SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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FAIRMARKET, INC.
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[LOGO]
FAIRMARKET, INC.
500 UNICORN PARK DRIVE
WOBURN, MASSACHUSETTS 01801
April 9, 2001
Dear Stockholder:
You are cordially invited to attend the 2001 Annual Meeting of Stockholders
of FairMarket, Inc. This year's meeting will be held on Wednesday, May 23, 2001
at 10:00 a.m., local time, at the Royal Sonesta Hotel, 5 Cambridge Parkway,
Cambridge, Massachusetts.
The attached formal Notice of Annual Meeting and Proxy Statement describe
the proposal we expect to act upon at the meeting. We urge you to review these
materials carefully and to use this opportunity to take part in the affairs of
FairMarket, Inc. by voting on the proposal described in the Proxy Statement. We
hope that you will be able to attend the meeting.
Your vote is important. WHETHER YOU PLAN TO ATTEND THE MEETING OR NOT,
PLEASE COMPLETE THE ENCLOSED PROXY CARD AND PROMPTLY RETURN IT IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. The attached Proxy Statement contains instructions about
the methods of voting. If you attend the meeting, you may continue to have your
shares voted as instructed in your proxy card or you may withdraw your proxy at
the meeting and vote your shares in person.
We look forward to seeing you at the meeting.
Sincerely,
/s/ Eileen Rudden
Eileen Rudden
PRESIDENT AND CHIEF EXECUTIVE OFFICER
FAIRMARKET, INC.
500 UNICORN PARK DRIVE
WOBURN, MASSACHUSETTS 01801
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 23, 2001
------------------------
TO OUR STOCKHOLDERS:
The 2001 Annual Meeting of Stockholders of FairMarket, Inc. will be held on
Wednesday, May 23, 2001 at 10:00 a.m., local time, at the Royal Sonesta Hotel, 5
Cambridge Parkway, Cambridge, Massachusetts, for the following purposes:
1. To elect one Class I director, to serve until the 2004 Annual Meeting of
Stockholders.
2. To consider and act upon any other matters that may properly be brought
before the Annual Meeting and at any adjournments or postponements of the
meeting.
These items are more fully described in the attached Proxy Statement.
Only stockholders of record at the close of business on March 29, 2001, the
record date, are entitled to notice of and to vote at the meeting.
If you do not plan to attend the meeting and vote your shares in person,
please vote by marking, signing, dating and promptly returning the enclosed
proxy card in the enclosed postage-paid envelope. Any proxy may be revoked at
any time before it is exercised at the Annual Meeting.
By Order of the Board of Directors
/s/ Lisa M. McGrath
Lisa M. McGrath
SECRETARY
Woburn, Massachusetts
April 9, 2001
FAIRMARKET, INC.
500 UNICORN PARK DRIVE
WOBURN, MASSACHUSETTS 01801
------------------------
PROXY STATEMENT
---------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of FairMarket, Inc. ("FairMarket") for use at
the 2001 Annual Meeting of Stockholders of FairMarket to be held on Wednesday,
May 23, 2001 at 10:00 a.m., local time, at the Royal Sonesta Hotel, 5 Cambridge
Parkway, Cambridge, Massachusetts, and at any adjournments or postponements
thereof.
This Proxy Statement and the accompanying materials are being mailed on or
about April 11, 2001 to holders of record of our common stock as of the record
date for the meeting, March 29, 2001.
FairMarket's 2000 Annual Report to Shareholders, together with FairMarket's
Annual Report on Form 10-K for the year ended December 31, 2000 (which includes
FairMarket's consolidated financial statements), is being mailed to stockholders
of FairMarket with this Proxy Statement. The Annual Report to Shareholders and
the Annual Report on Form 10-K are not, however, part of the proxy solicitation
material.
VOTING AND SOLICITATION OF PROXIES
At the Annual Meeting, stockholders will act upon the matters set forth in
the accompanying Notice of Annual Meeting, including the election of a Class I
director. We are not aware of any other matters to be presented at the meeting
other than those described in this Proxy Statement. If any other matters are
properly presented at the meeting, proxies will be voted in accordance with the
best judgment of the proxy holders.
STOCKHOLDERS ENTITLED TO VOTE; TABULATION OF VOTES. If our records show
that you are a stockholder as of the close of business on March 29, 2001 (the
record date for the meeting), you are entitled to receive notice of the Annual
Meeting and to vote the shares of FairMarket's common stock that you held at
that time. Each outstanding share of common stock entitles its holder to cast
one vote for each matter to be voted upon.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and "broker non-votes." "Broker non-votes" are shares represented at
the meeting that are held by brokers or nominees as to which instructions have
not been received from the beneficial owners or persons entitled to vote those
shares, and the brokers or nominees do not have discretionary voting power to
vote those shares.
On March 29, 2001, there were 28,774,161 shares of our common stock
outstanding, held by 186 stockholders of record.
ATTENDING THE ANNUAL MEETING. All stockholders of record of shares of
FairMarket's common stock at the close of business on the record date, or their
designated proxies, may attend the Annual Meeting.
QUORUM. The presence, in person or by proxy, of holders of at least a
majority of the total number of outstanding shares of FairMarket's common stock
entitled to vote is necessary to constitute a quorum for the transaction of
business at the Annual Meeting. As of the record date, there were 28,774,161
shares of common stock outstanding and entitled to vote at the Annual Meeting.
Shares that reflect abstentions and broker non-votes will be counted as present
for purposes of determining the presence of a quorum.
VOTING YOUR SHARES. Shares may be voted as described below.
VOTING BY PROXY HOLDERS FOR SHARES REGISTERED DIRECTLY IN THE NAME OF THE
STOCKHOLDER. If your shares are registered directly in your own name with our
transfer agent, EquiServe Trust Company, then you are considered to be the
"holder of record" of those shares. If you hold your shares in your own name as
a holder of record, you may instruct the proxy holders named in the enclosed
proxy card how to vote your shares by marking, signing, dating and mailing the
proxy card in the enclosed postage-paid envelope.
VOTING BY PROXY HOLDERS FOR SHARES REGISTERED IN THE NAME OF A BROKERAGE
FIRM OR BANK. If your shares are held of record by a broker, bank or other
nominee (in other words, in "street name"), you will receive instructions from
your nominee which you must follow in order to have your shares voted.
VOTING BY MAIL. If you would like to vote by mail, please mark your proxy
card, sign and date it, and return it in the enclosed postage-paid envelope.
VOTING IN PERSON. If you are the stockholder of record and attend the
Annual Meeting, you may deliver your completed proxy card in person. "Street
name" stockholders who wish to vote at the meeting will need to obtain a proxy
form from their broker, bank or other nominee that holds their shares of record.
VOTING BY PHONE. If you are the stockholder of record and live in the
United States or Canada, you may vote your proxy by following the "Vote by
Phone" instructions on the enclosed proxy card. If your shares are held in
street name, whether you may vote those shares telephonically will depend on
your broker or other nominee's voting arrangements, and you should contact your
broker or other nominee for that information if it does not appear on the voting
form you receive from your broker or other nominee.
VOTING BY INTERNET. If you are the stockholder of record and have Internet
access, you may vote your proxy from any location in the world by following the
"Vote by Internet" instructions on the enclosed proxy card. If your shares are
held in street name, whether you may vote those shares via the Internet will
depend on your broker or other nominee's voting arrangements, and you should
contact your broker or other nominee for that information if it does not appear
on the voting form you receive from your broker or other nominee.
REVOKING AND CHANGING A PROXY. You may revoke or change your proxy at any
time before it has been exercised by:
- delivering a written revocation to the Secretary of FairMarket at our
principal executive offices;
- delivering another signed proxy bearing a later date; or
- attending the Annual Meeting and voting in person.
