UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE
14A
(Rule 14a-101)
SCHEDULE
14A INFORMATION
Proxy Statement
Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant
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Filed by a Party other than the
Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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iParty Corp.
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(Name of Registrant as
Specified In Its Charter)
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(Name of Person(s) Filing
Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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transaction computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it was
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule and the
date of its filing.
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iParty Corp.
270 Bridge Street, Suite 301
Dedham, MA 02026
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 2008 Annual
Meeting of Stockholders of iParty Corp. will be held as follows:
Date:
Wednesday, June 4, 2008
Time:
11:00 a.m., local time
Place:
Posternak Blankstein & Lund LLP
Prudential Tower
800 Boylston Street, 33rd Floor
Boston, MA 02199
Matters to be voted on:
1.
The election of all six directors;
2.
Amendment to Certificate of the
Designations, Powers, Preferences and Rights of the Series B convertible preferred
stock (
Certificate of Designations-Series B
)
to change the requisite number of shares or holders necessary to amend or waive
certain provisions therein;
3.
Ratification of the selection of Ernst &
Young LLP as our independent registered public accounting firm for the fiscal
year ending December 27, 2008; and
4.
Any other matters properly brought before
the annual meeting or any adjournment thereof.
The Board of Directors has fixed the close of business
on April 14, 2008 as the record date for determining stockholders entitled
to notice of and to vote at the annual meeting.
Representation in person or by proxy of at least a majority of all
outstanding shares of each class of stock entitled to vote at the meeting is
required to constitute a quorum.
Accordingly, it is important that your shares be represented at the
annual meeting. The list of stockholders
entitled to vote at the annual meeting will be available for examination by any
stockholder at our offices at 270 Bridge Street, Suite 301, Dedham, MA
02026 for ten (10) days prior to June 4, 2008. Enclosed with the proxy statement for the
meeting, you will find a copy of our Annual Report on Form 10-K for fiscal
2007.
Your
vote at the meeting is very important to us regardless of the number of shares
you own. Please vote your shares,
whether or not you plan to attend the meeting, by completing the enclosed proxy
card and returning it to us in the enclosed envelope. Should you want to change your vote prior to
the annual meeting you may do so in accordance with the instructions contained
in the accompanying proxy statement.
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By Order of the
Board of Directors,
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/s/ David
Robertson
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DAVID ROBERTSON
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Secretary
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This notice, proxy statement, and
form of proxy are being distributed on or about April 29, 2008.
iParty Corp.
270 Bridge Street, Suite 301
Dedham, MA 02026
PROXY STATEMENT
for Annual Meeting of Stockholders to Be Held on June 4, 2008
GENERAL
INFORMATION
Our Board of Directors (the
Board
) is furnishing you this proxy
statement to solicit proxies on its behalf to be voted at the Annual Meeting of
Stockholders of iParty Corp. (
iParty
or the
Company
). The meeting
will be held at the offices of Posternak Blankstein & Lund LLP, at the
Prudential Tower, 33
rd
Floor, 800 Boylston Street, Boston MA, 02199,
on June 4, 2008, at 11:00 a.m., local time. The proxies also may be
voted at any adjournments or postponements of the meeting.
The mailing address of our principal executive offices
is iParty Corp., 270 Bridge Street, Suite 301, Dedham, MA, 02026. We are
first furnishing the proxy materials to stockholders on or about April 29,
2008.
All properly executed written proxies that are
delivered pursuant to this solicitation will be voted at the meeting in
accordance with the directions given in the proxy, unless the proxy is revoked
prior to completion of voting at the meeting.
Only owners of record of shares of common stock, Series B
convertible preferred stock (
Series B
Preferred Stock
), Series C convertible preferred stock (
Series C Preferred Stock
), Series D
convertible preferred stock (
Series D
Preferred Stock
), Series E convertible preferred stock (
Series E Preferred Stock
) and Series F
convertible preferred stock (
Series F
Preferred Stock
and together with the Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock, the
Convertible
Preferred
Stock
) of the
Company at the close of business on April 14, 2008, the record date, are
entitled to notice of and to vote at the meeting, or at any adjournments or
postponements of the meeting.
QUESTIONS AND ANSWERS ABOUT THE
MEETING AND VOTING
What is this document?
This is the Notice of our 2008 Annual Meeting of Stockholders of iParty Corp. (
iParty
or the
Company
), combined with our Proxy Statement which provides important information for your use in voting your shares of our common stock, or our various series of convertible preferred stock, at the annual meeting.
Who can vote?
You can vote your shares of common stock or your shares of convertible preferred stock if our records show that you owned the shares at the close of business on April 14, 2008, which is the record date for the annual meeting. Shares representing a total of 37,660,753 votes are eligible to vote at the meeting.
Common Stock.
You are permitted one vote for each share of common stock you owned at the close of business on April 14, 2008, including (i) shares held in your name as a stockholder of record, and (ii) shares held in street name for you as the beneficial owner through a broker, trustee, or other nominee, such as a bank. Thus, as of April 14, 2008, there were 22,717,400 votes eligible to vote at the meeting associated with 22,717,400 shares of common stock. The enclosed proxy card shows the number of shares you can vote.
Convertible Preferred Stock.
Except as otherwise required by Delaware General Corporation Law, the Convertible Preferred Stock is entitled to vote together with the common stock on all matters to which the common stock is entitled to vote. When the Convertible Preferred Stock votes together with the Common Stock as one class, you are permitted one vote for each whole number of shares of our common stock into which the shares of Convertible Preferred Stock are convertible. Thus, as of April 14, 2008, the number of votes eligible to vote at the meeting were 6,033,833 votes associated with 464,151 shares of Series B Preferred Stock (you are permitted thirteen (13) votes for each share of Series B Preferred Stock), 1,300,000 votes associated with 100,000 shares of Series C Preferred Stock (you are permitted thirteen (13) votes for each share of Series C Preferred Stock), 3,500,000 votes associated with 250,000
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shares of Series D Preferred Stock (you are permitted fourteen (14) votes for each share of Series D Preferred Stock), 2,966,660 votes associated with 296,666 shares of Series E Preferred Stock (you are permitted ten (10) votes for each share of Series E Preferred Stock), and 1,142,860 votes associated with 114,286 shares of Series F Preferred Stock (you are permitted ten (10) votes for each share of Series F Preferred Stock). In each such case, the number of votes is calculated based on the number of shares you owned at the close of business on April 14, 2008, including shares held in your name as a stockholder of record and shares held in street name for you as the beneficial owner through a broker, trustee, or other nominee, such as a bank. The enclosed proxy card shows the number of shares you can vote.
