SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
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|_| Preliminary Proxy Statement |_| Confidential, for Use of
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permitted by Rule 14a-6(e)(2))
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|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
OFFICIAL PAYMENTS CORPORATION
- -----------------------------------------------------------------------------
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|X| No fee required.
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by registration statement number, or the Form or Schedule and the
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As filed with the Commission on April 3, 2001
[OPC LOGO]
Three Landmark Square
Stamford, Connecticut 06901-2501
------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 8, 2001
------------------------------
To the Stockholders:
The Annual Meeting of Stockholders of Official Payments Corporation,
a Delaware corporation, will be held on Tuesday, May 8, 2001 at 10:00 a.m.,
local time, at the Landmark Club, One Landmark Square, 22nd Floor,
Stamford, Connecticut 06901 for the following purposes:
1. To elect nine members of the Board of Directors, each to serve
until the 2002 Annual Meeting of Stockholders and until a
successor is elected and qualified;
2. To ratify the selection of the firm of KPMG LLP as independent
auditors for the fiscal year ending December 31, 2001; and
3. To transact such other business as may properly come before the
meeting and any adjournments thereof.
Only stockholders of record at the close of business on March 28,
2001 are entitled to notice of and to vote at the Annual Meeting and at any
and all adjournments or postponements thereof.
By Order of the Board of Directors,
Mitchell H. Gordon
Senior Vice President, General Counsel
and Secretary
April 3, 2001
OFFICIAL PAYMENTS CORPORATION
Three Landmark Square
Stamford, Connecticut 06901-2501
PROXY STATEMENT
April 3, 2001
This Proxy Statement and the accompanying proxy card are being mailed
to stockholders beginning on or about April 3, 2001. They are furnished in
connection with the solicitation by the Board of Directors of Official
Payments Corporation (the "Company") of proxies from the holders of the
Company's common stock, par value $.01 per share ("Common Stock"), for use
at the Annual Meeting of Stockholders to be held at the time and place and
for the purposes set forth in the accompanying notice (the "Annual
Meeting").
PURPOSE OF THE MEETING
At the Annual Meeting, stockholders will act upon the election of
nine directors and ratification of the selection of KPMG LLP as the
Company's independent auditors for the fiscal year ending December 31,
2001.
RECORD DATE AND VOTING SECURITIES
Only holders of record of Common Stock at the close of business on
March 28, 2001 (the "Record Date") will receive notice of, and be entitled
to vote at, the Annual Meeting. At the close of business on the Record
Date, 21,978,115 shares of Common Stock were outstanding and entitled to
vote. The Common Stock is the only class of outstanding voting securities
of the Company.
QUORUM AND VOTING
The presence at the Annual Meeting, in person or by proxy, of the
holders of a majority of the votes entitled to be cast by the stockholders
entitled to vote generally as of the Record Date is necessary to constitute
a quorum to transact business. Abstentions and broker non-votes, if any,
will be counted for purposes of determining the presence of a quorum. In
deciding all matters, a holder of Common Stock on the Record Date shall be
entitled to cast one vote for each share of Common Stock then registered in
such holder's name.
Election of the director nominees named in Proposal No. 1 requires
the affirmative vote of a plurality of the votes cast by the stockholders
entitled to vote thereon at the Annual Meeting, who are present in person
or represented by proxy. Votes may be cast in favor of or withheld with
respect to any or all of the director nominees. Abstentions and broker
non-votes, if any, will not be counted as having been voted and will have
no effect on the outcome of the vote on the election of directors.
Ratification of the selection of KPMG LLP as the Company's
independent auditors for fiscal year 2001, as specified in Proposal No. 2,
requires the affirmative vote of a majority of the votes cast by the
stockholders entitled to vote thereon at the Annual Meeting, who are
present in person or represented by proxy. Abstentions and broker
non-votes, if any, will not be counted as having been voted and will have
no effect on the outcome of the vote on Proposal No. 2.
EXPENSES OF PROXY SOLICITATION
The Company is soliciting the proxies and will bear the entire cost
of this solicitation, including the preparation, assembly, printing and
mailing of this Proxy Statement and any additional materials furnished to
the Company's stockholders. Copies of solicitation material will be
furnished to brokerage houses, fiduciaries and custodians holding shares in
their names that are beneficially owned by others so that they may forward
this solicitation material to such beneficial owners. In addition, if
asked, the Company will reimburse such persons for their reasonable
expenses in forwarding the solicitation materials to such beneficial
owners. The original solicitation of proxies by mail may be supplemented by
telephone, telegram, telecopy, Internet and personal solicitation by
directors, officers or other regular employees of the Company. The Company
has retained Innisfree M&A Incorporated to assist it in the solicitation of
proxies for approximately $6,000, plus out-of- pocket expenses.
VOTING PROCEDURES
Stockholders of record should sign, date and return the proxy card in
the enclosed pre-paid envelope. By so casting a vote in such manner, you
are authorizing the individuals listed on the proxy to vote your shares in
accordance with your instructions. If you want to vote in person at the
Annual Meeting and you hold Common Stock in "street name," you must obtain
a proxy from your broker and bring that proxy to the Annual Meeting.
If the enclosed proxy is properly signed and returned, the shares
represented thereby will be voted at the Annual Meeting in accordance with
the instructions specified therein. If the proxy does not specify how the
shares represented thereby are to be voted, the shares represented by the
proxy will be voted: (i) "FOR" the election of the director nominees
proposed by the Board of Directors and (ii) "FOR" the ratification of the
selection of KPMG LLP as the Company's independent auditors for the fiscal
year ending December 31, 2001.
You may revoke your proxy by doing any of the following:
- File a written notice of revocation with the Secretary of the
Company, dated later than the proxy but before the vote is taken
at the Annual Meeting;
- Execute a later dated proxy before the vote is taken at the Annual
Meeting; or
- Vote in person at the Annual Meeting (your attendance at the
Annual Meeting, in and of itself, will not revoke the earlier
proxy).
Any written notice of revocation, or later dated proxy, should be
delivered to:
Official Payments Corporation
Three Landmark Square
Stamford, CT 06901-2501
Attention: Mitchell H. Gordon, Secretary
If you have any questions or need assistance in voting your shares,
please call:
INNISFREE M&A INCORPORATED
Toll Free: 1-888-750-5834
PROPOSAL NO. 1
ELECTION OF DIRECTORS
GENERAL
Nine directors are to be elected at the Annual Meeting, each to serve
until the 2002 Annual Meeting of Stockholders and until a successor is
elected and qualified. Each of the nominees of the Company has consented to
serve as a director if elected at the Annual Meeting and, to the best
knowledge of the Company as of the date of this Proxy Statement, is and
will be able to serve if so elected. In the event that any of the nominees
listed below should be unavailable to stand for election before the Annual
Meeting, the persons named in the accompanying proxy intend to vote for
such other person, if any, as may be designated by the Board of Directors,
in the place of any nominee unable to serve. Norman P. Creighton, a current
director of the Company and officer of Comerica Bank-California (a wholly
owned subsidiary of Comerica Incorporated, the beneficial owner of
approximately 55% of the Company's outstanding common stock), is not
standing for re- election to the Board. The Board has nominated John D.
Lewis, an officer and director of Comerica Incorporated, to fill the
directorship being vacated by Mr. Creighton.
Set forth below is the name, age and principal occupation of each
person nominated as a director by the Board of Directors, as well as such
individuals' positions with the Company and business experience during at
least the last five years and the year each was first elected or appointed
a director.
ANDREW COHAN. Mr. Cohan has served as a director of the Company since
November 1999. Since July 2000, Mr. Cohan has served as Senior Vice
President, Licensing, Marketing and Merchandising for Hyper Entertainment
Inc., an entertainment licensing and marketing company. From September 1999
to July 2000, Mr. Cohan was Chairman and Chief Executive Officer of Artist
Marketing Corp., a marketing company for artists and
entertainment/celebrity figures. From August 1997 to September 1999, Mr.
Cohan was Senior Vice President, Worldwide Entertainment, Licensing and
Marketing for Sony Signature, an entertainment licensing and marketing
company. From January 1996 to July 1997, Mr. Cohan was Senior Vice
President, Chief Merchandising Officer for Beverages and More, a start-up
beverages retailer. Before that, Mr. Cohan was Vice President,
Merchandising for Emerson Radio Corporation from February 1994. Age: 46.