Any stockholder of record as of the record date who attends the Annual
Meeting may vote in person whether or not the stockholder has previously
delivered a proxy, but the presence (without further action) of a stockholder at
the Annual Meeting will not constitute a revocation of a previously delivered
proxy.
SOLICITATION OF PROXIES. The cost of soliciting proxies will be borne by
FairMarket. If you choose to vote over the Internet, however, you are
responsible for Internet access charges you may incur. FairMarket will reimburse
its transfer agent for charges and expenses in connection with the distribution
of proxy materials to brokers or other persons holding shares in their names or
in the names of their nominees and for charges and expenses in forwarding
proxies and proxy materials to the beneficial owners of those shares. FairMarket
has retained Morrow & Co., Inc. to assist in the solicitation of proxies for the
Annual Meeting, at a cost to FairMarket of approximately $4,500 plus
2
reimbursement of reasonable expenses. Solicitations may also be made by officers
and regular employees of FairMarket, without additional compensation, by use of
the mails, personal interview, telephone or facsimile.
PROPOSAL TO ELECT A CLASS I DIRECTOR
The number of directors making up FairMarket's Board of Directors is
currently fixed at five. Our Board is divided into three classes, consisting of
one Class I director, whose term of office expires at the Annual Meeting, two
Class II directors, whose terms of office continue until the 2002 annual meeting
of stockholders, and two Class III directors, whose terms of office continue
until the 2003 annual meeting of stockholders. At each annual meeting of
stockholders, a class of directors will be elected for a three-year term to
succeed the directors of the same class whose terms are then expiring. At the
Annual Meeting, one Class I director will be elected to serve until the 2004
Annual Meeting, or until the director's successor is duly elected and qualified.
Our Board of Directors has nominated Eileen Rudden to serve as the Class I
director. Ms. Rudden is currently serving as a Class I director of FairMarket.
Our Board of Directors anticipates that its nominee will serve, if elected, as a
director. However, if any person nominated by our Board of Directors is unable
to accept election, proxies will be voted for the election of such other person
or persons as our Board of Directors may recommend.
VOTE REQUIRED. The affirmative vote of a plurality of the shares of common
stock present in person or represented by proxy and entitled to vote on the
issue at the Annual Meeting is required for the election of a director. Votes
may be cast for or withheld from any nominee. Votes cast for a nominee will
count as "yes votes." Abstentions and broker non-votes will be excluded entirely
from the vote and will have no effect.
RECOMMENDATION. THE BOARD OF DIRECTORS OF FAIRMARKET UNANIMOUSLY RECOMMENDS
A VOTE FOR ITS NOMINEE, EILEEN RUDDEN. PROXIES SOLICITED BY THE BOARD WILL BE
VOTED FOR THIS NOMINEE UNLESS INSTRUCTIONS TO WITHHOLD OR TO THE CONTRARY ARE
GIVEN.
INFORMATION REGARDING THE NOMINEE AND OTHER DIRECTORS
The following biographical descriptions contain information with respect to
the nominee for re-election as a Class I director at the Annual Meeting and each
director who is not up for re-election, based on information furnished to
FairMarket by each director as of March 21, 2001.
NOMINEE FOR ELECTION AS A CLASS I DIRECTOR FOR A THREE-YEAR TERM EXPIRING AT THE
2004 ANNUAL MEETING OF STOCKHOLDERS
EILEEN RUDDEN, age 50, has served as President and Chief Executive Officer
and as a director of FairMarket since September 11, 2000. Before joining
FairMarket, she served with Lotus Development Corporation in various positions
from 1986 to March 2000, including as the Senior Vice President responsible for
the software Lotus Notes, Domino and cc:Mail from November 1995 to August 1999
and as Senior Vice President of Business Development from August 1999 to
March 2000. Before joining Lotus in 1986, she was Director of Corporate Planning
at Wang Laboratories and a manager at The Boston Consulting Group. She is a
graduate of Brown University and Harvard Business School. Ms. Rudden also serves
as a member of the Board of Directors of the John H. Harland Company, a provider
of printed products and software to the financial institution market.
3
INCUMBENT CLASS II DIRECTORS--TERM EXPIRES 2002
RICHARD PALLAN, age 57, has served as a director of FairMarket since
January 2000. Mr. Pallan has over 20 years of experience in the financial
services industry. From 1981 until his retirement in December 1994, Mr. Pallan
served with Putnam Investments, an investment management firm. Mr. Pallan was a
Senior Managing Director of Putnam, a member of its Management and Executive
Committees and was responsible for business strategy. Mr. Pallan was also
responsible for the development of Putnam's Defined Contribution Plans (or
"401(k)") business. Mr. Pallan is a graduate of Tufts University and Harvard
Business School.
RORY COWAN, age 48, was elected as a director of FairMarket on March 21,
2001. Mr. Cowan is the founder of Lionbridge Technologies, Inc., a provider of
globalization products and services for worldwide deployment of technology and
information-based products, where he has served as Chairman of the Board and
Chief Executive Officer since September 1996. From September 1996 to
March 2000, Mr. Cowan also served as President of Lionbridge. Before founding
Lionbridge, Mr. Cowan served as Chief Executive Officer of Interleaf, Inc., a
document automation software services company, from October 1996 to
January 1997. From May 1995 to June 1996, Mr. Cowan served as Chief Executive
Officer of Stream International, Inc., a software and services provider and a
division of R.R. Donnelley & Sons, a provider of commercial print and
print-related services. Mr. Cowan joined R.R. Donnelley in 1988 and served most
recently as Executive Vice President from 1991 to June 1996. Before joining R.R.
Donnelley, Mr. Cowan was founder of CSA Press of Hudson, Mass., a software
duplication firm, and held positions at Compugraphic Corporation, an automated
publishing hardware firm. Mr. Cowan is also the Chairman of the Board of
Directors of NewsEdge Corporation, a provider of eContent applications for
business web sites and enterprise intranets. Mr. Cowan is a graduate of Harvard
University and Harvard Business School.
INCUMBENT CLASS III DIRECTORS--TERM EXPIRES 2003
NANDA KRISH, age 40, has served as a director of FairMarket since
April 1997. Mr. Krish is a founding team member and since November 1998 has
served as an operating officer of Verilytics, Inc., a creator of networks of
affinity-based portals, where he has overall responsibility for worldwide
revenue including sales and professional services. From 1995 to November 1998,
Mr. Krish served as Vice President of Corporate Development of Open
Market, Inc., a provider of Internet commerce software. Before that, Mr. Krish
held various positions with Electronic Data Systems Corporation (EDS), an
information technology services company, most recently as Vice President and
General Manager of the EDS unit responsible for the company's interactive
shopping strategy. Mr. Krish is a graduate of BU/India and the New Jersey
Institute of Technology/Rutgers University.
SCOTT RANDALL, age 38, founded FairMarket in February 1997 and has served as
a director since FairMarket's founding. Mr. Randall served as President and
Chief Executive Officer of FairMarket from its founding until the election of
Ms. Rudden to those roles in September 2000, and since then has served as
Chairman of FairMarket. Mr. Randall has served as the Chairman of the Board of
Directors of FairMarket since August 2000. Prior to founding FairMarket, he was
President of Yahoo! Marketplace, a joint venture between Yahoo! and VISA
International which was responsible for developing the online retail shopping
area of the Yahoo! site, from June through December 1996 and President of the
Internet Shopping Network, the Internet retail shopping division of the Home
Shopping Network, from February through May 1996. From June 1994 through
January 1996, he was the general manager of NECX Direct, an Internet home and
office technology shopping site. Before that, Mr. Randall held positions in
brand management at Procter & Gamble. Mr. Randall is a graduate of Harvard
College and Harvard Business School.