Special Voting Rights of Series C and Series D Preferred Stock with Respect to Election of Directors.
So long as at least fifty percent (50%), of the initially issued shares of Series C Preferred Stock remains outstanding, the holders of the Series C Preferred Stock are entitled to vote alone for the election of a Series C Director. So long as at least fifty percent (50%), of the initially issued shares of Series D Preferred Stock remains outstanding, the holders of the Series D Preferred Stock are entitled to vote alone for the election of a Series D Director.
Special Voting Rights of the Convertible Preferred Stock.
Under the various Certificates of Designations, each series of Convertible Preferred Stock has a separate class vote in the following instances:
·
The creation and issuance of any series of preferred stock or other security which is senior as to liquidation and or dividend rights to such Convertible Preferred Stock; and
·
An action that repeals, amends, or otherwise changes the Certificate of Designations or Certificate of Incorporation in a manner that would alter or change the powers, preferences, rights, privileges, restrictions and conditions of the particular class of Convertible Preferred Stock to adversely affect such class.
Unless otherwise specified in the Certificate of Designations, when voting as a separate class, you are permitted one vote for each share of Convertible Preferred Stock you owned at the close of business on April 14, 2008, including (i) shares held in your name as a stockholder of record, and (ii) shares held in street name for you as the beneficial owner through a broker, trustee, or other nominee, such as a bank. In the case of the second bullet point above, in addition to counting the votes previously described, each holder of Series B Preferred Stock, regardless of the number of shares of Series B Preferred Stock owned of record or beneficially, is also permitted one vote per holder when counting the number of holders.
How do I vote by proxy?
Follow the instructions on the enclosed proxy card to vote on each proposal to be considered at the annual meeting. Sign and date the proxy card and mail it back in the enclosed envelope. The proxy holders named on the proxy card will vote your shares as you instruct. If you sign and return the proxy card but do not vote on a proposal, the proxy holders will vote for you on that proposal. Unless you instruct otherwise, the proxy holders will vote in accordance with the Board of Directors recommendation below.
How does the board of directors recommend that I vote on the proposals?
The Board of Directors recommends that you vote:
FOR
the election of all six nominees to serve
as directors;
FOR
the Amendment to Certificate of the
Designations-Series B to change the requisite number of shares or holders
necessary to amend or waive certain provisions therein; and
FOR
the ratification of the selection of
Ernst & Young LLP as our independent registered public accounting firm
for the fiscal year ending December 27, 2008.
What if other matters come up at the meeting?
The matters described in this proxy statement are the only matters we know that will be voted on at the meeting. If other matters are properly presented at the meeting, the proxy holders will vote your shares in their discretion.
Can I change my vote after I return my proxy card?
Yes. At any time before the annual meeting, you can change your vote either by sending our Chief Financial Officer, David E. Robertson, a written notice revoking your proxy card or by signing, dating, and returning to us a new proxy card. We will honor the proxy card with the latest date.
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Can I vote in person at the meeting rather than by completing the proxy card?
Although we encourage you to complete and return the proxy card even if you plan to attend the meeting to ensure that your vote is counted, you can always vote your shares in person at the meeting.
Who will count the votes?
The votes cast by holders of shares of our common stock and our various series of convertible preferred stock will be counted, tabulated and certified by the transfer agent and registrar of our common stock and Series B Preferred Stock, Continental Stock Transfer & Trust Co. David E. Robertson, our Chief Financial Officer, will serve as the inspector of elections at the annual meeting.
Will my vote be kept confidential?
Yes, your vote will be kept confidential and we will not disclose your vote, unless (1) we are required to do so by law (including in connection with the pursuit or defense of a legal or administrative action or proceeding), (2) a stockholder makes a written comment on the proxy card or otherwise communicates his or her vote to management, (3) to allow the inspector of elections to certify the results of the vote, or (4) there is a contested election for the Board of Directors. The inspector of elections will forward any written comments that you make on the proxy card to our Board of Directors and Chief Executive Officer without providing your name, unless you expressly request disclosure on your proxy card.
What do I do if I am a beneficial owner and my shares are held in street name?
If your shares are held in the name of your broker, a bank, or other nominee, that party will give you instructions for voting your shares, which should be enclosed with this document.
What
constitutes a quorum?
In order for business to be
conducted at the meeting, a quorum must be present. The presence, in person or by proxy, of the
holders of a majority of all outstanding shares of each class of stock entitled
to vote at the annual meeting is necessary to constitute a quorum at the annual
meeting.
Shares of common stock and Convertible Preferred Stock represented in person or by proxy (including broker non-votes, if any, and shares that abstain or do not vote with respect to one or more of the matters to be voted upon) will be counted for the purpose of determining whether a quorum exists. Broker non-votes are those shares that are held in street name by a broker, bank, or other nominee that indicates on its proxy that it does not have discretionary authority to vote on a particular matter. Brokers, banks and other nominees may not be able to use their discretionary authority for the matters involving the amendment to the Certificate of Designations-Series B.
If a quorum is not present, the meeting will be
adjourned until a quorum is obtained.
Under our bylaws, notice need not be given of any such adjourned meeting
if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting, our stockholders may transact
any business that might have been transacted at the original meeting. If the
adjournment is for more than thirty (30) days, or if after the adjournment a
new record date is fixed for the adjourned meeting, our by-laws require that a
notice of the adjourned meeting be given to each stockholder of record entitled
to vote at the meeting.
What is
the voting requirement to approve each proposal?
In the
election of directors, the persons receiving the most number of FOR votes at
the meeting will be elected. Holders of shares of Series C Preferred Stock
alone are entitled to cast votes in respect of the election of the Series C
Director.
