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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or 240.14a-12
Egreetings Network, Inc.
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(Name of Registrant as Specified In Its Charter)
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(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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EGREETINGS NETWORK, INC.
149 NEW MONTGOMERY STREET
SAN FRANCISCO, CA 94105
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 26, 2000
------------------------
TO THE STOCKHOLDERS OF EGREETINGS NETWORK, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of EGREETINGS NETWORK, INC., a Delaware corporation (the "Company"),
will be held on Wednesday, July 26, 2000 at 11:00 a.m. (local time) at the
offices of the Company, 149 New Montgomery, San Francisco, California for the
following purposes:
(1) To elect one director to hold office until the 2003 Annual Meeting of
Stockholders.
(2) To ratify the selection of Ernst & Young LLP as independent auditors of
the Company for its fiscal year ending December 31, 2000.
(3) To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business, including the nominee for director, are
more fully described in the Proxy Statement accompanying this Notice (the "Proxy
Statement").
The Board of Directors has fixed the close of business on June 15, 2000, as
the record date for the determination of stockholders entitled to notice of and
to vote at this Annual Meeting and at any adjournment or postponement thereof.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE ANNUAL MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE
PREPAID IF MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF
YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE
MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A
BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST
OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME. YOUR PROXY IS
REVOCABLE IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN THE PROXY STATEMENT.
By Order of the Board of Directors
[Andrew P. Missan Signature]
/s/ ANDREW MISSAN
--------------------------------------
Andrew P. Missan
Vice President, General Counsel
and Secretary
San Francisco, California
June 15, 2000
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EGREETINGS NETWORK, INC.
149 NEW MONTGOMERY STREET
SAN FRANCISCO, CA 94105
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PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 26, 2000
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INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
This proxy statement is furnished in connection with the solicitation on
behalf of the Board of Directors (the "Board") of EGREETINGS NETWORK, INC., a
Delaware corporation (the "Company"), for use at the Annual Meeting of
Stockholders to be held on July 26, 2000, at 11:00 a.m. (local time) (the
"Annual Meeting"), or at any adjournment or postponement thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting. The
Annual Meeting will be held at 149 New Montgomery Street, San Francisco,
California. The Company intends to mail this Proxy Statement, accompanying proxy
card and the Company's Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1999, on or about June 15, 2000, to all stockholders entitled to
vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of common stock of the Company, par
value $.001 per share ("Common Stock"), beneficially owned by others to forward
to such beneficial owners. The Company may reimburse persons representing
beneficial owners of Common Stock for their costs of forwarding solicitation
materials to such beneficial owners. Original solicitation of proxies by mail
may be supplemented by telephone, telegram or personal solicitation by
directors, officers or other regular employees of the Company. No additional
compensation will be paid to directors, officers or other regular employees for
such services.
RECORD DATE, VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of shares of Common Stock of the Company, at the
close of business on June 15, 2000 (the "Record Date") will be entitled to
notice of and to vote at the Annual Meeting. At the close of business on the
Record Date the Company had outstanding and entitled to vote 35,010,036 shares
of Common Stock.
Each holder of record of Common Stock on the Record Date will be entitled
to one vote for each share held on all matters to be voted upon at the Annual
Meeting.
All votes will be tabulated by the inspector of election appointed for the
Annual Meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes with the assistance of the Company's transfer
agent. Abstentions will be counted towards the tabulation of votes cast on
proposals presented to the stockholders and will have the same effect as
negative votes. Broker non-votes are counted towards a quorum, but are not
counted for any purpose in determining whether a matter has been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 149 New
Montgomery Street, San Francisco, California 94105, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the meeting and voting in person. Attendance at the meeting will
not, by itself, revoke a proxy.
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STOCKHOLDER PROPOSALS
The deadline for submitting a stockholder proposal for inclusion in the
Company's proxy statement and form of proxy for the Company's 2001 annual
meeting of stockholders pursuant to Rule 14a-8 of the Securities and Exchange
Commission is March 14, 2001. The deadline for submitting a stockholder proposal
or a nomination for director that is not to be included in such proxy statement
and proxy is the close of business on a date no earlier than March 14, 2001 and
no later than April 13, 2001. Stockholders are also advised to review the
Company's Bylaws, which contain additional requirements with respect to advance
notice of stockholder proposals and director nominations.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation and Bylaws provide that
the Board shall be divided into three classes, each class consisting, as nearly
as possible, of one-third of the total number of directors, with each class
having a three-year term. Vacancies on the Board may be filled only by persons
elected by a majority of the remaining directors. A director elected by the
Board to fill a vacancy (including a vacancy created by an increase in the
Board) shall serve for the remainder of the full term of the class of directors
in which the vacancy occurred and until such director's successor is elected and
qualified.
The Board is presently composed of six members with one vacancy. One
director is not standing for reelection. There is one director in the class
whose term of office expires in 2000. If elected at the Annual Meeting, the
nominee would serve until the 2003 annual meeting and until his successor is
elected and has qualified, or until such director's earlier death, resignation
or removal.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented by
executed proxies will be voted, if authority to do so is not withheld, for the
election of the nominee named below. In the event that nominee should be
unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. The person nominated for election has agreed to serve if elected, and
management has no reason to believe that the nominee will be unable to serve.
Set forth below is biographical information for the person nominated and
each person whose term of office as a director will continue after the Annual
Meeting.
NOMINEE FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2003 ANNUAL MEETING
STEWART ALSOP -- Stewart Alsop has served as a director of Egreetings
Network since March 1999. Mr. Alsop has been a general partner of New Enterprise
Associates, a venture capital investment firm since 1998 and was a Venture
Partner at New Enterprise Associates from 1996 to 1998. From June 1991 to 1996,
Mr. Alsop served as Senior Vice President and Editor-in-Chief of InfoWorld Media
Group, Inc., which publishes InfoWorld, a weekly newspaper for information
technology professionals. Mr. Alsop also serves on the board of directors of Be,
Inc., an operating systems software company, TiVo Inc., a publicly held personal
television service company, and Netcentives, Inc., a publicly held Internet
promotions and customer loyalty vendor. Mr. Alsop holds a B.A. degree from
Occidental College.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF THE NAMED NOMINEE.
