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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 Section 14a-11(c) or Section 14a-12
CRITICAL PATH, INC.
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(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)(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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CRITICAL PATH LOGO
Critical Path, Inc.
532 Folsom Street
San Francisco, California 94105
To the Shareholders:
I am pleased to invite you to attend the Annual Meeting of Shareholders of
Critical Path, Inc. to be held on Wednesday, June 6, 2001 at 10:00 a.m. at the
Park Hyatt hotel located at 333 Battery Street, San Francisco, California.
The agenda for this year's meeting is identified and described in the
enclosed materials. The Proxy Statement describes in detail the proposed items
to be presented to the shareholders at the meeting. I encourage you to read the
proxy carefully.
I am delighted you have chosen to invest in Critical Path, Inc. and hope
that, whether or not you plan to attend the Annual Meeting, you will vote as
soon as possible by completing, signing and returning the enclosed proxy card in
the envelope provided. Your vote is important. Voting by written proxy will
ensure your representation at the Annual Meeting if you do not attend in person.
A copy of the Company's Annual Report to Shareholders has been mailed
concurrently herewith to all shareholders entitled to notice of and to vote at
the Annual Meeting.
Sincerely,
Hayden sig
David C. Hayden
Executive Chairman of the
Board of Directors
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CRITICAL PATH, INC.
532 FOLSOM STREET; SAN FRANCISCO, CALIFORNIA 94105; 415-808-8800
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS -- JUNE 6, 2001
To the Shareholders:
The Annual Meeting of Shareholders of Critical Path, Inc., a California
corporation (the "Company"), will be held on Wednesday, June 6, 2001, at 10:00
a.m. at the Park Hyatt hotel, located at 333 Battery Street, San Francisco,
California to:
- Elect five directors to serve until the next Annual Meeting and until
their successors have been elected and qualified.
- Transact any other business as may properly come before the meeting or
any adjournments or postponements thereof.
The names and biographies of the nominees for directors are set forth in
the enclosed Proxy Statement.
All shareholders are cordially invited and encouraged to attend the Annual
Meeting. In any event, to ensure your representation at the Annual Meeting,
please carefully read the accompanying Proxy Statement that describes the
matters to be voted on at the Annual Meeting and sign, date and return the
enclosed proxy card in the reply envelope provided. Should you receive more than
one proxy because your shares are registered in different names and addresses,
each proxy should be returned to assure that all your shares will be voted. If
you attend the Annual Meeting and vote by ballot, your proxy will be revoked
automatically and only your vote at the Annual Meeting will be counted. The
prompt return of your proxy card will assist us in preparing for the Annual
Meeting.
Only shareholders of record at the close of business on April 16, 2001 (the
"Record Date") are entitled to notice of and to vote at this meeting and at any
continuation or adjournment thereof. Please note that if your shares are held in
"street name," that is in the custody of a financial institution or other holder
of record, your vote will be cast by that institution or holder. If you wish to
vote at the meeting, you must obtain from the record holder a proxy issued in
your name.
By Order of the Board of Directors,
/s/ WILLIAM E. MCGLASHAN, JR.
William E. McGlashan, Jr.
Secretary
San Francisco, California
May 15, 2001
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PROXY STATEMENT
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SOLICITATION OF PROXY, REVOCABILITY AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors (the
"Board of Directors" or the "Board") of Critical Path, Inc., a California
corporation (the "Company" or "Critical Path"), for use at the 2001 Annual
Meeting of Shareholders to be held at 10:00 a.m. on June 6, 2001 at the Park
Hyatt hotel, located at 333 Battery Street, San Francisco, California.
The Company's principal executive offices are located at 532 Folsom Street,
San Francisco, California, 94105. The approximate date on which this Proxy
Statement and the accompanying Proxy are first being sent to shareholders on or
about May 18, 2001.
VOTING
Only shareholders of record of the Common Stock of the Company ("Common
Stock") at the close of business on April 16, 2001 will be entitled to vote at
the Annual Meeting and any continuations or adjournments thereof. Each share
entitles the holder to one vote at the Annual Meeting. Cumulative voting is not
permitted. On April 16, 2001, there were approximately 74,265,523 shares of
Common Stock outstanding and entitled to vote at the Annual Meeting. The
presence at the Annual Meeting of a majority, or 37,132,762 shares of Common
Stock, either in person or by proxy, will constitute a quorum for the
transaction of business at the Annual Meeting. Abstentions and broker non-votes
will be counted for the purpose of determining if a quorum is present. Broker
non-votes occur when a nominee, such as a financial institution, returns a
proxy, but does not have the authorization from the beneficial owner to vote the
owner's shares on a particular proposal because the nominee did not receive
voting instructions (via proxy vote) from the beneficial owner. An automated
system administered by ComputerShare Trust Company, Inc., the Company's transfer
agent, will tabulate votes cast by proxy and an employee of the transfer agent
will tabulate votes cast in person at the Annual Meeting. This employee of the
transfer agent also will tabulate separately affirmative and negative votes,
abstentions and broker non-votes.
If any shareholder is unable to attend the Annual Meeting, such shareholder
may vote by proxy. The enclosed proxy, when returned properly completed, will be
voted as you direct on your proxy card. In the discretion of the proxy holder,
shares represented by such proxies will be voted upon any other business as may
properly come before the Annual Meeting. In the election of directors, the five
nominees receiving the highest number of votes will be elected.
REVOCABILITY OF PROXIES
Any person giving a proxy in the form accompanying this Proxy Statement has
the power to revoke it at any time before its exercise. It may be revoked by
filing an instrument of revocation with the Secretary of the Company or by the
presentation, at the meeting, of a duly executed proxy bearing a later date. It
also may be revoked by attending the meeting and electing to vote in person.
SOLICITATION
The Company will bear the entire cost of preparing, assembling, printing
and mailing this Proxy Statement, the accompanying proxy and any additional
material that may be furnished to shareholders. Copies of solicitation material
will be furnished to brokerage houses, fiduciaries and custodians to forward to
beneficial owners of stock held in the names of such nominees. The Company may
retain the services of an outside proxy solicitation firm at an estimated cost
of approximately $6,000 to $9,000. The solicitation of proxies may also be made
by the use of the mails and through direct communication with certain
shareholders or their representatives by officers, directors and employees of
the Company, who will receive no additional compensation for such solicitation.
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SPECIAL NOTE ABOUT OUTSTANDING SHARES
Unless otherwise indicated, all mention of outstanding shares of Common
Stock includes 2,051,233 shares of Common Stock issuable upon the exchange of
Class A Non-Voting shares of Critical Path Messaging Co., a Nova Scotia
subsidiary of the Company, for Common Stock of the Company. The Class A
Non-Voting shares can be exchanged at any time for Common Stock of the Company
upon the election of the holder. The Class A Non-Voting shares are entitled to
vote by directing the holder of the Special Voting Share of the Company. The
Special Voting Share has one vote for each share of Class A Non-Voting stock
outstanding.
