At the Meeting, eight directors are to be elected to serve until the 2002
Annual Meeting of Stockholders and until their respective successors have been
duly elected and qualified. The Board of Directors has nominated the persons
listed below for election as directors.
Seven of the eight nominees are currently directors of the Company. It is
the intention of the persons named as proxies to vote for the election of the
nominees. In the unanticipated event that any such nominee should be unable to
serve, the persons named as proxies will vote the proxy for such substitutes, if
any, as the present Board of Directors may designate. None of the nominees have
been nominated pursuant to any arrangement or understanding with any person.
The following table sets forth certain information with respect to the
nominees for director, as well as those directors whose terms expire at the
Meeting and who have decided not to stand for re-election. When used below,
positions held with the Company include positions held with the Company's
predecessors and subsidiaries.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR EACH OF
THE NOMINEES NAMED BELOW.
DIRECTOR
NAME AGE POSITION SINCE
---- --- -------- --------
Nominees
Lucille S. Salhany................... 54 Chief Executive Officer, Co-President and 1999
Director
Michael Rosenblatt................... 50 Co-President and Chairman of the Board of 1999
Directors
Richard A. Guttendorf, Jr............ 59 Chief Financial Officer, Secretary and 1999
Director(1)
Dr. Ian Hunter....................... 47 Director 1999
Raymond Kurzweil..................... 52 Director 2000
Nancy Hawthorne...................... 49 Director(1) 2000
Dr. Leslie G. Selbovitz.............. 51 Director(1) 2000
Garrett Melby........................ 35 Nominee for Director
Directors Not Seeking Re-election
Dr. Stephen J. Andriole.............. 51 Director(2) 2000
Robert Verratti...................... 57 Director(2) 1999
(1) Member of the Company's Audit Committee.
(2) Member of the Company's Compensation Committee.
NOMINEES
Lucille S. Salhany. Ms. Salhany became Chief Executive Officer,
Co-President and a director of the Company on December 14, 1999. Ms. Salhany was
President of JH Media, Ltd. an advisory company with offices in Boston and Los
Angeles from 1997 until December 1999. From 1994 through 1997, Ms. Salhany was
President and CEO of the United Paramount Network. Previously, Ms. Salhany was
Chairman of the FOX Broadcasting Company, Chairman of Twentieth Television and a
member of the FOX, Inc. Board of Directors. Ms. Salhany guided the networks'
expansion from four to seven nights of programming and was instrumental in FOX's
acquisition of the broadcast rights to the NFL. Prior to that Ms. Salhany was
President
2
of Paramount Domestic Television. Ms. Salhany serves on the Boards of Directors
of Compaq Computer Corporation, Boston Restaurant Associates, Inc., Emerson
College and iMedium, Inc.
Michael Rosenblatt. Mr. Rosenblatt became Co-President and Chairman of the
Company on December 14, 1999. Mr. Rosenblatt served as Vice Chairman and
director of Pacific Title/Mirage, Inc. ("Pac Title/ Mirage") from October 1998
until its merger (the "Merger") with Fin Sports U.S.A., Inc. ("Fin Sports
U.S.A.") and served as Co-President and director of Pac Title/Mirage from 1997
to October 1998. Since 1995 he has been President of Mirage Technologies, Inc.,
the general partner of Mirage Technologies L.P. which, together with Safeguard
Scientifics, Inc. ("Safeguard") and Robert Verratti, formed Pac Title/Mirage in
October 1997. In 1974 Mr. Rosenblatt also founded Atlantic Entertainment Group,
Inc., which became one of the largest privately held motion picture production
and distribution companies in the United States. Mr. Rosenblatt is also a member
of the Executive Branch of the Motion Picture Academy of Arts and Science.
Richard A. Guttendorf, Jr. Mr. Guttendorf became Chief Financial Officer,
Secretary and a director of the Company on December 14, 1999. He serves on the
Company's audit committee (the "Audit Committee"). Mr. Guttendorf has been a
director of Pac Title/Mirage since November 1997 and served as its Chairman and
Chief Executive Officer from October 1998 until the Merger. From September 1996
until January 2001, Mr. Guttendorf served as a Vice President of Safeguard. Mr.
Guttendorf was previously Chief Executive Officer of Laser Communications, Inc.,
a leading manufacturer of short haul, laser optic wireless communications
equipment. Prior to Laser Communications, Inc., he was Chief Financial Officer
of InterDigital Communications Corporations, a manufacturer and licensor of
digital wireless telephone equipment and was Chief Financial Officer of Atlantic
Financial, an $8 billion financial institution.
Dr. Ian Hunter. Dr. Hunter became a director of the Company on December
14, 1999. Dr. Hunter has been a consultant to the Company since January 4, 2000.
Dr. Hunter was Director of Research and Development of Pac Title/Mirage from
October 1997 until the Merger. Dr. Hunter has been a Professor of Mechanical
Engineering and Bio-Engineering at the Massachusetts Institute of Technology
since 1994.
Raymond Kurzweil. Mr. Kurzweil became a director of the Company on
September 18, 2000. Mr. Kurzweil is the founder, Chairman and Chief Executive
Officer of Kurzweil Technologies, Inc., a software development firm. Mr.
Kurzweil is also president and Chief Executive Officer of Medical Learning
Company, Inc. and Family Practice.com and serves on the board of directors of
Medical Manager Corp.
Nancy Hawthorne. Ms. Hawthorne became a director of the Company on May 24,
2000. Ms. Hawthorne has been a private investor since 1997. She serves as
Chairperson of the Audit Committee. Until 1996, Ms. Hawthorne was Chief
Financial Officer of Continental Cablevision, Inc., a cable television system
operator. From 1996 to 1997, Ms. Hawthorne was Senior Vice President of
MediaOne, the surviving company of the merger of Continental Cablevision, Inc.
and US West. Ms. Hawthorne is Chairperson of the Board of Directors of World
Clinic, Inc. and serves on the boards of directors of Avid Technology, Peroni
Corporation, New England Zenith Fund and CGU.