The proposal to amend Section 4(c) and Section 7(c) of
the Certificate of Designations-Series B will require: (i) the
affirmative vote of a majority of the outstanding shares of our common stock
and Convertible Preferred Stock entitled to vote on the matter, voting together
as a single class on an as converted basis, (ii) the affirmative vote of a
majority of the outstanding shares of Series B Preferred Stock entitled to
vote on the matter, voting separately as a single class, and (iii) the
affirmative vote of a majority in number of the holders of the Series B
Preferred Stock entitled to vote on the matter, voting separately as a class,
in the case of Section 4(c) and the affirmative vote of one-half in
number of the holders of the Series B Preferred Stock entitled to vote on
the matter, voting separately as a class, in the case of Section 7(c).
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The proposal to ratify the selection of Ernst &
Young LLP as our independent registered public accounting firm for the fiscal
year ending December 27, 2008 requires the affirmative vote of a majority
of the votes cast at the meeting by the holders of outstanding shares of all
classes of our stock entitled to vote thereon who are present at the meeting
either in person or by proxy.
Votes withheld for a
particular director nominee and broker non-votes, if any, will have no effect
on the outcome of the election of directors.
Abstentions and broker non-votes, if any, will have the same effect as a
no vote with respect to the approval of the amendment to the Certificate of
Designations-Series B. Neither
abstentions nor broker non-votes, if any, will have an effect on the voting of
the ratification of the selection of Ernst & Young LLP as our
independent registered public accounting firm.
What are broker non-votes?
If you hold shares beneficially in street name and do not provide your broker with voting instructions, your shares may constitute broker non-votes. Generally, broker non-votes occur on a matter when a broker is not permitted to vote on that matter without instructions from you, as the beneficial owner. Brokers, banks and other nominees may not be able to use their discretionary authority for the matter involving the amendment to the Certificate of Designations-Series B; however, they may be able to use their discretionary authority for the matters involving the election of directors and the ratification of our independent registered public accounting firm for the fiscal year ended December 27, 2008.
Where can I find the voting results?
We will announce the results of the voting at the annual meeting and report the voting results in our Quarterly Report on Form 10-Q for the second quarter of fiscal 2008, which we expect to file with the Securities and Exchange Commission (
SEC
) in August 2008. The results will be contained in Part II, Item 4 of that Quarterly Report, which will be available via Internet on the Investor Relations page of our licensed website at www.iparty.com and on the SECs website, www.sec.gov.
Who pays for this proxy solicitation?
We do. In addition to sending you these materials, one of our officers, directors or employees may contact you by telephone, by mail, or in person. None of these persons will receive any extra compensation for doing this.
How and when may I submit a stockholder proposal for consideration at next years annual meeting of stockholders or to recommend nominees to serve as directors?
You may submit proposals, including director nominations, for consideration at future stockholder meetings.
Stockholder Proposals:
If you are interested in submitting a proposal for inclusion in our proxy statement for next years annual meeting, or would like to recommend a nominee for director, we must receive your written proposal at our principal executive offices no later than December 29, 2008, which is the 120th calendar day before the one-year anniversary of the proxy statement we are releasing to our stockholders for this years annual meeting. If the date of next years annual meeting (or special meeting in lieu of the annual meeting) is moved more than 30 days before or after the anniversary date of this years meeting, the deadline for inclusion of proposals in our proxy statement will instead be a reasonable time before we begin to print and mail our proxy materials next year. Such proposals also will need to comply with SEC regulations under Rule 14a-8 (Shareholder Proposals) regarding the inclusion of shareowner proposals in company-sponsored proxy materials. Any proposals should be addressed to:
iParty Corp.
270 Bridge Street, Suite 301
Dedham, MA 02026
ATTN: David E. Robertson, Chief Financial Officer
Fax:
(781) 326-7143
Except in the case of
proposals made in accordance with SEC Rule 14a-8 (Shareholder Proposals),
the Companys proxy holders are allowed to use their discretionary voting
authority on stockholder proposals that the Company did not receive written
notice of at least 45 days prior to the anniversary of the date on which
the Company first mailed its proxy materials for its immediately preceding
annual meeting of stockholders. The deadline for proposals to be presented at
the 2009 Annual Meeting of Stockholders is March 14, 2009.
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Copy of By-Law Provisions:
You may contact our Chief Financial Officer (Mr. Robertson) at our principal executive offices for a copy of the relevant by-law provisions regarding the requirements for making stockholder proposals. Our by-laws also are available on the Investor Relations page on our licensed website at www.iparty.com
.
How may I communicate with the board of directors or the non-management directors on the board of directors?
You may submit an e-mail to our Board of Directors at bod@iparty.com. All directors have access to this e-mail address. Communications intended for our non-management independent directors should be directed to the attention of Frank Haydu at frankhaydu@yahoo.com. You may report your concerns anonymously or confidentially.
Does iParty have a policy regarding the attendance of directors at the meeting?
Our by-laws do not mandate that members of the Board of Directors must attend the annual meeting of stockholders and we have no separate policy regarding such attendance.
How many directors attended last years annual meeting?
At last years annual meeting, six of our then seven directors were present in person. All six of our current directors were present in person at last years meeting.
Does iParty have a code of conduct applicable to all directors, officers, and employees?
Yes. In accordance with Section 406 of the Sarbanes-Oxley Act, Item 406 of SEC Regulation S-K, and Section 807 of the enhanced corporate governance rules of the American Stock Exchange, we have adopted a code of business conduct and ethics that is applicable to all our directors, officers and employees and is available on the Investor Relations page on our licensed website at www.iparty.com. Our written code of business conduct and ethics provides for an enforcement mechanism and requires that waiver of its provisions for any of our directors or officers must be approved by our Board of Directors. We are required to disclose any such waivers on the Investor Relations page of our corporate website at www.iparty.com.
Is the code of conduct publicly available?
Yes. Our code of business conduct and ethics is available on the Investor Relations page on our licensed website at www.iparty.com.
Where can I see the Companys corporate documents and SEC filings?
iPartys website contains its by-laws, the Board committee charters, corporate governance guidelines, code of business conduct and ethics and the Companys SEC filings. To view the by-laws, the Board committee charters, corporate governance guidelines, or code of business conduct and ethics, go to www.iparty.com and click on Investor Relations. To view iPartys SEC filings, including Forms 3, 4, and 5 filed by the Companys directors and executive officers, go to www.iparty.com, click on Investor Relations and then click on SEC Filings.
iParty will also promptly deliver free of charge, upon request, the Companys Certificate of Incorporation, by-laws, Board committee charters, corporate governance guidelines or the code of business conduct and ethics to any stockholder requesting a copy. Requests for these documents may be made in the same manner as requests for a copy of iPartys Annual Report on Form 10-K.