CHRISTOS M. COTSAKOS. Mr. Cotsakos has served as a director of the
Company since November 1999. Mr. Cotsakos is the Chairman of the Board of
Directors and Chief Executive Officer of E*TRADE Group, Inc., an on-line
financial services company. Prior to joining E*TRADE, he served as
President, Co-Chief Executive Officer, Chief Operating Officer and a
director of A.C. Nielsen, Inc. from March 1995 to January 1996, as
President and Chief Executive Officer of Nielsen International from
September 1993 to March 1995, and as President and Chief Operating Officer
of Nielsen Europe, Middle East and Africa from March 1992 to September
1993. Mr. Cotsakos joined Nielsen after 19 years with the Federal Express
Corporation, where he held a number of senior executive positions. Mr.
Cotsakos serves as a director of Fox Entertainment Group, Inc., Webvan
Group, Inc., PlanetRX.com, Inc., Digital Island, Inc. and Critical Path,
Inc., as well as several technology companies in the private sector. Age:
52.
THOMAS R. EVANS. Mr. Evans has served as Chairman of the Board and
Chief Executive Officer of the Company since August 1999. From April 1998
to May 1999, Mr. Evans was the President and Chief Executive Officer of
GeoCities, Inc., which was acquired by Yahoo! Inc. in May 1999. From 1991
to April 1998, Mr. Evans served as President and Publisher of U.S. News &
World Report. From January 1997 to April 1998, Mr. Evans also served as
President and Publisher of The Atlantic Monthly. In addition, from May 1995
to April 1998, Mr. Evans served as President and Publisher of Fast Company,
a magazine that showcases business people and ideas. Age: 46.
GEORGE L. GRAZIADIO, JR. Mr. Graziadio has served as a director of
the Company since November 1999. Since January 2001, Mr. Graziadio has
served as the Chairman of the Board of Comerica Bank-California, having
previously served as President and Chief Executive Officer of Imperial
Bancorp, a bank holding company, from 1969 until January 2001. Mr.
Graziadio is engaged as an owner or partner in many other business
activities, primarily in the real estate industry. Age: 81.
JOHN D. LEWIS. Mr. Lewis is a nominee to be a director of the
Company. He has served as Vice Chairman and a director of Comerica
Incorporated since January 1994 and Vice Chairman of Comerica Bank since
March 1995. Mr. Lewis also held these officer positions with Comerica
Incorporated and Comerica Bank between January 1990 and June 1992 and
served as a director of Comerica Incorporated between 1989 and 1992. Mr.
Lewis was Executive Vice President of Comerica Incorporated from June 1992
to January 1994.
VERNON R. LOUCKS JR. Mr. Loucks has served as a director of the
Company since November 1999. Mr. Loucks is the Chairman of InLight, Inc., a
provider of technology solutions that improve the efficiency and outcomes
of medical care. During 1998 and 1999, Mr. Loucks was Chairman of the Board
of Directors of Baxter International Inc., a developer, distributor and
manufacturer of health care products and services, and previously served as
Baxter's Chief Executive Officer from 1980 through 1998. Mr. Loucks also
serves as a director of Affymetrix, Inc., Anheuser-Busch Companies, Inc.,
Emerson Electric Company and The Quaker Oats Company. Age: 66.
LEE E. MIKLES. Mr. Mikles has served as a director of the Company
since November 1999. Mr. Mikles is the Chairman of Mikles/Miller Management
Inc., an investment advisor, and Chairman of Mikles/Miller Securities, LLC,
a registered broker/dealer. Mr. Mikles served as a director of Imperial
Bancorp from 1996 until 2000 and its wholly owned subsidiary, Imperial
Bank, from 1993 to 2000. Mr. Mikles currently serves on the board of
directors of Coastcast Corp., Boss Holdings, Inc., Center Span
Communications Corp. and The National Education Loan Network, Inc. Age: 45.
BRUCE S. NELSON. Mr. Nelson has served as a director of the Company
since November 1999. Since September 2000, Mr. Nelson has served as
Executive Vice President, Chief Marketing Officer of The Interpublic Group
of Companies, Inc. Mr. Nelson also currently serves as a marketing and
advertising consultant to the Company (see "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS"). From March 1998 through September 1999, he was Vice
Chairman, Chief Knowledge Officer of Young & Rubicam Inc. Prior to that
position, he worked at McCann-Erickson Worldwide for 19 years in various
positions, including as Director of Worldwide Accounts, Director of
Strategy for Worldwide Accounts and Creative Director for Worldwide
Accounts. Mr. Nelson is also a director of PCSupport.com. Age: 49.
KENNETH STERN. Mr. Stern, the Company's founder, has served as
President and a director of the Company since 1986. From 1984 to 1986, Mr.
Stern held a senior management position in software development at Integral
Systems. From 1976 to 1984, Mr. Stern was Vice President of Systems
Development at Tessereact Corporation. Age: 53.
CERTAIN INFORMATION CONCERNING THE BOARD OF DIRECTORS
Board of Directors and Committees of the Board. The Board of
Directors held seven meetings during 2000. In 2000, all incumbent directors
attended at least 75% of the aggregate number of meetings of the Board of
Directors and committees of the Board on which they served that were held
after their appointment, except for Mr. Loucks, who attended 73% of such
meetings.
The Board has established an Audit Committee and a Compensation
Committee. The Company has no nominating or similar committee; the full
Board of Directors performs that function.
The current members of the Audit Committee, which held three meetings
in 2000, are Mr. Cohan, Mr. Cotsakos and Mr. Mikles. Mr. Cohan was
appointed to the Audit Committee in December 2000 and the committee did not
meet in 2000 following his appointment. The Audit Committee meets from time
to time with the Company's independent auditors and has general
responsibility for reviewing the accounting and auditing affairs of the
Company.
The current members of the Compensation Committee, which held four
meetings in 2000, are Messrs. Cohan, Graziadio and Loucks. The Compensation
Committee has general responsibility for management and other employee
compensation, including incentive compensation and stock option plans.
Compensation of Directors. Directors who are not employees of the
Company or Comerica Incorporated (or its affiliates) receive an annual
retainer of $20,000. Directors are reimbursed for out-of-pocket expenses
incurred in connection with their service as directors. In addition, each
incumbent non-employee director, except for Andrew Cohan and Bruce Nelson,
received, upon consummation of the Company's initial public offering in
November 1999, options to purchase 75,000 shares of the Common Stock at an
exercise price per share equal to $15.00. Messrs. Cohan and Nelson received
93,750 and 95,000 options, respectively, to purchase the Common Stock at an
exercise price per share equal to $15.00. Mr. Nelson also received options
to purchase 15,000 shares of Common Stock at an exercise price per share
equal to $1.33. Non-employee directors (other than employees of Comerica
Incorporated or its affiliates) are also eligible to receive option grants
under the Company's 1999 Stock Incentive Plan at the discretion of the
Board. Directors who are officers or employees of the Company or Comerica
Incorporated (or its affiliates) do not receive any additional compensation
for their services as directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE ELECTION OF THE NOMINEES LISTED ABOVE.
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF KPMG LLP AS
THE COMPANY'S INDEPENDENT AUDITORS
The Company has selected KPMG LLP ("KPMG") as its independent
auditors for the fiscal year ending December 31, 2001. The Company is
submitting its selection of independent auditors for ratification by the
stockholders at the Annual Meeting. KPMG has audited the financial
statements of the Company (and its predecessor business, U.S. Audiotex,
LLC) since 1996. The Company expects that representatives of KPMG will be
present at the Annual Meeting, will have an opportunity to make a statement
if they wish and will be available to respond to appropriate questions.
The Company's Bylaws do not require that the stockholders ratify the
selection of the independent auditors, but this item is being submitted to
the stockholders for ratification as a matter of good corporate practice.
If the stockholders do not ratify the selection, the Board of Directors and
the Audit Committee will reconsider whether or not to retain KPMG. Even if
the selection is ratified, the Board of Directors and the Audit Committee,
in their discretion, may change the appointment 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 BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE RATIFICATION OF THE SELECTION OF KPMG LLP AS
THE COMPANY'S INDEPENDENT AUDITORS.