Dr. Leslie Selbovitz. Dr. Selbovitz became a director of the Company on
July 6, 2000. He serves on the Audit Committee. Since August 1998, Dr. Selbovitz
has been Senior Vice President for Medical Affairs and Chief Medical Officer at
Newton-Wellesley Hospital. He is also Associate Clinical Professor of Medicine
at Tufts University School of Medicine, and serves on the Executive Committee of
Partners HealthCare System, Inc. From 1990 to 1998, Dr. Selbovitz was Medical
Director for Quality, Utilization and Risk Management at Baystate Medical
Center. While at BayState Medical Center, he founded and directed the office of
Clinical Practices Evaluation and Management to develop an explicit approach to
technology evaluation and clinical policies. Dr. Selbovitz received his M.D.
degree from the University of Rochester in 1975, and his Bachelor of Arts degree
from Cornell University in 1971.
3
Garrett Melby. Mr. Melby was nominated to serve as a director of the
Company on March 1, 2001. Since December 1999 Mr. Melby has been Vice President
of Safeguard Scientifics, Inc.'s e-services division. From 1991 until he joined
Safeguard, Mr. Melby was a corporate attorney in the mergers and acquisitions
department of Skadden, Arps, Slate, Meagher & Flom, LLP. Mr. Melby serves on the
boards of directors of Persona, Inc., FOB, Inc. and EON Digital, Inc.
DIRECTORS NOT SEEKING RE-ELECTION
Robert Verratti. Mr. Verratti became a director of the Company on December
14, 1999. He serves on the Company's compensation committee (the "Compensation
Committee"). Mr. Verratti served as Chief Executive Officer and Chairman of the
Board of Pac Title/Mirage from 1997 to October 1998. Since 1980, Mr. Verratti
has been the President of Charlestown Investments, Ltd., a company specializing
in investments in companies in turnaround or undervalued situations. Mr.
Verratti is also a managing director of TL Ventures. Mr. Verratti serves on the
boards of directors of Webvision, Inc., OE Waves, Inc. and OPT 4, Inc. Mr.
Verratti's present term as a director of the Company expires at the Meeting and
he has chosen not to stand for re-election.
Dr. Stephen J. Andriole. Dr. Andriole became a director of the Company on
March 15, 2000. He serves as Chairperson of the Compensation Committee. From
October 1997 to December 2000, Dr. Andriole was Senior Vice President and Chief
Technology Officer of Safeguard. From March 1995 to October 1997, Dr. Andriole
was Chief Technology Officer and Senior Vice President for Technology Strategy
at CIGNA Corporation. Dr. Andriole serves on the boards of directors of: US
Data; aligne, Inc.; iMedium, Inc.; Integrated Visions, Inc.; the Ben Franklin
Technology Center of Southeastern Pennsylvania; Broadreach Consulting, Inc.; and
STORM Systems. Dr. Andriole's present term as a director of the Company expires
at the Meeting and he has chosen not to stand for re-election.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held four meetings during the fiscal
year ended December 31, 2000. The Board of Directors also acted on four
occasions by written consent in lieu of a special meeting. Each director
attended at least 75% of the aggregate number of all meetings of the Board of
Directors and committees of which he or she was a member during such fiscal
year. The Board of Directors currently has an Audit Committee and a Compensation
Committee. The Board does not have a Nominating Committee.
The Compensation Committee, currently composed of Mr. Verratti and Dr.
Andriole, met once during the fiscal year ended December 31, 2000 and acted by
written consent on eight occasions. The functions of the Compensation Committee
include determining salaries, grants and awards under incentive plans, benefits
and overall compensation. Because Mr. Verratti and Dr. Andriole have chosen not
to stand for re-election as directors, the Board of Directors intends to elect
new members to the Compensation Committee after the Meeting.
AUDIT COMMITTEE REPORT
The Audit Committee is currently comprised of three of the Company's
directors, Ms. Hawthorne, the Chairperson, Mr. Guttendorf, and Dr. Selbovitz.
Both Ms. Hawthorne and Dr. Selbovitz are "independent" as defined under the
listing standards of the Nasdaq National Market. Until he became employed by the
Company in January 2001, Mr. Guttendorf was also considered "independent" under
the Nasdaq standards. After the meeting, the Board intends to add a third
independent member to the Audit Committee. The Audit Committee, which met twice
during the fiscal year ended December 31, 2000, operates pursuant to a charter
4
(the "Audit Committee Charter") which was approved and adopted by the Board of
Directors on July 6, 2000 and is attached to this Proxy Statement as Annex A.
Under the provisions of the Audit Committee Charter, the Audit Committee is
responsible for, among other things: monitoring the independence and performance
of the Company's independent auditors and internal auditing department;
reviewing the Company's financial disclosure documents; monitoring the Company's
financial reporting process and internal control systems; and providing a
liaison between the independent auditors and the Board of Directors.
The Audit Committee has reviewed and discussed with management the
Company's audited consolidated financial statements for the fiscal year ended
December 31, 2000. The Audit Committee has also discussed with KPMG LLP, the
Company's independent auditors ("KPMG"), the matters required to be discussed by
the Auditing Standards Board Statement on Auditing Standards No. 61, as amended.
As required by Independence Standards Board Standard No. 1, as amended,
"Independence Discussion with Audit Committees," the Audit Committee has
received and reviewed the required written disclosures and a confirming letter
from KPMG regarding their independence, and has discussed the matter with the
auditors.
Based on its review, the Audit Committee has recommended to the Board of
Directors that the Company's audited consolidated financial statements for the
fiscal year 2000 be included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000. Further, the Audit Committee recommends
that the Board of Directors engage KPMG as the Company's independent auditors
for the fiscal year ending December 31, 2001.
Audit Committee
Nancy Hawthorne, Chairperson
Richard A. Guttendorf, Jr.
Dr. Leslie Selbovitz
5
COMPENSATION OF DIRECTORS
Each member of the Board of Directors who is not an employee of the Company
or Safeguard will receive:
- a one-time appointment grant of an option to purchase 25,000 shares of
Common Stock, which will vest annually over four years;
- an annual grant of an option to purchase 4,000 shares of Common Stock,
which will vest annually over two years; and
- an annual fee of $8,000.
In addition, the Chairpersons of the Company's Compensation Committee and
Audit Committee will receive an additional annual fee of $1,000. As of December
31, 2000, no cash compensation had been paid under this plan.