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DIRECTORS CONTINUING IN OFFICE UNTIL THE 2001 ANNUAL MEETING
BRENDON S. KIM -- Brendon Kim has served as a director of Egreetings
Network since April 1996. Mr. Kim has been a general partner of Altos Ventures,
a venture capital investment firm, since January 1996. From September 1994 to
June 1996, Mr. Kim worked at CSC Index, a consulting company, where he was an
associate. Mr. Kim also serves on the board of directors of several private
companies, including Branders.com, Blue Dot Software and Hearing Science. Mr.
Kim also serves on the board of directors of the Korean American Society of
Entrepreneurs, a not-for-profit organization to promote entrepreneurship. Mr.
Kim holds an A.B. degree from Princeton University and an M.B.A. degree from the
Stanford University Graduate School of Business.
PETER NIEH -- Peter Nieh has served as a director of Egreetings Network
since March 1999. Mr. Nieh has been a general partner of Weiss, Peck & Greer
L.P., a technology-focused venture capital investment firm since October 1995.
From 1992 to 1995, Mr. Nieh held product marketing and business development
roles at General Magic, Inc., a communications software company. From 1990 to
1991, Mr. Nieh managed the portable PC business in North America for Acer, Inc.,
a personal computer manufacturer. Mr. Nieh is a director of several private
companies. Mr. Nieh holds a B.S. degree in Electrical Engineering and an A.B.
degree in Economics from Stanford University and an M.B.A. degree from the
Stanford University Graduate School of Business.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2002 ANNUAL MEETING
GORDON M. TUCKER -- Gordon Tucker joined Egreetings Network in February
1999 as our Chief Executive Officer and as a director. From July 1994 to
February 1999, Mr. Tucker served as Chief Executive Officer and Chairman of the
Board of Directors of IdeaNet Management Company, a "virtual" management company
serving early-stage technology companies with venture capital financial support.
In his capacity as Chief Executive officer of IdeaNet, from November 1996 to
March 1998 Mr. Tucker served as acting Senior Vice President of Excite Studios,
Ecommerce and Communities at Excite, Inc. (now Excite@Home), an Internet media
company. From September 1993 to July 1994, Mr. Tucker was President, Chief
Executive Officer and a director of Micrografx, Inc., a graphics software
company. Earlier in his career, Mr. Tucker served as Brand Manager for The
Procter & Gamble Company, a leading consumer products company, and as Executive
Vice President for LoJack Corporation, a wireless communications company. Mr.
Tucker holds a B.B.A. degree from the University of Michigan School of Business
Administration.
LEE ROSENBERG -- Lee Rosenberg has served as a director of Egreetings
Network since November 1995. Mr. Rosenberg has been a general partner of Kettle
Partners, L.P., an Internet and technology-focused venture capital investment
firm since March 1998. Mr. Rosenberg also currently serves on the board of
directors of several private companies, including Ignite Sports Media, LLC, an
Internet sports media company, and ActiveUSA, a global registration site for
active sports communities. Over the past 15 years, Mr. Rosenberg has been
President of Rosenberg Capital and general partner of Rosy Partnership, entities
involved in a broad spectrum of venture capital and real estate investments.
Previously, Mr. Rosenberg served as a director of GRP Records. Mr. Rosenberg is
a C.P.A. and holds a B.B.A. degree from the University of Michigan School of
Business Administration.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1999 the Board of Directors held
ten meetings. The Board has an Audit Committee and a Compensation Committee.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements; recommends to the Board the independent auditors to be retained; and
receives and considers the accountants' comments as to controls, adequacy of
staff and management performance and procedures in connection with audit and
financial controls. In 1999, the Audit Committee consisted of two non-employee
directors: Mr. Nieh and Dr. Holloway. It met one time during 1999. Dr. Holloway
resigned from the Board effective January 27, 1999.
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The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants under
the Company's equity incentive plans, employee stock purchase plans, and
otherwise determines compensation levels and performs such other functions
regarding compensation as the Board may delegate. The Compensation Committee
consists of two non-employee directors: Messrs. Kim and Rosenberg. The
Compensation Committee met ten times during 1999.
The Board did not have a standing Nominating Committee during 1999.
During 1999, each Board member attended 80% or more of the aggregate of the
meetings of the Board and of the committees on which he served, held during the
period for which he was a director or committee member, respectively.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board has selected Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending December 31, 2000 and has further directed
that management submit the selection of independent auditors for ratification by
the stockholders at the Annual Meeting. Ernst & Young has audited the Company's
financial statements since 1998. Representatives of Ernst & Young are expected
to be present at the Annual Meeting, will have an opportunity to make a
statement if they so desire and will be available to respond to appropriate
questions.
Stockholder ratification of the selection of Ernst & Young as the Company's
independent auditors is not required by the Company's Bylaws or otherwise.
However, the Board is submitting the selection of Ernst & Young to the
stockholders for ratification as a matter of good corporate practice. If the
stockholders fail to ratify the selection, the Audit Committee and the Board
will reconsider whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee and the Board in their discretion may direct the
appointment of different independent auditors at any time during the year if
they determine that such a change would be in the best interests of the Company
and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Ernst & Young. Abstentions will be
counted toward the tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF THE RATIFICATION OF
SELECTION OF INDEPENDENT AUDITORS.
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SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of March 1, 2000 by: (i) each director and
nominee for director; (ii) each of the Named Executive Officers; (iii) all
executive officers and directors of the Company as a group; and (iv) all those
known by the Company to be beneficial owners of more than five percent of its
Common Stock.
