<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
SOUTHEAST INTERACTIVE TECHNOLOGY FUND I, LLC
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(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> 2
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF
SOUTHEAST INTERACTIVE TECHNOLOGY FUND I, LLC
TO BE HELD FEBRUARY 8, 1999
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Shareholders of
Southeast Interactive Technology Fund I, LLC, a North Carolina limited liability
company (the "Fund"), will be held at MCNC, 3021 Cornwallis Road, Research
Triangle Park, North Carolina on February 8, 1999 at 2:00 p.m. and at any
adjournments thereof, for the purpose of considering and acting upon the
following matters:
1. To elect four directors of the Fund to serve until the next Annual
Meeting of Shareholders and until their successors have been duly elected and
qualified;
2. To approve amendments to the Operating Agreement and the Advisory
and Management Agreement regarding management fees;
3. To ratify the appointment of Ernst & Young LLP as the independent
public accountants of the Fund for the year ending December 31, 1998; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
All shareholders of record at the close of business on January 15, 1999
will be entitled to vote at the meeting or any adjournment thereof.
By order of the Managers,
David C. Blivin, CPA
Managing Director
Date: January 19, 1999
<PAGE> 3
Southeast Interactive Technology Fund I, LLC
2525 Meridian Parkway, Suite 300A
Durham, North Carolina 27713
---------------------------------
PROXY STATEMENT
---------------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 8, 1999
GENERAL
This Proxy Statement is being furnished by Southeast Interactive
Technology Fund I, LLC, a North Carolina limited liability company (the "Fund"),
to the holders of shares of membership interest in the Fund ("Shareholders") as
a proxy statement in connection with the solicitation of appointments of proxy
by the managers of the Fund ("directors") for use at the annual meeting of
Shareholders to be held at 2:00 p.m. on February 8, 1999, at MCNC, 3021
Cornwallis Road, Research Triangle Park, North Carolina (the "Annual Meeting")
and at any adjournments thereof. The Annual Meeting has been called for the
purpose of considering and acting upon the following proposals: (i) to elect
four directors to serve until the next Annual Meeting of Shareholders and until
their successors have been duly elected and qualified; (ii) to approve
amendments to the Operating Agreement of the Fund (the "Operating Agreement")
and the Advisory and Management Agreement (the "Advisory Agreement") between the
Fund and Southeast Venture Partners, LLC (the "Advisor") that include a
clarification of language regarding management fees; (iii) to ratify the
appointment of Ernst & Young, LLP as the independent public accountants of the
Fund for the year ending December 31, 1998; and (iv) to transact such other
business as may properly come before the meeting or any adjournments thereof.
Voting of Proxies; Revocation
Persons named on the enclosed appointment of proxy as proxies for the
Shareholders at the Annual Meeting are David C. Blivin and Norvell E. Miller,
IV. Shares of membership interest in the Fund ("Shares") represented by each
appointment of proxy which is properly executed, returned, and not revoked will
be voted in accordance with the directions thereon. If no directions are given,
those Shares will be voted "FOR" the election of each of the four nominees named
herein and "FOR" the other proposals described herein. If, at or before the
Annual Meeting, any nominee becomes unavailable for any reason, the proxies will
be authorized to vote for a substitute nominee. On such other matters as may
properly come before the Annual Meeting, the proxies will be authorized to vote
Shares represented by appointments of proxy in accordance with their best
judgment.
A Shareholder may revoke an appointment of proxy at any time before the
Shares represented by it have been voted by filing with the Fund at the address
above an instrument revoking it or a properly executed appointment of proxy
bearing a later date, or by attending the Annual Meeting and announcing his or
her intention to vote in person.
<PAGE> 4
Expenses of the Solicitation
The Fund will pay the cost of preparing, assembling, and mailing this
Proxy Statement to Shareholders and certain other proxy solicitation expenses.
In addition to the use of mail, appointments of proxy may be solicited in person
or by telephone by officers, directors, or employees of the Fund or the Advisor
without additional compensation.
Record Date
The Board of Directors has set January 15, 1999 as the record date for
the determination of Shareholders entitled to notice of and to vote at the
Annual Meeting. Only Shareholders of record on that date will be entitled to
vote at the Annual Meeting.
Voting Securities
The voting securities of the Fund are its shares of limited liability
company membership interest, of which 244 were outstanding on the record date.
Voting Procedures; Votes Required for Approval
The representation in person or by proxy of a majority of the votes
entitled to be cast is necessary to provide a quorum at the Annual Meeting. At
the Annual Meeting, each Shareholder will be entitled to cast one vote for each
Share held of record on the record date for each matter submitted for voting
and, in the election of directors, for each director to be elected.