EXECUTIVE OFFICERS
Set forth below is information regarding the current executive
officers of the Company, who serve at the discretion of the Board of
Directors:
NAME AGE POSITION(S)
- ---- --- -----------
Thomas R. Evans 46 Chairman, Chief Executive Officer and Director
Michael P. Presto 47 Chief Operating Officer
Kenneth Stern 53 President and Director
Edward J. DiMaria 35 Chief Financial Officer
Michael Barrett 38 Chief Internet and Sales Officer
Bruce J. Zanca 40 Senior Vice President, Communications and
Administration
Mitchell H. Gordon 35 Senior Vice President, General Counsel and
Secretary
The biographical information for Mr. Evans and Mr. Stern is provided
in the biographical information of the directors of the Company set forth
in the section above discussing Proposal No. 1.
Michael P. Presto has served as the Company's Chief Operating Officer
since September 1999, and is responsible for technology, customer service
and business operations of the Company. Mr. Presto was Senior Vice
President, Circulation and Business Development at Curtis Circulation
Company from April 1998 to September 1999, where he was responsible for
worldwide circulation sales and marketing strategies. From January 1993 to
April 1998, Mr. Presto was Vice President of Consumer Marketing and Senior
Vice President of Consumer Marketing and Distribution for The New York
Daily News, during which time he also served as President of Data Comm
Services Inc., an affiliated telemarketing/fulfillment customer service
business. In addition, Mr. Presto has held executive management positions
at U.S. News & World Report and Newsweek.
Edward J. DiMaria has been the Company's Chief Financial Officer
since August 2000. From August 1994 to August 2000, Mr. DiMaria was
employed by Best Friends Pet Care, Inc., where his final position was
Executive Vice President and Chief Financial Officer. Mr. DiMaria has also
held finance and accounting positions with Business Express, Inc., Advanced
Network & Services, Inc. and KPMG Peat Marwick.
Michael Barrett has served as the Company's Chief Internet and Sales
Officer since September 1999. Mr. Barrett is responsible for managing the
Company's marketing, sales, business development and strategic partnerships
activities. From May 1999 to September 1999, Mr. Barrett worked as an
e-commerce consultant for Yahoo!, Inc., and from September 1997 to May
1999, Mr. Barrett was Senior Vice President of Sales and Strategic
Partnerships at GeoCities, Inc. In addition, from November 1995 to
September 1997, Mr. Barrett was Vice President of Advertising for Disney
Online, and he served as Publisher of Family PC Magazine for Ziff Davis
Publishing. Previously, he held sales management positions at Newsweek and
Meredith Publishing.
Bruce J. Zanca oversees the Company's corporate communications,
public relations and investor relations efforts. He also manages the
Company's business administration infrastructure. From September 1998 to
June 1999 he was Vice President of Communications at GeoCities, Inc., where
he was responsible for public affairs, media relations, government affairs
and investor relations. From 1994 to 1998, Mr. Zanca was Vice President of
Corporate Communications at the U.S. News & World Report Magazine Group. In
the past, Mr. Zanca served as a White House press secretary under Marlin
Fitzwater and a public relations advisor to President George Bush. He has
held senior communications positions at the U.S. Justice Department and
U.S. Commerce Department, and has served on the staff of the Vice President
of the United States.
Mitchell H. Gordon has served as the Company's General Counsel since
February 2000, and is responsible for managing the Company's legal affairs,
including supervising the Company's internal legal staff and outside legal
counsel. From September 1995 to February 2000, Mr. Gordon was an attorney
at Skadden, Arps, Slate, Meagher & Flom LLP, concentrating on mergers and
acquisitions and general corporate law.
EXECUTIVE OFFICER COMPENSATION
The following table sets forth the compensation awarded to, earned by
or paid to the person serving as the Company's Chief Executive Officer
during 2000, as well as the four other most highly compensated executive
officers of the Company in 2000, for services rendered in all capacities to
the Company during 2000, 1999 and 1998, as applicable. Except as set forth
below, perquisites and other personal benefits, securities and property did
not exceed the lesser of $50,000 or 10% of the total annual salary and
bonus reported for the named executive officers.
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------- -----------
AWARDS
-----------
SECURITY
UNDERLYING
NAME AND OTHER ANNUAL OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATIONS($) (#) COMPENSATION($)(a)
- ------------------ ------ ---------- ----------- ---------------- ------------ ------------------
Thomas R. Evans 2000 200,000 - - - 7,598
Chairman and Chief
Executive Officer
1999 76,955 500,000 - 1,370,328 -
1998 - - - - -
Kenneth Stern 2000 215,000 100,000 28,202(b) - 18,167
President
1999 198,046 - 32,058(b) 219,252 9,728
1998 144,000 - - - -
Michael P. Presto 2000 200,000 100,000 - 200,000 12,848
Chief Operating 1999 50,000 - - 685,164 -
Officer 1998 - - - - -
Michael Barrett 2000 200,000 100,000 - - 11,397
Chief Internet 1999 50,000 - - 822,196 -
and Sales Officer 1998 - - - - -
Bruce J. Zanca 2000 190,000 50,000 - - 14,342
Senior Vice 1999 63,333 - - 274,065 -
President, 1998 - - - - -
Communications
and
Administration
(a) "All Other Compensation" in 2000 and 1999 represents the aggregate
amount of contributions made per listed individual by the Company or
its then ultimate parent company, Imperial Bancorp, to three employee
benefit plans offered to eligible Company employees: the Imperial
Bancorp Salary Investment Plan (the "401(k) Plan"), the Imperial
Bancorp Employee Stock Ownership Plan (the "ESOP") and the Imperial
Bancorp Profit Sharing Plan (the "PS Plan").
(b) The amounts shown in 2000 and 1999 include automobile allowances of
$24,445 and $27,196, respectively.
The table below discloses information concerning individual grants of
stock options made during the last completed fiscal year to the executive
officers named in the Summary Compensation Table, which stock options were
granted with exercise prices equal to the market price of the Common Stock
on the date of grant. Stock options granted generally vest over a
three-year period.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
-------------------------- ------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION 5% 10%
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE ($)(A) ($)(A)
- ---- ----------- --------------- ------------- -------- -------- --------
Thomas R. Evans - - - - - -
Kenneth Stern - - - - - -
Michael P. Presto 200,000 16.4% $7.16 10/27/10 $ 789,502 $1,944,581
Michael Barrett - - - - - -
Bruce J. Zanca - - - - - -
- ----------
(a)These amounts represent hypothetical gains that could be achieved for
the options if they are executed at the end of their respective terms.
The assumed 5% and 10% rates of stock price appreciation are mandated by
the rules of the Securities and Exchange Commission. They do not
represent the Company's estimate or projection of future prices of the
Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The table set forth below discloses certain information concerning
the number and value of unexercised options for the last completed fiscal
year by the executive officers named in the Summary Compensation Table.
None of the executive officers named in the Summary Compensation Table
exercised options to purchase shares of the Common Stock during the last
completed fiscal year.
AGGREGATED FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY-END(#) AT FY-END($)(a)
------------------------ ----------------------
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
- ---- ------------- -------------
Thomas R. Evans........ 1,370,328/0(b) $7,598,469/0
Kenneth Stern.......... 219,252/0(b) $1,215,752/0
Michael P. Presto...... 843,266/41,898(b)(c) $3,799,234/0
Bruce J. Zanca......... 274,065/0(b) $1,519,690/0
Michael Barrett........ 822,196/0(b) $4,559,077/0
- ----------
(a)The value of unexercised options was determined using the $6.875 closing
price of the Common Stock on December 29, 2000, the last Nasdaq trading
day in 2000.
(b)This amount represents non-qualified stock options granted under the
Company's 1999 Incentive Stock Plan, which options are immediately
exercisable but subject (for all persons shown other than Mr. Stern) to
a right of repurchase by the Company, which right lapses over a
three-year period in accordance with the terms of such plan. As of
December 31, 2000, such right of repurchase lapsed with respect to the
following number of option shares for the persons indicated: Thomas R.
Evans, 598,234 shares; Michael P. Presto, 284,238 shares; Michael
Barrett, 341,085 shares; and Bruce J. Zanca, 113,693 shares. The right
of repurchase lapsed with respect to all of the options upon
consummation of the Imperial Bancorp/Comerica Incorporated merger on
January 30, 2001.