4
BOARD MEETINGS AND COMMITTEES
BOARD OF DIRECTORS. Our Board of Directors met 15 times and acted by
written consent in lieu of a meeting on four occasions during 2000. Each of the
directors attended 75% or more of the aggregate of (a) the total number of
meetings of the Board of Directors during 2000 (held during the period such
person served as a director) and (b) the total number of meetings held by all
committees of the Board of Directors on which such director served during 2000.
AUDIT COMMITTEE. In February 2000, our Board of Directors established an
Audit Committee consisting of Messrs. Krish and Pallan. The Audit Committee is
composed solely of independent directors as defined and required by Nasdaq. The
Audit Committee (a) reviews the scope and timing of the audit of FairMarket's
financial statements by FairMarket's independent auditors, (b) reviews with
FairMarket's independent auditors, and with our management, policies and
procedures with respect to financial and accounting controls and (c) reviews
with FairMarket's independent auditors their reports on FairMarket's financial
statements and recommendations they make for improvements in our internal
controls and the implementation of those recommendations. The Audit Committee
has adopted a written charter to govern its operation which is attached to this
Proxy Statement as Exhibit A. The Audit Committee held four meetings during
2000. On March 21, 2001, in connection with the election of Rory Cowan as a
director of FairMarket, Mr. Cowan was also elected as the third member of the
Audit Committee.
COMPENSATION COMMITTEE. In February 2000, our Board of Directors
established a Compensation Committee consisting of Messrs. Krish and Pallan. The
Compensation Committee is responsible for reviewing and recommending to the
Board of Directors the amount and type of consideration to be paid to senior
management, administering our stock option and employee stock purchase plans and
establishing and reviewing general policies relating to compensation and
benefits of employees. The Compensation Committee did not separately meet during
2000 as its duties were performed at meetings of the full Board of Directors,
and acted by written consent in lieu of a meeting on two occasions during 2000.
On March 21, 2001, in connection with the election of Mr. Cowan as a director of
FairMarket, Mr. Cowan was also elected as a member of the Compensation
Committee. For transition purposes, Mr. Krish will continue to serve as a member
of this committee until May 31, 2001, at which time his term as a member of this
committee will expire.
OPTION COMMITTEE. In March 2000, our Board of Directors established an
Option Committee, consisting of Mr. Randall, to administer the grant of options
under our stock option plans to employees other than executive officers, as
authorized from time to time by the Compensation Committee or the Board of
Directors. Ms. Rudden replaced Mr. Randall as the sole member of the Option
Committee in September 2000. The Option Committee acted by written action in
lieu of a meeting on 11 occasions during 2000.
NOMINATING COMMITTEE. In February 2000, our Board of Directors established
a Nominating Committee consisting of Messrs. Krish and Randall. The Nominating
Committee is responsible for designating FairMarket's nominees for election to
the Board of Directors. The Nominating Committee did not meet during 2000. On
March 21, 2001, the Board expanded this committee to three members and elected
Mr. Pallan as the third member of this committee.
5
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table shows the amount of common stock of FairMarket
beneficially owned as of March 21, 2001 by:
- each director;
- each person who served as Chief Executive Officer during 2000
(Mr. Randall and Ms. Rudden), the four other most highly compensated
executive officers of FairMarket for 2000 and two other individuals who
would have been included among the most highly compensated executive
officers of FairMarket for 2000 but for the fact that they were not
employed with FairMarket at the end of the year (the "Named Executive
Officers");
- all directors and executive officers of FairMarket as a group; and
- each person known by FairMarket to beneficially own more than 5% of our
outstanding common stock.
Beneficial ownership of common stock includes shares that are directly owned
or jointly owned, as well as shares over which the individual or entity has sole
or shared investment or voting authority. Beneficial ownership of common stock
also includes shares that the individual or entity has the right to acquire
(through the exercise of options or warrants or any other right) within 60 days
after March 21, 2001.
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS(1)
------------------------------------ -------------------- ----------
DIRECTORS AND EXECUTIVE OFFICERS
Matthew Ackley............................................ 78,325(2) *
Louis Gennaro(3).......................................... 0 0
Scott Randall............................................. 3,764,125(4) 11.2%
Eileen Rudden............................................. 0 0
Bryan Semple.............................................. 76,850(5) *
N. Louis Shipley.......................................... 114,863(6) *
Robert Supnik(7).......................................... 50,910 *
Bruce Worrall............................................. 71,313(8) *
Rory Cowan................................................ 0 *
Nanda Krish............................................... 83,700(9) *
Richard Pallan............................................ 50,000(10) *
All directors and executive officers as a group (13
persons)................................................ 4,945,939(11) 12.8%
OTHER 5% BENEFICIAL OWNERS
At Home Corporation....................................... 4,000,000(12) 11.9%
450 Broadway Street
Redwood City, CA 94063
Microsoft Corporation..................................... 5,750,000(13) 17.1%
One Microsoft Way
Redmond, WA 98052
Sierra Ventures Associates VII, LLC....................... 4,925,334(14) 14.6%
3000 Sand Hill Road
Menlo Park, CA 94025
Ticketmaster.............................................. 2,250,000(15) 6.7%
3701 Wilshire Boulevard
Los Angeles, CA 90010
------------------------
* Less than 1%
6
(1) The total number of shares of common stock outstanding used in calculating
the percentage assumes that all options and warrants to acquire shares of
FairMarket's common stock that were exercisable on, or become exercisable
within 60 days of, March 21, 2001 are exercised.
(2) Includes 68,125 shares of common stock issuable upon the exercise of
options.
(3) Mr. Gennaro resigned as Vice President of Sales effective September 29,
2000.
(4) Includes 78,125 shares of common stock issuable upon the exercise of
options.
(5) Includes 76,250 shares of common stock issuable upon the exercise of
options.
(6) Includes 64,063 shares of common stock issuable upon the exercise of
options.
(7) Mr. Supnik resigned as Vice President of Engineering effective December 1,
2000.
(8) Includes 70,313 shares of common stock issuable upon the exercise of
options.
(9) Includes 25,000 shares of common stock issuable upon the exercise of
options.
(10) Consists of 50,000 shares of common stock issuable upon the exercise of
options.
(11) Includes 445,939 shares of common stock issuable upon the exercise of
options.
(12) This information is based on a Schedule 13G, dated March 13, 2001, filed
by At Home Corporation (formerly Excite, Inc.).
(13) This information is based on a Schedule 13G, dated March 14, 2001, filed
by such entity. Includes 4,500,000 shares issuable upon exercise of a
warrant held by Microsoft.
(14) This information is based on a Schedule 13G, dated February 14, 2001,
filed by such entity.
(15) This information is based on a Schedule 13G, dated March 28, 2001, filed
by Ticketmaster (formerly Ticketmaster Online-CitySearch, Inc.).
7
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTOR COMPENSATION
During 2000, directors who were employees received no additional
compensation for their services as directors. Beginning in 2001, each
non-employee director will receive an annual cash retainer of $15,000.