SECURITY OWNERSHIP OF DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS
The following table shows, as of March 2, 2001, the beneficial ownership of
the Company's outstanding shares of Common Stock by:
- each person we know to beneficially own at least 5% of the Company's
Common Stock;
- each director and nominee;
- each of the Company's most highly compensated executive officers; and
- all of the Company's executive officers and directors as a group.
Unless otherwise indicated herein, the address of each stockholder is: c/o
Lifef/x, Inc., 153 Needham Street, Bldg #1, Newton, Massachusetts 02464.
The term beneficial ownership as used in this section, consistent with Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), is defined as the sole or shared voting power over or sole or shared
investment power over the security. Each person has sole voting and investment
power with respect to his or her shares of Common Stock, except as otherwise
indicated. Beneficial ownership consists of a direct interest in the shares of
Common Stock, except as otherwise indicated.
NUMBER OF PERCENTAGE
BENEFICIAL OWNER SHARES OF TOTAL(1)
---------------- --------- -----------
Directors, Officers And Nominees
Lucille S. Salhany.......................................... 1,366,722(2) 6.6%
Michael Rosenblatt.......................................... 3,298,890(3)(11) 16.0%
Richard A. Guttendorf, Jr................................... 102,500(4) *
Dr. Serge Lafontaine........................................ 2,200,483(5)(11) 11.3%
Dr. Ian Hunter.............................................. 1,935,885(6)(11) 10.1%
Raymond Kurzweil............................................ -- --
Robert Verratti............................................. 491,013(7) 2.5%
Dr. Stephen J. Andriole..................................... 30,000 *
Dr. Leslie G. Selbovitz..................................... 2,020(8) *
Nancy Hawthorne............................................. -- --
Garrett Melby............................................... 10,000 *
6
NUMBER OF PERCENTAGE
BENEFICIAL OWNER SHARES OF TOTAL(1)
---------------- --------- -----------
All Directors and Executive Officers (10 persons)........... 9,427,513(9) 42.0%
5% or more Beneficial Ownership
Safeguard Scientifics, Inc.................................. 30,325,731(10) 64.5%
435 Devon Park Drive
Wayne, PA 19087
* Less than 1% of the outstanding common stock.
(1) The percentage of shares held assumes that options and warrants held by the
particular individual, if any, have been exercised, and no others.
(2) Includes 1,366,722 shares that Ms. Salhany has the right to acquire within
60 days upon exercise of stock options.
(3) Includes 1,364,967 shares that Mr. Rosenblatt has the right to acquire
within 60 days upon exercise of stock options, 43,750 shares owned by
Mirage Technologies, Inc., a corporation owned by Mr. Rosenblatt; 500,000
shares held in a gifted share trust; 5,600 shares held in trust for members
of Mr. Rosenblatt's immediate family; 167,501 shares owned by Mirage
Technologies, LP, a partnership in which Mirage Technologies, Inc. is the
sole general partner.
(4) Includes 34,000 shares held by family members and a gifted share trust and
67,500 shares that Mr. Guttendorf has the right to acquire within 60 days
upon exercise of stock options.
(5) Includes 270,448 shares that Dr. Lafontaine has the right to acquire within
60 days upon exercise of stock options and 161,783 shares owned by Mirage
Technologies, LP, in which he owns an interest.
(6) Includes 161,783 shares held by Mirage Technologies, LP, in which he owns
an interest.
(7) Includes 191,666 shares that Mr. Verratti has the right to acquire within
60 days upon exercise of stock options.
(8) Includes 2,020 shares held jointly be Dr. Selbovitz and his wife.
(9) Includes 3,261,303 shares that all directors and officers as a group have a
right to acquire within 60 days.
(10) Subsidiaries of Safeguard own 2,535,779 shares of the Company, and have the
right to acquire 27,789,952 shares within 60 days through the exercise of
warrants.
(11) 546,872 of the total shares held by Mirage Technologies, LP are pledged to
Safeguard as collateral for a loan from Safeguard to Mirage Technologies,
LP.
7
MANAGEMENT
The names of the Company's executive officers who are not directors of the
Company, and certain biographical information furnished by them, are set forth
below.
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
Dr. Serge Lafontaine................. 51 Chief Technology Officer, Lifef/x Networks, Inc.
Dr. Paul Charette.................... 38 Vice President and Co-Director of Research and
Development, Lifef/x Networks, Inc.
Dr. Mark Sager....................... 34 Vice President and Co-Director of Research and
Development, Lifef/x Networks, Inc.
Dr. Keith Waters..................... 40 Senior Technology Officer, Lifef/x Networks, Inc.
Dr. Serge Lafontaine. Dr. Lafontaine became the Chief Technology Officer
of Lifef/x Networks, Inc., wholly-owned subsidiary of the Company ("Networks")
on December 14, 1999. From October 1997 until the Merger, he was Co-Director of
Research of Pac Title/Mirage and Assistant Director of Research of Mirage
Technologies, Inc. Dr. Lafontaine has been a post-doctoral fellow in mechanical
engineering at the Massachusetts Institute of Technology since 1999, and was
previously a post-doctoral associate in mechanical engineering at the
Massachusetts Institute of Technology from 1997 to 1999. Since 1998, Dr.
Lafontaine has been a partner of Advanced Instrumentation Systems, which builds
instrumentation for drug discovery. From 1997 to 1998, Dr. Lafontaine was also a
partner of BOMEC, which conducts research in conducting polymers. From 1994
through 1997, Dr. Lafontaine was a visiting research scientist at the
Massachusetts Institute of Technology.
Dr. Paul Charette. Dr. Charette became the Vice President and Co-Director
of Research and Development of Networks on December 14, 1999. From October 1997
until the Merger, he was Co-Director of Research and Development of Pac
Title/Mirage. From 1994 to 1997, Dr. Charette held post-doctoral fellowships in
the department of mechanical engineering at the Massachusetts Institute of
Technology, and in the department of engineering science at the University of
Auckland, New Zealand. Dr. Charette received his doctorate degree from McGill
University in 1994, where he worked under Dr. Ian Hunter, and received his
Bachelors degree in electrical engineering from McGill University in 1986.
