company's directors met and discussed
many matters, including:
o The Company's cash position. Masters advised the Board that
the Company's cash would be sufficient for nine months at the
current burn rate. Subsequently we have learned of weekly
internal reports that showed the Company's cash might be
consumed within three to four months.
o The stock buy-back. We agreed that the Company's stock
buy-back program should be restricted in view of the Company's
cash position.
o The Manugistics agreement. Masters described the proposed
software licensing agreement with Manugistics. It required a
$7 million commitment of which $2.5 million would be paid up
front. It also would have resulted in a significant change in
the direction of VirtualFund.
o The engagement of a consultant. We were seriously concerned
with the viability of the possible new strategy, the size of
the commitment related to a deal with Manugistics and whether
the Company had sufficient cash to fund this possible
strategy. All present, including Masters, agreed that the
Company should hire a consultant to evaluate the proposed
Manugistics contract and its implications for the Company.
On November 15, three directors, constituting a majority of the Board
of Directors, delivered a letter to Masters. The letter directed Masters to
suspend the stock repurchase program, and not to enter into any material
contracts until the consultant had reviewed VirtualFund's business direction and
the proposed Manugistics agreement.
On November 17, Masters signed an agreement between the Company and
Manugistics, directly contrary to the Board's instructions. The Board of
Directors did not learn of this agreement for three days.
On November 20, Matrix Associates, a highly respected business
consulting firm, agreed to evaluate the proposed Manugistics agreement and the
Company's business direction. Also on this date, we learned from a corporate
officer that Masters--without authorization and in defiance of your Board's
explicit instructions--had signed the Manugistics agreement and initiated a wire
transfer to Manugistics of $2.5 million.
<PAGE>
Frankly, this was a moment of truth for your Board of Directors. It was
clear that strong steps were necessary to protect the interests of shareholders.
Subsequently, the Board has authorized the following actions:
o Suspension of Masters with pay, and subsequent termination of
his employment.
o Notification of Manugistics that the contract signed by
Masters was not authorized, and demand for the return of the
Company's $2.5 million. Matrix' report, received in early
December, recommended that the Company immediately suspend its
Manugistics based strategy.
o Suspension, then lay-off of the employees associated with the
B2Bxchange initiative.
o Engagement of PricewaterhouseCoopers to investigate the use of
the Company's cash since the sale of its printer business,
including a number of related party transactions between the
Company and Masters. PWC has identified a number of financial
irregularities that are under further investigation. Several
of these are the subject of counterclaims brought by the
Company against Masters.
o Commencement of litigation to void the lease between the
Company and GRAMPI, an entity Master controls, for breach of
fiduciary duty.
o Initiation of actions to recover Company property in Masters'
possession and more than $1.8 million that he owes to the
Company.
o Appointment of Michael Coughlin as acting CFO of the Company.
o Appointment of Stephen Fisher as CEO of RSPNetwork.
o Appointment of Douglass E. Coy as the Company's interim CEO.
Mr. Coy heads a corporate restructuring firm based in
Minneapolis.
o Appointment of Roger Wikner as Chairman of the Board.
The Future. The Board is repeatedly asked about its plans for the
Company's future. Over the next several weeks the Company will:
o Continue to work with Nasdaq to attempt to restore the
Company's listing.
o Continue to attempt to recover Company assets.
o Continue to reduce the Company's operating costs.
o Continue to refine and develop the operations of RSPNetwork.
o Continue to defend the Company and the named directors against
the litigation initiated by Masters and his associates.
o Seek and evaluate synergistic business opportunities for the
Company.
Be assured that your Board will continue to act aggressively to protect
shareholders' interests in VirtualFund.com. We have called a Special Meeting of
Shareholders for April 19, 2001 to provide you with the opportunity to vote on
the composition of the Board. We believe, based on advice of counsel, that a
special meeting purportedly called by Masters for February 13 was not validly
called and will not be properly held, as it failed to comport with Minnesota law
and your Company's Bylaws.
<PAGE>
The Company will be sending you proxy materials in connection with the
April 19 Special Meeting which will provide more detailed information regarding
the problems created by Masters, the corrective action your Board has taken, and
the results of the PricewaterhouseCoopers investigation. We urge you not to sign
any proxy card you may receive from any party or attend any purported meeting of
shareholders until such time as you have received proper notice and appropriate
proxy materials from the Company.
We appreciate your continuing support and will keep you apprised of
further developments.
/s/ Edward S. Adams /s/ John Cavanaugh
----------------------------------- --------------------------------------
Edward S. Adams John Cavanaugh
/s/ Timothy R. Duoos /s/ Stephen Fisher
----------------------------------- --------------------------------------
Timothy R. Duoos Stephen Fisher
/s/ Roger J. Wikner
-----------------------------------
Roger J. Wikner
Additional Information
VirtualFund.com, Inc. ("VirtualFund") may solicit proxies from its
shareholders in connection with any action to remove and/or elect members to the
company's board of directors. Before distributing forms of proxy to
VirtualFund's shareholders in connection with any such solicitation, VirtualFund
will file proxy materials (a proxy statement and related documents) with the
U.S. Securities and Exchange Commission (the "SEC") containing information
regarding the participants in any such solicitation.