How can I obtain an annual report on Form 10-K?
A copy of our Annual Report on Form 10-K for the year ended December 29, 2007 is enclosed with this proxy statement. Stockholders may request another free copy of our proxy statement and our 2007 Annual Report on Form 10-K by making a written or oral request to:
iParty Corp.
270 Bridge Street, Suite 301
Dedham, MA 02026
ATTN: David E. Robertson, Chief Financial Officer
Telephone: (781) 329-3952
Our proxy statement and Annual Report on Form 10-K for fiscal 2007 is also available on the Investor Relations page of our licensed website at www.iparty.com and the SECs website at www.sec.gov.
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Where can I get directions to the meeting?
The meeting will be held in the offices of Posternak Blankstein & Lund LLP on the 33rd floor of the Prudential Tower, 800 Boylston Street, Boston, MA. Directions to the meeting location are available at www.pbl.com.
Who should I contact if I have any questions?
If you have any questions about the annual meeting or any matters relating to this proxy statement, please contact David E. Robertson, our Chief Financial Officer, at the address and telephone number above.
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ITEMS TO BE ACTED
ON AT THE MEETING
Proposal 1.
Election of Directors
Our entire Board of Directors, to consist of six (6) members,
will be elected at the meeting. Each
nominee for director currently serves on our Board of Directors. The directors elected will hold office until
their successors are elected and qualified, which should occur at the next
annual meeting or special meeting in lieu thereof, in accordance with our
by-laws.
We have no reason to believe that any of the nominees
will not be a candidate or will be unable to serve as a director. However, in the event any nominee is not a
candidate or is unable or unwilling to serve as a director at the time of the
election, the Board of Directors (on recommendation of the Nominating
Committee) may either propose to reduce the number of directors or propose a
substitute nominee.
Under the Certificate of Designations-Series C,
for so long as at least 50% of the initially issued shares of Series C
Preferred Stock remain outstanding, the holders of the Series C have the
exclusive right, voting separately as a class, to elect one director of the
Company (the
Series C Director
). Robert W. Jevon is the designee of the
holders of the Series C Preferred Stock.
Under the Certificate of Designations-Series D,
for so long as at least 50% of the initially issued shares of Series D
Preferred Stock remain outstanding, the holders of the Series D Preferred
Stock have the exclusive right, voting separately as a class, to elect one
director of the Company (the
Series D
Director
). The holders of
the Series D Preferred Stock have not elected to designate a Series D
Director at the 2008 Annual Meeting.
The Board recommends that you vote
FOR each of the following nominees:
·
Sal V.
Perisano
·
Daniel I. De
Wolf
·
Frank W.
Haydu III
·
Eric
Schindler
·
Joseph S.
Vassalluzzo
·
Robert W.
Jevon, Jr.
(for Series C
Director)
Biographical information about each of these
nominees can be found on pages 15 through 17 of this proxy statement.
Unless you specify otherwise, the Board intends the
accompanying proxy to be voted for these nominees. Thus, unless you withhold
authority or your proxy contains contrary instructions, a properly signed and
dated proxy will be voted
FOR
the election of these
nominees.
Votes
withheld will not affect the outcome of the voting with respect to the election
of any nominee.
Proposal
2.
Proposal to amend the Certificate of
Designations-Series B to change the requisite number of shares or holders
necessary to amend or waive certain provisions therein
Our Board of Directors has approved and declares
advisable an amendment to Section 4(c) and Section 7(c) of the
Certificate of Designations-Series B that:
·
Changes the waiver threshold in
s
ection
4(c) from the affirmative vote of a
majority
in number
of the holders of the then outstanding shares of Series B
Preferred Stock to the affirmative vote of the
holders
of a majority
of the then outstanding shares of Series B
Preferred Stock (
Section 4(c)
);
·
Changes the approval threshold in
s
ection
7(c) from the consent of
one-half in number
of
the holders of the then outstanding shares of Series B Preferred Stock to
the consent of the
holders of a majority
of
the then outstanding shares of Series B Preferred Stock in the event that
a vote is required due to an action that
9
would adversely alter or change the powers,
preferences, rights, privileges, and restrictions of the Series B
Preferred Stock (
Section 7(c)
); and
·
Adds the ability of the holders of a majority of the then outstanding
shares of Series B Preferred Stock to waive any of the rights,
preferences, designations, or restrictions contained in the Series B
Preferred Stock (
Section 7(c)
).
The full text of the proposed resolutions is
contained in the proposed Certificate of Amendment to the Restated Certificate
of Incorporation, which is attached to this proxy statement as
Appendix A
and incorporated herein by reference.
Summary
of Rights of Series B Preferred Stock.
As set forth more fully in the Certificate of Designations - Series B,
which is included as an exhibit to our annual report on Form 10-K for the
fiscal year ended December 29, 2007, the holders of the Series B Preferred Stock
have certain defined rights and preferences. These rights and preferences
include: (i) a liquidation preference senior to the holders of our common
stock, as more fully described under
Voting on Liquidation Events
, (ii) an anti-dilution provision that protects the holders in the
event we issue common stock or certain rights including option grants in excess
of certain defined amounts, to purchase or convert into common stock, at a
price below the then existing conversion price, (iii) the right to participate
in dividends, when and if declared by the Board of Directors, and (iv) certain
defined voting rights, which include the right to vote together with the common
stock as one class on all matters to which the common stock is entitled to vote
and a separate class vote as described below under
Current Voting
Standards of the Series B Preferred Stock.
With
respect to the right to participate in dividends noted above, as of April 14,
2008, the Company has never paid a cash dividend on its common stock.
Current
Voting Standards of the Series B Preferred Stock
.