]
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Annual Meeting, five directors are to be elected to serve until the
next Annual Meeting and until their successors are elected and qualified, or
until the death, resignation, or removal of such director. It is intended that
the proxies will be voted for the election of the five nominees named below as
directors unless authority to vote for any such nominee is withheld. The five
nominees receiving the highest number of votes will be elected. In the
unanticipated event that a nominee is unable or declines to serve as a director
at the time of the Annual Meeting, the proxies will be voted for any nominee
named by the current Board of Directors to fill the vacancy. As of the date of
this Proxy Statement, the Board of Directors is not aware of any nominee who is
unable or will decline to serve as a director.
In October 2000, the Board accepted the resignation of Christos Cotsakos as
a director. In March 2001, the Board appointed Amy Rao to the Board and accepted
the resignation of James Smith as a director. In May 2001, the Board appointed
William McGlashan to the Board and accepted the resignation of Lisa Gansky as a
director. The Company's Bylaws authorize the number of directors to be not less
than four or more than seven. The number of directors on the Board is currently
fixed at five.
Biographical summaries and ages as of April 16, 2001 of the executive
officers of the Company and individuals nominated by the Board of Directors for
election as directors are set forth below.
DAVID C. HAYDEN; AGE 46; EXECUTIVE CHAIRMAN OF THE BOARD OF
DIRECTORS. David C. Hayden founded Critical Path and served as its Chairman,
President and Chief Executive Officer and Secretary from its inception in
February 1997 to October 1998. Mr. Hayden has served as Chairman of the Board of
Directors of Critical Path since October 1998 and was appointed Executive
Chairman of the Board in February 2001. From February 1993 to August 1996, Mr.
Hayden served as Chairman, Chief Executive Officer, and co-founder of The
McKinley Group, Inc., creators of Magellan, an Internet search engine.
WILLIAM E. MCGLASHAN, JR.; AGE 37; INTERIM PRESIDENT AND CHIEF OPERATING
OFFICER AND DIRECTOR. William E. McGlashan, Jr. has served as interim President
and Chief Operating Officer of the Company since April 2001 and has served as a
director of the Company since May 2001. Mr. McGlashan has served as the Chief
Executive Officer of Vectis Group, LLC, an international venture corporation,
since May 2000, and as a Venture Partner at Whitney & Co., a venture firm, since
December 1999. Mr. McGlashan co-founded and served as President of Pharmanex, a
phyto-pharmaceutical and dietary supplement company from 1994 to 2000. He also
co-founded and served as Chief Executive Officer of Generation Ventures, a
venture firm, from 1993 to 1998.
LAWRENCE P. REINHOLD; AGE 41; EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER. Lawrence P. Reinhold has served as Executive Vice President and Chief
Financial Officer since December 2000, when he joined Critical Path. From 1995
to December 2000, Mr. Reinhold was employed as a partner with Price Waterhouse
and PricewaterhouseCoopers, and most recently served as Managing Partner of that
firm's Technology, Information & Communications and Entertainment & Media
practice in the Midwest Region of the United States.
AMY RAO; AGE 38; INTERIM VICE PRESIDENT FOR SALES AND DIRECTOR. Amy Rao has
served as a director of Critical Path since March 2001. She was named the
Company's interim Vice President for Sales in April 2001. Ms. Rao founded
Integrated Archive Systems, a systems integrator and managed services company,
in 1994 and has served as its Chief Executive Officer since its inception.
SUE BARSAMIAN; AGE 41; SENIOR VICE PRESIDENT OF PRODUCT MARKETING. Sue
Barsamian has served as Senior Vice President of Product Marketing since
February 2001. Ms. Barsamian joined Critical Path as Vice President of Product
Marketing in March 2000 through its acquisition of RemarQ Communities. From
December 1998 to March 2000, Ms. Barsamian served as Vice President of Marketing
for RemarQ. From March 1996 to December 1998, Ms. Barsamian was a Principal in
Romans Barsamian. From August 1988 to March 1996, Ms. Barsamian was employed in
various marketing and sales management capacities with Verity, most recently as
Vice President of Marketing.
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MICHAEL SERBINIS; AGE 27; VICE PRESIDENT AND CHIEF TECHNOLOGY
OFFICER. Michael Serbinis has served as Vice President and Chief Technology
Officer since February 2001. Mr. Serbinis joined Critical Path as its Chief
Security Officer in March 2000 and served in this capacity until February 2001.
From November 1997 to March 2000, Mr. Serbinis was the Chief Technology Officer
of The docSpace Company, which he co-founded in November 1997. From September
1996 to October 1997, Mr. Serbinis was a software engineer for Total Control, a
subsidiary of General Electric. From April 1996 to August 1996, Mr. Serbinis was
responsible for search engine engineering at Zip2 Corporation.
BRETT M. ROBERTSON; AGE 40; VICE PRESIDENT OF STRATEGIC DEVELOPMENT AND
GENERAL COUNSEL. Brett M. Robertson has served as Vice President of Stategic
Development and General Counsel since June 1999. From July 1998 to December
1998, Ms. Robertson served as General Counsel of Broderbund Software. From
August 1994 to July 1998, Ms. Robertson served as Associate General Counsel of
Broderbund Software.
CHERYL VAN; AGE 42; VICE PRESIDENT OF HUMAN RESOURCES. Cheryl Van has
served as Vice President of Human Resources since January 2000. From March 1997
to December 1999, Ms. Van served as Vice President of Employment and Development
at Visa International. From October 1988 to February 1997, Ms. Van was employed
at Apple Computer in various capacities, and most recently as Senior Manager
Employment.
KEVIN R. HARVEY; AGE 36; DIRECTOR. Kevin R. Harvey has served as a director
of Critical Path since April 1998. Mr. Harvey has been a General Partner of
Benchmark Capital, a venture capital firm, since January 1995. Mr. Harvey also
is a director of Red Hat, a Linux and open source solutions company,
Ashford.com, a Web-based retailer, Broadbase Software, a provider of intelligent
customer interaction software, and a director of several privately held
companies.
GEORGE ZACHARY; AGE 35; DIRECTOR. George Zachary has served as a director
of Critical Path since April 1998. Mr. Zachary has been a partner at Mohr,
Davidow Ventures II, a venture capital firm, since January 1996. From March 1993
to December 1997, Mr. Zachary ran the consumer products business at Silicon
Graphics, Inc., a computer workstation company. Mr. Zachary serves as a director
for many privately held companies.
VOTE REQUIRED
In the election of directors, the five nominees receiving the highest
number of votes will be elected.
RECOMMENDATION: THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL
OF THE ABOVE NOMINEES AS DIRECTORS.