Dr. Mark Sagar. Dr. Sagar became Vice President and Co-Director of
Research and Development of Networks on December 14, 1999. From October 1997
until the Merger, he was Co-Director of Research and Development of Pac
Title/Mirage. Dr. Sagar was a post-doctoral fellow at Dr. Ian Hunter's
laboratory at the Massachusetts Institute of Technology in 1996. From 1992
through 1996, Dr. Sagar was a member of Professor Peter Hunter's bio-engineering
group at the University of Auckland, where he developed an anatomically accurate
computer model of the human eye combining visual and mechanical realism for use
in robotic eye surgery and developed a new methodology and software for the
creation of complex solid based virtual anatomy for bio-engineering virtual
environments. These methods were used to create a virtual model of the heart.
Dr. Sagar received a doctorate degree from the University of Auckland in 1996
and a bachelor of science degree in Physics and Mathematics from the University
of Auckland in 1987.
Dr. Keith Waters. Dr. Waters has been Senior Technical Officer of Networks
since December 14, 1999. From 1998 to December 1999, Dr. Waters was a member of
the technical staff at Compaq Computer Corporation's Cambridge Research
Laboratory, where he developed FaceWorks, a Windows-based multimedia authoring
tool for synthetic faces, in 1997. Dr. Waters was a member of the technical
staff at Digital Equipment Corporation from 1991 to 1998, where he developed
DECface, a real-time synthetic face that used a software text-to-speech engine.
Dr. Waters received a Ph.D. in computer graphics from Middlesex
8
University in London, England. Dr. Waters is on the editorial boards of the
Graphics and Image Processing Journal and the Computer Graphics and
Visualization Journal.
Executive officers of the Company are elected by the Board of Directors on
an annual basis and serve until their successors have been duly elected and
qualified. There are no family relationships among any of the executive officers
or directors of the Company.
9
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the compensation during
the last three fiscal years of each of the Company's Chief Executive Officer,
the Chief Executive Officer of the Company's predecessor company, and the three
other most highly compensated executive officers of the Company (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION AWARDS
------------------------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
--------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS OPTIONS/SAR(#) COMPENSATION
--------------------------- ---- --------- -------- ---------- -------------- ------------
Lucille S. Salhany................... 2000 400,000 -- -- 195,246 6,000(4)
Chief Executive Officer, 1999 30,769(1) -- -- 1,952,459 --
Co-President and Director 1998 -- -- -- -- --
Michael Rosenblatt................... 2000 335,000 -- -- 236,194 6,000(4)
Chairman of the Board, 1999 73,769(2) -- -- 1,911,511 --
Co-President and Director 1998 51,000 -- -- -- --
Richard A. Guttendorf, Jr............ 2000 --(3) -- -- -- --
Chief Financial Officer, 1999 --(3) -- -- -- --
Secretary and Director 1998 --(3) -- -- -- --
Dr. Serge Lafontaine................. 2000 250,000 -- -- 138,999 --
Chief Technology Officer 1999 15,385(1) -- -- 301,541 --
Lifef/x Networks, Inc. 1998 -- -- -- -- --
Robert Verratti...................... 2000 -- -- -- -- --
Chairman and CEO of 1999 -- -- -- 50,001 --
Pac Title/Mirage, and Director 1998 150,631 -- -- 170,999 --
(1) Covers the period for December 1999, the month of the Merger.
(2) Represents $50,000 paid through Pac Title/Mirage and $23,769 for December
1999, the month of the Merger.
(3) Until January 2001, Mr. Guttendorf was a Vice President of Safeguard and was
compensated by that entity for his services, including services provided to
the Company. Pursuant to an employment agreement between the Company and Mr.
Guttendorf dated as of January 18, 2001, Mr. Guttendorf is entitled to an
annual base compensation of $210,000. See "Employment Agreements."
(4) Represents an automobile allowance.
The following tables present information concerning stock options held by
the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL
REALIZABLE
VALUE AT
PERCENT ASSUMED
OF TOTAL MARKET ANNUAL RATES
NUMBER OPTIONS/SARs VALUE OF STOCK PRICE
OF GRANTED ON APPRECIATION
SECURITIES TO DATE FOR OPTION
UNDERLYING EMPLOYEES EXERCISE OF TERM($)
OPTIONS/SARs IN FISCAL PRICE GRANT EXPIRATION ----------------------
GRANTED(3) YEAR ($/SHARE) ($/SHARE) DATE 5% 10%
------------ ------------ --------- --------- ---------- --------- ----------
Lucille S. Salhany........ 195,246 6.5% 8.28 8.28 12/20/2010 4,052,056 10,268,559
Michael Rosenblatt........ 40,948 1.4% 27.50 27.50 3/09/2010 4,052,075 10,268,609
195,246 6.5% 8.28 8.28 12/20/2010
Richard A. Guttendorf,
Jr...................... -- -- -- -- -- -- --
Dr. Serge Lafontaine...... 98,950 3.3% 27.50 27.50 3/09/2010 831,167 2,106,309
40,409 1.3% 8.28 8.28 12/20/2010
No options were exercised by officers in 1998, 1999 or 2000.
10
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 2000 (#) DECEMBER 31, 2000 (#)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------- ------------- ----------- -------------
Lucille S. Salhany........... -- -- 1,171,476 976,229 4,100,166 2,733,411
Michael Rosenblatt........... -- -- 1,169,136 978,569 2,293,812 1,529,210
Richard A. Guttendorf, Jr.... -- -- -- -- -- --
Dr. Serge Lafontaine......... -- -- 230,399 210,141 460,798 142,798
(1) Market value of underlying securities at December 29, 2000, the last day
during the fiscal year for which market prices are available ($5.00 per
share as quoted on the Nasdaq National Market), less the exercise price. The
values in the last two columns have not been, and may never be, realized by
the Named Executive Officers. Actual gains, if any, on option exercises will
depend on the value of the Company's common stock on the date of exercise.
COMPENSATION COMMITTEE REPORT
The Company's executive compensation program is designed to promote the
following objectives:
- to provide competitive compensation that will attract, retain and reward
highly qualified executives
- to recognize individual initiative and achievement
- to enhance the profitability of the Company and to increase stockholder
value; and
- to align the interests of management with those of stockholders by
including long-term equity incentives.