Investors and shareholders are urged to read the proxy materials
carefully when they are available. The proxy materials will contain important
information about VirtualFund, the proxy solicitation, and related matters.
Investors and shareholders will be able to obtain copies of the proxy materials
free of charge through the web site maintained by the SEC at http://www.
sec.gov.
In addition to the proxy materials, VirtualFund has filed annual,
quarterly and current reports, proxy statements and other information with the
SEC. You may read and copy any reports, statements and other information filed
by VirtualFund at the SEC public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or at the SEC's other public reference rooms in New York,
New York and Chicago, Illinois. Please call the SEC at 1.800.SEC.0330 for
further information on the hours and locations of the public reference rooms.
VirtualFund's filings are also available to the public from commercial document
retrieval services and at the web site maintained by the SEC at http://www.
sec.gov.
Shareholders and investors may also obtain copies of documents
VirtualFund has filed with the SEC free of charge from VirtualFund by requesting
them in writing or by telephone at the following address:
VirtualFund.com, Inc., 6462 City West Parkway, Suite 175
Eden Prairie, Minnesota 55344
Attention: Joseph P. Beckman, Esq.
phone: (952) 943 3236
<PAGE>
Information Concerning Participants
VirtualFund, its directors, executive officers, certain other members
of management and employees, agents and nominees may be deemed to be
participants in any solicitation of its shareholders. VirtualFund filed a
preliminary proxy statement with the SEC on October 30, 2000 in anticipation of
an Annual Meeting of Shareholders on January 9, 2001. While the Annual Meeting
scheduled for January 9, 2001 has been cancelled, we make reference to certain
information contained in the preliminary proxy statement. Information concerning
VirtualFund's directors, executive officers and certain other employees is set
forth in VirtualFund's preliminary proxy statement filed with the SEC on October
30, 2000 and will be contained in any Proxy Statement filed by VirtualFund in
connection with the removal and/or election of members of the company's board of
directors.
As of January 15, 2001, based upon their most recent reports filed with
the SEC, VirtualFund's officers and directors beneficially own, as a group,
4,433,415 shares of VirtualFund common stock, representing approximately 24.2%
of the shares outstanding. Melvin L. Masters, VirtualFund's former Chief
Executive Officer and President, has reported on his most recent filing with the
SEC that he beneficially owns 3,419,607 of those shares, representing
approximately 19.2% of the shares outstanding.
VirtualFund's preliminary proxy statement filed with the SEC on October
30, 2000 and any Proxy Statement relating to the removal and/or election of
members of the company's board of directors are, or will be, available to the
public from commercial document retrieval services and at the web site
maintained by the SEC at http://www. sec.gov.
In addition to any solicitations that may be made by any of the
above-referenced persons, VirtualFund has retained Innisfree M&A Incorporated to
act as its advisor and provide proxy solicitation services, for which it will
receive customary compensation. Employees of Innisfree M&A Incorporated may
communicate in person, by telephone or otherwise with persons who are
shareholders of VirtualFund.
Cautionary Factors That May Affect Future Results
Certain statements contained in this document and other written and
oral statements made from time to time by VirtualFund do not relate strictly to
historical or current facts. As such, they are considered "forward-looking
statements" which provide current expectations or forecasts of future events.
Such statements can be identified by the use of terminology such as
"anticipate," "believe," "estimate," "expect," "intend," "may," "could,"
"possible," "plan," "project," "should", "will," "forecast" and similar words or
expressions. VirtualFund's forward-looking statements generally relate to its
growth strategies, financial results, product development and sales efforts. One
must carefully consider forward-looking statements and understand that such
statements involve a variety of risks and uncertainties, known and unknown, and
may be affected by inaccurate assumptions, including, among others, those
statements made which relate to any future operating results and mergers and
acquisitions activity. Consequently, no forward-looking statement can be
guaranteed and actual results may vary materially.
VirtualFund undertakes no obligation to update any forward-looking
statement, but investors are advised to consult any further disclosures by the
company on this subject in its filings with the Securities and Exchange
Commission, especially on Forms 10-K, 10-Q and 8-K (if any), in which the
company discusses in more detail various important factors that could cause
actual results to differ from expected or historic results. VirtualFund notes
these factors as permitted by the Private Securities Litigation Reform Act of
1995. It is not possible to foresee or identify all such factors. As such,
investors should not consider any list of such factors to be an exhaustive
statement of all risks, uncertainties or potentially inaccurate assumptions.