In voting for directors, the nominees receiving the highest numbers of
votes will be elected. With respect to the election of directors, votes may be
cast in favor of nominees or withheld. Withheld votes are not treated as votes
cast and, therefore, have no effect on the election of directors. The proposal
to amend the Operating Agreement and the Advisory Agreement will be approved if
Shareholders holding two-thirds (66 2/3%) or more of the outstanding Shares vote
in favor of the proposal. The proposal to ratify the appointment of independent
public accountants and any other proposal properly before the Annual Meeting
will be approved if Shareholders holding (i) more than 50% of the outstanding
Shares or (ii) if less, 67% or more of the Shares which are present or
represented by proxy at the meeting, vote in favor of the proposal.
2
<PAGE> 5
Amount and Nature of Beneficial Ownership of Voting Securities
The following table sets forth certain information regarding the
beneficial ownership of Shares as of the record date by (i) any person known to
the Fund to be the beneficial owner of more than five percent of the outstanding
Shares and (ii) each director. Each person included on the table has sole voting
power and sole investment power with respect the Shares beneficially owned
thereby.
<TABLE>
<CAPTION>
Amount and Nature of
Name and Address of Beneficial Ownership Percent of
Beneficial Owner (1) Class (2)
------------------------------------- -------------------- ----------
<S> <C> <C>
Interstate/Johnson Lane Corporation 14 5.7%
David C. Blivin 1 *
Norvell E. Miller, IV -- --
George R. Collins 1 *
L. Scott Stankavage 1 *
</TABLE>
- ------------
(1) Amounts presented are the number of Shares held by each person.
(2) An "*" indicates less than one percent.
Section 30(f) Beneficial Ownership Reporting Compliance
Section 30(f) of the Investment Company Act of 1940, as amended (the
"Act"), requires every person who is an officer, director, member of an advisory
board, investment adviser or an affiliate of an investment adviser of a
registered investment company or who owns more than ten percent of a registered
investment company's outstanding securities to file initial reports of ownership
and reports of changes in their ownership of such securities with the United
States Securities and Exchange Commission (the "SEC"). Reporting persons are
required by SEC regulations to furnish the Fund with copies of all Section 30(f)
forms they file. To the Advisor's knowledge, no such reports are required since
no single entity own more than ten percent of the Fund.
3
<PAGE> 6
PROPOSAL TO ELECT DIRECTORS
Election of Directors
Directors are elected annually and serve until the next annual meeting
of Shareholders and until their successors are elected and qualified. Four
directors are to be elected at the Annual Meeting. The following table provides
certain information with respect to the nominees. The Board of Directors
recommends that you vote "FOR" all of the nominees listed below.
<TABLE>
<CAPTION>
Name Age Current Position
---- --- ----------------
<S> <C> <C>
David C. Blivin * 41 Managing Director
Norvell E. Miller * 41 Managing Director
George R. Collins 51 Director
L. Scott Stankavage 36 Director
</TABLE>
- ---------------
* Messrs. Blivin and Miller are shareholders and directors of
the Advisor. Consequently, each of these nominees is an
"interested person" within the meaning of Section 2(a)(19) of
the Act.
The education and experience of each nominee is discussed below.
David C. Blivin - Mr. Blivin has served as the Managing Director of the
Fund and the Advisor since their inception in May 1995. His experience also
includes serving as the Chief Financial Officer of Montrose Capital Corporation
from July 1987 to June 1996. He is a 1985 graduate of the Duke University Fuqua
School of Business and a Certified Public Accountant. Prior to joining Montrose
Capital Corporation, Mr. Blivin worked as a Senior Auditor with Arthur Andersen
LLP and in this capacity audited a number of technology companies. As Chief
Financial Officer for Montrose Capital Corporation, Mr. Blivin has negotiated
financings and developed business plans for a number of entities in which
Montrose Capital Corporation invested during his terms. Mr. Blivin has served on
the Board of Directors of Virtus Corporation and The Pantry, Inc.
Norvell E. Miller, IV - Mr. Miller has been a Managing Director of the
Advisor since March 1998. Mr. Miller has extensive experience in venture company
operations, investment banking and fund management. As Managing Director of EMS
Financial, Inc., he co-founded or invested in numerous companies. Representative
transactions include: Pixel Magic Imaging, Inc., an Austin, Texas based digital
imaging firm; Vision Software, a North Carolina based enterprise software and
communication company selling into the public safety sector; Landfall Village
LLC, a third generation CCRC, where Mr. Miller is a Managing General Partner;
The Mobius Group Inc., where Mr. Miller was a co-founder and lead investor until
he sold his holdings to UAI Technology Inc.; Sirrom Capital Inc., where Mr.