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INFORMATION ABOUT THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
COMPENSATION OF DIRECTORS. Critical Path reimburses each member of its
Board of Directors for out-of-pocket expenses incurred in connection with
attending Board meetings. No member of Critical Path's Board of Directors
receives any additional cash compensation.
MEETINGS OF THE BOARD OF DIRECTORS. During fiscal 2000, there were four
regular meetings of the Board of Directors and two special meetings.
COMPENSATION COMMITTEE. Critical Path's Compensation Committee currently
consists of two non-employee directors: Kevin Harvey and George Zachary. In
fiscal 2000, the Compensation Committee consisted of Lisa Gansky and George
Zachary. The committee acted by written consent twice in fiscal 2000. In April
2001, Ms. Gansky resigned from the committee and the Board appointed George
Zachary to the committee. The committee is responsible for determining salaries,
incentives and other forms of compensation for Critical Path's directors,
officers and other employees and administering various incentive compensation
and benefit plans.
AUDIT COMMITTEE. Critical Path's Audit Committee currently consists of two
non-employee directors: Kevin Harvey and George Zachary. In fiscal 2000, the
Audit Committee consisted of James Smith and George Zachary. The Audit Committee
met three times in fiscal 2000. In March 2001, Amy Rao was appointed to the
Audit Committee, but resigned from the committee in April when she was appointed
interim Vice President for Sales of the Company. Kevin Harvey was appointed to
the Audit Committee in April 2001. The Audit Committee meets independently with
representatives of the Company's independent accountants and with
representatives of senior management. The committee reviews the general scope of
the Company's accounting, reporting, annual audit, matters relating to internal
control systems and the fee charged by the independent accountants. In addition,
the Audit Committee is responsible for reviewing and monitoring the performance
of non-audit services by the Company's independent accountants and for the
engagement or discharge of the Company's independent accountants.
STOCK COMMITTEE. Critical Path's Stock Committee currently consists of one
director: David Hayden. In fiscal 2000, the committee consisted of one director,
Douglas Hickey. The Stock Committee acted thirty-six times in fiscal 2000. The
Stock Committee is responsible for granting stock options to all employees of
Critical Path who are not directors, executive officers or holders of more than
10% of the Company's Common Stock.
In fiscal 2000, each director attended at least 75% of the aggregate of the
meetings of the Board and the meetings of all committees of the Board of which
he or she was a member.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDE PARTICIPATION
During fiscal 2000, Lisa Gansky and Kevin Harvey, two of the Company's
non-employee directors, served on the Compensation Committee. During fiscal
2000, no member of the Company's Board of Directors or Compensation Committee
served as a member of the board of directors or compensation committee of any
entity that had one or more executive officers serving as a member of the
Company's Board of Directors or Compensation Committee.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
holders of more than 10% of the Company's Common Stock to file with the
Securities and Exchange Commission (the "SEC") initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. The Company believes that during the fiscal year ended December 31,
2000, its officers, directors and holders of more than 10% of the Company's
Common Stock complied with all Section 16(a) filing requirements with the
exception of the following late filings: (a) Mr. Hayden, Executive Chairman of
the Board, inadvertently failed to file in a timely manner: (i) Form 4s for the
months of May, July, August, October, November and December in 2000 to report an
aggregate of nineteen transactions, and (ii) a Form 5 for fiscal 2000 to report
one transaction; and (b) to the Company's knowledge, Mr. Rinehart, the Company's
former Vice President of Worldwide Sales, has failed to file in a timely manner
a Form 5 for fiscal 2000 to report one transaction. In making this statement,
the Company has relied upon the written representations of its directors and
officers.
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COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of common stock as of April 16, 2001 by:
- each person or entity known to Critical Path to own beneficially more
than 5% of Critical Path's Common Stock;
- each of Critical Path's directors;
- the Chief Executive Officer of the Company as of December 31, 2000, each
of the four other most highly compensated executive officers of the
Company whose total salary and bonus exceeded $100,000 during the year
ended December 31, 2000, and two former executive officers whose total
salary and bonus exceeded $100,000 during the year ended December 31,
2000 (collectively, the "Named Executive Officers"); and
- all executive officers and directors as a group.
SHARES BENEFICIALLY
OWNED(2)
--------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER PERCENT
--------------------------------------- --------- -------
FMR Corp.(3)................................................ 9,207,551 12.4%
c/o Fidelity Management & Research Company
82 Devonshire Street
Boston, MA 02109
Putnam Investments, LLC(4).................................. 5,067,902 6.8%
One Post Office Square
Boston, MA 02109
David C. Hayden(5).......................................... 2,271,672 3.1%
Lisa A. Gansky.............................................. 162,137 *
Kevin M. Harvey(6).......................................... 1,886,919 2.5%
Amy Rao..................................................... 0 *
George Zachary.............................................. 58,824 *
Douglas T. Hickey(7)........................................ 1,269,410 1.7%
William H. Rinehart......................................... 132,325 *
Mark J. Rubash.............................................. 0 *
Mari E. Tangredi(8)......................................... 325,490 *
David A. Thatcher........................................... 224,060 *
Cynthia Diana Whitehead(9).................................. 113,293 *
All directors and executive officers as a group (17
persons)(10).............................................. 6,632,183 8.8%
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* Less than 1%.
(1) Unless otherwise indicated, the address for each of the executive officers
and directors above is c/o Critical Path, Inc., 532 Folsom Street, San
Francisco, California 94105.
(2) Applicable percentage ownership is based on 74,265,523 shares of Common
Stock outstanding as of April 16, 2001. Beneficial ownership is determined
in accordance with the rules and regulations of the Securities and Exchange
Commission. 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 held by that person that are currently exercisable or
exercisable within 60 days of April 16, 2001 are deemed outstanding. These
shares, however, are not deemed outstanding for the purposes of computing
the percentage ownership of another person. Except as indicated in the
footnotes to this table and pursuant
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to applicable community property laws, each shareholder named in the table
has sole voting and investment power with respect to the shares set forth
opposite such shareholder's name.
(3) FMR Corp. filed Amendment No. 1 to a Schedule 13G, dated February 14, 2001,
with the Securities and Exchange Commission on behalf of itself and related
parties. FMR Corp. reported sole voting power over 421,961 shares and sole
dispositive power over 9,207,551 shares.
(4) Putnam Investments, LLC ("Putnam Investments") filed a Schedule 13G, dated
February 13, 2001, with the Securities and Exchange Commission on behalf of
itself and related parties. Putnam Investments reported sole voting power
over none of the shares and sole dispositive power over 5,067,902 shares.
(5) Includes 29,256 shares subject to options exercisable within 60 days after
April 16, 2001.