(c)This second amount shown represents incentive stock options granted
under the Company's 1999 Incentive Stock plan, which are not exercisable
prior to vesting. These stock options vested upon consummation of the
Imperial Bancorp/Comerica Incorporated merger on January 30, 2001.
EMPLOYMENT AGREEMENTS
Thomas R. Evans. The Company has entered into an employment agreement
with Thomas R. Evans, the Company's Chairman and Chief Executive Officer.
The employment agreement provides for a minimum annual base salary of
$200,000, which the Compensation Committee increased to $350,000 as of
January 1, 2001. In addition, Mr. Evans is eligible to receive unspecified
annual bonuses at the discretion of the Compensation Committee and,
pursuant to the agreement, Mr. Evans received an additional one-time bonus
of $500,000, half of which was paid to Mr. Evans in 1999 and the remaining
half of which was paid in 2000. In accordance with the employment
agreement, Mr. Evans was also granted options (the "Initial Evans Options")
to purchase 1,370,328 shares of the Company's common stock at $1.33 per
share under the 1999 Stock Incentive Plan. Under the terms of the
employment agreement, Imperial Bank (now a wholly owned subsidiary of
Comerica) has guaranteed that the "value" - as defined in the agreement -
of Mr. Evans' vested options will be $10,000,000 on or before the third
anniversary of the date of the agreement, or on such third anniversary
date, Imperial Bank will pay Mr. Evans an amount equal to the difference
between $10,000,000 and the highest value of the vested options during such
three-year period. If Mr. Evans' employment is terminated by the Company
without "cause" or if he terminates his employment for "good reason,"
including a "change in control," as these terms are defined in the
agreement, the Company will be required to pay him his base salary and
benefits for one year, and all of his then unvested options will vest
immediately. The merger of Imperial Bancorp (the parent holding company of
Imperial Bank in 2000) with and into a wholly owned subsidiary of Comerica
Incorporated constituted a change of control of the Company for purposes of
the preceding sentence and also resulted in the full vesting of the Initial
Evans Options. If Mr. Evans' employment is terminated by the Company with
cause, the Company will be required to pay him any compensation, benefits
or reimbursements accrued through the date of termination. Mr. Evans'
employment under the agreement may be terminated by the Company on 30 days'
notice without cause, or immediately upon notice with cause, and may be
terminated by Mr. Evans on 60 days' notice without good reason, or
immediately for good reason.
Michael P. Presto. The Company has entered into an employment
agreement with Michael P. Presto, the Company's Chief Operating Officer.
The employment agreement provides for a minimum annual base salary of
$200,000. In addition, under the terms of his agreement, Mr. Presto
received a bonus of $100,000 in 2000 and is eligible to receive unspecified
annual bonuses in the future at the discretion of the Compensation
Committee. In accordance with the employment agreement, Mr. Presto was also
granted options (the "Initial Presto Options") to purchase 685,164 shares
of the Company's common stock at $1.33 per share under the 1999 Stock
Incentive Plan. If Mr. Presto's employment is terminated by the Company
without "cause" or if he terminates his employment for "good reason,"
including a "change in control," as these terms are defined in the
agreement, the Company will be required to pay him his base salary and
benefits for one year, and all of his then unvested options will vest
immediately. The Imperial Bancorp/Comerica Incorporated merger constituted
a change of control of the Company for purposes of the preceding sentence
and also resulted in the full vesting of the Initial Presto Options. If Mr.
Presto's employment is terminated by the Company with cause, the Company
will be required to pay him any compensation, benefits or reimbursements
accrued through the date of termination. Mr. Presto's employment under the
agreement may be terminated by the Company on 60 days' notice without
cause, or immediately upon notice with cause, and may be terminated by Mr.
Presto on 60 days' notice without good reason, or immediately for good
reason.
Kenneth Stern. The Company has entered into an employment agreement
with Kenneth Stern, pursuant to which Mr. Stern has agreed to serve as
President of the Company and a member of the Company's board of directors
until August 23, 2006. The employment agreement provides for a minimum
annual base salary of $215,000 and a minimum annual bonus of $100,000. Mr.
Stern has the right to take early retirement at any time after August 24,
2002, upon which event the Company would be required to pay him his base
salary and bonus through August 23, 2006. If Mr. Stern's employment is
terminated by the Company without "cause" or if he terminates his
employment for "good reason," as these terms are defined in the agreement,
the Company will be required to pay him his base salary and bonus through
August 23, 2006, and provide benefits through December 31, 2002 or for one
year from the date of termination, whichever is later. Additionally, Mr.
Stern would be entitled to retain his position as a director through August
23, 2006, provided that he and Beranson Holdings, Inc. own or control an
aggregate of 10% of the Company's outstanding common stock. If Mr. Stern's
employment is terminated by the Company with cause, the Company will be
required to pay him any compensation, benefits or reimbursements accrued
through the date of termination. Mr. Stern's employment under the agreement
may be terminated by the Company on 30 days' notice without cause, or
immediately upon notice with cause, and may be terminated by Mr. Stern on
120 days' notice without good reason, or immediately for good reason.
Edward J. DiMaria. The Company has entered into an employment
agreement with Edward J. DiMaria, the Company's Chief Financial Officer.
The employment agreement provides for a minimum annual base salary of
$195,000. In addition, under the terms of his agreement, Mr. DiMaria
received a one-time signing bonus of $60,000 in 2000 and is eligible to
receive unspecified annual bonuses in the future at the discretion of the
Compensation Committee. The employment agreement provides for Mr. DiMaria
to receive a minimum annual bonus in 2001 of $35,000. In accordance with
the employment agreement, Mr. DiMaria was also granted options (the
"Initial DiMaria Options") to purchase 200,000 shares of the Company's
common stock under the 1999 Stock Incentive Plan at $7.12 per share (the
fair market value of the Company's common stock on the day Mr. DiMaria
began his employment). On the earlier of August 25, 2001 or the date on
which the Compensation Committee determines that Mr. DiMaria has satisfied
certain performance criteria, Mr. DiMaria is eligible to receive an
additional grant of options to purchase up 50,000 shares of the Company's
common stock at the lesser of $7.12 per share or the fair market value of
the Company's common stock on such date. If Mr. DiMaria's employment is
terminated by the Company without "cause" or if he terminates his
employment for "good reason," including a "change in control," as these
terms are defined in the agreement, the Company will be required to pay him
a lump-sum amount equal to one year of his base salary, provide him his
other employment benefits for one year and, if such termination occurs
prior to August 25, 2001, pay Mr. DiMaria's guaranteed minimum 2001 bonus
of $35,000. The Imperial Bancorp/Comerica Incorporated merger constituted a
change of control of the Company for purposes of the preceding sentence and
also resulted in the full vesting of the Initial DiMaria Options. If Mr.
DiMaria's employment is terminated by the Company with cause, the Company
will be required to pay him any compensation, benefits or reimbursements
accrued through the date of termination. Mr. DiMaria's employment under the
agreement may be terminated by the Company immediately upon notice with or
without cause, and may be terminated by Mr. DiMaria on 30 days' notice
without good reason, or immediately for good reason.
Michael Barrett. The Company has entered into an employment agreement
with Michael Barrett, the Company's Chief Internet and Sales Officer. The
employment agreement provides for a minimum annual base salary of $200,000.
In addition, under the terms of his agreement, Mr. Barrett received a bonus
of $100,000 in 2000 and is eligible to receive unspecified annual bonuses
in the future at the discretion of the Compensation Committee. In
accordance with the employment agreement, Mr. Barrett was also granted
options (the "Initial Barrett Options") to purchase 822,196 shares of the
Company's common stock at $1.33 per share under the 1999 Stock Incentive
Plan. If Mr. Barrett's employment is terminated by the Company without
"cause" or if he terminates his employment for "good reason," including a
"change in control," as these terms are defined in the agreement, the
Company will be required to pay him his base salary and benefits for one
year, and all of his then unvested options will vest immediately. The
Imperial Bancorp/Comerica Incorporated merger constituted a change of
control of the Company for purposes of the preceding sentence and also
resulted in the full vesting of the Initial Barrett Options. If Mr.