Miller invested as a limited partner and subsequently participated in the
company's successful initial public offering; and DentalCare Partners Inc.,
where Mr. Miller was a co-founder and Chief Executive Officer prior to the
company's merger with Family Dental, Inc. of Cleveland, Ohio. In addition, Mr.
Miller successfully invested in and exited Waxter Associates, SVI Ltd., AMS Inc.
and Affordable Care, Inc. He also served as a senior vice president for
McMillion/Eubanks, Inc. in Chapel Hill, North Carolina. Prior to becoming active
in managing venture capital investments, Mr. Miller served as the founding
Director of Investments for the University of North Carolina at Chapel Hill from
1980-1985 and instructed in the business school. Mr. Miller is a Chartered
Financial Analyst and has a Masters of Business Administration from the Fuqua
School at Duke University. Mr. Miller is the past president and
4
<PAGE> 7
sits on the Board of Directors of the Coastal Entrepreneurial Council and the
North Carolina Investors Film Symposium. He served on the Board of the Council
for Entrepreneurial Development from 1991-1994.
George R. Collins - Mr. Collins is Director of Sales for the consumer
products division of Greenfield Industries, a wholly owned subsidiary of
Kennametal Inc. Kennametal Inc. is a worldwide leader in the manufacture of
carbide and high-speed steel disposable cutting tools. For the past 28 years,
Mr. Collins has held leadership roles in both sales and marketing with various
consumer products companies including the Stanley Works (8 years) and the Newell
Companies (11 years). In Mr. Collins' current capacity, he has sales
responsibility for retailers that include Lowe's Companies, Sears, and Wal-Mart.
Mr. Collins graduated with honors from Ohio University where he earned a degree
in economics. Mr. Collins is currently a shareholder in the Fund and Southeast
Interactive Technology Fund II, LLC ("Fund II").
L. Scott Stankavage - Mr. Stankavage is a principal with Goodman Segar
Hogan Hoffler, one of the largest commercial real estate companies in the
Southeast. He has over 14 years of real estate experience in the Raleigh/Durham,
Philadelphia, and Denver markets. Mr. Stankavage is a former Academic All
Atlantic Coast Conference athlete and was starting quarterback at the University
of North Carolina at Chapel Hill. He also was a member of the National Football
League's Denver Broncos. Mr. Stankavage graduated from the University of North
Carolina at Chapel Hill with a degree in business administration. He is
currently a shareholder in the Fund and Fund II.
Meetings of the Board of Directors
During 1997, the Board of Directors met one time and acted by unanimous
written consent one time. There are no committees of the Board of Directors. An
annual retainer of $1,000 was paid by the Fund to each of the independent
members of the Board of Directors during the year.
Related Parties and Transactions with Affiliates
On August 30, 1996, the SEC issued an order under Section 17(b) of the
Act granting an exemption from Sections 17(a)(1) and (3) of the Act in response
to an application filed by the Fund to purchase a $600,000 convertible note (the
"Note") from One Room Systems, Inc. ("ORSI"). ORSI is controlled by E. Lee
Bryan, who served as a director of the Fund and as a director and shareholder of
the Advisor until November 1998. The Note bears interest at the rate of 10% per
annum, is payable monthly, and is secured by certain receivables of ORSI and is
personally guaranteed by Mr. Bryan. The Note matured in August 1998 and is
convertible, at the Fund's option, into common stock of ORSI at a conversion
price of $1.00 per share, subject to certain adjustments. In connection with its
investment in the Note and subsequent renewals, the Fund also received warrants
to purchase up to 586,500 in additional shares of common stock of ORSI at the
various prices. In December 1998, ORSI entered into a definitive agreement to be
acquired by another company. The Advisor and the acquiror have negotiated a
modification of the Note to extend its maturity date and enhance the equity
rights of the Fund thereunder. The principal amount of the note now totals
$693,000 and matures on December 31, 1999. In addition, the Fund will hold
warrants for 933,000 shares of common stock of the acquiror having an exercise
price of $1.00.