BENEFICIAL OWNERSHIP(1)
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BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF TOTAL
---------------- ---------------- ----------------
Gibson Greetings, Inc.(2)................................... 6,841,074 19.5%
100 East River Center Blvd
Covington, KY 41011-1635
NBC-EGRT Holding, Inc....................................... 2,475,247 7.1
30 Rockefeller Plaza
New York, NY 10112
Entities Affiliated with Weiss, Peck & Greer Venture
Partners(3)............................................... 2,333,469 6.7
555 California St., Suite 3130
San Francisco, CA 94194
Entities Affiliated with Altos Ventures(4).................. 2,162,544 6.2
2882 Sand Hill Road, Suite 100
Menlo Park, CA 94025
Entities Affiliated with New Enterprise Associates(5)....... 1,664,026 4.8
2490 Sand Hill Road
Menlo Park, CA 94025
Frank O'Connell(6).......................................... 6,841,074 19.5
Peter Nieh(3)............................................... 2,333,469 6.7
Brendon Kim(4).............................................. 2,162,544 6.2
Stewart Alsop(5)............................................ 1,664,026 4.8
Lee Rosenberg(7)............................................ 671,089 1.9
Gordon M. Tucker(8)......................................... 2,627,563 7.5
Frederick R. Campbell....................................... 1,610,000 4.6
Anthony Levitan............................................. 1,630,833 4.7
Paul Lipman(9).............................................. 103,096 *
Behrouz Arbab, Ph.D(10)..................................... 52,083 *
Kenneth W. Wallace(11)...................................... 27,777 *
All directors and executive officers as a group (10
persons)(12).............................................. 16,523,392 46.8%
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* Represents beneficial ownership of less than 1% of the outstanding shares
of our common stock.
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the Securities
and Exchange Commission (the "SEC"). Beneficial ownership is determined in
accordance with the rules of the SEC. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options or warrants exercisable within 60
days of March 1, 2000 are deemed outstanding. Unless otherwise indicated in
the footnotes to this table and subject to community property laws where
applicable, the Company believes that each of the stockholders named in
this table has sole voting and investment power with respect to the shares
indicated as beneficially owned. Applicable percentages are based on
34,979,605 shares outstanding on March 1, 2000, adjusted as required by
rules promulgated by the SEC.
(2) Includes warrants to purchase 67,854 shares that are currently exercisable.
On March 9, 2000, American Greetings Corp. completed its acquisition,
pursuant to a cash tender offer, of all of the outstanding shares of Gibson
Greetings Inc.
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(3) Consists of 500,296 shares held by WPG Enterprise Fund III, L.L.C., 572,167
shares held by Weiss, Peck & Greer Venture Associates IV, L.L.C., 22,167
shares held by WPG Information Sciences Entrepreneur Fund, L.P., 72,124
shares held by Weiss, Peck & Greer Venture Associates IV Cayman, L.P.,
1,134,603 shares held by Weiss, Peck & Greer Venture Associates V, L.L.C.,
1,266 shares held by WPG Venture Associates V-A, L.L.C. and 30,846 shares
held by WPG Venture Associates V, Cayman L.P. Mr. Nieh, a director of
Egreetings Network, is a Managing Member of WPG VC Fund Adviser, L.L.C.,
the Fund Investment Advisory Member of WPG Enterprise Fund III, L.L.C., and
Weiss, Peck & Greer Venture Associates IV, L.L.C., and the General Partner
of WPG Information Sciences Entrepreneur Fund, L.P. In addition, Mr. Nieh
is a Managing Member of WPG VC Fund Adviser II, L.L.C., the Fund Investment
Advisory Member of Weiss, Peck & Greer. Venture Associates V, L.L.C., Weiss
Peck & Greer Venture Associates V-A, L.L.C., and the Fund Investment
Advisory Partner of Weiss, Peck & Greer Venture Associates V Cayman, L.P.
In such capacities, Mr. Nieh may be deemed to have an indirect pecuniary
interest in an indeterminate portion of the shares beneficially owned by
the Weiss Peck & Greer funds. Mr. Nieh disclaims beneficial ownership of
the shares held by the Weiss Peck & Greer funds within the meaning of Rule
l3d-3 under the Securities Exchange Act of 1934.
(4) Includes 11,428 shares held by Altos Partners 1, 1,686,874 shares held by
Altos Ventures I, L.P. and 412,540 shares held by Altos Ventures II, L.P.
Also includes warrants to purchase 51,702 shares that are currently
exercisable. Mr. Kim, a director of Egreetings Network, is a general
partner of Altos Partners and, as such, may be deemed to have an indirect
pecuniary interest in an indeterminate portion of the shares beneficially
owned by the Altos funds. Mr. Kim disclaims beneficial ownership of these
shares within the meaning of Rule l3d-3 under the Securities Exchange Act
of 1934.
(5) Includes 17,142 shares held by NEA Presidents Fund, L.P., 1,428 shares held
by NEA Ventures 1999, L.P., and 1,645,456 shares held by New Enterprise
Associates VIII, L.P. Mr. Alsop, a director of Egreetings Network, is a
general partner of New Enterprise Associates and, as such, may be deemed to
have an indirect pecuniary interest in an indeterminate portion of the
shares beneficially owned by the NEA funds. Mr. Alsop disclaims beneficial
ownership of these shares within the meaning of Rule l3d-3 under the
Securities Exchange Act of 1934.
(6) Mr. O'Connell is the former Chairman, Chief Executive Officer and President
of Gibson Greetings, Inc. Effective March 8, 2000, Mr. O'Connell retired in
connection with the acquisition of Gibson Greetings, Inc. by American
Greetings Corp. As of March 1, 2000, but terminating on March 9, 2000, Mr.
O'Connell may have been deemed to have an indirect pecuniary interest in an
indeterminate portion of the shares beneficially owned by Gibson Greetings
Inc. Mr. O'Connell disclaims beneficial ownership of these shares within
the meaning of Rule 13d-3 under the Securities Exchange Act of 1934.