Executive Officer Compensation Program
The compensation of executive officers consists of three elements: (i) base
salary; (ii) annual incentive compensation; and (iii) long-term equity
incentives in the form of stock options. Executive officers are also eligible to
participate in certain benefit programs which are generally available to all
employees of the Company. The base salary of an executive officer is generally
determined by evaluating the experience of and the responsibilities to be held
by the individual. The Compensation Committee also considers generally available
information regarding salaries paid to executive officers with comparable
qualifications, experience and responsibilities at companies in similar
businesses. Annual bonuses for executive officers are determined by the
Compensation Committee based on the recommendations of Ms. Salhany and Mr.
Rosenblatt and are awarded on a discretionary basis. No bonuses were awarded to
executive officers for fiscal 2000.
Long-term incentive compensation, in the form of stock option grants, is
intended to promote the success of the Company by aligning the financial
interests of the executive officers with those of the stockholders. Option
grants are based on various subjective factors, including the responsibilities
of the individual officers, their expected future performance, existing levels
of stock ownership, previous grants of options and the current price of the
Company's Common Stock. During fiscal 2000, options to purchase 570,799 shares
of Common Stock were granted to the Named Executive Officers under the Company's
Option Plan.
11
Compensation of the Chief Executive Officer
The compensation of Lucille Salhany, the Company's Chief Executive Officer,
is subject to the terms of an employment agreement by and between Ms. Salhany
and the Company. Pursuant to the agreement, which was entered into on December
14, 1999 and has a two-year term, Ms. Salhany is entitled to an annual base
salary of $400,000. She is also entitled to annual consideration for a bonus
based on her personal performance and the performance of the Company. See
"Employment Agreements." During fiscal 2000, Ms. Salhany received options to
purchase 195,246 shares of the Company's Common Stock.
Compensation Committee,
Dr. Stephen J. Andriole
Robert Verratti
EMPLOYMENT AGREEMENTS
Lucille S. Salhany
Ms. Salhany serves as the Company's Chief Executive Officer and
Co-President under an employment agreement with a term of two years which
commenced on December 1, 1999. Under the terms of her employment, Ms. Salhany's
annual base compensation is $400,000. She is entitled to annual consideration
for a bonus based on her personal performance and the performance of the
Company. Ms. Salhany has the option to purchase 2,147,705 shares of the
Company's Common Stock under the Lifef/x, Inc. 1999 Long-Term Incentive Plan
(the "Company's Option Plan"). Ms. Salhany's right to purchase twenty percent of
1,952,459 of these shares vested on grant and her right to purchase the balance
will vest in equal quarterly installments over a two year period until fully
vested. In addition, Ms. Salhany has an option to purchase 195,246 shares that
vest in equal annual installments over a three year period. If Ms. Salhany's
employment terminates due to her death, permanent disability or for other good
cause, as further described in the agreement, she would receive accrued but
unpaid base salary and vacation. If Ms. Salhany's employment is terminated by
the Company for any other reason, she will receive as severance compensation her
full base salary for the unexpired period of the term of her employment, in
addition to accrued but unpaid salary and vacation.
Michael Rosenblatt
Mr. Rosenblatt serves as our Chairman of the Board of Directors and as
Co-President under an employment agreement with a term of two years which
commenced on December 1, 1999. Under the terms of his employment, Mr.
Rosenblatt's annual base compensation is $335,000. He is entitled to annual
consideration for a bonus based on his personal performance and the performance
of the Company. Mr. Rosenblatt has the option to purchase 2,147,705 shares of
the Company's Common Stock under the Company's Option Plan. Mr. Rosenblatt's
right to purchase twenty percent of 1,952,459 of these shares vested on grant
and his right to purchase the balance will vest in equal quarterly installments
over a two year period until fully vested. In addition, Mr. Rosenblatt has an
option to purchase 195,246 shares that vest in equal annual installments over a
three year period. If Mr. Rosenblatt's employment terminates due to his death,
permanent disability or for other good cause, as further described in the
agreement, he would receive accrued but unpaid base salary and vacation. If Mr.
Rosenblatt's employment is terminated by the Company for any other reason, he
will receive as severance compensation his full base salary for the unexpired
period of the term of his employment, in addition to any accrued but unpaid
salary and vacation.
12
Dr. Serge Lafontaine
Dr. Lafontaine serves as Networks' Chief Technology Officer under an
employment agreement with a term of two years which commenced on December 1,
1999. Under the terms of his employment, Dr. Lafontaine's annual base
compensation is $250,000. He is entitled to annual consideration for a bonus
based on his personal performance and the performance of the Company. Dr.
Lafontaine has the option to purchase 440,540 shares of the Company's Common
Stock under the Company's Option Plan. Dr. Lafontaine's right to purchase twenty
percent of 400,491 of these shares vested on grant and his right to purchase the
balance will vest in equal quarterly installments over a two year period until
fully vested. In addition, Dr. Lafontaine has an option to purchase 40,049
shares that vest in equal annual installments over a three year period. If Dr.
Lafontaine's employment terminates due to his death, permanent disability or for
other good cause, as further described in the agreement, he will receive accrued
but unpaid base salary and vacation. If Dr. Lafontaine's employment is
terminated by Networks for any other reason, he would receive as severance
compensation his full base salary for the unexpired period of the term of his
employment, in addition to any accrued but unpaid salary and vacation.
Richard A. Guttendorf, Jr.
Mr. Guttendorf serves as the Company's Chief Financial Officer and
Secretary under an employment agreement with a term of two years which commenced
on January 18, 2001. Under the terms of his employment, Mr. Guttendorf's annual
base compensation is $210,000. He is entitled to annual consideration for a
bonus based on his personal performance and the performance of the Company. Mr.
Guttendorf has the option to purchase 225,000 shares of the Company's Common
Stock under the Company's Option Plan. Mr. Guttendorf's right to purchase twenty
percent of these shares vested on grant and his right to purchase the balance
will vest in equal quarterly installments over a two year period until fully
vested. If Mr. Guttendorf's employment terminates due to his death, permanent
disability or for other good cause, as further described in the agreement, he
will receive accrued but unpaid base salary and vacation. If Mr. Guttendorf's
employment is terminated by the Company for any other reason, he would receive
as severance compensation his full base salary for the unexpired period of the
term of his employment, in addition to any accrued but unpaid salary and
vacation.