5
<PAGE> 8
PROPOSAL TO AMEND THE FUND'S OPERATING AND
ADVISORY AGREEMENTS
Background
The operating agreement of a limited liability company such as the Fund
is an agreement among the members of the company that defines the rights and
duties of the company's managers and members. It is similar to the partnership
agreement of a partnership or the articles of incorporation and bylaws of a
corporation. The advisory and management agreement between an investment fund
and its advisor is the contract which governs the relationship between the two
entities. The Operating Agreement and the Advisory Agreement were approved by
the Shareholders in connection with the initial organization of the Fund on
August 31, 1995. Although the Advisory Agreement is the contract which
establishes the fee arrangements between the Fund and the Advisor, the Operating
Agreement contains certain nonbinding language regarding a contemplated
adjustment in the Advisor's fees if certain events occur in the future. These
proposed amendments change the contingency upon which the fee adjustment is
based and add the adjustment language to the Advisory Agreement in order to make
it legally binding on the Advisor and the Fund.
The Advisory Agreement provides for the payment of an annual management
fee to the Advisor that is equal to 5% of the net asset value of the Fund.
One-half of this fee (2.5%) is payable in cash on a monthly basis (the "Current
Fee") while the remaining half is deferred and becomes payable as follows: (i)
upon the distribution to Shareholders of the net proceeds from the sale or
disposition of a portfolio investment of the Fund, but only to the extent of
twenty percent (20%) of the profits from such sale or disposition otherwise
available for distribution, (ii) after Shareholders have received cumulative
distributions from all sources equal to the proceeds of the Fund's initial
offering ($6.1 million), upon the Fund's having funds available for
distribution, without limitation. The Operating Agreement further contemplates a
reduction in the Current Fee to 2% upon the "formation" of a new venture capital
fund by W. Clay Hamner, David C. Blivin, or E. Lee Bryan (the "Fee Reduction
Provision"). Although the Fee Reduction Provision does not appear in the
Advisory Agreement, it was contemplated that the Advisory Agreement would be
amended to reduce the Current Fee if and when the contingency required by the
Fee Reduction Provision was met.
At the time of its organization in 1995, the capitalization goal for
the Fund was $25 million. The theory underlying the Fee Reduction Provision was
that once the asset base for the Advisor's management fee exceeded $50 million
(presumably comprised of two $25 million funds), the Current Fee could be
reduced to 2% and still enable the Advisor to generate an adequate level of
revenue to cover its cost of operations. However, the initial offering for the
Fund was closed in August 1995 with a capitalization of only $6.1 million. At
the time of the initial closing, the Fee Reduction Provision should have been
modified to reflect the economic impact of closing the Fund at a much lower
level of initial capitalization that had been originally contemplated. In 1996,
Messrs. Hamner, Blivin, and Bryan organized Southeast Interactive Technology
Fund II, LLC. An initial closing was held for Fund II in December 1996 with
initial subscriptions totaling approximately $3 million. The Advisor also serves
as the investment advisor to Fund II. The Advisory Agreement has not been
amended to include the Fee Reduction Provision because of the ambiguity created
by the lower than expected capitalization levels for each fund.
The following table presents certain information regarding the fees
paid by the Fund since its inception. In addition to information regarding the
Advisor's Current and Deferred Fees, the table reflects the impact of
professional fees paid to the Advisor by portfolio companies, one-half of which
are
6
<PAGE> 9
remitted to the Fund on an annual basis. After adjustment for remitted fees,
Current Fees paid to the Advisor have ranged from 2.5% to 1.23% of the Fund's
net asset value ("NAV"). The last two columns of the table reflect the pro forma
impact of the Fee Reduction Provision had it become effective in 1997 and 1998,
which is 50 basis points in each year.
<TABLE>
<CAPTION>
Pro
Net Forma
Current Total Pro Total
Remitted Remitted Net Fees As Fees As Forma Fees As
Current Fees Fees Current A % of Deferred Total A % of Total A % of
Year Fees (1) (Cash)(2) (Securities)(2) Fees NAV Fees(3) Fees NAV Fees(4) NAV
- ---- ---------- --------- -------------- --------- --------- ---------- ---------- --------- ---------- ---------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 78,541 -- -- 78,541 2.50 78,541 157,082 5.00 157,082 --
1996 139,552 27,000 43,000 69,552 1.25 139,552 209,104 3.75 209,104 --
1997 143,919 -- 29,000 114,919 2.00 143,919 258,838 4.50 230,054 4.00
1998 117,850 -- 60,000 57,850 1.23 117,850 175,700 3.73 152,130 3.23
</TABLE>
- --------------
(1) Current Fees paid to the Advisor since inception of the Fund. The Advisor
receives an annual management fee equal to 5% of the Fund's NAV. The
Current Fee portion is payable in cash on a monthly basis while the
Deferred Fee portion is deferred and becomes payable only if the Fund makes
distributions to Shareholders in excess of specified amounts.