(6) Includes 1,686,769 shares held by Benchmark Capital Partners II, L.P., of
which Mr. Harvey is a managing partner. Mr. Harvey disclaims beneficial
ownership of all such shares except to the extent of his pecuniary interest
therein.
(7) Includes 18,180 shares held in the name of Mr. Hickey's minor childrens'
name.
(8) Includes 263,490 shares subject to options exercisable within 60 days after
April 16, 2001.
(9) Includes 111,250 shares subject to options exercisable within 60 days after
April 16, 2001.
(10) See Footnotes (5) through (9). Includes 1,138,811 shares subject to options
exercisable within 60 days after April 16, 2001.
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COMPENSATION OF EXECUTIVE OFFICERS
The following table summarizes all compensation earned by or paid to the
Named Executive Officers for services rendered in all capacities to Critical
Path during the fiscal years ended December 31, 2000, 1999 and 1998.
SUMMARY COMPENSATION TABLE FOR LAST THE THREE FISCAL YEARS
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITY
-------------------------------------------- UNDERLYING
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS(1) OTHER OPTIONS (#)
--------------------------- ----------- -------- -------- ------- ------------
David C. Hayden(2)..................... 2000 $124,455 $200,000 -- --
Executive Chairman of the Board of 1999 222,157 -- -- --
Directors 1998 170,833 135,000 -- 1,364,482
Douglas T. Hickey(3)................... 2000 350,000 250,000 $61,281(4) --
Former Chief Executive Officer 1999 332,373 -- 52,908(5) --
1998 51,136 -- 8,818(6) 2,549,374
William H. Rinehart(7)................. 2000 194,000 25,000 -- --
Former Vice President of Worldwide 1999 185,000 -- -- --
Sales 1998 19,621 -- -- 454,545
Mark J. Rubash(8)...................... 2000 180,888 250,000(9) -- 475,000
Former Executive Vice President and 1999 -- -- -- --
Chief Financial Officer 1998 -- -- -- --
Mari E. Tangredi(10)................... 2000 185,000 60,000 -- --
Former Executive Vice President of 1999 140,000 -- -- --
Business Development, Sales and 1998 108,055 65,000 -- 431,816
Professional Services
David A. Thatcher(11).................. 2000 309,000 185,000 -- --
Former President 1999 185,000 -- -- --
1998 9,110 -- -- 848,836
Cynthia Diana Whitehead(12)............ 2000 185,000 30,000 -- 100,000
Former President 1999 126,614 43,215 -- 230,000
1998 -- -- -- --
- ---------------
(1) The Company paid discretionary bonuses to certain of its officers in fiscal
2000.
(2) Mr. Hayden served as the Company's Chairman, President, Chief Executive
Officer and Secretary from its inception in February 1997 to October 1998,
and as its Chairman of the Board of Directors and an employee from October
1998 to July 2000. Mr. Hayden ceased to be an employee of the Company in
July 2000, but continued as Chairman of the Board of Directors until his
appointment as Executive Chairman of the Board in February 2001. Mr. Hayden
was not compensated for his service as Chairman of the Board of Directors
after he ceased to be an employee.
(3) Mr. Hickey served as Chief Executive Officer of the Company from October
1998 until his resignation in February 2001, and was also its President
from October 1998 through January 2000.
(4) Includes $38,400 paid to Mr. Hickey for use of a corporate apartment,
$10,881 for use of a corporate automobile and $12,000 for investment
advisory fees.
(5) Includes $38,400 paid to Mr. Hickey for use of a corporate apartment and
$14,508 for use of a corporate automobile.
(6) Includes $6,400 paid to Mr. Hickey for use of a corporate apartment and
$2,418 for use of a corporate automobile.
(7) Mr. Rinehart commenced his employment with the Company in November 1998 and
served as the Company's Vice President of Worldwide Sales until his
separation from the Company in February 2001.
(8) Mr. Rubash served as the Company's Executive Vice President and Chief
Financial Officer from January 2000 until his resignation in December 2000.
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(9) Mr. Rubash received a bonus payment of $250,000 in connection with the
settlement agreement and mutual release he entered into with the Company in
December 2000.
(10) Ms. Tangredi commenced her employment with the Company in February 1998 and
served as its Executive Vice President of Business Development, Sales and
Professional Services at the time of her termination in April 2001.
(11) Mr. Thatcher served as the Company's Executive Vice President, Chief
Financial Officer and Secretary from December 1998 to January 2000, and as
its President and Secretary from January 2000 until his separation from the
Company in February 2001.
(12) Ms. Whitehead commenced her employment with the Company in March 1999 and
served as its President at the time of her termination in April 2001.
OPTION GRANTS IN FISCAL YEAR 2000
POTENTIAL REALIZABLE VALUE AT
PERCENTAGE OF ASSUMED ANNUAL RATES OF
TOTAL OPTIONS STOCK PRICE APPRECIATION FOR
GRANTED TO EXERCISE FOR OPTION TERMS(3)(4)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------------
NAME GRANTED(1) 2000(2) ($/SHARE)(3) DATE 5% 10%
---- ---------- ------------- ------------ ---------- ------------- -------------
David C. Hayden.......... -- -- -- -- -- --
Douglas T. Hickey........ -- -- -- -- -- --
William H. Rinehart...... -- -- -- -- -- --
Mark J. Rubash........... 475,000 2.60% $66.6875 01/18/04 $19,921,220 $50,484,283
Mari E. Tangredi......... -- -- -- -- -- --
David A. Thatcher........ -- -- -- -- -- --
Cynthia Diana
Whitehead.............. 100,000 0.05% $ 50.50 01/01/04 $ 3,175,918 $ 8,048,399
- ---------------
(1) These non-qualified stock options had a ten-year term, vested ratably on a
monthly basis, and were to become fully vested on the fourth anniversary of
the vest start date, but were each terminated due to the resignation or
separation of the officer's employment with the Company.
(2) Based on options to purchase an aggregate of 18,292,397 shares of Common
Stock granted during fiscal 2000.
(3) The exercise price was equal to the closing price of the Company's Common
Stock on Nasdaq, on the date of grant.
(4) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent Critical Path's
estimate or projection of the future common stock price. There can be no
assurance that any of the values reflected in the table will be achieved.
Actual gains, if any, on stock option exercises will depend on future
performance of the Company's Common Stock, the officer's continued
employment through applicable vesting periods and the date on which the
options are exercised.