INDEMNIFICATION
The Company's Articles of Incorporation limit the liability of directors to
the maximum extent permitted by Nevada law. In addition, the Company's by-laws
require the Company to indemnify its directors and officers, and allow the
Company to indemnify its other employees and agents to the fullest extent
permitted by law. At present, there is no pending litigation or proceeding
involving any director, officer, employee or agent in which the Company believes
indemnification will be required or permitted. The Company is not aware of any
threatened litigation or proceeding that might result in a claim for
indemnification. If the Company permits indemnification for liabilities arising
under the Securities Act of 1933, as amended (the "Securities Act") to
directors, officers or persons controlling the Company under these provisions,
the Company has been informed that, in the opinion of the Securities and
Exchange Commission (the "SEC"), this indemnification is against public policy
as expressed in the Securities Act and is unenforceable.
STOCK OPTION PLAN
1999 Long-Term Incentive Plan
Pac Title/Mirage had a stock option plan which provided for the grant to
Pac Title/Mirage employees of incentive stock options and for the grant of
nonstatutory stock options, stock awards or restricted stock to Pac
13
Title/Mirage employees, directors and consultants. On December 14, 1999, this
stock option plan was terminated and the Company adopted the Company's Option
Plan with terms substantially similar to those of the Pac Title/Mirage option
plan. The Company's Option Plan reserves up to 10,539,944 shares of the Company
Common Stock for issuance under the Company's Option Plan. Following the
adoption of the Company's Option Plan, the Company assumed the obligations of
outstanding options granted to Pac Title/ Mirage employees under the Pac
Title/Mirage option plan. As of December 31, 2000, options to purchase 8,535,420
shares have been granted under the Company's Option Plan, 206,446 of which have
been exercised and 8,328,974 of which are outstanding.
These outstanding option obligations included an option grant to Lucille S.
Salhany, the Chief Executive Officer, Co-President and a director of the
Company, for 1,952,459 shares of Common Stock, after adjusting for the
conversion from Pac Title/Mirage shares to shares of the Common Stock of the
Company. The options are exercisable at $1.50 per share, as adjusted. Twenty
percent of the options vested at the date of grant and the balance of the
options vest on a quarterly basis over two years.
For financial reporting purposes, the Company has recorded deferred stock
compensation of $2,928,689 during the year ended December 31, 1999, representing
the difference between the exercise price, $1.50, and the fair value of the
Company's Common Stock on the grant date of $3.00. This amount is being
amortized by a charge to operations over the two year vesting period, which
resulted in amortization expense of $656,541 for the year ended December 31,
1999 and $1,171,476 for the year ended December 31, 2000. In addition, the
Company recognized $25,950 of compensation expense for options granted to a
non-employee, representing the fair value of the options on the grant date.
In addition, as part of the Merger, the Company granted options to various
employees, which vest over time. Under the Company's Option Plan, the strike
price for nonstatutory stock option grants must be at least 85% of fair market
value on the grant date and the strike price for incentive stock options must be
the fair market value on the grant date. Outstanding options under the Company's
Option Plan vest over periods established by the Compensation Committee and
expire on or before the tenth anniversary of the grant date, but terminate early
under some circumstances as provided in the Company's Option Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Board of Directors established a Compensation Committee on
December 14, 1999. The Compensation Committee currently consists of Mr. Verratti
and Dr. Andriole. During the fiscal year ended December 31, 2000, each of Ms.
Salhany, the Company's Chief Executive Officer, Co-President and a director, and
Mr. Rosenblatt, the Company's Co-President and Chairman of the Board,
participated in the deliberations of the Board of Directors concerning the
compensation of executive officers, but did not participate in the Board's
deliberations concerning their own compensation.
14
PERFORMANCE GRAPH
The following graph sets forth a comparison of cumulative total returns for
(i) the Company's Common Stock, which is traded on the Nasdaq Stock Market; (ii)
the Nasdaq Composite Index; and (iii) the Chase H&Q Technology Index.
The Company's Common Stock began trading on the OTC Bulletin board on
December 15, 1999. On September 18, 2000, the Common Stock was approved for
listing on the Nasdaq National Market under the symbol "LEFX". All returns were
calculated assuming dividend reinvestment.
[STOCK PERFORMANCE CHART]
Assumes $100 invested on December 15, 1999 in the Company's Common Stock,
the Chase H&Q Technology Index, and the Nasdaq Market Index.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
UniServices License
We license a portion of the Company's technology from Auckland UniServices
Limited ("UniServices") under a licensing agreement effective November 1, 2000.
Under the UniServices licensing agreement, the Company has been granted an
exclusive, worldwide, perpetual license to use UniServices' continuum modeling
technology in all communications applications. Additionally the Company has
recently expanded our arrangement with UniServices under an agreement dated
January 26, 2001, to include the Company's ownership of the player and Stand-in
technology for all communications applications, including professional medical,
scientific and engineering applications, which were previously excluded from the
Company's license. In connection with the amendment, UniServices has been issued
2,250,000 shares in the Company and has been granted warrants to purchase
675,000 shares at an exercise price of $20.00 per share and 75,000 shares at an
exercise price of $12.00 per share.
15
Dr. Ian Hunter, one of the Company's directors, is the brother of Dr. Peter
Hunter, a professor at the University of Auckland, and the leading developer of
the licensed technology there. UniServices acts as a licensing agent for the
University of Auckland in this relationship. Ian Hunter receives none of the
fees paid by the Company to UniServices.
Sale Of Assets Of Discontinued Operation To Company Owned By Pre-Merger Pac
Title/Mirage Shareholders And Related Indemnification Agreements
On March 20, 2000, the Company sold all of the assets of its discontinued
operation to PTM Productions, Inc., ("PTM Productions") a newly-organized
company that was formed for the specific purpose of holding these non-Company
assets. PTM Productions is owned by the shareholders that owned Pac Title/Mirage
prior to the Merger. The owners of PTM Productions are the Company's shareholder
Safeguard (92.6%), Mirage Technologies, LP (7.1%) and the Company's shareholder
and director Robert Verratti (0.3%). Investors in Mirage Technologies LP include
the Company's Chairman and Co-President, Michael Rosenblatt, the Networks' Chief
Technology Officer, Dr. Serge Lafontaine, the Company's director, Dr. Ian
Hunter, and the Company's shareholder, Michael MacCloskey.