Non-employee directors are eligible to participate in FairMarket's 2000 Stock
Option and Incentive Plan at the discretion of the full Board of Directors. In
February 2000, pursuant to this plan, the Board granted each of Messrs. Krish
and Pallan an option to purchase 75,000 shares of common stock at an exercise
price of $8.50 per share which vests in three equal installments over three
years. In September 2000, the Board approved an amendment to the option
certificates covering such grants to provide for the acceleration in full of
such options upon the occurrence of a "sale event," as defined in FairMarket's
2000 Stock Option and Incentive Plan, with such provision to apply to all future
option grants to non-employee directors. In August 2000, the Board granted
Mr. Pallan an additional option to purchase 25,000 shares at an exercise price
of $4.4375 per share which vests in two equal installments over a two-month
period, in recognition of special directorial services rendered by Mr. Pallan to
FairMarket during the summer of 2000.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides information as to compensation paid by
FairMarket for 1999 and 2000 to the Chief Executive Officer and the Named
Executive Officers. Except as otherwise indicated below, none of those persons
was employed with FairMarket during 1998.
LONG-TERM
COMPENSATION AWARDS
--------------------------
ANNUAL COMPENSATION RESTRICTED
------------------------------ STOCK NUMBER OF ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS OPTIONS COMPENSATION
--------------------------- -------- -------- -------- ---------- --------- ------------
Eileen Rudden(1)...................... 2000 $ 57,692 $25,000 -- 900,000 $ 186(2)
President and Chief Executive
Officer............................. 1999 -- -- -- -- --
Scott Randall(1)...................... 2000 $174,038 $50,000 -- 250,000 $ 260(2)
Chairman 1999 $150,000 -- -- -- $ 135(2)
1998 $133,654 -- -- -- --
Matthew Ackley........................ 2000 $129,615 $ 9,375 -- 15,000 $ 190(2)
Vice President, Professional Services 1999 $ 93,077 -- -- 110,000 $ 78(2)
1998 -- -- -- 40,000 --
Louis Gennaro(3)...................... 2000 $116,683 $75,000 -- 225,000 $ 504(2)
Former Vice President, Sales 1999 -- -- -- -- --
Bryan Semple.......................... 2000 $129,615 -- -- 15,000 $ 214(2)
Vice President, Corporate Strategy 1999 $ 86,934 -- -- 150,000 $ 103(2)
N. Louis Shipley...................... 2000 $133,980 $43,750 $425,000(4) 175,000 $ 96,708(5)
Vice President, Worldwide Sales, 1999 -- -- -- -- --
President of International
Robert Supnik(6)...................... 2000 $158,649 $30,000 -- 90,000 $ 637(2)
Former Vice President, Engineering 1999 $ 50,212 -- -- 200,000 $ 274(2)
Bruce Worrall......................... 2000 $151,346 $47,500 $212,500(4) 60,000 $127,120(7)
Vice President, Business Development 1999 $ 16,433 -- -- 130,000 $ 3,139(8)
------------------------
(1) Ms. Rudden was elected President and Chief Executive Officer of FairMarket
in September 2000. Mr. Randall served as FairMarket's President and Chief
Executive Officer until that time.
(2) Represents insurance premiums paid by FairMarket for group life insurance
for the benefit of such person.
8
(3) Mr. Gennaro resigned from FairMarket effective September 29, 2000.
(4) All restrictions on the shares covered by such award had lapsed as of
December 31, 2000.
(5) Represents (a) $16,155 in cost-of-living adjustment (COLA) payments, $34,340
in reimbursed relocation expenses and $45,985 in reimbursed housing and
automobile expenses in connection with Mr. Shipley's assignment in England
and (b) insurance premiums paid by FairMarket for group life insurance for
the benefit of such person. FairMarket has also agreed to pay Mr. Shipley
certain "tax equalization" payments for the period of Mr. Shipley's
assignment to England, the amount of which for 2000 has not yet been
determined.
(6) Mr. Supnik resigned from FairMarket effective December 1, 2000.
(7) Represents (a) $65,803 in reimbursed relocation expenses and $61,094 in
payment of taxes related to such expense reimbursement and (b) insurance
premiums paid by FairMarket for group life insurance for the benefit of such
person.
(8) Represents (a) $2,197 in reimbursed relocation expenses and $906 in payment
of taxes related to such expense reimbursement and (b) insurance premiums
paid by FairMarket for group life insurance for the benefit of such person.
OPTION GRANTS IN FISCAL YEAR 2000
The following table provides certain information with respect to stock
options granted by FairMarket during 2000 to the Chief Executive Officer and
each of the Named Executive Officers.
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE
% OF TOTAL APPRECIATION FOR OPTION
OPTIONS GRANTED TERM (1)
OPTIONS TO EMPLOYEES IN EXERCISE PRICE EXPIRATION ---------------------------
NAME GRANTED FISCAL YEAR PER SHARE DATE(2) 5% 10%
---- -------- --------------- -------------- ---------- ------------ ------------
Eileen Rudden........... 900,000 22.0% $ 4.00 09/11/10(3) $5,864,021 $9,337,473
Scott Randall........... 42,780 1.0% $ 9.35(4) 02/08/10(3) $ 651,546 $1,037,479
207,220 5.1% $ 8.50 02/08/10(3) $2,869,086 $4,568,540
Matthew Ackley.......... 15,000 0.4% $2.6125(5) 10/18/05(5) $ 50,014 $ 63,112
Louis Gennaro........... 225,000 5.5% $ 8.50 02/08/10(3)(6) $3,115,261 $4,960,532
Bryan Semple............ 15,000 0.4% $2.6125(5) 10/18/05(5) $ 50,014 $ 63,112
N. Louis Shipley........ 125,000 3.1% $ 8.50 02/08/10(3) $1,730,701 $2,755,851
50,000 1.2% $2.6125(5) 10/18/05(5) $ 166,714 $ 210,373
Robert Supnik........... 75,000 1.8% $ 8.50 02/08/10(3)(6) $1,038,420 $1,653,511
15,000 0.4% $2.6125(5) 10/18/05(5)(6) $ 50,014 $ 63,112
Bruce Worrall........... 45,000 1.1% $ 8.50 02/08/10(3) $ 623,052 $ 992,106
15,000 0.4% $2.6125(5) 10/18/05(5) $ 50,014 $ 63,112
------------------------
(1) Potential Realizable Value is the value of the granted options, based on the
assumed annual growth rates of the share price shown during the option term.
For example, a 5% growth rate, compounded annually, for Mr. Shipley's
125,000 share option grant, with its $8.50 per share exercise price and
10-year option term, results in a share price of $13.84 per share, and a 10%
growth rate, compounded annually, for that grant results in a share price of
$22.05 per share. These potential realizable values are listed to comply
with the regulations of the SEC, and FairMarket cannot predict whether these
values will be achieved. Actual gains, if any, on stock option exercises are
dependent on the future performance of FairMarket's common stock.
(2) All of the options listed in this table were granted under FairMarket's 2000
Stock Option and Incentive Plan, which provides that upon certain "sale
events" involving FairMarket, if provision is not made for appropriate
substitution or adjustment of outstanding stock options, the options will
9
automatically become fully vested. The vesting of these options is also
subject to acceleration under the agreements described under "Severance
Agreements" below.
(3) Option vests over a four-year period and expires 10 years from the date of
grant.
(4) Option was granted at an exercise price equal to 110% of the fair market
value of FairMarket's common stock on the date of grant in accordance with
the "incentive stock option" (ISO) rules under Section 422 of the Internal
Revenue Code.
(5) Option was granted in connection with FairMarket's October 2000 workforce
reduction and the grant by FairMarket to all remaining non-executive
employees of a special retention stock option grant. The options granted to
the executives indicated above have an exercise price equal to 110% of the
fair market value of FairMarket's common stock on the date of grant but are
otherwise on the special terms of the retention grant made to non-executive
employees, with the options vesting over a one-year period beginning on the
six-month anniversary of the date of grant and having a term of five years.