Barrett's employment is terminated by the Company with cause, the Company
will be required to pay him any compensation, benefits or reimbursements
accrued through the date of termination. Mr. Barrett's employment under the
agreement may be terminated by the Company on 30 days' notice without
cause, or immediately upon notice with cause, and may be terminated by Mr.
Barrett on 60 days' notice without good reason, or immediately for good
reason.
All of the employment agreements generally contain confidentiality
provisions and covenants not to compete during the term of employment and
for one year after termination of employment.
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
GENERAL
The following is the Report of the Compensation Committee of the
Board of Directors, describing the compensation policies and rationale
applicable to the Company's executive officers with respect to compensation
paid to such executive officers for the calendar period ended December 31,
2000. The Compensation Committee was established in January 2000 and
currently consists of Andrew Cohan, George L. Graziadio, Jr. and Vernon
Loucks Jr. The information contained in this Report shall not be deemed
"soliciting material" or to be "filed" with the Securities and Exchange
Commission nor shall such information be deemed incorporated by reference
into any future filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), except to
the extent the Company specifically incorporates it by reference into such
filing.
The goals of the Company's compensation program are to align
compensation with business objectives and performance and to enable it to
attract, retain and reward executive officers and other key employees who
contribute to the Company's long-term success and to motivate them to
enhance long-term stockholder value. The Compensation Committee is
particularly mindful of the extremely competitive environment for
attracting senior level management in the technology sector, and the
continuous and extraordinary efforts which have been made by other
technology companies to lure away management and key personnel. To meet
these goals, the Company has adopted a mix of the compensation elements of
salary, bonus and stock incentive awards.
BASE SALARY
The base salary of the Company's executive officers was individually
negotiated at the time each officer joined the Company or assumed his
current position. The Compensation Committee reviews each executive
officer's base salary periodically (and at least annually), and when doing
so, considers individual and corporate performance, levels of
responsibility, prior experience, breadth of knowledge and competitive pay
practices. The Compensation Committee believes that the current executive
salaries are comparable to the salaries in effect at companies that compete
with the Company for executive talent.
BONUS
The Company's bonus policy has been to award bonuses to executive
officers and key employees based on the achievement of specific goals set
by the Company, and the level of contribution made by these individuals. In
calculating bonus awards, certain Company performance objectives will be
considered, including operating, strategic and financial goals necessary
for the achievement of the Company's short and long-term objectives.
Certain executive officers have employment agreements providing for minimum
bonus awards.
STOCK INCENTIVE AWARDS
The purpose of the Company's stock incentive plans is to provide
employees of the Company with the opportunity to share, along with
stockholders of the Company, in the long-term performance of the Company.
The Compensation Committee makes periodic grants of stock options or
restricted stock to eligible employees, generally upon commencement of
employment, following a significant change in job responsibilities or in
recognition of a significantly noteworthy accomplishment. Stock options
usually vest over three years and expire ten years from the date of grant
(provided the employee remains employed with the Company). The exercise
price of options is normally 100% of fair market value of the underlying
stock on the date of grant (other than stock options granted prior to
completion of the Company's initial public offering). The Company's
executive officers are not eligible to receive grants of stock options or
restricted stock under the 2000 Plan and only receive grants of stock
options under the 1999 Plan. In awarding stock options and restricted
stock, the Compensation Committee considers individual performance, overall
contribution to the Company, the competitive climate for recruiting
personnel and the total number of stock options and shares of restricted
stock to be awarded.
CEO COMPENSATION
Compensation in 2000 for Mr. Evans, the Company's Chairman and Chief
Executive Officer, was established in his employment agreement with the
Company (See "EXECUTIVE OFFICER COMPENSATION - Employment Agreements"). Mr.
Evans' total compensation is heavily weighed toward equity incentives,
consisting of the stock options granted to him in 1999 when he commenced
employment with the Company. Mr. Evans' compensation was designed to align
his interests with those of the Company's stockholders by tying the value
of the awards and his eligibility for annual cash bonuses to the success
qualitatively of his efforts toward building the Company's management,
business and infrastructure and promoting the operating and financial
performance of the Company. In light of Mr. Evans' past performance and
contributions to the Company, the Compensation Committee increased Mr.
Evans' annual base salary from $200,000 to $350,000, effective as of
January 1, 2001.
Section 162(m) of the Code imposes limitations on the deductibility
for federal income tax purposes of compensation over $1 million paid to
certain 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. While the Company does not expect this limitation to
affect the Company with respect to the 2000 tax year, the Compensation
Committee intends to continue to evaluate the effects of the statute and
any U.S. Treasury Department regulations and to comply with Section 162(m)
of the Code in the future to the extent consistent with the best interests
of the Company.
Compensation Committee:
Andrew Cohan
George L. Graziadio, Jr.
Vernon Loucks Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee was established in January 2000 and
consists solely of the following non-employee directors: Messrs. Cohan,
Graziadio and Loucks. Mr. Graziadio served as the Company's Chief Executive
Officer from April 16, 1999 to July 15, 1999. During the year ended
December 31, 2000, none of the Company's executive officers served:
o as a member of the compensation committee (or other board
committee performing equivalent functions or, in the absence of
any such committee, the entire board of directors) of another
entity, one of whose executive officers served on the Company's
compensation committee (or other board committee performing
equivalent functions or, in the absence of any such committee,
the entire board of directors);
o as a director of another entity, one of whose executive
officers served on the Company's compensation committee (or
other board committee performing equivalent functions or, in
the absence of any such committee, the entire board of
directors); or
o as a member of the compensation committee (or other board
committee performing equivalent functions or, in the absence of
any such committee, the entire board of directors) of another
entity, one of whose executive officers served as a director of
the Company.
INFORMATION REGARDING INDEPENDENT AUDITORS
Audit Fees. KPMG's aggregate fees billed for professional services
rendered for the annual audit of the Company's 2000 financial statements
and review of the Company's interim financial statements in 2000 were
$137,700.
Financial Information Systems Design and Implementation Fees. KPMG
did not bill the Company in 2000 for any professional fees relating to the
design and implementation of the Company's financial information systems.
All Other Fees. KPMG's aggregate fees for all other professional
services rendered to the Company in 2000 were $150,509, relating to payroll
tax consulting and preparation services, consulting services relating to
the Company's benefit plans and risk management services with respect to
the Company's transaction flow and related financial processes.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is comprised of three
directors and operates under a written charter adopted by the Board of
Directors in June 2000, a copy of which charter is included as Appendix A
to this Proxy Statement. Messrs. Cohan, Cotsakos and Mikles (Chairman) are
the members of the Audit Committee. The information contained in this
Report shall not be deemed "soliciting material" or to be "filed" with the
Securities and Exchange Commission nor shall such information be deemed
incorporated by reference into any future filing under the Securities Act
of 1933, as amended, or the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), except to the extent the Company specifically
incorporates it by reference into such filing.
In 2000 the Board of Directors has determined that each of the
members of the Audit Committee was "independent" as defined in the
Marketplace Rules for the Nasdaq Stock Market, except for Mr. Mikles. The
Board's determination that Mr. Mikles was not independent was based on the
fact that in connection with assisting the Company, Imperial Bank and the
investment bankers in the arrangements for the Company's initial public
offering, Imperial Bank entered into an agreement with Mr. Mikles (the
"Mikles Agreement") pursuant to which, upon the disposition of Imperial
Bank's shares of Common Stock or a "change of control" of the Company, Mr.
Mikles had the right to receive 6.5% of any realized pre-tax gains received
by Imperial Bank on its investment in the Common Stock and 7.5% of any such
gains in excess of $500 million (using Imperial's basis in the Common Stock
immediately following such initial public offering). The Imperial Bancorp/
Comerica Incorporated merger constituted a "change of control" for the
purposes of the Mikles Agreement and in February 2001 Mr. Mikles exercised
his right to receive payment of his interests in connection with such
event, resulting in an aggregate payment by Comerica Incorporated to Mr.