The transfer of the non-Company assets and liabilities to PTM Productions
was done because the operations of PTM Productions, which consist of providing
post production services to the film entertainment industry, were not germane to
the Company's operations. The sales price consisted of PTM Productions'
assumption of all of the liabilities of the discontinued operation. On the date
of the sale, the amount of the liabilities assumed by PTM Productions exceeded
the carrying value of the assets it acquired from us. As part of this sale, the
Company transferred all of its bank debt to PTM Productions. Safeguard has
agreed to fully indemnify the Company against all losses and liabilities
relating to or arising from the bank debt and PTM Productions. In addition,
Safeguard has agreed to indemnify the Company for any liability related to the
assets purchased and the liabilities assumed by PTM Productions.
Formation Of Pac Title/Mirage
Pac Title/Mirage was formed in 1997 as the combination of the Company's
technology contributed by Mirage Technologies LP and the post-production
services business that was acquired from Pacific Title and Art Studio, a
post-production company founded in 1918. In this transaction, Mirage
Technologies LP received $8 million of preferred equity for its technology
contribution and Safeguard received $8 million of preferred and common equity
for the $8 million in cash it contributed. This $8 million cash, along with
approximately $8 million from the proceeds of bank borrowings, was used to
purchase the post-production business in an arm's-length, negotiated transaction
from unaffiliated owners of Pacific Title and Art Studio for $15.5 million.
The limited partners of Mirage Technologies LP were Michael Rosenblatt, the
Company's Chairman and Co-President, Dr. Serge Lafontaine, Dr. Ian Hunter, Dr.
Ivan Gulas and Michael MacCloskey. Dr. Serge Lafontaine is the Chief Technology
Officer of Networks. Dr. Ian Hunter is a consultant to Networks and a director
of the Company. Dr. Ivan Gulas is also a consultant to Networks. At the time of
the formation of Pac Title/Mirage in 1997, Michael Rosenblatt and Dr. Ivan Gulas
each owned 25.5% of Mirage Technologies LP, Dr. Ian Hunter and Dr. Serge
Lafontaine each owned 19% and Michael MacCloskey owned 11%.
Dr. Ian Hunter serves as a technical and engineering consultant to Networks
under a consulting agreement with a term of one year which commenced on January
4, 2001 at compensation of $150,000.
Dr. Ivan Gulas serves as a consultant to Networks under a consulting
agreement with a term of three years which commenced on December 13, 1999 at an
annual compensation of $200,000.
16
Subsequent to the formation of Pac Title/Mirage, Robert Verratti, an
officer and director, acquired approximately 2% of the common stock from
Safeguard in a cash transaction.
Pac Title/Mirage incurred losses from its inception. Safeguard, which owned
approximately 49% of Pac Title/Mirage, loaned it significant amounts to support
its operations. From the time of Pac Title/Mirage's formation in 1997 until
September 30, 1999, Safeguard loaned it a total of $13,775,000. Safeguard's
consideration for making these loans included warrants to purchase common stock
of Pac Title/Mirage at exercise prices ranging from $1.00 to $2.50 per share.
These warrants were subsequently converted into warrants to purchase common
stock of the Company, as part of the Merger.
Subsequent to September 30, 1999, Safeguard made additional loans to Pac
Title/Mirage, but these loans did not include any warrant or other equity
component. These post-September 30 loans from Safeguard, along with bank debt
and other debt related to non-Company operations, were transferred to PTM
Productions on March 20, 2000.
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT AUDITORS
The Company is asking the stockholders to ratify the selection of KPMG as
the Company's independent accountants for the fiscal year ending December 31,
2001. KPMG has served as the Company's auditors since December 14, 1999, and
also served as the auditors of Pac Title/Mirage and continues to serve as the
auditors of PTM Productions. It is expected that a member of the firm will be
present at the Meeting with the opportunity to make a statement if so desired
and will be available to respond to appropriate questions from the stockholders.
The affirmative vote of a majority of the outstanding voting shares of the
Company present or represented and entitled to vote at the Meeting is required
to ratify the selection of KPMG. Abstentions will have the effect of voting
against this Proposal No. 2. Broker non-votes will have no effect on the vote.
In the event the stockholders fail to ratify the appointment, the Board of
Directors will reconsider its selection. Even if the selection is ratified, the
Board of Directors, in its discretion, may direct the appointment of a different
independent accounting firm at any time during the year if the Board of
Directors feels that such a change would be in the Company's and the
stockholders' best interests.
INDEPENDENT AUDITOR FEES
Audit Fees. KPMG billed the Company an aggregate of $55,000 for
professional services rendered by KPMG in connection with its audit of the
Company's financial statements for the fiscal year ended December 31, 2000 and
its review of the Company's quarterly reports on Form 10-Q during fiscal 2000.
Financial Information Systems Design and Implementation. During fiscal
2000, KPMG did not directly or indirectly, operate, or supervise the operation
of, the Company's information systems or manage the Company's local area
network. Nor did KPMG design or implement a hardware or software system that
aggregates source data underlying the financial statements of the Company or
generates information that is significant to the Company's financial statements
taken as a whole.
All Other Fees. KPMG billed the Company an additional $140,450 for
professional services rendered during fiscal 2000 for services not otherwise
described above. These fees include fees for tax-related services, review of
certain corporate filings, and other consulting services.
17
The Company's Audit Committee considered whether the non-audit services
rendered by KPMG during fiscal 2000, as described under the caption "All Other
Fees" above, and determined that such services were compatible with KPMG's
independence.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE SELECTION OF KPMG TO SERVE AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2001.
OTHER MATTERS
VOTING PROCEDURES
The votes of stockholders present in person or represented by proxy at the
Meeting will be tabulated by an inspector of elections appointed by the Company.
A quorum, consisting of a majority of shares of all stock issued, outstanding
and entitled to vote at the Meeting, will be required to be present in person or
by proxy for consideration of the proposal to elect directors. If a quorum is
not present, a vote of a majority of the votes properly cast will adjourn the
Meeting.
The eight (8) nominees for directors of the Company who receive the
greatest number of votes cast by stockholders present in person or represented
by proxy at the Meeting and entitled to vote thereon will be elected directors
of the Company. The affirmative vote of a majority of the outstanding voting
shares of the Company present or represented and entitled to vote at the Meeting
is required to ratify the selection of KPMG.