(2) The Advisor is obligated to remit to the Fund one-half of any fees paid to
it by portfolio companies in exchange for certain professional services
rendered by the Advisor. Portfolio companies typically pay such fees in
cash, warrants, shares common stock or a combination thereof. Values
presented for fees paid in warrants or shares are based on the Advisor's
estimate of fair market value as of the date of payment. As of December 31,
1998, the Fund had net unrealized appreciation on securities received as
remitted fees of $113,913, based on the Advisor's estimate of the fair
market value of such securities on that date. The value actually realized
by the Fund upon disposition of fees paid in securities will be subject to
the market value of the securities on the date of disposition.
(3) Deferred Fees accrued by the Advisor since inception of the Fund. See
Note 1 above.
(4) Presents, on a pro forma basis, the amount of total fees payable to the
Advisor if the Fee Reduction Provision had become effective on December 31,
1996, the date of the initial closing for Fund II.
Proposal
The Board is proposing to amend to Section 8.8 (a) of the Operating
Agreement to clarify the nonbinding language regarding management fees by
deleting the fifth sentence of that section and replacing it with the following
sentence:
"The portion of the management fee described in clause (i)
above will be reduced to two percent (2.0%) of the net asset value of
the Fund commencing on the first day of any month following a month
during which the net asset value of all venture capital funds under
management by the Advisor shall exceed $50 million."
The Board is further proposing to amend Section 6 of the Advisory
Agreement to add the following sentence to the end of that Section:
"The portion of the management fee described in clause (a)
above will be reduced to two percent (2.0%) of the net asset value of
the Fund commencing on the first
7
<PAGE> 10
day of any month following a month during which the net asset value of
all venture capital funds under management by the Advisor shall exceed
$50 million."
PROPOSAL TO RATIFY THE APPOINTMENT OF ACCOUNTANTS
The Board of Directors has selected Ernst & Young LLP as the
independent accountants to audit the financial statements of the Fund for the
year ending December 31, 1998. A representative of Ernst & Young LLP is expected
to be present at the Annual Meeting, will have an opportunity to make a
statement if he or she desires to do so, and is expected to be available to
respond to appropriate questions. The Board of Directors unanimously recommends
a vote "FOR" the proposal to ratify the appointment of Ernst & Young LLP as the
Fund's independent accountants for the year ending December 31, 1998.
8
<PAGE> 11
APPENDIX A
Southeast Interactive Technology Fund I, LLC
2525 Meridian Parkway, Suite 300A
Durham, North Carolina 27713
Appointment of Proxy
This Appointment of Proxy is solicited on behalf of the Board of
Directors. The undersigned hereby appoints David C. Blivin, CPA and Norvell E.
Miller, IV and each of them proxies, with power of substitution, to represent
the undersigned at the Annual Meeting of Shareholders of Southeast Interactive
Technology Fund I, LLC. (the "Fund") to be held at 2:00 p.m. on February 8, 1999
at MCNC, 3021 Cornwallis Road, Research Triangle Park, North Carolina, and at
any adjournments thereof, to vote the number of shares which the undersigned
would be entitled to vote if present in person in such manner as such proxies
may determine, and to vote on the following proposals as specified below by the
undersigned.
1. Election of Directors:
For _____ Against _____ For All Except _____
Nominees: David C. Blivin, Norvell E. Miller IV, George R. Collins,
L. Scott Stankavage
Instruction: To withhold authority to vote for any individual
nominee mark "For All Except" and write that nominee's name in
the space provided: _________________
2. To approve amendments to the Operating Agreement and the Advisory
and Management Agreement regarding management fees.
For _____ Against _____ Abstain _____
3. To ratify the appointment of Ernst & Young LLP as the
independent public accountants of the Fund for the year ending
December 31, 1998:
For _____ Against _____ Abstain _____
4. In their discretion, the proxies are authorized to vote upon
other business as may properly come before the meeting or any
adjournment thereof.
The shares represented by this appointment of proxy will be voted as
directed above. In the absence of any direction, such shares will be voted by
the proxies "FOR" proposal and each of the listed nominees for director. Please
sign exactly as your name(s) appear on this card. If shares are held by joint
tenants, both should sign. If signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
_____________________________
Date: _______________, 1999 Shareholder sign above
_____________________________
Co-holder (if any) sign above