Mikles of $2.2 million and the termination of the Mikles Agreement. Prior
to the termination of the Mikles Agreement and as permitted under the
Nasdaq rules, the Board of Directors determined that notwithstanding the
Mikles Agreement, it was in the best interests of the Company and its
stockholders for Mr. Mikles to serve on the Audit Committee due to his
significant finance employment experience and expertise, as well as the
value of maintaining the continuity of his participation on the Audit
Committee (which began in January 2000). In light of the termination of the
Mikles Agreement, the Board of Directors determined in March 2001 that Mr.
Mikles is now independent for the purposes of his participation on the
Audit Committee.
The Committee has recommended to the Board of Directors, subject to
stockholder ratification, the selection of the Company's independent
auditors.
Management is responsible for the Company's financial reporting
process and internal controls. KPMG, the Company's independent auditors, is
responsible for performing an independent audit of the Company's financial
statements in accordance with generally accepted accounting principles and
for issuing a report in connection with that audit. The Audit Committee is
responsible for monitoring and supervising these processes.
In this context, the Audit Committee has met and held discussions
with the Company's management and representatives of KPMG. Management
represented to the Audit Committee that the Company's financial statements
were prepared in accordance with generally accepted accounting principles,
and the Audit Committee has reviewed and discussed the financial statements
with management and the independent auditors. The Audit Committee discussed
with the representatives of KPMG the matters required to be discussed by
Statement on Auditing Standards No. 61 ("Communication with Audit
Committees").
KPMG also provided to the Audit Committee the written disclosures
required by Independence Standards Board Standard No. 1 ("Independence
Discussions with Audit Committees") and the Committee discussed with KPMG
its independence. The Audit Committee has also considered whether the
provision of certain non-audit services provided by KPMG to the Company in
2000 is compatible with maintaining auditor independence.
Based on the Audit Committee's discussion with management and the
independent auditors and the Audit Committee's review of the
representations of management and the report of the independent auditors to
the Audit Committee, the Audit Committee recommended that the Board of
Directors include the audited financial statements in the Company's Annual
Report on Form 10-K for the year ended December 31, 2000 filed with the
Securities and Exchange Commission.
Audit Committee:
Lee E. Mikles (Chairman)
Andrew Cohan
Christos M. Cotsakos
STOCK PERFORMANCE GRAPH
The performance graph below compares the annual change in the
Company's cumulative total stockholder return on its Common Stock during a
period commencing on November 23, 1999, the date on which the Company's
common stock began publicly trading, and ending on December 31, 2000 (as
measured by dividing (i) the sum of (A) the cumulative amount of dividends
for the measurement period, assuming dividend reinvestment and (B) the
difference between the Company's share price at the end and the beginning
of the measurement period; by (ii) the share price at the beginning of the
measurement period) with the cumulative total return of each of: (a) the
Nasdaq Composite Index (Nasdaq); and (b) the Dow Jones Internet Index
during such period, assuming a $100 investment on November 23, 1999. The
Company's share price at the beginning of the measurement period was the
closing price for the Common Stock on November 23, 1999, and not the price
at which the Company's shares of common stock were initially offered for
purchase in its public offering. It should be noted that the Company has
not paid any dividends on the Common Stock, and no dividends are included
in the representation of the Company's performance.
The information contained in the performance graph shall not be
deemed "soliciting material" or to be "filed" with the Securities and
Exchange Commission (the "SEC") nor shall such information be deemed
incorporated by reference into any future filing under the Securities Act
of 1933, as amended, or the Exchange Act, except to the extent the Company
specifically incorporates it by reference into such filing.
[GRAPHIC OMITTED]
DOW JONES
DATE OFFICIAL PAYMENTS CORP NASDAQ INDEX INTERNET INDEX
11/23/99 $100.00 $100.00 $100.00
12/31/99 $231.11 $121.73 $126.10
12/31/00 $ 30.56 $ 73.90 $ 42.84
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the close of business on March
28, 2001, certain information regarding the beneficial ownership of (i) the
Common Stock of each person (including any "group" as that term is used in
Section 13(d)(3) of the Exchange Act) known to the Company to beneficially
own more than 5% of the Common Stock, (ii) the Common Stock and the common
stock of Comerica Incorporated, the Company's parent, of each of the
Company's directors, director nominees and named executive officers, and
(iii) the Common Stock and the common stock of Comerica Incorporated of
each of the Company's directors and executive officers as a group. None of
the Company's directors, director nominees or executive officers own any
shares of Comerica Incorporated's Series E Preferred Stock.
Except as indicated below, information with respect to beneficial
ownership is based upon information furnished by each director, director
nominee or officer. Except as noted below, all persons referenced below
have sole voting and investment power over the shares beneficially owned by
them. All shares of Common Stock subject to options currently exercisable
or exercisable within 60 days after March 28, 2001 are deemed to be
outstanding and to be beneficially owned by the person holding such options
for the purpose of computing the number of shares beneficially owned and
the percentage ownership of such person, but are not deemed to be
outstanding and to be beneficially owned for the purpose of computing the
percentage ownership of any other person.
OF THE TRUST
NUMBER OF SHARES
BENEFICIALY
OWNED, SHARES
TOTAL AMOUNT OF WHICH MAY BE PERCENT
SHARES BENEFICIALLY ACQUIRED WITHIN OF COMMON
NAME TITLE AND CLASS OF SECURITY OWNED (a) 60 DAYS STOCK OWNED
- -------------------- ---------------------------- ------------------- --------------------- ------------
PRINCIPAL STOCKHOLDERS:
Comerica Incorporated.............. Company Common Stock 12,000,00(b) - 54.6%
Comerica Tower at Detroit Ctr.
500 Woodward Avenue
MC 3391
Detroit, MI 48226
DIRECTORS, DIRECTOR NOMINEES AND
EXECUTIVE OFFICERS:
Thomas R. Evans................. Company Common Stock 1,370,328 1,370,328 5.9%
Comerica Common Stock 112 - *
Kenneth Stern................... Company Common Stock 3,161,252(c) 219,252 12.6%
Comerica Common Stock 1,769(d) - *
Andrew Cohan.................... Company Common Stock 93,750 93,750 *
Comerica Common Stock - - *
Christos Cotsakos............... Company Common Stock 75,000 - *
Comerica Common Stock - - *
Norman P. Creighton............. Company Common Stock 2,700 - *
Comerica Common Stock 509,045(e) 63,241 *
George L. Graziadio, Jr. ....... Company Common Stock 190,000 75,000 *
Comerica Common Sto 2,058,251(f) 90,068 1.2%
John D. Lewis................... Company Common Stock - - *
Comerica Common Stock 350,272(g) 269,275 *
Vernon Loucks Jr. .............. Company Common Stock 75,000 75,000 *
Comerica Common Stock - - *
Lee E. Mikles................... Company Common Stock 77,000 75,000 *
Comerica Common Stock 5 - *
Bruce S. Nelson................. Company Common Stock 110,000 110,000 *
Comerica Common Stock - - *
Michael Barrett................. Company Common Stock 822,196 822,196 3.6%
Comerica Common Stock 167 - *
Michael P. Presto............... Company Common Stock 885,164 885,164 3.9%
Comerica Common Stock 194 - *
Bruce J. Zanca.................. Company Common Stock 294,065 274,065 1.3%
Comerica Common Stock 224 - *
DIRECTORS AND EXECUTIVE OFFICERS
AS A GROUP (14 individuals).... Company Common Stock 7,536,455 4,379,755 25.5%
Comerica Common Stock 2,571,516 156,212 1.4%
- ---------------
* Less than 1%
(a) With respect to shares of Comerica Incorporated common stock, includes
the number of shares held for the listed persons in the 401(k) Plan,
the PS Plan and the ESOP, as follows: Mr. Evans: 112 shares in the
ESOP; Mr. Stern: 83 shares in the 401(k) Plan and 352 shares in the
ESOP; Mr. Creighton: 557 shares in the 401(k) Plan, 183 shares in the
PS Plan and 365 shares in the ESOP; Mr. Graziadio: 855 shares in the
401(k) Plan, 458 shares in the PS Plan and 698 shares in the ESOP; Mr.
Presto: 83 shares in the 401(k) Plan and 194 shares in the ESOP; Mr.
Zanca: 62 shares in the 401(k) Plan.