Abstentions will have no effect on the outcome of the vote for the election
of directors, but will have the effect of voting against the proposal to ratify
the selection of the auditors. Shares of Common Stock held of record by brokers
who do not return a signed and dated proxy will not be considered present at the
Meeting, will not be counted towards a quorum and will not be voted in the
election of directors or for the ratification of the auditors. Shares of Common
Stock held of record by brokers who return a signed and dated proxy or comply
with the internet or telephone voting instructions but who fail to vote (a
"broker nonvote") on the election of directors or the proposal to ratify the
auditors will count toward the quorum but will have no effect on those proposals
not voted.
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than 10% of the Company's Common Stock,
to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with
the SEC. Executive officers, directors and greater than 10% stockholders are
required to furnish the Company with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons that they
were not required to file Forms 5 for specified fiscal years, the Company
believes that all of its executive officers, directors and greater than 10%
stockholders complied with all Section 16(a) filing requirements applicable to
them during the Company's fiscal year ended December 31, 2000, with the
following exceptions: Mr. Rosenblatt and Dr. Lafontaine each failed to file a
Form 4 covering an option grant; Mr. Verratti failed to file a Form 4 covering
certain dispositions of shares; and Mr. Guttendorf failed to timely file a Form
4 covering a purchase. All such transactions have since been reported to the
SEC.
18
OTHER PROPOSED ACTION
The Board of Directors knows of no matters which may come before the
Meeting other than the election of directors. However, if any other matters
should properly be presented to the Meeting, the persons named as proxies shall
have discretionary authority to vote the shares represented by the accompanying
proxy in accordance with their own judgment.
STOCKHOLDER PROPOSALS
Proposals which stockholders intend to present at the Company's 2002 Annual
Meeting of Stockholders and wish to have included in the Company's proxy
materials pursuant to Rule 14a-8 promulgated under the Exchange Act must be
received by the Company no later than November 10, 2001. If a proponent fails to
notify the Company by January 25, 2002 of a non-Rule 14a-8 stockholder proposal
which it intends to submit at the Company's 2002 Annual Meeting of Stockholders,
the proxy solicited by the Board of Directors with respect to such meeting may
grant discretionary authority to the proxies named therein to vote with respect
to such matter.
INCORPORATION BY REFERENCE
To the extent that this Proxy Statement has been or will be specifically
incorporated by reference into any filing by the Company under the Securities
Act or the Exchange Act, the sections of the Proxy Statement entitled "Audit
Committee Report," "Compensation Committee Report" and "Performance Graph" shall
not be deemed to be so incorporated, unless specifically otherwise provided in
any such filing.
ANNUAL REPORT ON FORM 10-K
Copies of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000 as filed with the SEC are available to stockholders
without charge upon written request addressed to the Secretary of the Company at
153 Needham Street, Bldg. #1, Newton, Massachusetts 02464.
19
ANNEX A -- AUDIT COMMITTEE CHARTER
LIFEFX, INC.
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
I. AUDIT COMMITTEE PURPOSE
The Audit Committee is appointed by the Board of Directors to assist the
Board in fulfilling its oversight responsibilities. The Audit Committee's
primary duties and responsibilities are to:
- Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting and legal
compliance.
- Monitor the independence and performance of the Company's independent
auditors and internal auditing department.
- Provide an avenue of communication among the independent auditors,
management, the internal auditing department and the Board of Directors.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and 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 Stock
Market, Inc. The Audit Committee shall be comprised of three or more directors
as determined by the Board, the majority whom shall be independent nonexecutive
directors, free from any relationship that would interfere with the exercise of
his or her independent judgment. All members of the Committee shall have a basic
understanding of finance and accounting and be able to read and understand
fundamental financial statements, and at least one member of the Committee shall
have accounting or related financial management expertise.
Audit Committee members shall be appointed by the Board on recommendation
of the Nominating Committee. If an Audit Committee Chair is not designated or
present, the members of the Committee may designate a Chair by majority vote of
the Committee membership.
The 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 Committee should meet privately in
executive session at least annually with management, the director of the
internal auditing department, the independent auditors, and as a committee to
discuss any matters that the Committee or each of these groups believe should be
discussed. In addition, the 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.
A-1
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 (3) years in accordance with Securities and
Exchange Commission ("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 management, the independent auditors and the
internal 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 expenses. Review
significant findings prepared by the independent auditors and the internal
auditing department 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 should review and 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.
Internal Audit Department and Legal Compliance
11. Review the budget, plan, changes in plan, activities, organizational
structure and qualifications of the internal audit department, as needed.
12. Review the appointment, performance and replacement of the senior
internal audit executive.
13. Review significant reports prepared by the internal audit department
together with management's response and follow-up to these reports.
A-2
14. On at least an annual basis, review with the Company's counsel any
legal 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
15. Annually prepare a report to shareholders as required by the SEC. The
report should be included in the Company's annual proxy statement.
16. Perform any other activities consistent with this Charter, the
Company's Bylaws and governing law, as the Committee or the Board deems
necessary or appropriate.
17. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
A-3
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF LIFEF/X, INC.
The undersigned hereby appoints Lucille S. Salhany and Richard A.
Guttendorf, Jr., as proxies, with power to act without the other and with power
of substitution, and hereby authorizes them to represent and vote, as designated
on the other side, all the shares of stock of Lifef/x, Inc. standing in the name
of the undersigned with all powers which the undersigned would possess if
present at the Annual Meeting of Stockholders of Lifef/x, Inc. to be held April
12, 2001 or any adjournment thereof.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
FOLD AND DETACH HERE
The Board of Directors recommends a vote FOR Proposal 1.
1. Election of Directors:
Nominees: Lucille S. Salhany, Michael Rosenblatt, Richard A.
Guttendorf, Jr., Dr. Ian Hunter, Raymond Kurzweil, Nancy Hawthorne,
Dr. Leslie G. Selbovitz, Garrett Melby
FOR WITHHELD FOR ALL WITHHELD FOR: (Write that nominee's
name in the space provided below)
--------------------------------
The Board of Directors recommends a vote FOR Proposal 2.
2. To ratify the selection of KPMG LLP as independent auditors for the
fiscal year ending December 31, 2001.
FOR AGAINST ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly be presented at the meeting or any
adjournments or postponements thereof.
Next Section
Previous Section