(7) Consists of 394,378 shares held by Mr. Rosenberg personally, 16,499 shares
issuable upon exercise of options to Mr. Rosenberg exercisable within 60
days of March 1, 2000, 225,366 shares held by Kettle Partners L.P. and
warrants to purchase 34,846 shares that are currently exercisable held by
Kettle Partners L.P. Mr. Rosenberg, a director of Egreetings Network, is a
principal of Kettle Partners L.P. and, as such, may be deemed to have an
indirect pecuniary interest in an indeterminate portion of the shares
beneficially owned by Kettle Partners L.P. Mr. Rosenberg disclaims
beneficial ownership of these shares within the meaning of Rule l3d-3 under
the Securities Exchange Act of 1934.
(8) Includes 1,913,238 shares subject to repurchase by us within 60 days of
March 1, 2000.
(9) Includes 97,596 shares issuable upon exercise of options exercisable within
60 days of March 1, 2000.
(10) Includes 45,416 shares issuable upon exercise of options exercisable within
60 days of March 1, 2000.
(11) Consists of 27,777 shares issuable upon exercise of options exercisable
within 60 days of March 1, 2000.
(12) See footnotes 2 through 11 above, as applicable. Includes 3,000 shares held
by Andrew Moley and 162,329 shares subject to repurchase by us within 60
days of March 1, 2000.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file with the SEC initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16 (a) forms they
file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1999, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with, except that Mr.
Moley failed to file timely one report on Form 4 with respect to a stock
purchase. Mr. Moley filed such report immediately after being notified of the
failure to file timely.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Our directors receive no cash compensation for their services as directors
but are reimbursed for their reasonable expenses in attending Board meetings.
In September 1999, the Board adopted, and in December 1999 the stockholders
approved, the 1999 Non-Employee Directors' Stock Option Plan (the "Directors'
Plan") to provide for the automatic grant of options to purchase shares of
Common Stock to non-employee directors of the Company who are not employees of
or consultants to the Company or of any affiliate of the Company (a
"Non-Employee Director") to be effective upon the initial public offering of the
Company's Common Stock. The Directors' Plan is administered by the Board, unless
the Board delegates administration to a Committee comprised of members of the
Board.
The aggregate number of shares of Common Stock that may be issued pursuant
to options granted under the Directors' Plan is 500,000 shares. Pursuant to the
terms of the Directors' Plan, each person who is elected or appointed for the
first time to be a Non-Employee Director automatically shall, upon the date of
his or her initial election or appointment to be a Non-Employee Director by the
Board or stockholders of the Company, be granted an option to purchase 24,000
shares of Common Stock. In addition, on the day following each Annual Meeting of
Stockholders of the Company ("Annual Meeting"), commencing with the Annual
Meeting in 2000, each person who is then serving as a Non-Employee Director
automatically shall be granted an option to purchase 8,000 shares of Common
Stock, which amount shall be prorated for any Non-Employee Director who has not
continuously served as a Non-Employee Director for the 12-month period prior to
the date of such Annual Meeting. Each of the directors currently serving on the
Board will be eligible for this grant.
The exercise price of the options granted under the Directors' Plan will be
equal to closing sale price of the Company's Common Stock on the NASDAQ National
Market on the date of grant. No option granted under the Directors' Plan may be
exercised after the expiration of 10 years from the date it was granted. Options
granted under the Directors' Plan vest and become exercisable as to 1/36th of
the shares on the last day of each month following the date of grant that, for
annual grants will be April 30 of each year. Options granted under the
Directors' Plan generally are non-transferable except by will or the laws of
descent. However, an optionee may designate a beneficiary who may exercise the
option following the optionee's death. An optionee whose service relationship
with the Company or any affiliate (whether as a Non-Employee Director of the
Company or subsequently as an employee, director, or consultant of either the
Company or an affiliate) ceases for any reason may exercise vested options for
the term provided in the option agreement (3 months generally, 12 months in the
event of disability and 18 months in the event of death).
In the event of certain changes in control of the Company, all outstanding
awards under the Directors' Plan either will be assumed or substituted for by
any surviving entity. If the surviving entity determines not to
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assume or substitute for such awards, the vesting and time during which such
options may be exercised shall be accelerated prior to such event and the
options will terminate if not exercised after such acceleration and at or prior
to such event. Unless terminated sooner by the Board, the Directors' Plan will
terminate in September 2009.
As of May 31, 2000, no options had been exercised under the Directors'
Plan.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table shows for the fiscal year ended December 31, 1999,
compensation awarded or paid to, or earned by (i) the Company's Chief Executive
Officer; (ii) the Company's former Chief Executive Officer and Chief Financial
Officer; (iii) the Company's former President and Chief Concept Officer; and
(iv) the three most highly compensated current executive officers whose
aggregate salary and bonus earned exceeded $100,000 in the fiscal year ended
December 31, 1999 (collectively, (i) through (iv) the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE(1)
-----------------------------------------------------------------------
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS -----------------------
-------------------------------------------- SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING
COMPENSATION STOCK OPTIONS/
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) AWARDS ($) SARS (#)
--------------------------- ---- ---------- --------- ------------ ---------- ----------
Gordon M. Tucker....................... 1999 198,605 74,302 75,000(4) -- --
Chief Executive Officer(3)
Frederick Campbell..................... 1999 114,840 -- 136,106 -- --
Former Chief Executive Officer
and Chief Financial Officer(5)
Paul Lipman............................ 1999 146,500 37,500 -- -- --
Senior Vice President,
Business Development
Behrouz Arbab, Ph.D.................... 1999 96,137 25,000 -- -- --
Senior Vice President and
Chief Technology Officer
Kenneth W. Wallace..................... 1999 98,730 42,849 -- -- --
Senior Vice President, Sales
Anthony Levitan........................ 1999 116,421 -- 117,788 -- --
Former President and
Chief Concept Officer(6)
- ---------------
(1) As permitted by the rules promulgated by the Securities and Exchange
Commission, no amounts are shown for 1998.
(2) Bonuses are reported in the year earned, even if actually paid in a
subsequent year.
(3) Mr. Tucker became our Chief Executive Officer in February 1999.