(6) Mr. Gennaro resigned from FairMarket effective September 29, 2000 and
Mr. Supnik resigned from FairMarket effective December 1, 2000. All options
held by such persons expired on their resignation dates to the extent the
options were not vested, and expired as to any vested portion of the options
within the time period specified in the applicable option grant. All such
options had expired as of March 21, 2001.
AGGREGATE OPTION EXERCISES IN FISCAL YEAR 2000
AND YEAR-END OPTION VALUES
The following table sets forth the number of shares of FairMarket's common
stock covered by all stock options exercised by the Chief Executive Officer and
the Named Executive Officers during 2000 and the number of shares of
FairMarket's common stock covered by all stock options held by them as of
December 31, 2000. The value of unexercised in-the-money options is based on the
closing price of our common stock as reported by Nasdaq on December 29, 2000,
minus the exercise price, multiplied by the number of shares underlying the
options.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF OUTSTANDING
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 2000 AT DECEMBER 31, 2000
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
Eileen Rudden.................... -- -- -- 900,000 -- --
Scott Randall.................... -- -- -- 250,000 -- --
Matthew Ackley................... 10,000 $ 99,000 51,250 103,750 $71,750 $124,250
Louis Gennaro(1)................. -- -- -- -- -- --
Bryan Semple..................... -- -- 59,375 105,625 $83,125 $126,875
N. Louis Shipley................. -- -- -- 175,000 -- --
Robert Supnik(2)................. 50,000 $156,270 -- -- -- --
Bruce Worrall.................... -- -- 32,500 157,500 -- --
------------------------
(1) Mr. Gennaro resigned from FairMarket effective September 29, 2000.
(2) Mr. Supnik resigned from FairMarket effective December 1, 2000.
SEVERANCE AGREEMENTS
Effective February 26, 2001, FairMarket entered into a severance agreement
with each of our executive officers. These agreements provide that if the
officer's employment with FairMarket is terminated other than "for cause" (as
defined in the severance agreements) or if the officer terminates
10
their employment with FairMarket for "good reason" (as defined in the severance
agreements) during the two-year period following the occurrence of a "change of
control" (as defined in the severance agreements), then (a) all outstanding
options held by that person (including those listed above under "Options Grants
in Fiscal Year 2000" and all other options granted to that person to date) will
accelerate in full upon such termination and (b) FairMarket will pay that person
a lump-sum cash amount equal to one year of their base salary plus one year's
bonus (calculated as the average of the last four quarterly bonuses paid or
payable to the executive prior to the date on which such termination occurs,
multiplied by four), except that the agreements with Ms. Rudden and Mr. Randall
provide for the payment to such persons of an amount equal to two times their
annual base salary plus bonus calculated as described above.
The agreements with Ms. Rudden and Messrs. Randall and Worrall also provide
that if such person's employment with FairMarket is terminated other than "for
cause" or if such person terminates their employment with FairMarket for "good
reason," in each case other than during the two-year period following the
occurrence of a "change of control," then (a) all outstanding options held by
that person (including those listed above under "Options Grants in Fiscal Year
2000" and all other options granted to that person to date) will accelerate by
one year, in the cases of Ms. Rudden and Mr. Randall, and two years in the case
of Mr. Worrall, and (b) FairMarket will continue to pay that person their base
salary for one year, in the cases of Ms. Rudden and Mr. Randall, and six months
in the case of Mr. Worrall, following their termination date.
Each of these agreements also prohibits the executive from competing with
FairMarket and its affiliates or soliciting any employee of FairMarket or its
affiliates for a period of one year following termination of the executive's
employment with FairMarket.
REPORT OF THE BOARD OF DIRECTORS AND THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS ON EXECUTIVE COMPENSATION
In connection with its initial public offering in March 2000, FairMarket's
Board of Directors established a Compensation Committee of the Board, composed
of Messrs. Krish and Pallan during 2000. The Compensation Committee is
responsible for reviewing and recommending to the Board of Directors the amount
and type of consideration to be paid to senior management, administering our
stock option and employee stock purchase plans and establishing and reviewing
general policies relating to compensation and benefits of employees. Both such
members of the Compensation Committee are independent directors. For the year
ended December 31, 2000, FairMarket's executive compensation program was
administered either by the full Board of Directors or by the Compensation
Committee. Ms. Rudden did not participate in deliberations by the Board or the
Compensation Committee regarding her individual compensation for 2000.
The goals of FairMarket's compensation program are to align compensation
with business objectives and performance, to enable FairMarket to attract,
retain and reward executive officers and other employees who contribute to
FairMarket's long-term success and to motivate those officers and employees to
enhance long-term stockholder value. The compensation of FairMarket's officers
and employees currently consists of an annual base salary and long-term
performance incentives in the form of stock options. During 2000, certain
executive officers of FairMarket also received quarterly performance incentives
in the form of cash bonuses. FairMarket has in the past and continues to
emphasize the award of stock options in its executive compensation policy and
believes that in the highly competitive, evolving markets in which FairMarket
operates, equity-based compensation provides the greatest incentive for
outstanding executive performance and encourages the greatest alignment of
management and stockholder long-term interests.
11
BASE SALARY. The initial annual base salary for executive officers hired by
FairMarket since FairMarket's initial public offering, one of whom was hired
during 2000, has been reviewed and approved by FairMarket's Board of Directors.
When reviewing those base salaries, the Board has considered level of
responsibility, breadth of knowledge and prior experience as well as publicly
available compensation information and informal survey information obtained by
FairMarket's management with respect to other companies in the Internet
industry. The relative importance of these factors varies, depending on the
particular individual whose salary is being reviewed. The Board has not
determined it necessary to specifically analyze compensation levels at companies
included in the index under the caption "Performance Graph." The Compensation
Committee intends to conduct an annual review of each executive officer's base
salary beginning with FairMarket's general annual salary review for 2001, which
is currently scheduled to occur in the second quarter of 2001.
BONUSES. During 2000, certain of FairMarket's executive officers were
eligible to receive a quarterly cash bonus of up to either a specified
percentage of their quarterly base salary or a specified dollar amount. Bonuses
for the fourth quarter of 2000 were based on the extent to which business and
individual performance objectives, approved by the Compensation Committee for
each such person, were achieved. These objectives consisted of operating,
strategic and/or financial goals that are considered to be important to
FairMarket's fundamental long-term goal of building stockholder value.
STOCK OPTIONS. FairMarket's equity incentive plans are designed to provide
its employees with an opportunity to share, along with its stockholders, in
FairMarket's long-term performance. Initial grants of stock options are
generally made to employees upon commencement of employment, with additional
grants being made to certain employees following a significant change in job
responsibility, scope or title. Options granted under FairMarket's standard
stock option program generally vest over a four-year period and expire 10 years
from the date of grant. The exercise price of the options is usually 100% of the
fair market value of FairMarket's common stock on the date of grant.
The number of shares of FairMarket's common stock covered by options granted
to new employees other than executive officers is generally determined based on
a schedule of option grant ranges for each job level, as approved by the Board
of Directors. These ranges take into account publicly available compensation
information and informal survey information obtained by FairMarket's management
with respect to other companies in the Internet industry. The number of shares
of FairMarket's common stock covered by options granted to new executive
officers is determined on an individual basis taking into account the same
factors as are considered in establishing the officers' initial base salary, as
described above. Follow-on option grants to employees are based upon a number of
factors, including performance of the individual, job level, potential, and past
option grants. In October 2000, in connection with FairMarket's workforce
reduction and the grant by FairMarket to all remaining employees of a special
retention stock option grant, the Compensation Committee granted
Messrs. Ackley, Semple, Shipley and Worrall additional options to purchase an
aggregate of 95,000 shares of FairMarket's common stock in order to increase the
total number of options granted to date to each such officer to levels more
competitive within FairMarket's industry and to provide such officers with
additional incentive both to remain with FairMarket and to drive FairMarket's
business. These options were granted at 110% of the fair market value of
FairMarket's common stock on the date of grant and otherwise on the special
terms of the retention grant made to all employees, with the options vesting
over a one-year period beginning on the six-month anniversary of the date of
grant and having a term of five years.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. Effective September 11, 2000,
the Board of Directors elected Eileen Rudden as President and Chief Executive
Officer of FairMarket, replacing Mr. Randall who now serves as Chairman of
FairMarket. In considering and approving Ms. Rudden's compensation, the Board of
Directors reviewed information regarding the compensation paid to the chief
executive officers of comparable public companies in FairMarket's industry.