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FISCAL YEAR END OPTION VALUES
The following table provides summary information concerning stock options
held as of December 31, 2000 by each of the Named Executive Officers. Six of the
Named Executive Officers exercised options in 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
SHARES AT FISCAL YEAR-END FISCAL YEAR-END(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
David C. Hayden...................... 1,335,226 $71,098,070 -- 28,410 $ -- $ 872,982
Douglas T. Hickey(3)................. 29,000 $ 909,194 230,169 1,015,518 $6,885,275 $30,378,205
William H. Rinehart.................. 198,864 $10,058,310 -- 217,803 -- $ 6,515,359
Mark J. Rubash....................... -- -- 98,958 -- -- --
Mari E. Tangredi..................... 36,000 $ 2,214,998 118,601 144,889 $3,531,037 $ 4,296,564
David A. Thatcher.................... 102,000 $ 7,338,228 186,055 288,055 $5,565,649 $ 8,616,877
Cynthia Diana Whitehead.............. 35,000 $ 1,101,800 88,541 206,459 $ 442,969 $ 873,281
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(1) The value realized is calculated by determining the difference between the
fair market value of the securities underlying the options and the exercise
price of the options at the time of exercise.
(2) The value of unexercised in-the-money options at fiscal year-end is based on
a price per share of $30.75, the closing price quoted on Nasdaq as of
December 29, 2000, less the exercise price.
(3) Mr. Hickey's option agreements allowed for early exercise subject to
repurchase by the Company over the vesting period. Shares that would, as of
December 31, 2000, be subject to repurchase if issued upon the exercise of
options, are reflected in the "Unexercisable" columns in the table above.
REPORT OF THE COMPENSATION COMMITTEE
The Company applies a consistent philosophy to compensation for all
employees, including senior management. This philosophy is based on the premise
that the achievements of the Company result from the coordinated efforts of all
individuals working toward common objectives. The Company strives to achieve
those objectives through teamwork that is focused on meeting the expectations of
customers and shareholders.
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 whose contributions are critical to the
long-term success of the Company. The Company's compensation program for
executive officers is based on the same four principles applicable worldwide to
compensation decisions for all employees of the Company:
- The Company pays competitively.
The Company is committed to maintaining a pay program that helps attract
and retain the best people in the industry. To ensure that pay is
competitive, the Company regularly compares its pay practices with those
of other leading companies and sets its pay parameters based in part on
this review.
- The Company pays for sustained performance.
Executive officers are rewarded based upon corporate performance,
business unit performance and individual performance. Corporate
performance and business unit performance are evaluated by reviewing the
extent to which strategic and business plan goals are met, including such
factors as profitability, performance relative to competitors and timely
new product introductions. Individual performance is evaluated by
reviewing organizational and management development progress against set
objectives and the degree to which teamwork and Company values are
fostered.
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- The Company strives for fairness in the administration of pay.
The Company strives to compensate a particular individual equitably
compared to other executives at similar levels both inside the Company
and at comparable companies.
- The Company believes that employees, including executive officers, should
understand the performance evaluation and pay administration process.
The process of assessing the performance is as follows:
1. At the beginning of the performance cycle, the evaluating manager and
the employee, or the Compensation Committee and the executive officer,
set and agree upon objectives and key goals.
2. The evaluating manager gives the employee ongoing feedback on
performance.
3. At the end of the performance cycle, the manager evaluates the
accomplishment of objectives and key goals.
4. The evaluating manager communicates the comparative results to the
employee.
5. The comparative results affect decisions on salary and, if applicable,
stock incentives.
COMPENSATION VEHICLES
The Company has had a successful history of using a simple total
compensation program that consists of cash and equity-based compensation. Having
a compensation program that allows the Company to attract and retain key
employees permits it to provide useful products and services to customers,
enhance shareholder value, motivate technological innovation, foster teamwork,
and adequately reward employees. The vehicles are:
- CASH-BASED COMPENSATION
Salary
The Company establishes salary ranges for employees, including executive
officers, by reviewing the aggregate of base salaries for competitive
positions in the market. The Company uses salary survey data and
generally, the Company sets its competitive salary midpoint for an
executive officer position at the median level compared to those
companies it surveys. The Company then creates a salary range based on
this midpoint. The range is designed to place an executive officer at,
above or below the midpoint, according to that officer's overall
individual performance. As described above, overall individual
performance is measured against the following factors: long-term
strategic goals, short-term business goals, the development of employees
and the fostering of teamwork and other Company values. In both setting
goals and measuring an executive officer's performance against those
goals, the Company takes into account the performance of its competitors
and general economic and market conditions. None of the factors included
in the Company's strategic and business goals is assigned a specific
weight. Instead, the Company recognizes that these factors may change in
order to adapt to specific business challenges and to changing economic
and marketplace conditions.
The Company does not have a formal bonus plan. However, discretionary
bonuses were paid to certain officers in fiscal 2000.
- EQUITY-BASED COMPENSATION
Stock Incentive Program
The purpose of this program is to provide additional incentives to
employees to work towards maximizing shareholder value. The Company also
recognizes that a stock incentive program is a necessary element of a
competitive compensation package for its employees. The program utilizes
vesting periods to encourage key employees to continue in the employ of
the Company and thereby acts
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as a retention device for key employees. The Company believes that the
program encourages employees to maintain a long-term perspective.
CEO COMPENSATION
Douglas T. Hickey served as the Chief Executive Officer and a director of
Critical Path from October 1998 to February 2001, and was also President of the
Company from October 1998 through January 2000. The Compensation Committee used
the same compensation policy described above for all employees to determine Mr.
Hickey's fiscal 2000 compensation.
In setting both the cash-based and equity-based elements of Mr. Hickey's
compensation, the Compensation Committee made an overall assessment of Mr.
Hickey's leadership in achieving the Company's long-term strategic and business
goals.
COMPENSATION COMMITTEE
Lisa A. Gansky
George Zachary
TRANSACTIONS WITH RELATED PARTIES
ACQUISITION
In March 2000, the Company acquired RemarQ Communities, Inc. ("RemarQ") for
a total purchase price of approximately $267.6 million consisting of Common
Stock valued at $259.3 million, assumed stock options with an estimated fair
market value of $7.7 million, and other acquisition related expenses of
approximately $600,000. At the time of acquisition, Benchmark Capital Partners
II, L.P. ("Benchmark") held approximately 29% of RemarQ's outstanding shares.
Kevin Harvey is a managing member of Benchmark and served as a director of
RemarQ. Additionally, David Hayden and Lisa Gansky each served on RemarQ's
advisory Board and held a nominal number of RemarQ stock options.
SEVERANCE AGREEMENTS
Mark Rubash resigned as Executive Vice President and Chief Financial
Officer of the Company in December 2000. In connection with his resignation, Mr.
Rubash entered into a settlement agreement and mutual release. Pursuant to the
agreement, Mr. Rubash received a bonus payment of $250,000.