(4) Consists of reimbursement to Mr. Tucker for relocation expenses of $75,000.
(5) Mr. Campbell resigned from his position as Chief Executive Officer in
February 1999 and served as Chief Financial Officer until July 1999.
(6) Mr. Levitan resigned from his position as President and Chief Concept
Officer in August 1999.
STOCK OPTION GRANTS AND EXERCISES
The Company granted options to its executive officers under its 1996 Stock
Option Plan (the "1996 Plan") and currently grants options to its executive
officers under its 1999 Equity Incentive Plan (the "1999 Plan"). As of May 31,
2000, options to purchase a total of 2,055,502 shares and 719,155 shares were
outstanding under the 1996 Plan and the 1999 Plan, respectively, 1,454,524
shares remained available for grant under the 1996 Plan and 1,930,845 shares
remained available for grant under the 1999 Plan, respectively.
8
11
The following tables show for the fiscal year ended December 31, 1999,
certain information regarding options granted to, exercised by, and held at year
end by, the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF ASSUMED ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION FOR OPTION
UNDERLYING OPTIONS GRANTED EXERCISE OR TERM(4)
OPTION GRANTED TO EMPLOYEES IN BASE PRICE -----------------------------
(#)(1) FISCAL YEAR(2) ($/SH)(3) EXPIRATION DATE 5% ($) 10% ($)
-------------- --------------- ----------- --------------- ------------ --------------
Gordon M. Tucker(5).......... 2,627,563 44.9 2.10 6/17/09 2,993,183 7,596,336
Kenneth W. Wallace(6)........ 133,333 2.6 2.10 6/30/09 176,000 446,666
Behrouz Arbab, Ph.D(6)....... 250,000 5.0 2.10 6/14/09 338,000 837,500
Paul Lipman(6)............... 106,366 2.1 1.55/1.75 3/23/09/3/25/09 8,276/77,000 14,451/279,000
Anthony Levitan.............. 200,000 4.0 1.75 3/25/09 220,000 558,000
- ---------------
(1) Options generally vest at a rate 1/8 on the date six months from the vesting
commencement date and 1/48 each month thereafter. The term of each option
granted is generally the earlier of (i) ten years or (ii) 90 days after
termination of the optionee's services to the Company. Options are
immediately exercisable; however, the unvested shares purchasable under such
options are subject to repurchase by the Company at the original exercise
price paid per share upon the optionee's cessation of service prior to the
vesting of such shares.
(2) Based on an aggregate of 5,045,518 options granted to employees, consultants
and directors of the Company, including the Named Executive Officers, during
the fiscal year ended December 31, 1999.
(3) The exercise price per share of each option was equal to the fair market
value of the Common Stock on the date of grant as determined by the Board
after consideration of a number of factors, including, but not limited to,
the development life cycle of the Company's products, the Company's
financial performance, market conditions, the price preferred rights and
privileges of shares of equity securities sold to or purchased by outside
investors, and third-party appraisals.
(4) The potential realizable value is calculated based on the terms of the
option at its time of grant (ten years). It is calculated assuming that the
fair market value of the Company's Common Stock on the date of grant
appreciates at the indicated annual rate compounded annually for the entire
term of the option is exercised and sold on the last day of its term for the
appreciated stock price. There can be no assurance that the amounts
reflected in the table will be achieved.
(5) In the event of certain change of control events, the vesting of options
held by Mr. Tucker shall accelerate for up to the first three years of any
grant pursuant to Mr. Tucker's employment agreement.
(6) In the event of certain change of control events and a termination in
connection with such change of control, the Board has implemented a policy
whereby certain executives, including Messrs. Arbab, Wallace and Lipman
shall have the remaining unvested options accelerate vesting for up to 18
months.
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AGGREGATE OPTION EXERCISES IN 1999 AND YEAR-END VALUES AT DECEMBER 31, 1999
The following table sets forth the number of shares of common stock
acquired and the value realized upon exercise of stock options during 1999 and
the number of shares of common stock subject to exercisable and unexercisable
stock options held as of December 31, 1999 by each of the named executive
officers.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OPTIONS AT IN-THE-MONEY OPTIONS AT
OF SHARES DECEMBER 31, 1999(#) DECEMBER 31, 1999($)(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED $(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- ------------- ----------- -------------
Gordon M. Tucker............. 2,267,563 -- -- -- -- --
Frederick R. Campbell........ -- -- -- -- -- --
Paul Lipman.................. 5,500 49,500 80,202 106,664 $771,016 $ 922,471
Behrouz Arbab, Ph.D.......... 6,667 52,669 24,583 218,750 197,279 1,755,469
Kenneth W. Wallace........... -- -- 16,666 116,667 133,745 936,253
Anthony Levitan.............. 20,833 57,289 -- -- -- --
- ---------------
(1) The value realized is based on the fair market value of the Company's Common
Stock on the date of exercise minus the exercise price.
(2) Value of unexercised in-the-money options are based on the fair market value
of the Company's Common Stock on December 31, 1999 of $10.125 per share,
minus the per share exercise price of the options.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON
EXECUTIVE COMPENSATION(1)
The Compensation Committee of the Board of Directors ("Committee") consists
of Messrs. Kim and Rosenberg, neither of whom are currently officers or
employees of the Company. The Committee is responsible for establishing the
Company's compensation programs for all employees, including executives. For
executive officers, the Committee evaluates performance and determines
compensation policies and levels.
COMPENSATION PHILOSOPHY
The goals of the compensation program are to align compensation with
business objectives and performance and to enable the Company to attract, retain
and reward executive officers and other key employees who contribute to the
long-term success of the Company and to motivate them to enhance long-term
stockholder value. Key elements of this philosophy are:
- The Company pays competitively compared to leading technology companies
with which the Company competes for talent. To ensure that pay is
competitive, the Company regularly compares its pay practices with these
companies and establishes its pay parameters based on this review.
- The Company maintains annual incentive opportunities sufficient to
provide motivation to achieve specific operating goals and to generate
rewards that bring total compensation to competitive levels.