Ms. Rudden's initial annual base
12
salary was set at $200,000 and her quarterly cash bonus target amount was set at
$25,000, with the actual amount of each quarterly bonus to be based on the
attainment of quarterly performance measures approved by the Board or
Compensation Committee. In connection with her election as President and Chief
Executive Officer, the Board also granted Ms. Rudden an option to purchase
900,000 shares of FairMarket's common stock, which amount was determined after
FairMarket reviewed a study by independent compensation consultants which showed
that such an award as a percentage of FairMarket's common stock outstanding was
approximately at the 50th percentile of percentage ownership reported for
non-founder chief executive officers of public Internet companies. The
Compensation Committee also approved the payment to Ms. Rudden of her full
$25,000 cash bonus for the quarter ended December 31, 2000 in recognition of the
achievement by Ms. Rudden of certain internal operational goals during that
period, including, for example, expansion of FairMarket's marketing initiatives
and the launch of FairMarket's professional services group.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION. Compensation payments in excess of
$1 million to the chief executive officer or the other four most highly
compensated executive officers are subject to a limitation on deductibility for
FairMarket under Section 162(m) of the Internal Revenue Code of 1986, as
amended. Certain performance-based compensation is not subject to the limitation
on deductibility. The Compensation Committee does not expect cash compensation
in 2001 to its chief executive officer or any other executive officer to be in
excess of $1 million. FairMarket intends to maintain qualification of its
applicable stock option plans for the performance-based exception to the
$1 million limitation on deductibility of compensation payments.
BOARD OF DIRECTORS and
COMPENSATION COMMITTEE
Nanda Krish
Richard Pallan
Scott Randall
Eileen Rudden
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For the year ended December 31, 2000, FairMarket's executive compensation
program was administered either by the full Board of Directors or by the
Compensation Committee. Neither Mr. Krish nor Mr. Pallan, the members of our
Compensation Committee during 2000, has ever been an officer or employee of
FairMarket. None of our executive officers serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving on our Board of Directors or Compensation Committee.
CERTAIN TRANSACTIONS WITH RELATED PARTIES
MICROSOFT AGREEMENT. FairMarket is party to an Auction Services Agreement
with Microsoft which has a five-year initial term with an automatic renewal term
of five years. Under the agreement, we have agreed to provide auction services
to MSN.com and certain other web sites owned or operated by Microsoft, in return
for monthly hosting fees and a share of transaction fees charged on the
Microsoft sites. The total amount paid to FairMarket for 2000 under this
agreement, net of the payment to Microsoft of a portion of the transaction fees
paid on listings placed on other FairMarket-powered sites and sold on the
Microsoft sites, was approximately $750,000. For 2000, we also paid Microsoft
$70,000 for certain engineering and software consulting services performed for
us by Microsoft during that year.
EXCITE AGREEMENTS. During 2000, FairMarket was a party to an Auction
Services Agreement with Excite, Inc. (now known as At Home Corporation) which
had a five-year initial term. Under this
13
agreement, we provided auction services to Excite.com in return for a share of
transaction fees charged by the Excite site. The agreement required Excite to
supply online banner and other advertising services to us in return for
$2.5 million per quarter for the first two years of the agreement. During 2000,
we purchased $10 million in banner advertising under this provision.
In December 2000, FairMarket and At Home entered into an agreement
terminating the Auction Services Agreement. Under the termination agreement,
FairMarket purchased an incremental $500,000 in banner advertising from At Home
during December 2000 and also licensed a permission-based email marketing
database from an affiliate of At Home for $3.5 million, which was paid during
December 2000. At that time, FairMarket and At Home also entered into a new
Outlet Center agreement which has an 18-month initial term with an automatic
renewal term of one year. Under this agreement, we have agreed to provide our
"Outlet Center" service offering to At Home in return for an implementation fee,
paid in December 2000, and a share of banner advertising, merchandising and
transaction revenue.
Effective May 1, 2000, we entered into a Broadband Auction Services
Agreement with At Home which has an initial term ending in April 2001 with
automatic renewal terms of one year each. Under this agreement, we have agreed
to provide a broadband auction site for At Home in return for an implementation
fee, a monthly service fee and a share of transaction fees. At Home paid
FairMarket a total of approximately $70,000 for 2000 under this agreement.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
FairMarket's executive officers and directors and persons who beneficially own
more than 10% of FairMarket's common stock to file reports of ownership and
changes in ownership with the SEC and to furnish copies to FairMarket.
Based upon a review of the reports furnished to FairMarket and
representations made to FairMarket by its officers and directors and certain 10%
beneficial owners, FairMarket believes that, during 2000, its officers and
directors and 10% beneficial owners complied with all applicable reporting
requirements, except that Mr. Supnik filed a Form 4 with respect to one
transaction late, and except that Jeffrey B. Meyer, Vice President of
Engineering, inadvertently omitted his ownership of certain shares from his
initial Form 3, which Form 3 was subsequently amended to include such shares.
AUDIT COMMITTEE REPORT
The Audit Committee of our Board of Directors is composed solely of
independent directors as defined and required by Nasdaq. The Audit Committee
(a) reviews the scope and timing of the audit of FairMarket's financial
statements by FairMarket's independent auditors, (b) reviews with FairMarket's
independent auditors, and with our management, policies and procedures with
respect to financial and accounting controls and (c) reviews with FairMarket's
independent auditors their reports on FairMarket's financial statements and
recommendations they make for improvements in our internal controls and the
implementation of those recommendations. The Audit Committee has adopted a
written charter to govern its operation which is attached to this Proxy
Statement as Exhibit A. The Audit Committee held four meetings during 2000.
14
REPORT OF THE AUDIT COMMITTEE
The following is a report of the Audit Committee of FairMarket's Board of
Directors with respect to FairMarket's audited financial statements for the year
ended December 31, 2000.
In connection with its function of overseeing and monitoring the financial
reporting process, the Audit Committee has, among other things, done the
following:
- reviewed and discussed FairMarket's audited financial statements for the
year ended December 31, 2000 with FairMarket's management and
PricewaterhouseCoopers LLP, FairMarket's independent auditors;
- discussed with PricewaterhouseCoopers LLP those matters required to be
discussed by Statement on Auditing Standards No. 61, "Communications with
Audit Committees"; and
- received and reviewed the written disclosures and the letter from
PricewaterhouseCoopers LLP required by Independence Standard No. 1,
"Independence Discussions with Audit Committees," and discussed with
PricewaterhouseCoopers LLP their independence from FairMarket.