Except as
otherwise required by Delaware General Corporation Law, the Series B Preferred
Stock is entitled to vote together with the common stock and all of the other
outstanding classes of Convertible Preferred Stock on all matters to which the
common stock is entitled to vote. In
addition, in certain circumstances, the holders of the Series B Preferred Stock
have a separate class vote. For example,
the holders of shares of the Series B Preferred Stock vote as a separate class
in the following circumstances:
·
The creation and issuance of any series of preferred stock or other
security which is senior as to liquidation and or dividend rights to such Series
B Preferred Stock; and
·
An action that repeals, amends, or otherwise changes the Certificate of
Designations or Certificate of Incorporation in a manner that would alter or
change the powers, preferences, rights, privileges, restrictions and conditions
of the Series B Preferred Stock to adversely affect such class.
The Series B Preferred Stock has four distinct approval
standards. Depending on the matter to be
acted on or waived, the necessary approval may require either: (i) the
vote of a
majority in number
of
the holders of the Series B Preferred Stock entitled to vote on the matter, (ii) the
vote of
one-half in number
of the
holders of the Series B Preferred Stock entitled to vote on the matter, (iii) the
vote of the
holders of one-half
of the outstanding
shares of the Series B Preferred Stock entitled to vote on the matter or (iv) the
vote of
holders of a majority
of the outstanding
shares of Series B Preferred Stock entitled to vote on the matter. In addition, under Delaware General
Corporation Law, the holders of the Series B Preferred Stock are entitled to
vote as a class upon an amendment to the Certificate of Incorporation if the
amendment, among other specified actions, would alter or change the powers,
preferences, or special rights of the shares of such class that affects them
adversely. In this case, the minimum
required vote under Delaware Law is a majority of the outstanding shares of the
Series B Preferred Stock. Thus, in
addition to the standards noted above, Delaware General Corporation Law may
require us to count the votes in two ways with respect to a proposed amendment
before determining that a matter has been approved or defeated: first, count
the number of stockholders voting, and second, count the number of votes cast
on the matter.
Reasons
for the Amendment
. The proposed amendment
to the Series B Preferred Stock seeks to make consistent the necessary
vote or consent among the various approval provisions contained in the Series B
Preferred Stock by having one standard that follows the Delaware General
Corporation Law standard for separate class voting, and makes the approval
provisions of the Series B Preferred Stock more similar to the other
outstanding series of Convertible Preferred Stock. By removing the provision
requiring the Company to count stockholders rather than shares and making the approval
standard essentially consistent throughout the terms of the Series B
Preferred Stock, the Board believes that the approval of the amendment will
have the following benefits:
·
It will be easier to determine whether a particular vote is achievable;
·
The approval provisions will be consistent and more understandable for
our stockholders;
·
The approval provisions will be consistent with the traditional concepts
of majority voting and
the minimum statutory requirements
contained in the Delaware General Corporation law
; and
·
The Series B Preferred Stock approval power will be allocated according
to the stockholders relative economic stake in the Company rather than the
arbitrary number of owners.
The Board is proposing to amend the voting
provisions of only the Series B Preferred Stock. The voting provisions in the other series of
preferred stock: 1) follow more closely the minimum statutory requirement of
the Delaware General Corporation Law and 2) since they only have one or two
stockholders, do not present the same issue in class voting as the Series B
Preferred Stock. For those reasons, the Board is not proposing an amendment to
the voting provisions of the other series of Convertible Preferred Stock.
10
We are not now considering any corporate action that
would trigger one or more of the various special voting provisions of the Series B
Preferred Stock or other series of Convertible Preferred Stock; however, we may
be faced with such a vote in the future, and thus, we believe that, for the
reasons expressed above, it is advisable to amend the voting terms of the Series B
Preferred Stock at this time.
Voting
on Liquidation Events.
Under Section 4
of the Certificate of Designations-Series B, a liquidation, dissolution or
winding up of iParty is considered a liquidation event. In the event of a liquidation
event, a holder of shares of Series B Preferred Stock is entitled to
receive a liquidation preference equal to $20 per share, equivalent to approximately
$1.49 per common share on an as converted basis, or approximately $9.3 million in
the aggregate at December 29, 2007. The liquidation preferences are payable to
the holders of shares of Series B Preferred Stock
pari passu
and pro rata with the other outstanding shares of series of Convertible
Preferred Stock and prior to any distribution to common stock.
The Certificate of Designations-Series B deems
a merger, consolidation, or sale of substantially all of our assets of the
Company a liquidation event if the holders of shares of Series B Preferred
Stock do not receive securities in the surviving corporation that have
substantially similar rights as the Series B Preferred Stock. The terms of the Certificate of Designations-Series B
allow the
majority in number
of
holders to waive this deemed liquidation event.
We believe that the affirmative consent of a
majority in number of the holders to effect a waiver of the deemed liquidation
event is not typical. Usually, the approval
of the holders of a majority of the outstanding shares of Series B
Preferred Stock would be used to effect the waiver. As of April 14, 2008, there were 100
holders of shares of Series B Preferred Stock. To obtain the necessary approval to effect a
waiver of a deemed liquidation event, we would need to obtain the consent of 51
individual holders and these 51 holders might not represent a majority of the
outstanding shares of the Series B Preferred Stock.
Specific
Class Vote and Waiver Provision
. The
proposed amendment also contains an amendment to Section 7(c) making it more
consistent with the minimum statutory requirements of Delaware General
Corporation Law and adds a provision allowing the holders of shares of Series B
Preferred Stock to waive any of the rights, powers, preferences and other terms
of the Series B Preferred Stock set forth in the Certificate of
Designations-Series B, or otherwise in the Restated Certificate of
Incorporation on behalf of all holders of shares Series B Preferred Stock.
As proposed, the waiver would require the affirmative written consent or vote
of the holders of at least a majority of the shares of Series B Preferred
Stock then outstanding. Absent the
waiver provision, the Board might need to amend the Certificate of
Designations-Series B to achieve the same results. An amendment is potentially a more costly and
time-consuming process. We believe that the waiver would allow us more
flexibility and certainty in acting on or responding to certain corporate actions,
including an acquisition or a financing, which might trigger the anti-dilution
provisions or liquidation provision in the Series B Preferred Stocks.
Potential
Effects of the Amendment on Voting Concentrations.