- The Company provides significant equity-based incentives for executives
and other key employees to ensure that they are motivated over the
long-term to respond to the Company's business challenges and
opportunities as owners and not just as employees.
- ---------------
(1) The material in this report is not "soliciting material," is not deemed
"filed" with the SEC, and is not to be incorporated by reference into any
filing of the Company under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, whether made before or after
the late hereof and irrespective of any general incorporation language
contained in such filing.
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PHILOSOPHY REGARDING SECTION 162(M) OF THE INTERNAL REVENUE CODE. Section
162(m) of the Internal Revenue Code (the "Code") limits the Company to a
deduction for federal income tax purposes of no more than $1 million of
compensation paid to certain Named Executive Officers in a taxable year.
Compensation above $1 million may be deducted if it is "performance-based
compensation" within the meaning of the Code.
The Compensation Committee has determined that stock options granted under
the Company's 1999 Equity Incentive Plan with an exercise price at least equal
to the fair market value of the Company's common stock on the date of grant
shall be treated as "performance-based compensation."
BASE SALARY. The Committee annually reviews each executive officer's base
salary. When reviewing-base salaries, the Committee considers individual and
corporate performance, levels of responsibility, prior experience, breadth of
knowledge and competitive pay practices.
1999 INCENTIVE BONUS PLAN. In August 1999 the Board adopted the 1999
Incentive Bonus Plan which applied to all full-time employees hired prior to
September 30, 1999 other than sales employees on commission plans. Employees
were eligible to receive cash bonuses ranging in amounts from up to 50% of
salary for the chief executive officer and up to 5% to 35% of employees' 1999
salaries. The individual calculations were based 50% on individual performance
and 50% on the Company's achievement of financial and operational goals. In
January 2000, the Board determined that the Company would pay 95% of the
available bonus pool. The bonus payments included 5% of salaries to all
employees and managers for the performance of the Company, with an additional up
to 35% of salary, which were pre-determined bonus targets, for all managers for
individual performance. Mr. Tucker received 37% of his salary as a cash bonus.
LONG-TERM INCENTIVES. The Company's long-term incentive program consists of
the 1999 Equity Incentive Plan. The option program utilizes vesting periods
(generally four years) to encourage key employees to continue in the employ of
the Company. Through option grants, executives receive significant equity
incentives to build long-term stockholder value. Grants are made at 100% of fair
market value on the date of grant. Executives receive value from these grants
only if the value of the Company's Common Stock appreciates over the long-term.
The size of option grants is determined based on competitive practices at
leading companies in the technology industry and the Company's philosophy of
significantly linking executive compensation with stockholder interests. In
1999, the Committee granted to executives stock options that will vest over a
four-year period. These grants were intended to provide incentive to maximize
stockholder value over the next several years. The Committee believes this
approach creates an appropriate focus on longer term objectives and promotes
executive retention.
The Compensation Committee
Lee Rosenberg
Brendon Kim
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to September 1999, the Company did not have a Compensation Committee
of the Board, and the entire Board participated in all compensation decisions.
In September 1999, the Board formed the Company's Compensation Committee to
review and recommend to the Board Compensation and benefits for the Company's
officers and administer the Company's stock purchase and stock option plans.
Each of the Company's directors, or an affiliated entity, holds securities of
the Company.
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14
PERFORMANCE MEASUREMENT COMPARISON(1)
The following graph shows the total stockholder return of an investment of
$100 in cash on December 16, 1999 for the Company's Common Stock and an
investment of $100 in cash on December 31, 1999 for (i) the Standards & Poor's
500 Stock Index (the "S&P 500 Stock Index") and (ii) the Chicago Board Options
Exchange Interest Index (the "CBOE Internet Index"). All values assume
reinvestment of the full amount of all dividends and are calculated as of last
day of each month:
COMPARISON OF 3 MONTH CUMULATIVE TOTAL RETURN ON INVESTMENT
EGREETINGS NETWORK S&P 500 STOCK INDEX CBOE INTERNET INDEX
------------------ ------------------- -------------------
12/16/99 100.00 100.00 100.00
12/31/99 101.25 103.56 95.63
01/2000 73.75 98.29 93.80
02/2000 56.56 96.31 100.27
03/2000 56.88 105.63 109.70
- ---------------
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the Securities Act of 1933, as amended, or the Securities Exchange Act
of 1934, as amended, whether made before or after the date hereof and
irrespective of any general incorporation language in any such filing.
RELATED-PARTY TRANSACTIONS
Other than the transaction described below, since January 1999 there has
not been nor is there currently proposed any transaction or series of similar
transactions to which we were or will be a party:
- in which the amount involved exceeded or will exceed $60,000; and
- in which any director, executive officer, holder of more than 5% of our
common stock or any member of their immediate family had or will have a
direct or indirect material interest.
PREFERRED STOCK FINANCINGS
From March to April 1999, we issued and sold an aggregate of 3,726,493
shares of Series F preferred stock for gross proceeds of approximately $26.1
million including 442,857 shares issued upon conversion of convertible
promissory notes having an aggregate principal amount of approximately $3.1
million that were issued between November 1998 and March 1999. Each of these
shares converted into two shares of Common Stock in December 1999.
In October 1999, we issued and sold an aggregate of 5,846,546 shares of
Series G preferred stock for gross proceeds of approximately $23.6 million,
which converted into two-thirds of one share of Common Stock in December 1999.
12
15
In November 1999, we issued and sold 3,712,871 shares of Series G preferred
stock for gross proceeds of approximately $7.5 million in cash and an
advertising credit of approximately $7.5 million. Each of these shares converted
into two-thirds of one share of Common Stock in December 1999.
Purchasers of our preferred stock include, among others, the following
directors, holders of more than 5% of our outstanding stock and a trust of which
the father of one of our executive officers is the sole trustee. All of the
share numbers in the following table reflect the conversion of each outstanding
share of Series F preferred stock into two shares of common stock, and each
outstanding share of Series G preferred stock into two-thirds of one share of
common stock.