(b) Based on information contained in its Schedule 13D, dated March 28,
2001, Comerica Incorporated beneficially owned 12,000,000 shares of
the Common Stock with sole power to vote and dispose of all such
shares. On January 30, 2001, Imperial Bancorp, the parent holding
company of Imperial Bank (the owner of approximately 55% of the
Common Stock), was acquired by Comerica Incorporated in a transaction
pursuant to which shareholders of Imperial Bancorp received 0.46 of a
share of Comerica Incorporated common stock for each of their shares
of Imperial Bancorp common stock, representing an aggregate of 21
million shares of Comerica Incorporated common stock. Imperial Bank
transferred ownership of its shares of Common Stock to Comerica
Incorporated on March 20, 2001.
(c) Consists of 219,252 shares of the Common Stock underlying presently
exercisable options and 2,942,000 shares of the Common Stock held by
Beranson Holdings, Inc., a California corporation controlled by
Kenneth Stern and his wife Michaella Stern (as joint tenants), with
Lauren Stern (a minor and the daughter of Mr. Stern) as the only other
stockholder. For a discussion of Mr. Stern's options, see "Employment
Agreements."
(d) Consists of 804 shares of Comerica Incorporated common stock held by
Beranson Holdings, Inc.; 350 shares of Comerica Incorporated common
stock held by Kenneth Stern and Michaella Stern as joint tenants; and
the shares referenced in note (a) above.
(e) Consists of 63,241 shares of Comerica Incorporated common stock
underlying presently exercisable options; 444,699 shares directly held
by Mr. Creighton; and the shares referenced in note (a) above.
(f) Consists of 90,068 shares of Comerica Incorporated common stock
underlying presently exercisable options; 536,680 shares directly held
by Mr. Graziadio; the shares referenced in note (a) above; and
1,429,492 shares held by Graziadio Investment Company, a California
limited partnership, of which the Graziadio Investment Corp. is the
general partner. Mr. Graziadio is the controlling shareholder of
Graziadio Investment Corp.
(g) Includes 10,500 shares of restricted stock and options to purchase
269,275 shares of Comerica Incorporated common stock, which Comerica
Incorporated granted to Mr. Lewis under its Long-Term Incentive Plan.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors
and executive officers, and persons who own more than ten percent of the
Common Stock, to file initial reports of ownership and changes in ownership
with the SEC and the Nasdaq National Market. Such persons are required by
SEC regulations to furnish the Company with copies of all Section 16(a)
forms they file. To the best of the Company's knowledge, the reports for
all officers, directors and holders of more than ten percent of the Common
Stock were timely filed during the year ended December 31, 2000, except for
Mr. Gordon's initial Form 3 which was filed one day late and a Form 4 for
Mr. Stern which was inadvertently filed late.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Imperial Bank, a wholly owned subsidiary of Comerica Incorporated, is
one of the merchant banks the Company uses to process credit card
transactions and perform traditional merchant credit card settlement
services. The Company has an agreement with Imperial Bank in which Imperial
Bank agrees to sponsor the Company as an independent service provider, and
the Company agrees to use its best efforts to use Imperial Bank as a
provider of credit card settlement services at customary market rates.
Under the agreement with Imperial Bank for processing and settlement
services, Imperial Bank is paid from the Company's sales revenues customary
merchant discount fees usually charged for similar processing services, on
a product by product basis as negotiated between the Company and Imperial
Bank. Both parties have agreed to negotiate in good faith as to the
discount per product. During 2000, the Company paid Imperial Bank
approximately $5.9 million for performing these processing and settlement
services, which represents 28% of the total merchant discount fees paid by
the Company during that period. During 2000, the merchant discount fees
paid by the Company to Imperial Bank ranged from 1.90% to 2.95% of the
total amount paid by the consumer.
In 2000 Imperial Bank provided human resource services and other
assistance to the Company. These services and assistance included payroll
processing and benefits administration, including the administration of the
Company's 401(k) plan and other benefit programs. Like all wholly owned and
majority-owned subsidiaries of Imperial Bank, the Company paid a
pass-through charge, based on the total number of employees, for these
services. The Company paid Imperial Bank a fee of $135,000 for these
services in 2000. Beginning in January 2001, the Company stopped using
Imperial Bank for these services, and began administering its employee
benefits programs both internally and through unaffiliated third-party
vendors.
Imperial Bank guarantees the performance of the Company's obligations
under six equipment leases. These leases are comprised of a master lease
agreement with one lessor for five leases for various furniture and
computer equipment and a separate lease agreement for network equipment.
Imperial Bank will continue to guarantee the six leases until the leases
expire.
The Company has entered into an agreement with Bruce Nelson, one of
the Company's directors, pursuant to which, among other things, Mr. Nelson
provides services in connection with the Company's marketing and
advertising campaigns, analyst and other presentations and corporate
positioning strategy. This agreement is renewable on a yearly basis and
provides for an annual base salary of $50,000. Also in connection with his
services, in 1999 Mr. Nelson received a one-time grant of options to
purchase 15,000 shares of the Company's common stock at an exercise price
of $1.33 per share, as well as options to purchase 20,000 shares of the
Company's common stock at $15.00 per share. While these options initially
had a three-year vesting schedule, they fully vested in January 2001 upon
the change of control of the Company effected through the Imperial
Bancorp/Comerica Incorporated merger.
Executive officers, directors and employees of the Company may
utilize the Company's credit card payment services in order to pay federal,
state and/or municipal tax or other obligations in the ordinary course of
business, and the Company provides these persons a discount from the
convenience fee charged to unaffiliated third parties utilizing similar
services.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 2002 Annual
Meeting of Stockholders pursuant to Rule 14a-8 under the Exchange Act must
be received by the Company at its principal executive offices not later
than December 4, 2001 and must otherwise comply with the requirements of
Rule 14a-8 in order to be considered for inclusion in the 2002 Proxy
Statement and proxy.
In order for proposals of stockholders submitted outside of Rule
14a-8 for consideration at the 2002 Annual Meeting to be considered
"timely" for purposes of Rule14a-4(c) under the Exchange Act, such proposal
must be received at the Company's principal executive offices not less than
90 days prior to the date of such meeting.
The Bylaws of the Company provide that in order for a stockholder to
bring business before, or propose director nominations at, an annual
meeting of stockholders, the stockholder must give written notice (either
by personal delivery or by United States mail) to the Secretary of the
Company not less than 90 days prior to the date of that annual meeting. To
be in proper written form a stockholder's notice must set forth information
specified in the Bylaws.
ANNUAL REPORT
A copy of the Company's 2000 Annual Report is being mailed to
stockholders of the Company concurrently with this Proxy Statement. The
Annual Report is not incorporated into this Proxy Statement and shall not
be deemed solicitation material.
STOCKHOLDERS MAY REQUEST A COPY OF THE ANNUAL REPORT, WITHOUT CHARGE,
BY CONTACTING THE COMPANY'S SOLICITATION AGENT, INNISFREE M&A INCORPORATED,
AT 501 MADISON AVENUE, NEW YORK, NEW YORK 10022 OR CALLING TOLL-FREE
1-888-750-5834.
OTHER MATTERS
The Company's Board of Directors knows of no other matters that have
been submitted for consideration at the Annual Meeting. If any other
matters come before the stockholders at the Annual Meeting, the persons
named on the enclosed proxy intend to vote the shares they represent in
accordance with their best judgment.
APPENDIX A
Charter of the Audit Committee of the Board of Directors
of Official Payments Corporation (the "Company")
ADOPTED JUNE 2000
I. Audit Committee Purpose
The Audit Committee is appointed by the Board of Directors to assist
the Board in fulfilling its legal and fiduciary oversight
responsibilities. The Audit Committee's primary duties and
responsibilities are to:
o Monitor the integrity of the Company's financial reporting process
and systems of internal controls regarding finance, accounting, and
legal compliance.
o Monitor the independence and performance of the Company's
independent auditors.
o Provide an avenue of communication among the independent auditors,
management and the Board of Directors.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it has direct
access to the independent auditors as well as anyone in the
organization. The Audit Committee has the ability to retain, at the
Company's expense, special legal, accounting, or other consultants or
experts it deems necessary in the performance of its duties.
II. Audit Committee Composition and Meetings
Audit Committee members shall meet the requirements of the NASDAQ
National Market. The Audit Committee shall be comprised of three or
more directors as determined by the Board, all of whom shall be
independent nonexecutive directors, free from any relationship that
would interfere with the exercise of his or her independent judgment.