If the proposed amendment is approved, as of April 14, 2008, we
could obtain the same waiver or vote with the approval of as few as two or more
holders rather than the 51 holders currently required under Section 4(c),
and the 50 holders currently required under Section 7(c). As of April 14,
2008, there were 465,151 outstanding shares of Series B Preferred Stock. Based
on the Companys stockholder records as of April 14, 2008, Mr. Lessin,
who beneficially owns 125,000 shares of Series B Preferred Stock, or
approximately 27% of the outstanding shares of Series B Preferred Stock,
and Roccia Partners, L.P., who beneficially owns 179,610 shares of Series B
Preferred Stock, or approximately 39% of the outstanding shares of Series B
Preferred
11
Stock, acting together or separately with a number
of holders, could approve or defeat a matter. Given the current ownership of
the shares of Series B Preferred Stock, no one owner before the proposed
amendment or, if approved, after the proposed amendment could approve or defeat
a matter acting alone.
See
Ownership of iParty Stock
for a discussion of Mr. Lessins and Roccia Partners, L.Ps stock
holdings in the Company.
Approval
Required and Recommendation
. The
proposal to amend Section 4(c) and Section 7(c) of the
Certificate of Designations-Series B will require: (i) the
affirmative vote of a majority of the outstanding shares of our common stock
and Convertible Preferred Stock entitled to vote on the matter, voting together
as a single class on an as converted basis, (ii) the affirmative vote of a
majority of the outstanding shares of Series B Preferred Stock entitled to
vote on the matter, voting separately as a single class, and (iii) the
affirmative vote of a majority in number of the holders of the Series B
Preferred Stock entitled to vote on the matter, voting separately as a class,
in the case of Section 4(c) and the affirmative vote of one-half in
number of the holders of the Series B Preferred Stock entitled to vote on
the matter, voting separately as a class, in the case of Section 7(c).
The Board of Directors recommends that you vote
FOR
approval
of the amendment to Section 4(c) and Section 7(c) of the
Certificate of Designations-Series B.
Unless you specify otherwise, the Board intends the
accompanying proxy to be voted for this proposal.
Proposal 3. Proposal to Ratify the Selection of
Independent Registered Public Accounting Firm.
Our Audit Committee has selected the independent
registered public accounting firm of Ernst & Young LLP (
E&Y
) to examine and audit our
financial statements for the year ending December 27, 2008. A resolution
to ratify this selection will be presented at the meeting.
Stockholder ratification of the selection of E&Y
is not required. Although not required
to do so, the Board is submitting the selection of E&Y for ratification by
iPartys stockholders for their views.
However, if the stockholders do not ratify the selection, the Audit
Committee will take that into account in future deliberations. The Audit
Committee will retain the ultimate discretion to appoint or terminate the
appointment of our independent registered public accounting firm, irrespective
of the outcome of this proposal.
E&Y audited and reported upon our financial
statements for fiscal 2007. In
connection with that audit, E&Y also reviewed our Annual Report on Form 10-K
for the fiscal year ended December 29, 2007, quarterly financial
statements for the fiscal quarters ended March 31, 2007, June 30,
2007 and September 29, 2007, and our filings with the SEC, and consulted
with management as to the financial statement implications of matters under
consideration.
We expect that one or more representatives of E&Y
will be present at the annual meeting. They will be afforded an opportunity to
make a statement at the annual meeting if they desire to do so and to respond
to appropriate questions by stockholders.
E&Y has advised us that it has no direct, nor any
indirect, financial interest in iParty or any of its subsidiaries.
The proposal to ratify the selection of E&Y as our
independent registered public accounting firm for fiscal 2008 requires the
affirmative vote of a majority of the votes cast at the meeting by the holders
of outstanding shares of all classes of our stock entitled to vote thereon who
are present at the meeting either in person or by proxy.
The Board recommends that
you vote
FOR
the proposal to
ratify the selection of Ernst & Young LLP.
Unless you specify
otherwise, the Board intends the accompanying proxy to be voted for this
proposal.
Information about the
fees and services we paid to E&Y in 2006 and 2007 is contained on page 28
of this proxy statement.
12
OWNERSHIP OF iPARTY STOCK
The following table shows the number of shares of our
common stock beneficially owned as of April 14, 2008 by:
·
each person or entity that we believe beneficially owns more than 5% of
our common stock,
·
each director and nominee for director,
·
each person shown in the summary compensation table on page 23
below, and
·
all executive officers and directors as a group.
Name of Beneficial Owner (1)
|
|
Number of
Common Shares
Beneficially Owned (2)
|
|
Percent of Class
|
|
5% Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
Robert H. Lessin
Jefferies & Co.
520 Madison Ave., 12
th
Floor
New York, NY 10022
|
|
11,086,521
|
(3)
|
35.4
|
%
|
|
|
|
|
|
|
Roccia Partners,
L.P.
c/o Lorenzo Roccia
220 East 67
th
Street
New York, NY 10021
|
|
3,080,926
|
(4)
|
12.1
|
%
|
|
|
|
|
|
|
Naida S. Wharton
c/o Sandra Minardo
520 Madison Ave., 12
th
Floor
New York, NY 10022
|
|
2,474,100
|
(5)
|
10.9
|
%
|
|
|
|
|
|
|
Highbridge
International LLC
c/o Eleazer N. Klein
Schulte Roth & Zabel LLP
919 Third Avenue
New York, NY 10022
|
|
2,083,334
|
(6)
|
8.4
|
%
|
|
|
|
|
|
|
Boston Millennia
Partners, LP
30 Rowes Wharf, Suite 500
Boston, MA 02110
|
|
1,365,200
|
(7)
|
5.7
|
%
|
|
|
|
|
|
|
Patriot Capital
Limited
c/o Stephen Rasch
Loeb, Block and Partners LLP
505 Park Avenue
New York, NY 10022
|
|
1,184,803
|
(8)
|
5.0
|
%
|
|
|
|
|
|
|
Directors,
Nominees for Director, and Executive Officers
|
|
|
|
|
|
Sal V. Perisano
|
|
4,597,958
|
(9)
|
17.0
|
%
|
Patrick Farrell
|
|
1,014,587
|
(10)
|
4.3
|
%
|
Dorice P. Dionne
|
|
4,597,958
|
(11)
|
17.0
|
%
|
David Robertson
|
|
31,250
|
(12)
|
0.1
|
%
|
Daniel I. De Wolf
|
|
495,000
|
(13)
|
2.1
|
%
|
Joseph S. Vassalluzzo
|
|
405,000
|
(14)
|
1.8
|
%
|
Frank W. Haydu III
|
|
260,000
|
(15)
|
1.1
|
%
|
Eric Schindler
|
|
235,000
|
(16)
|
1.0
|
%
|
Robert
W. Jevon, Jr.
Boston Millennia Partners, LP
30 Rowes Wharf, Suite 500
Boston, MA 02110
|
|
75,000
|
(17)
|
0.3
|
%
|
All executive officers and directors as a group (8
persons)
|
|
6,099,208
|
|
21.4
|
%
|
13
1.