SHARES OF SERIES F SHARES OF SERIES G
INVESTOR PREFERRED STOCK PREFERRED STOCK
-------- ------------------ ------------------
Lee Rosenberg(1)............................................ 192,858 96,204
Entities affiliated with Altos Ventures(2).................. 485,714 412,540
Gibson Greetings, Inc.(3)................................... 1,168,000 412,226
National Broadcasting Company, Inc.(4)...................... -- 2,475,247
New Enterprise Associates(5)................................ 1,400,000 264,026
Entities affiliated with Weiss, Peck & Greer Venture
Partners(6)............................................... 1,971,428 362,041
Richard M. Moley Annuity Trust U/A dated May 12, 1998(7).... -- 166,666
- ---------------
(1) Includes 142,858 shares of Series F preferred stock and 82,508 shares of
Series G preferred stock held by Kettle Partners, L.P. for which Mr.
Rosenberg, a director of Egreetings Network, serves as a principal.
(2) Consists of 11,428 shares of Series F preferred stock held by Altos Partners
I, 474,286 shares of Series F preferred stock held by Altos Ventures I,
L.P., and 412,540 shares of Series G preferred stock held by Altos Ventures
II, L.P. Brendon Kim, a director of Egreetings Network, is affiliated with
the Altos entities.
(3) Frank O'Connell, a director of Egreetings Network, is the Former Chairman of
the Board, President and Chief Executive Officer of Gibson Greetings, Inc.
Gibson Greetings, Inc. was acquired by American Greeting Corp. on March 8,
2000.
(4) National Broadcasting Company, Inc. (NBC) subsequently transferred its
shares of Series G preferred stock to NBC-EGRT Holding, Inc., a wholly owned
subsidiary of NBC.
(5) Stewart Alsop, a director of Egreetings Network, is affiliated with New
Enterprise Associates.
(6) Consists of 148,909 shares of Series G preferred stock held by Weiss, Peck &
Greer Venture Associates V, L.L.C., 422,674 shares of Series F preferred
stock and 77,622 shares of Series G preferred stock held by WPG Enterprise
Fund III, L.L.C., 483,394 shares of Series F preferred stock and 88,773
shares of Series G preferred stock held by Weiss, Peck & Greer Venture
Associates, IV, L.L.C., 18,728 shares of Series F preferred stock and 3,439
shares of Series G preferred stock held by WPG Information Sciences
Entrepreneur Fund, L.P., 60,938 shares of Series F preferred stock and
11,186 shares of Series G preferred stock held by Weiss, Peck & Greer
Venture Associates IV Cayman, L.P., 801,764 shares of Series F preferred
stock held by WPG Venture Associates V, L.L.C. 8,280 shares of Series F
preferred stock and 1,266 shares of Series G preferred stock held by WPG
Venture Associates V-A, L.L.C., and 175,650 shares of Series F preferred
stock and 30,846 shares of Series G preferred stock held by WPG Venture
Associates V, Cayman L.P. Peter Nieh, a director of Egreetings, is a general
partner of Weiss, Peck & Greer Venture Partners and a member or a general
partner of the above-named funds.
(7) Mr. Moley, the sole trustee of this trust, is the father of Andrew J. Moley,
our Chief Financial Officer.
13
16
In connection with the promissory notes issued in connection with the
Series F financing, the following 5% stockholders received warrants. All of the
share numbers in the following table reflect the conversion of each outstanding
share of Series F preferred stock into two shares of Common Stock.
NUMBER OF SHARES
WARRANT HOLDER SUBJECT TO WARRANT EXPIRATION DATE
-------------- ------------------ ---------------
Gibson Greetings, Inc.(1)................ 53,570 November 2005
Gibson Greetings, Inc.(1)................ 14,284 January 2006
Altos Ventures I, L.P.(2)................ 17,856 November 2005
Altos Ventures I, L.P.(2)................ 14,284 January 2006
Kettle Partners, L.P.(3)................. 28,570 January 2006
- ---------------
(1) The acquisition of Gibson Greetings, Inc., by American Greetings Corp. was
completed on March 9, 2000.
(2) Brendon Kim, a director of Egreetings Network, is a general partner of Altos
Ventures I, L.P.
(3) Lee Rosenberg, a director of Egreetings Network, is a principal of Kettle
Partners, L.P.
TRANSACTIONS WITH EXECUTIVE OFFICERS AND DIRECTORS
In February 1999, we entered into an employment agreement with Gordon M.
Tucker to serve as our Chief Executive Officer. The employment agreement is not
for a specified term and is terminable at will or without cause at any time upon
written notice. Mr. Tucker's employment agreement further provides that the
Company's Board of Directors will set Mr. Tucker's salary in accordance with the
payroll policies of the Company as constituted from time to time.
In June 1999, Mr. Tucker exercised in full the option granted to him
pursuant to his employment agreement and acquired 2,267,563 shares of common
stock. However, as of December 31, 1999, 1,967,457 shares held by Mr. Tucker may
be repurchased at $2.10 per share by the Company, subject to certain
acceleration provisions in Mr. Tucker's employment agreement. Mr. Tucker paid
the $2.10 exercise price per share for such shares by delivery of a promissory
note bearing a simple interest rate of 5.37% per annum. The full principal and
interest payable under the note are due in June 2003 or, if Mr. Tucker's
employment is terminated prior to that time, 60 days after the termination. The
note is secured by the shares of common stock purchased by Mr. Tucker. As of
December 31, 1999, approximately $4,891,177 in unpaid principal and interest was
outstanding in the aggregate under the note.
In July 1999, Andrew J. Moley, our Chief Financial Officer, exercised an
option grant to purchase an aggregate of 200,000 shares of common stock and
entered into an early exercise stock purchase agreement under the 1996 Stock
Option Plan regarding the shares. However, we have a right to repurchase any
unvested portion of the 200,000 shares within 90 days upon Mr. Moley's
termination of employment. As of December 31, 1999, 200,000 shares held by Mr.