Notwithstanding the preceding sentence, one member of the Audit
Committee may be non-independent under exceptional and limited
circumstances as contemplated by Rule 4460(d)(2)(B) of the Nasdaq
Marketplace Rules. All members of the Committee shall have a basic
understanding of finance and accounting and be able to read and
understand fundamental financial statements, including a balance
sheet, income statement and cash flow statement (or be able to do so
within a reasonable period of time after his or her appointment to
the Audit Committee). In addition, at least one member of the Audit
Committee shall have past employment experience in finance or
accounting, requisite professional certification in accounting or any
other comparable experience or background which results in such
member's financial sophistication.
Audit Committee members shall be appointed by the Board. If an audit
committee Chair is not designated or present, the members of the
Audit Committee may designate a Chair by majority vote of the Audit
Committee's membership.
The Audit Committee shall meet at least four times annually, or more
frequently as circumstances dictate. The Audit Committee Chair shall
prepare and/or approve an agenda in advance of each meeting. The
Audit Committee should meet privately in executive session at least
annually with management, and the independent auditors, and as a
committee to discuss any matters that the Audit Committee or each of
these groups believe should be discussed. In addition, the Audit
Committee, or at least its Chair, should communicate with management
and the independent auditors quarterly to review the Company's
financial statements and significant findings based upon the auditors
limited review procedures.
Notice of meetings, quorum, and voting requirements for the Audit
Committee shall be as set forth in Article IV, Section 2 of the
Company's Bylaws.
III. Audit Committee Responsibilities and Duties
Review Procedures
1. Review and reassess the adequacy of this Charter at least annually.
Submit the charter to the Board of Directors for approval and have the
document published at least every three years in accordance with SEC
regulations.
2. Review the Company's annual audited financial statements prior to
filing or distribution. Review should include discussion with
management and independent auditors of significant issues regarding
accounting principles, practices, and judgments.
3. In consultation with the management and the independent auditors,
consider the integrity of the Company's financial reporting processes
and controls. Discuss significant financial risk exposures and the
steps management has taken to monitor, control, and report such
exposures. Review significant findings prepared by the independent
auditors together with management's responses.
4. Review with financial management and the independent auditors the
company's quarterly financial results prior to the release of earnings
and/or the company's quarterly financial statements prior to filing or
distribution. Discuss any significant changes to the Company's
accounting principles and any items required to be communicated by the
independent auditors in accordance with SAS 61 (see item 9). The Chair
of the Committee may represent the entire Audit Committee for purposes
of this review.
Independent Auditors
5. The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors. The Audit Committee shall review
the independence and performance of the auditors and annually recommend
to the Board of Directors the appointment of the independent auditors
or approve any discharge of auditors when circumstances warrant.
6. Approve the fees and other significant compensation to be paid to the
independent auditors.
7. On an annual basis, the Committee shall request and review a formal
written statement from, as well as discuss with, the independent
auditors all significant relationships they have with the Company that
could impair the auditors' independence.
8. Review the independent auditors audit plan - discuss scope, staffing,
locations, reliance upon management, and internal audit and general
audit approach.
9. Prior to releasing the year-end earnings, discuss the results of the
audit with the independent auditors. Discuss certain matters required
to be communicated to audit committees in accordance with AICPA SAS 61.
10. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in
its financial reporting.
Compliance with Laws, Regulations and Company Policies
11. On at least an annual basis, review the Company's control procedures
relative to Legal and Regulatory compliance and compliance with Company
policies. This will include discussions with the Financial Department
staff, the Independent Auditors and the General Counsel, and will
include an assessment of the need for a separate Internal Audit
function.
12. On at least an annual basis, review with the Company's counsel, any
legal or regulatory matters that could have a significant impact on the
organization's financial statements, the Company's compliance with
applicable laws and regulations, and inquiries received from regulators
or governmental agencies.
Other Audit Committee Responsibilities
13. Annually prepare a report to shareholders as required by the Securities
and Exchange Commission. The report should be included in the Company's
annual proxy statement.
14. Perform any other activities consistent with this Charter, the
Company's by-laws, and governing law, as the Committee or the Board
deems necessary or appropriate.
15. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
Other Optional Charter Disclosures
16. Establish, review, and update periodically a Code of Ethical Conduct
and ensure that management has established a system to enforce this
Code.
17. Periodically perform self-assessment of audit committee performance.
18. Review financial and accounting personnel succession planning within
the company.
19. Annually review policies and procedures as well as audit results
associated with directors and officers expense accounts and
perquisites.
20. Approve all Company transactions where members of management have a
personal financial interest. On a quarterly basis, review a summary of
director and officer related-party transactions and potential conflicts
of interest.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits to determine that the Company's financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles. This is the responsibility of management and the independent
auditor. Nor is it the duty of the Audit Committee to conduct
investigations, to resolve disagreements, if any, between management and
the independent auditor or to assure compliance with laws and regulations
and the Company's Code of Conduct.
OFFICIAL PAYMENTS CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 8, 2001
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Thomas R. Evans and Michael P. Presto, and either of them, the
attorneys and proxies of the undersigned, each with full power of
substitution, to appear and to vote all of the shares of Common Stock, par
value $0.01 per share (the "Common Stock"), of Official Payments
Corporation (the "Corporation") registered in the name of the undersigned
at the Annual Meeting of Stockholders of the Corporation which will be held
at the Landmark Club, One Landmark Square, 22nd Floor, Stamford,
Connecticut 06901 on May 8, 2001 at 10:00 a.m., local time, and at any
adjournments or postpone-ments thereof, for the purposes described in the
accompanying Proxy Statement and, in their discre- tion, on all other
matters which properly come before the meeting.
Upon being returned, signed and dated, all shares represented by this proxy
will be voted as indicated by the shareholder below. IN THE ABSENCE OF SUCH
INDICATION, THIS PROXY WILL BE VOTED "FOR" EACH OF THE PROPOSALS SET FORTH
BELOW. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
CORPORATION.
(PLEASE VOTE AND SIGN ON THE OTHER SIDE)
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE
ANNUAL MEETING OF STOCKHOLDERS
OFFICIAL PAYMENTS CORPORATION
MAY 8, 2001
Please Detach and Mail in the Envelope Provided
- -------------------------------------------------------------------------------
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
FOR ALL NOMINEES WITHHOLD
LISTED AUTHORITY
(EXCEPT AS MARKED TO TO VOTE ALL
THE CONTRARY BELOW) NOMINEES LISTED
1. ELECTION OF [ ] [ ]
DIRECTORS
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED HERE
NOMINEES:
Andrew Cohan
Christos M. Cotsakos
Thomas R. Evans
George L. Graziadio, Jr.
John D. Lewis
Vernon R. Loucks Jr.
Lee E. Mikles
Bruce S. Nelson
Kenneth Stern
2. TO RATIFY THE SELECTION OF THE FIRM FOR AGAINST ABSTAIN
OF KPMG LLP AS INDEPENDENT AUDITORS [ ] [ ] [ ]
FOR THE FISCAL YEAR ENDING DECEMBER 31, 2001.
3. IN THEIR DISCRETION, ON ALL OTHER MATTERS WHICH PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.
YOU ARE URGED TO DATE, SIGN AND PROMPTLY RETURN THIS PROXY IN THE
ENVELOPE PROVIDED (NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES).
IT IS IMPORTANT FOR YOU TO BE REPRESENTED AT THE MEETING. THE EXECUTION OF
YOUR PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ARE PRESENT
AT THE MEETING. THIS PROXY IS REVOCABLE AT ANY TIME BEFORE IT IS VOTED, AND
THE UNDERSIGNED RESERVES THE RIGHT TO ATTEND THE MEETING AND VOTE IN
PERSON.
I WILL [ ] WILL NOT [ ]
ATTEND THE MEETING
Signature _________________Signature______________ DATED: ______________, 2001
IMPORTANT: Please sign exactly as your name appears on the share
certificates, and when signing as an attorney, executor, administrator,
trustee or guardian, give your full title as such. If the signatory is a
corporation, a duly authorized officer should sign the full corporate name;
if a partnership, a duly authorized person should sign in the partnership's
name.