Unless
otherwise indicated, all addresses are c/o iParty Corp., 270 Bridge Street, Suite 301,
Dedham, MA 02026.
2.
The
number of shares beneficially owned by each entity, person, director or named
executive officer is determined under SEC rules, particularly Rule 13d-3,
and the information is not necessarily indicative of beneficial ownership for
any other purpose. Under such rules,
each entity or individual is considered the beneficial owner of any shares as
to which they have the sole or shared voting power or investment power. Such persons and entities are also deemed
under the same rules to beneficially own any shares that they have the
right to acquire within sixty (60) days of April 14, 2008 (i.e., June 13,
2008) through the conversion of convertible preferred stock, the exercise of
stock options or warrants or other similar rights. This stock ownership information is based
upon information furnished to us by the persons named in the table. The percentage of class is calculated in
accordance with Rule 13d-3 and is based on 22,717,400 shares outstanding
as of April 14, 2008 plus, as to each holder thereof and no other person,
the number of shares (if any) that the person has the right to acquire on or
prior to June 13, 2008, through the exercise of stock options or warrants
or other similar rights.
3.
Mr. Lessin
beneficially owns (1) 2,474,100 shares of common stock, (2) 250,000
shares of common stock that may be acquired upon the exercise of presently
exercisable options, (3) 273,268 shares of common stock that may be
acquired upon the exercise of presently exercisable warrants, (4) 1,674,500
shares of common stock that may be acquired upon the conversion of 125,000
shares of presently convertible Series B Preferred Stock, (5) 3,652,250
shares of common stock which may be acquired upon the conversion of 250,000
shares of presently convertible Series D Preferred Stock which constitutes
all of the outstanding Series D Preferred Stock, and (6) 2,762,403 shares
of common stock which may be acquired upon the conversion of 266,667 shares of
presently convertible Series E Preferred Stock. The figure listed in the table does not
include any shares reflected as owned by Ms. Wharton, who was formerly Mr. Lessins
spouse.
4.
The
figure in the table for Roccia Partners, L.P. includes 2,406,056 shares of
common stock, which may be acquired upon the conversion of 179,610 shares of
presently convertible Series B Preferred Stock held in the name of Roccia
Partners, L.P. The figure also includes (1) 364,100
shares of common stock held in the name of Roccia Venture Partners, L.P. and (2) 310,770
shares of common stock, which may be acquired upon the conversion of 30,000
shares of presently convertible Series E Preferred Stock held in the name
of Roccia Venture Partners, L.P.
5.
Ms. Wharton
beneficially owns 2,474,100 shares of common stock.
6.
The
figure in the table for Highbridge International LLC includes 2,083,334 shares
of common stock, which may be acquired upon the exercise of a presently
exercisable warrant.
7.
The
figure in the table for Boston Millennia Partners, LP includes 1,365,200 shares
of common stock that may be acquired upon the conversion of 100,000 shares of
presently convertible Series C Preferred Stock owned by Boston Millennia
Partners, LP and an affiliated entity, which constitutes all of the oustanding
Series C Preferred Stock. The figure in the table does not include any of the
shares beneficially owned by Mr. Jevon described in footnote (17) below.
8.
The
figure in the table for Patriot Capital Limited includes 1,184,803 shares of
common stock, which may be acquired upon the conversion of 114,286 shares of
presently convertible Series F Preferred Stock, which constitutes all
of the outstanding Series F Preferred Stock.
9.
Mr. Perisano
owns 204,700 shares and holds options for 4,393,258 shares, which are presently
exercisable. The figure in the table
includes options for 2,779,645 shares granted to Mr. Perisano and options
for 1,613,613 granted to Mr. Perisanos wife, Ms. Dionne. The figure in the table includes 204,700
shares of common stock held jointly by Mr. Perisano and Ms. Dionne.
10.
Mr. Farrell
owns 44,500 shares and holds options for 970,087 shares, which are presently
exercisable.
14
11.
Ms. Dionne
owns 204,700 shares and holds options for 4,393,258 shares, which are presently
exercisable. The figure in the table
includes options for 2,779,645 shares granted in the name of Ms. Dionnes
husband, Mr. Perisano, and options for 1,613,613 shares granted to Ms. Dionne. The figure in the table includes 204,700
shares of common stock held jointly by Mr. Perisano and Ms. Dionne.
12.
Mr. Robertson
holds options for 125,000 shares, of which 31,250 are presently exercisable or
will be exercisable within 60 days of April 14, 2008.
13.
Mr. De
Wolf beneficially owns 10,000 shares of common stock and holds options for
485,000 shares, which are presently exercisable or will be exercisable within
60 days of April 14, 2008. The owner of record of the 10,000 shares of
common stock is Pine Street Ventures LLC, a Delaware limited liability
company. The beneficial owners of Pine
Street Ventures are Mr. De Wolfs children. Mr. De Wolf controls sole voting power.
14.
Mr. Vassalluzzo
beneficially owns 140,000 shares of common stock and holds options for 265,000
shares, which are presently exercisable or will be exercisable within 60 days
of April 14, 2008.
15.
Mr. Haydu
beneficially owns 25,000 shares of common stock and holds options for 235,000
shares, which are presently exercisable or will be exercisable within 60 days
of April 14, 2008.
16.
Mr. Schindler
beneficially holds options for 235,000 shares, which are presently exercisable
or will be exercisable within 60 days of April 14, 2008.
17.