Based upon the foregoing, the Audit Committee recommended to the Board of
Directors that the audited financial statements referred to above be included in
FairMarket's Annual Report on Form 10-K for the year ended December 31, 2000 for
filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
Nanda Krish
Richard Pallan (Chairman)
15
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on
FairMarket's common stock with the cumulative total return of (a) the Nasdaq
Market Index and (b) a peer group that includes the following businesses, which
FairMarket considers to be a peer group: Ariba, Inc., Commerce One, Inc.,
Digital River, Inc., eBay Inc. and Bid.com International Inc. The graph assumes
that $100 was invested in each of our common stock, the Nasdaq Market Index and
the peer group on March 14, 2000 (the date on which our common stock was first
publicly traded) and reflects the return through December 31, 2000, and assumes
the reinvestment of dividends, if any. The comparisons in the graph below are
based on historical data and are not necessarily indicative of, or intended to
forecast, possible future performance of FairMarket's common stock.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
FAIRMARKET, INC. PEER GROUP NASDAQ MARKET INDEX
3/14/00 $100 $100 $100
3/31/00 $47 $75 $99
6/30/00 $15 $45 $85
9/30/00 $7 $58 $78
12/31/00 $3 $22 $53
3/14/00 3/31/00 6/30/00 9/30/00 12/31/00
-------- -------- -------- -------- --------
FairMarket, Inc........................ $100 $47 $15 $ 7 $ 3
Peer Group............................. $100 $75 $45 $58 $22
Nasdaq Market Index.................... $100 $99 $85 $78 $53
STOCKHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
Stockholder proposals intended to be presented at FairMarket's 2002 annual
meeting of stockholders must be received by FairMarket no earlier than
January 24, 2002 and no later than February 23, 2002 in order to be considered
for inclusion in FairMarket's proxy statement for that meeting. These proposals
must also comply with the rules of the SEC governing the form and content of
proposals and the requirements of our By-laws in order to be included in the
proxy statement and
16
must be delivered to the Secretary of FairMarket at our principal executive
offices at 500 Unicorn Park Drive, Woburn, Massachusetts 01801.
Under FairMarket's By-laws, any stockholder of record who wishes to have a
stockholder proposal that is not included in FairMarket's proxy statement
considered at the 2002 annual meeting of stockholders must deliver a written
notice of such proposal to the Secretary of FairMarket at our principal
executive offices not less than 90 days or more than 120 days prior to May 23,
2002. However, if the date of the 2002 annual meeting is set for a date that is
more than 30 days before or more than 60 days after May 23, 2002, then the
notice must be delivered not more than 120 days prior to the date of the meeting
and not later than the later of (a) 90 days prior to the date of the meeting or
(b) the 10th day after the day on which the date of the meeting is first
publicly announced. The proposal must also comply with other requirements
contained in FairMarket's By-laws, including supporting documentation and other
information. Proxies solicited by the Board of Directors will confer
discretionary voting authority with respect to these proposals, subject to the
SEC's rules governing the exercise of this authority.
INDEPENDENT AUDITORS
Our Board of Directors has selected the firm of PricewaterhouseCoopers LLP
as the independent auditors of FairMarket for the year ending December 31, 2001.
A representative of PricewaterhouseCoopers LLP is expected to be present at the
Annual Meeting and will be given the opportunity to make a statement if he or
she so desires and to respond to appropriate questions.
AUDIT FEES. The total fees billed by PricewaterhouseCoopers LLP for
professional services for the audit of FairMarket's annual consolidated
financial statements for the year ended December 31, 2000 and the review of the
consolidated financial statements included in FairMarket's Quarterly Reports on
Form 10-Q filed during the year ended December 31, 2000 were $156,880.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. There were no
fees billed by PricewaterhouseCoopers LLP to FairMarket for financial
information systems design and implementation services for the year ended
December 31, 2000.
ALL OTHER FEES. The total fees billed to FairMarket for all other services
rendered by PricewaterhouseCoopers LLP for the year ended December 31, 2000 were
$871,649. The majority of this amount was incurred in connection with our
initial public offering. The Audit Committee has considered whether the
provision of non-audit services by PricewaterhouseCoopers LLP is compatible with
maintaining PricewaterhouseCoopers LLP's independence.
OTHER MATTERS
Our Board of Directors is not aware of any matters to be presented for
action at the Annual Meeting other than those described in this Proxy Statement.
If any other matters are duly presented, proxies will be voted on those matters
in accordance with the best judgment of the proxy holders.
17
EXHIBIT A
FAIRMARKET, INC.
AUDIT COMMITTEE CHARTER
I. GENERAL STATEMENT OF PURPOSE
The Audit Committee of the Board of Directors (the "Audit Committee") of
FairMarket, Inc. (the "Company") assists the Board of Directors (the "Board") in
general oversight and monitoring of management's and the independent auditor's
participation in the Company's financial reporting process and of the Company's
procedures for compliance with legal and regulatory requirements. The primary
objective of the Audit Committee in fulfilling these responsibilities is to
promote and preserve the integrity of the Company's financial statements and the
independence and performance of the Company's external independent auditor.
II. AUDIT COMMITTEE COMPOSITION
The Audit Committee shall consist of at least three members who shall be
appointed annually by the Board and shall satisfy the qualification requirements
set forth in Rule 4310 of the Marketplace Rules of the National Association of
Securities Dealers, Inc. The Board shall designate one member of the Audit
Committee to be Chairman of the committee.
III. MEETINGS
The Audit Committee generally is to meet four times per year in person or by
telephone conference call, with any additional meetings as deemed necessary by
the Audit Committee.
IV. AUDIT COMMITTEE ACTIVITIES
The principal activities of the Audit Committee will generally include the
following:
A. REVIEW OF CHARTER
- Review and reassess the adequacy of this Charter annually and submit it
to the Board for approval.
B. AUDITED FINANCIAL STATEMENTS AND ANNUAL AUDIT
- Review the overall audit plan (both external and internal) with the
independent auditor and the members of management who are responsible
for maintaining the Company's accounts and preparing the Company's
financial statements, including the Company's Chief Financial Officer
and/or principal accounting officer or principal financial officer (the
Chief Financial Officer and such other officer or officers are referred
to herein collectively as the "Senior Accounting Executive").
- Review and discuss with management (including the Company's Senior
Accounting Executive) and with the independent auditor:
(i) the Company's annual audited financial statements, including any
significant financial reporting issues which have arisen in
connection with the preparation of such audited financial
statements;
(ii) the adequacy of the Company's internal financial reporting
controls that could significantly affect the integrity of the
Company's financial statements;
(iii) major changes in and other questions regarding accounting and
auditing principles and procedures; and
A-1
(iv) the effectiveness of the Company's internal audit process
(including evaluations of its Senior Accounting Executive and
any other relevant personnel).
- Review and discuss with the independent auditor (outside of the
presence of management) how the independent auditor plans to handle its
responsibilities under the Private Securities Litigation Reform Act of
1995, and receive assurance from the auditor that Section 10A of the
Private Securities Litigation Reform Act of 1995 has not been
implicated.
- Review and discuss with the independent auditor (outside of the
presence of management) any problems or difficulties that the auditor
may have encountered with management or others and any management
letter provided by the auditor and the Company's response to that
letter. This review shall include considering:
(i) any difficulties encountered by the auditor in the course of
performing its audit work, including any restrictions on the
scope of its activities or its access to information; and
(ii) any changes required by the auditor in the scope or performance
of the Company's internal audit.
- Review and discuss major changes to the Company's auditing and
accounting principles and practices as may be suggested by the
independent auditor or management.
- Discuss with the independent auditor such issues as may be brought to
the Audit Committee's attention by the independent auditor pursuant to
Statement on Auditing Standards No. 61 ("SAS 61").
- Based on the Audit Committee's review and discussions (1) with
management of the audited financial statements, (2) with the
independent auditor of the matters required to be discussed by SAS 61,
and (3) with the independent auditor concerning the independent
auditor's independence, make a recommendation to the Board as to
whether the Company's audited financial statements should be included
in the Company's Annual Report on Form 10-K.