Douglas Hickey resigned as Chief Executive Officer of the Company in
February 2001. In connection with his resignation, Mr. Hickey entered into an
agreement and release detailing his resignation from the Company. Pursuant to
the agreement, Mr. Hickey received (i) nine months base salary plus automobile
allowance, (ii) immediate vesting of all stock options that would vest on or
prior to August 9, 2001, (iii) continuing health benefit coverage through
February 2002, including payment for his annual physical and related travel
expenses, (iv) continuation of existing financial planning services, and (v) use
of the Company's corporate apartment until May 2001. The Company and Mr. Hickey
were parties to a letter agreement dated October 1, 1998 governing his
employment with the Company. The agreement had set forth Mr. Hickey's
compensation level and eligibility for salary increases, bonuses, benefits and
option grants under the 1998 Stock Plan. In connection with his employment
agreement, Mr. Hickey received a loan in the amount of $500,000, bearing
interest at 4.51%. The repayment of the loan has been extended until March 2002
and shall remain nonrecourse. In November 1998, the Company loaned Douglas
Hickey, the Company's former Chief Executive Officer, $1.1 million pursuant to a
promissory note bearing interest at the rate of 4.51% per annum. In connection
with Mr. Hickey's resignation from the Company, the repayment of the loan has
been extended to May 2002.
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LOANS TO OFFICERS
In January 1999, the Company loaned William Rinehart, the Company's former
Vice President of Worldwide Sales, $65,000 pursuant to a promissory note bearing
interest at the rate of 4.64% per annum. The note is presently due and payable.
In January 2000, the Company loaned Mark Rubash, the Company's former
Executive Vice President and Chief Financial Officer, $100,000. The loan was
repaid in full in December 2000 in connection with Mr. Rubash's resignation from
the Company.
In December 2000, the Company loaned Lawrence Reinhold, the Company's
Executive Vice President and Chief Financial Officer, $1.7 million. The loan
accrues interest at 6.0% per annum and both principal and accrued interest are
being forgiven over a specified period. Additionally, the repayment of the
outstanding loan is subject to certain change of control and employment
termination criteria.
COMMERCIAL RELATIONSHIPS
During 2000, the Company leased an aircraft, for use by certain officers of
the Company, from D Squared LLC, in which Douglas Hickey and David Thatcher, the
Company's former Chief Executive Officer and former President respectively, had
a direct investment. The aggregate amount billed to the Company for the use of
the aircraft or other aircraft arranged through D Squared LLC aggregated
approximately $337,000.
Effective March 2001, the Company entered into an agreement with Vectis
Group, LLC ("Vectis Group") to engage Vectis Group as an advisor to the Company
with respect to various strategic alternatives the Company is currently
exploring. The agreement provides Vectis Group with (i) a $50,000 monthly
retainer fee during the term of the agreement, (ii) a warrant to purchase
500,000 shares of the Company's Common Stock at a price of $2.00 per share, and
(iii) transaction fees in connection with certain dispositions or acquisitions
of assets in an amount equal to 5% of proceeds, up to a maximum of $1 million
per transaction. The agreement may be terminated at the option of either party
upon 60 days notice, and Vectis Group may be entitled to transaction fees under
certain scenarios for twelve months following the termination of the agreement.
Effective March 2001, the Company entered into an agreement with Vectis
Group to engage Vectis Group as a placement agent in connection with a possible
private placement by Critical Path of equity securities. Under the agreement,
Vectis Group is entitled to 5% of the gross proceeds raised by the Company from
specified purchasers, payable in cash, securities or a combination thereof at
the election of Vectis Group. The agreement may be terminated at the option of
either party upon 10 days notice, and Vectis Group may be entitled to
transaction fees under certain scenarios for twelve months following the
termination of the agreement.
Effective April 2001, the Company and Vectis Group agreed to enter into an
additional agreement whereby Vectis Group would act as an advisor with respect
to a restructuring of and management of the Company. The agreement provides
Vectis Group with a monthly retainer fee of $125,000 during the term of the
agreement. The agreement may be terminated at the option of either party upon
sixty 60 days notice.
William McGlashan, Jr., who was appointed the Company's interim President
and Chief Operating Officer in April 2001, serves as the Chief Executive Officer
of Vectis Group and holds a significant beneficial ownership in Vectis Group.
David Hayden, the Company's Executive Chairman of the Board, serves on Vectis
Group's Advisory Board and Executive Committee (a body that provides input but
does not have any decision making authority with respect to Vectis Group). Mr.
Hayden is also the Executive Chairman and founder of Archipelago, a global
holding company. Archipelago has a commitment to invest $1 million in Vectis
Group in exchange for (i) an 8% annual return and (ii) a right, in its
discretion, to purchase 15% of future investment opportunities generated by
Vectis Group. Mr. Hayden does not have any equity or voting interests in Vectis
Group and will not receive any compensation related to the Company's
relationship with Vectis Group.
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INDEMNIFICATION
The Company's articles of incorporation limit the liability of its
directors for monetary damages arising from a breach of their fiduciary duty as
directors, except to the extent otherwise required by the California
Corporations Code. Such limitation of liability does not affect the availability
of equitable remedies such as injunctive relief or rescission.
The Company's bylaws provide that the Company may indemnify its directors
and officers to the fullest extent permitted by California law, including in
circumstances in which indemnification is otherwise discretionary under
California law. The Company also has entered into indemnification agreements
with its officers and directors containing provisions that may require the
Company, among other things, to indemnify such officers and directors against
certain liabilities that may arise by reason of their status or service as
directors or officers (other than liabilities arising from willful misconduct of
a culpable nature), to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and to obtain
directors' and officers' insurance if available on reasonable terms.
RELATED TRANSACTIONS POLICY
The Company believes that the foregoing transactions were in its best
interests. It is the Company's current policy that all transactions by the
Company with officers, directors, five percent shareholders and their affiliates
will be entered into only if such transactions are approved by a majority of the
disinterested independent directors, are on terms no less favorable to the
Company than could be obtained from unaffiliated parties and are reasonably
expected to benefit the Company.
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STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on the
Company's Common Stock with the cumulative total return on the NASDAQ Stock
Market (U.S. companies) Index and the JP Morgan H&Q Internet 100 Index (formerly
the Chase Internet Index). The period shown commences on March 29, 1999, the
Company's first trading day on NASDAQ, and ends on December 31, 2000, the end of
the Company's last fiscal year. The graph assumes an investment of $100 on March
29, 1999, and the reinvestment of any dividends.
The comparisons in the graph below are based on historical data and are not
indicative of, nor intended to forecast, future performance of the Company's
Common Stock.
COMPARISON OF 21 MONTH CUMULATIVE TOTAL RETURN*
AMONG CRITICAL PATH, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE JP MORGAN H&Q INTERNET 100 INDEX
[PERFORMANCE GRAPH]
NASDAQ STOCK JP MORGAN H & Q
CRITICAL PATH, INC. MARKET (U.S.) INTERNET 100
------------------- ------------- ---------------
3/29/99 100.00 100.00 100.00
3/99 116.89 98.70 98.56
6/99 83.97 107.97 101.51
9/99 61.24 110.66 104.35
12/99 143.26 163.55 202.00
3/00 129.03 183.58 210.99
6/00 88.52 159.63 156.52
9/00 92.22 146.89 150.57
12/00 46.68 98.32 77.72
* $100 invested on 3/29/99 in stock or index -- including reinvestment of
dividends. Fiscal year ending December 31.