Moley remain subject to repurchase at $2.78 per share. Mr. Moley paid the $2.78
purchase price per share for such shares by delivery of a promissory note
bearing a simple interest rate of 6.00% per annum. The full principal and
interest payable under the note are due in July 2003 or, if Mr. Moley's
employment is terminated prior to that time, the date of Mr. Moley's
termination. The note is secured by the shares of common stock purchased by Mr.
Moley. As of December 31, 1999, approximately $569,014 in unpaid principal and
interest was outstanding in the aggregate under the note. In October 1999, Mr.
Moley's father purchased 166,666 shares of Series G Preferred Stock at $6.06 per
share.
In July 1999, we loaned $200,000 to Anthony Levitan, our former President
and Chief Concept Officer and then a holder of more than 5% of our outstanding
stock, in exchange for a promissory note bearing a simple interest rate of 6%
per annum. Principal payments of $25,000, plus interest thereon, will become due
quarterly, on the last day of February, May, August and November of each year
such that the full principal and interest payable under the note will be repaid
no later than August 31, 2001. As of December 31, 1999, approximately $175,875
in unpaid principal and interest remained outstanding under the note.
14
17
In May 1999, we entered into an employment and consulting agreement with
Fredrick R. Campbell, our former Chief Financial Officer and then a holder of
more than 5% of our outstanding stock. In August 1999, we also entered into an
employment and consulting agreement with Mr. Levitan, our former President and
Chief Concept Officer and then a holder of more than 5% of our outstanding
stock.
ADVERTISING AND CONTENT PROVIDER AGREEMENTS WITH NATIONAL BROADCASTING COMPANY,
INC.
In November 1999, in addition to a $7.5 million purchase of Series G
preferred stock, we entered into a two-year advertising agreement with National
Broadcasting Company, Inc. for approximately $7.5 million in advertising credit.
The agreement contains a pre-approved six-month advertising schedule and
provides that no less than 60% of the value of the advertising provided to us
will be broadcast during prime time hours. In November 1999, we also entered
into a two-year content licensing agreement with NBC pursuant to which we have
the right to create and distribute digital greetings for a minimum of five NBC
television programs for each six-month television season, which amount may be
increased, at NBC's option, to a maximum of 30 NBC television programs for each
season.
In December 1999, the Company also entered into indemnification agreements
with each of its directors and executive officers. The agreements require the
Company to indemnify such individuals to the fullest extent permitted by
Delaware law for certain liabilities to which they may become subject as a
result of their affiliation with the Company.
TRANSACTIONS INVOLVING COOLEY GODWARD LLP
The Company retains the law firm of Cooley Godward LLP as its primary
outside corporate counsel. Mr. Tucker is married to a partner of Cooley Godward
LLP. The Company paid Cooley Godward LLP approximately $301,770 in fees for the
year ended December 31, 1999.
We believe that the foregoing transactions were in our best interest and
were made on terms no less favorable to us than could have been obtained from
unaffiliated third parties. All future transactions between us and any of our
officers, directors or principal stockholders will be approved by a majority of
the disinterested members of the Board, will be on terms no less favorable to us
than could be obtained from unaffiliated third parties and will be in connection
with our bona fide business purposes.
15
18
OTHER MATTERS
The Board knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
[Andrew P. Missan Signature]
/s/ ANDREW P. MISSAN
--------------------------------------
Andrew P. Missan
Vice President, General Counsel and
Secretary
San Francisco, California
June 15, 2000
A copy of the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year ended December 31, 1999 is available
without charge upon written request to: Corporate Secretary, Egreetings Network,
Inc., 149 New Montgomery Street, San Francisco, California 94105.
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19
EGREETINGS NETWORK, INC.
ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, JULY 26, 2000
11:00 A.M. PST
OFFICES OF EGREETINGS NETWORK, INC.
149 NEW MONTGOMERY STREET
SAN FRANCISCO, CA 94105
EGREETINGS NETWORK, INC.
149 NEW MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94105 PROXY
- --------------------------------------------------------------------------------
This proxy is solicited by the Board of Directors for us at the Annual Meeting
on July 26, 2000.
The shares of stock you hold in your account or in a dividend reinvestment
account will be voted as you specify herein.
If no choice is specified, the proxy will be voted "FOR" Items 1 and 2.
By signing this proxy, you revoke all previous proxies and hereby appoint Gordon
M. Tucker and Andrew J. Moley, and each of them, as attorneys with full power of
substitution, to vote all of the shares of stock of Egreetings Network, Inc.
which the undersigned may be entitled to vote at the Annual Meeting to be held
at the offices of the Company at 149 New Montgomery Street, San Francisco,
California, on Wednesday, July 26, 2000 at 11:00 a.m. (local time), and at any
and all postponements, continuations and adjournments, with all powers that the
undersigned would possess if personally present, on the following matters shown
on the reverse side, with discretionary authority as to any and all other
matters that may properly come before the meeting.
Please vote, date and promptly return this proxy in the enclosed return envelope
which is postage prepaid if mailed in the United States.
See reverse side for voting instructions.
20
Please detach here
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
1. Election of director to hold office until the 2003 Annual Meeting of
Stockholders.
NOMINEE: Stewart Alsop [ ] FOR the nominee [ ] WITHHOLD AUTHORITY
listed below (except
as marked).
2. To ratify selection of Ernst & Young LLP [ ] FOR [ ] AGAINST OR ABSTAIN
as independent auditors of the Company for
its fiscal year ending December 31, 2000.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL.
Address change? DATED
-----------------------------------
Mark Box -----------------------------------
Indicate changes below -----------------------------------
SIGNATURE(S)
Please sign exactly as your name appears
on Proxy. If the stock is held in joint
tenancy or registered in the names of
two or more persons, each should sign.
Executors, administrators, trustees,
guardians and attorneys-in-fact should
include title and authority. Corporation
should give full corporate name and
title of authorized signer. If signer is
a partnership, please sign in
partnership name by authorized person.