- Request that the independent auditor provide the Audit Committee with
the written disclosures and the letter required by Independence
Standards Board Standard No. 1, and review and discuss with the
independent auditor the independent auditor's independence.
- Prepare the Audit Committee report required by Item 306 of
Schedule 14A of the Securities Exchange Act of 1934 (or any successor
provision) to be included in the Company's annual proxy statement.
C. UNAUDITED QUARTERLY FINANCIAL STATEMENTS
- Review and discuss with management and the independent auditor the
Company's quarterly financial statements. Such review shall include
discussions by the Chairman of the Audit Committee or the Audit
Committee with the independent auditor of such issues as may be brought
to the Chairman's or Audit Committee's attention by the independent
auditor pursuant to Statement on Auditing Standards No. 71.
D. MATTERS RELATING TO SELECTION, PERFORMANCE AND INDEPENDENCE OF
INDEPENDENT AUDITOR
- Recommend to the Board the appointment of the independent auditor.
- Instruct the independent auditor that the independent auditor's
ultimate accountability is to the Board and the Audit Committee as
representatives of the Company's shareholders.
A-2
- Evaluate on an annual basis the performance of the independent auditor
and, if necessary in the judgment of the Audit Committee, recommend
that the Board replace the independent auditor.
- Recommend to the Board on an annual basis the fees to be paid to the
independent auditor.
- Require that the independent auditor provide the Audit Committee with
periodic reports regarding the auditor's independence, which reports
shall include but not be limited to a formal written statement setting
forth all relationships between the independent auditor and the Company
or any of its officers or directors. The Audit Committee shall discuss
such reports with the independent auditor, and if necessary in the
judgment of the Audit Committee, the committee shall recommend that the
Board take appropriate action to ensure the independence of the auditor
or replace the auditor.
E. MATTERS RELATING TO THE INDEPENDENCE OF THE AUDIT COMMITTEE
- Periodically review the independence of each member of the Audit
Committee and promptly bring to the attention of management and the
Board any relationships or other matters that may in any way compromise
or adversely affect the independence of any member of the Audit
Committee or any member's ability to assist the Audit Committee in
fulfilling its responsibilities under this Charter, including any such
relationship or other matter that may have caused or may in the future
cause the Company to fail to comply with the requirements set forth in
Rule 4310 of the Marketplace Rules of the National Association of
Securities Dealers, Inc.
F. GENERAL
- The Audit Committee may be requested by the Board to review or
investigate on behalf of the Board activities of the Company or of its
employees, including compliance with laws, regulations or Company
policies.
- Perform such other oversight functions as may be requested by the
Board.
- In performing its responsibilities, the Audit Committee shall be
entitled to rely upon advice and information that it receives in its
discussions and communications with management and the independent
auditor. The Audit Committee shall have the authority to retain special
legal, accounting or other professionals to render advice to the
committee. The Audit Committee shall have the authority to request that
any officer or employee of the Company, the Company's outside legal
counsel, the Company's independent auditor or any other professional
retained by the Company to render advice to the Company attend a
meeting of the Audit Committee or meet with any members of or advisors
to the Audit Committee.
- Notwithstanding the responsibilities and powers of the Audit Committee
set forth in this Charter, the Audit Committee does not have the
responsibility of planning or conducting audits of the Company's
financial statements or determining whether or not the Company's
financial statements are complete, accurate and in accordance with
generally accepted accounting principles. Such responsibilities are the
duty of management and, to the extent of the independent auditor's
audit responsibilities, the independent auditor. It also is not the
duty of the Audit Committee to resolve disagreements, if any, between
management and the independent auditor or to ensure compliance with
laws, regulations or Company policies.
A-3
Dear Stockholder:
Please take note of the important information enclosed with this proxy.
Your vote is important and you are strongly encouraged to exercise your right
to vote your shares.
Please mark the boxes on the proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy in the enclosed
postage-paid envelope.
Alternatively, you can vote by proxy over the Internet or by telephone. See
the reverse side for instructions. FairMarket, Inc. is a corporation
organized under the laws of the State of Delaware. The Delaware General
Corporation Law authorizes the granting of proxies over the Internet or by
telephone. Accordingly, proxies granted over the Internet or by telephone, in
accordance with the procedures set forth on this proxy card, will be valid
under Delaware law.
Sincerely,
FairMarket, Inc.
DETACH HERE
PROXY
FAIRMARKET, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 23, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of FairMarket, Inc. acknowledges receipt of a
copy of FairMarket's 2001 Annual Report to Shareholders, Annual Report on
Form 10-K for the year ended December 31, 2000 and Notice of Annual Meeting
and Proxy Statement dated April 9, 2001, and revoking any proxy heretofore
given, hereby appoints Lisa M. McGrath, James E. O'Neill and Janet Smith, and
each of them, with full power of substitution to each, as proxies for the
undersigned, and hereby authorizes each of them to vote all the shares of
Common Stock of FairMarket, Inc. held of record by the undersigned on March
29, 2001 at the Annual Meeting of Stockholders of FairMarket, Inc. to be held
at 10:00 a.m., local time, on May 23, 2001, at the Royal Sonesta Hotel, 5
Cambridge Parkway, Cambridge, Massachusetts, and any adjournments or
postponements thereof, and otherwise to represent the undersigned at the
meeting with all powers possessed by the undersigned as if personally present
at the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE
REVOKED PRIOR TO ITS EXERCISE. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE
VOTED AS DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS
INDICATED, IT WILL BE VOTED FOR THE NOMINEE FOR CLASS I DIRECTOR NAMED IN THE
PROXY STATEMENT.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
VOTING BY TELEPHONE OR INTERNET
You may vote by telephone or Internet at your convenience 7 days/week, 24
hours/day. Your telephone or Internet vote authorizes Lisa M. McGrath, James
E. O'Neill and Janet Smith, and each of them, with full power of
substitution, as proxies, to vote your shares in the same manner as if you
had marked, signed and returned the proxy card.
THE DEADLINE FOR VOTING BY TELEPHONE OR THROUGH THE INTERNET IS
11:59 P.M. (EST) MAY 22, 2001
To vote your shares through the Internet or by telephone, you will need the
control number printed in the box below, just below the perforation.
TO VOTE BY TELEPHONE:
1. CALL TOLL FREE ON A TOUCH TONE TELEPHONE:
1-877-PRX-VOTE (1-877-779-8683)
2. When prompted, enter the control number.
3. Have your proxy card ready, then follow the prerecorded instructions
when prompted.
4. Your vote will be confirmed and cast as you directed.
TO VOTE BY INTERNET:
1. GO TO THE WEB SITE ADDRESS: http://www.eproxyvote.com/faim
2. When prompted, enter the control number.
3. Have your proxy card ready and follow the instructions on your
screen when prompted.
4. Your vote will be confirmed and cast as you directed.
If you choose to vote your shares through the Internet or by telephone,
please do not mail back your proxy card.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
DETACH HERE
PLEASE MARK
/X/ VOTES AS IN
THIS EXAMPLE
1. Election of Class I Director.
In their discretion, the proxies are authorized to vote upon any other
Nominee: (01) Eileen Rudden business that may properly come before the meeting.
/ / FOR / / WITHHELD
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREON. JOINT OWNERS
SHOULD EACH SIGN. EXECUTORS, ADMINISTRATORS, TRUSTEES, GUARDIANS
OR OTHER FIDUCIARIES SHOULD GIVE FULL TITLE AS SUCH. IF SIGNING
FOR A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY A DULY
AUTHORIZED OFFICER.
SIGNATURE: DATE: SIGNATURE: DATE:
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