- ---------------------------------------------------------------------------------------------------------------------------------
3/29/99 3/99 6/99 9/99 12/99 3/00 6/00 9/00 12/00
- ---------------------------------------------------------------------------------------------------------------------------------
Critical Path, Inc. 100.00 116.89 83.97 61.24 143.26 129.03 88.52 92.22 46.68
NASDAQ Stock Market (U.S.) 100.00 98.70 107.97 110.66 163.55 183.58 159.63 146.89 98.32
JP Morgan H & Q Internet 100 100.00 98.56 101.51 104.35 202.00 210.99 156.52 150.57 77.32
- ---------------------------------------------------------------------------------------------------------------------------------
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this proxy statement, in whole or in part, the preceding Report of the
Compensation Committee and the preceding Performance Graph shall not be
incorporated by reference into any of these filings; nor shall the report or
graph be incorporated by reference into any future filings.
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REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. The Audit Committee is responsible for
providing independent, objective oversight of the Company's accounting functions
and internal controls. Management has the primary responsibility for the
financial statements and the reporting process, including the systems of
internal controls. The Audit Committee acts under a written charter first
adopted and approved by the Board of Directors in June 2000. Each of the members
of the Audit Committee is independent as defined by the Company's standards as
set forth in the Audit Committee Charter and the Nasdaq listing standards. A
copy of the Audit Committee Charter is attached to this Proxy Statement as
Exhibit A.
In fulfilling its oversight responsibilities, the Audit Committee reviewed
and discussed the audited financial statements in the Company's Annual Report on
Form 10-K with management, including a discussion of the quality, not just the
acceptability, of the accounting principles, the reasonableness of significant
judgments, and the clarity of disclosures in the financial statements for the
fiscal year ended December 31, 2000. Additionally, this year the Audit Committee
adopted the Audit Committee Charter to reflect the new standards set forth in
SEC regulations and the Nasdaq listing standards.
The Audit Committee is responsible for recommending to the Board of
Directors that the Company's financial statements be included in the Company's
Annual Report on Form 10-K. The Audit Committee took several steps in making
this recommendation for 2000, including, discussing with PricewaterhouseCoopers
LLP, the Company's independent accountants, those matters the independent
accountants communicated to and reviewed with the Audit Committee under
applicable auditing standards, including information regarding the scope and
results of the audit. Additionally, the Audit Committee met with the independent
accountants, with and without management present, to discuss the results of
their examinations, their evaluations of the Company's internal controls, and
the overall quality of the Company's financial reporting. The Audit Committee
reviewed with the independent accountants, who are responsible for expressing an
opinion on the conformity of the Company's audited financial statements with
generally accepted accounting principles, their judgments as to the quality, not
just the acceptability, of the Company's accounting principles and such other
matters as are required to be discussed with the Audit Committee under generally
accepted auditing standards and in compliance with Statement on Auditing
Standards No. 61. These communications and discussions are intended to assist
the Audit Committee in overseeing the financial reporting and disclosure
process.
In addition, the Audit Committee has discussed with the Company's
independent accountants, their independence from management and the Company,
including the matters received in the written disclosures and the letter
required by the Independence Standards Board Standard No. 1. This discussion and
disclosure informed the Audit Committee of the accountants' independence, and
assisted the Audit Committee in evaluating such independence.
Finally, the Audit Committee reviewed and discussed, with the Company's
management and the independent accountants, the Company's audited consolidated
balance sheet at December 31, 2000 and December 31, 1999, and consolidated
statements of operations, shareholders' equity and cash flows for the three
years ended December 31, 2000. In reliance on the reviews and discussions
referred to above, the Audit Committee recommended to the Board of Directors and
the Board approved the inclusion of the audited financial statements in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000 for
filing with the Securities and Exchange Commission.
AUDIT COMMITTEE FEE DISCLOSURES
Set forth below is a discussion of the fees for which
PricewaterhouseCoopers LLP billed the Company in connection with fiscal 2000.
AUDIT FEES. Fees billed to the Company by PricewaterhouseCoopers LLP for
the audit of the Company's annual financial statements for fiscal 2000 and for
the review of the financial statements included in the Company's quarterly
reports on Form 10-Q totaled $2,346,696.
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FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. Fees billed
to the Company for financial information systems design and implementation
services provided by PricewaterhouseCoopers LLP during fiscal 2000 totaled
$2,483,784.
ALL OTHER FEES. Fees billed to the Company by PricewaterhouseCoopers LLP
during fiscal 2000 for all other non-audit services rendered, including tax
related services, totaled $1,557,537.
AUDIT COMMITTEE INDEPENDENCE. The Audit Committee has considered the role
of PricewaterhouseCoopers LLP in providing the Company with information
technology services and other non-audit services, such as tax related services
and valuations of the fair value and certain intangible assets, and has
concluded that such services are compatible with PricewaterhouseCoopers LLP's
independence from management and from the Company.
All persons who spent more then fifty percent of their hours of employment
on performing audits of us during fiscal 2000 were full-time permanent employees
of PricewaterhouseCoopers LLP.
AUDIT COMMITTEE
Kevin R. Harvey
George Zachary
Representatives of PricewaterhouseCoopers LLP, independent public accountants
for the Company for fiscal 2000 and the current fiscal year, are expected to be
present at the Annual Meeting, will have an opportunity to make a statement, and
will be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
If a shareholder entitled to vote for the election of directors at a
meeting wishes to propose a candidate for consideration by the Board of
Directors as a possible nominee for management's proposed slate of directors, or
such shareholder wishes to make a director nomination at a shareholder meeting,
then such shareholder must give written notice of his or her intent to make such
nomination, either by personal delivery or by United States mail, postage
prepaid, to Attention: Secretary, Critical Path, Inc., 532 Folsom Street, San
Francisco, California 94105, not later than: (i) with respect to the election to
be held at an Annual Meeting of shareholders, 90 days in advance of such
meeting, and (ii) with respect to any election to be held at a special meeting
of shareholders for the election of directors, the close of business on the
seventh day following the date on which notice of such meeting is first given to
shareholders. Each notice must set forth:
- the name and address of the shareholder who intends to make the
nomination and of the person or persons to be nominated,
- a representation that such shareholder is a holder of record of stock of
the Company entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to nominate the person or persons
specified in the notice,
- a description of all arrangements or understandings between such
shareholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to
be made by such shareholder,
- such other information regarding each nominee proposed by the SEC if such
nominee had been nominated by the Board of Directors, and
- the consent of each nominee to serve as a director of the Company if
elected. The chairman of a shareholder meeting may refuse to acknowledge
the nomination of any person not made in compliance with the foregoing
procedure.
Proposals of shareholders that are intended to be presented at the
Company's annual meeting of shareholders in 2002 must be received by January 19,
2002, to be included in the proxy statement and proxy
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relating to that meeting. Shareholder proposals received by the Company after
that time will be considered untimely.
MATTERS NOT DETERMINED AT THE TIME OF SOLICITATION
The Board is not aware of any other matters to come before the meeting. If
any other matter should come before the meeting, then the persons named in the
enclosed form of proxy will have discretionary authority to vote all proxies
with respect thereto in accordance with their judgment.
VOTE OF PROXIES
All shares represented by duly executed proxies will be voted for the
election of the nominees named above as directors unless authority to vote for
the proposed slate of directors or any individual director has been withheld. If
for any unforeseen reason any of such nominees should not be available as a
candidate for director, the proxies will be voted in accordance with the
authority conferred in the proxy for such other candidate or candidates as may
be nominated by the Board of Directors.
By Order of the Board of Directors,
/s/ WILLIAM E. MCGLASHAN, JR.
William E. McGlashan, Jr.
Secretary
Dated: May 15, 2001
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EXHIBIT A
CHARTER FOR THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF
CRITICAL PATH, INC.
PURPOSE:
The purpose of the Audit Committee of the Board of Directors of Critical
Path, Inc. (the "Company") shall be:
- to provide oversight and monitoring of Company management and the
independent auditors and their activities with respect to the Company's
financial reporting process;
- to provide the Company's Board of Directors with the results of its
monitoring and recommendations derived therefrom;
- to nominate to the Board of Directors independent auditors to audit the
Company's financial statements and oversee the activities and
independence of the auditors; and
- to provide to the Board of Directors such additional information and
materials as it may deem necessary to make the Board of Directors aware
of significant financial matters that require the attention of the Board
of Directors.
The Audit Committee will undertake those specific duties and
responsibilities listed below and such other duties as the Board of Directors
may from time to time prescribe.
MEMBERSHIP:
The Audit Committee members will be appointed by, and will serve at the
discretion of, the Board of Directors and will consist of at least three members
of the Board of Directors. On or before June 14, 2001, the members will meet the
following criteria:
1. Each member will be an independent director, in accordance with the
Nasdaq National Market Audit Committee requirements;
2. Each member will be able to read and understand fundamental financial
statements, in accordance with the Nasdaq National Market Audit
Committee requirements; and
3. At least one member will have past employment experience in finance or
accounting, requisite professional certification in accounting, or other
comparable experience or background, including a current or past
position as a chief executive or financial officer or other senior
officer with financial oversight responsibilities.
RESPONSIBILITIES:
The responsibilities of the Audit Committee shall include:
- Providing oversight and monitoring of Company management and the
independent auditors and their activities with respect to the Company's
financial reporting process;
- Recommending the selection and, where appropriate, replacement of the
independent auditors to the Board of Directors;
- Reviewing fee arrangements with the independent auditors;
- Reviewing the independent auditors' proposed audit scope, approach and
independence;
- Reviewing the performance of the independent auditors, who shall be
accountable to the Board of Directors and the Audit Committee;
A-1
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- Requesting from the independent auditors of a formal written statement
delineating all relationships between the auditor and the Company,
consistent with Independent Standards Board Standard No. 1, and engaging
in a dialogue with the auditors with respect to any disclosed
relationships or services that may impact the objectivity and
independence of the auditors;
- Directing the Company's independent auditors to review before filing with
the Securities and Exchange Commission the Company's interim financial
statements included in Quarterly Reports on Form 10-Q, using professional
standards and procedures for conducting such reviews;
- Discussing with the Company's independent auditors the matters required
to be discussed by Statement on Accounting Standard No. 61, as it may be
modified or supplemented;
- Reviewing with management, before release, the audited financial
statements and Management's Discussion and Analysis in the Company's
Annual Report on Form 10-K;
- Providing a report in the Company's proxy statement in accordance with
the requirements of Item 306 of Regulation S-K and Item 7(e)(3) of
Schedule 14A;
- Reviewing the Audit Committee's own structure, processes and membership
requirements; and
- Performing such other duties as may be requested by the Board of
Directors.
MEETINGS:
The Audit Committee will meet at least quarterly. The Audit Committee may
establish its own schedule, which it will provide to the Board of Directors in
advance.
The Audit Committee will meet separately with the independent auditors as
well as members of the Company's management as it deems appropriate in order to
review the financial controls of the Company.
MINUTES:
The Audit Committee will maintain written minutes of its meetings, which
minutes will be filed with the minutes of the meetings of the Board of
Directors.
REPORTS:
Apart from the report prepared pursuant to Item 306 of Regulation S-K and
Item 7(e)(3) of Schedule 14A, the Audit Committee will summarize its
examinations and recommendations to the Board from time to time as may be
appropriate, consistent with the Committee's charter.
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CRITICAL PATH, INC.
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 6, 2001
The undersigned hereby appoints David C. Hayden and William E. McGlashan, Jr.,
and each of them, as attorneys and proxies of the undersigned, with full power
of substitution, to vote all of the shares of common stock of Critical Path,
Inc. which the undersigned may be entitled to vote at the Annual Meeting of
Shareholders of Critical Path, Inc. to be held at the Park Hyatt, located at 333
Battery Street, San Francisco, California on Wednesday, June 6, 2001 at 10:00
a.m. local time, and at any and all postponements, continuations and
adjournments thereof, with all powers that the undersigned would possess if
personally present, upon and in respect of the following matters and in
accordance with the following instructions.
Unless a contrary direction is indicated, this Proxy will be voted for Proposals
1 and 2, as more specifically described in the Proxy Statement. If specific
instructions are indicated, this Proxy will be voted in accordance therewith.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
PROPOSAL 1: To elect five directors to serve until the next Annual Meeting and
until their successors have been elected and qualified consisting
of Kevin R. Harvey, David C. Hayden, William E. McGlashan, Jr., Amy
Rao and George Zachary:
[ ] FOR ALL NOMINEES [ ] WITHHELD FROM ALL NOMINEES
[ ] FOR ALL NOMINEES, EXCEPT AS NOTES ABOVE
25
Dated:
-----------------------------------,
2001
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SIGNATURE(S)
Please sign exactly as your name
appears hereon. If the stock is
registered in the names of two or
more persons, each should sign.
Executors, administrators,
trustees, guardians and
attorneys-in-fact should add their
titles. If signer is a corporation,
please give full corporate name and
have a duly authorized officer
sign, stating title. If signer is a
partnership, please sign in
partnership name by authorized
person.
PLEASE VOTE, DATE, SIGN AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE
THAT IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.