Mr. Jevon
beneficially owns 75,000 shares of common stock that may be acquired upon the
exercise of presently exercisable options. Mr. Jevon is employed by Boston
Millenia Partners, LP. Mr. Jevon has been awarded stock options, which are
presently exercisable, to purchase 75,000 shares of common stock, for serving
from February 2000 to June 2001 as director by appointment of Boston
Millenia Partners, LP. The figure for Mr. Jevon does not include any of
the shares described in footnote (7) above with respect to Boston Millenia
Partners, LP.
BOARD
OF DIRECTORS AND CORPORATE GOVERNANCE MATTERS
The following table sets forth the name and age of
each of our directors, his or her position with us, and the period during which
he has served as a director. Each of our
currently serving directors is a nominee for reelection as a director at the
meeting.
Name
|
|
Age
|
|
Position
|
|
Director
Since
|
Sal V. Perisano
|
|
57
|
|
Chairman of the Board, Chief Executive Officer
|
|
1998
|
Daniel I. De Wolf
|
|
51
|
|
Director
|
|
2003
|
Frank W. Haydu III
|
|
60
|
|
Director
|
|
2003
|
Eric Schindler
|
|
47
|
|
Director
|
|
2003
|
Joseph S. Vassalluzzo
|
|
60
|
|
Director
|
|
2004
|
|
|
|
|
|
|
|
Series C
Director
|
|
|
|
|
|
|
(Elected only by holders of Series C Preferred Stock)
|
|
|
|
|
|
|
Robert W. Jevon, Jr.
|
|
55
|
|
Series C Director
|
|
2006
|
Sal V. Perisano,
age 57, has served as a director of
iParty since 1998 and its Chief Executive Officer since 1999. Mr. Perisano served as Chairman of the
Board and President of The Big Party Corporation from 1992 to 1998, and
continued serving as a director until 2000.
In 1981, he co-founded Videosmith, which became a leading video retailer
in the Boston area. In 1989, Videosmith
was sold to a publicly traded company called Xtravision
15
PLC, which owned 250 stores throughout the U.K. and
Ireland. Mr. Perisano stayed on as
a director and was later named Chief Executive Officer of the parent company,
which was subsequently acquired by Blockbuster Video. Mr. Perisano holds a bachelors degree
from Boston College and a masters degree from Harvard University. Mr. Perisano is married to Ms. Dorice
Dionne, who is employed by iParty as its Senior Vice President, Merchandising
and Marketing.
Daniel I. De Wolf
, age 51,
has served as a director of iParty since 2003. Mr. De Wolf is a member of the corporate
practice in the New York office and Co-Chair of the Ventures and Emerging
Company Group of the law firm of Mintz, Levin, Cohen, Ferris, Glovsky, and
Popeo PC. Prior to joining Mintz Levin,
he was the President of the Dawntreader Group and a Managing Director of Dawntreader
Ventures, an early stage venture capital firm.
Mr. De Wolf is also an adjunct professor at the New York University
Law School, where he teaches venture capital law. From 1999 to 2003, Mr. De Wolf was
Director of Venture Capital Funds for SoundView Technology Group. Prior to
joining SoundView, Mr. De Wolf was Of Counsel with the law firm of Cahmy,
Karlinsky & Stein LLP (CKS) in New York City. Mr. De Wolf established the Corporate
and Securities Practice Group at CKS in 1994 and was the head of that firms
New Media and E-Law Group. Mr. De
Wolf has over 25 years of corporate transactional experience and has been an
advisor to many early and developmental stage companies. Mr. De Wolf is a
graduate of the University of Pennsylvania as well as the University of
Pennsylvania School of Law. Mr. De
Wolf currently serves as a director of various privately-held companies,
including, HNW, Inc., Tutor.com, and Visible World.
Frank W. Haydu III
, age 60, has served as a director of
iParty and Chairman of our Audit Committee since November 2003. Since November 2001, Mr. Haydu has
served as a Managing Director of Valuation Perspectives, Inc., a financial
services consulting practice and since August 2005, has served in a
consulting capacity at Source Precision Medicine, a life sciences medical
supplier. Until May 2001, Mr. Haydu served as the Chairman of Haydu &
Lind, LLC, a senior living development company. Mr. Haydu also serves as a
director of CombinatoRx, Inc., Moldflow Corporation and several private
companies. Mr. Haydu holds a Bachelor of Arts degree in economics from
Muhlenberg College.
Eric Schindler
, age 47, has served as a director of
iParty since 2003. Mr. Schindler serves as CEO of ESSA, a medical
aesthetics group in Argentina since 2007. Before 2007, Mr. Schindler headed the
investment banking division at Calyon Securities (USA) Inc., which was formerly
known as Crédit Lyonnais Securities (USA) Inc. Before joining Crédit Lyonnais
Securities in 1995, Mr. Schindler was employed by Crédit Lyonnais La
Défense in France, and was responsible for a team of senior bankers for the
banks global relationships with multinational corporations in the
infrastructure, engineering, telecommunications, transportation, auto parts,
and information systems sectors. Prior
to this position, from 1989 to 1992, Mr. Schindler was a Vice President
responsible for Latin American debt restructurings and debt/equity swaps. He also headed the investment banking
activities at Crédit Lyonnais Argentina from 1987 to 1989. Mr. Schindler is a former director of
Crédit Lyonnais Securities in New York and Crédit Lyonnais in Brazil. Mr. Schindler has a National Public
Accountant degree from Universidad Católica Argentina and a B.A. in two
languages with a specialization in Economic Sciences from Académie de Poitiers.
Joseph S. Vassalluzzo
, age 60,
has served as a director of iParty since 2004. From 2000 to 2005, Mr. Vassalluzzo
served as Vice Chairman of Staples, Inc., in which capacity he was
responsible for Staples store growth, both domestic and abroad, oversaw
Staples corporate environmental initiatives, and was responsible for its
merger and acquisition activities worldwide.
He first joined Staples, Inc. in 1989 as its Executive Vice
President, Growth & Support Services.
He was named Executive Vice President, Global Growth and Development of
Staples, Inc. in 1993, was promoted to President, Staples Realty &
Development in 1997, and was further promoted to Vice Chairman of Staples, Inc.
in 2000. Before joining Staples, Mr. Vassalluzzo
held executive positions at American Stores Co., Acme Supermarkets, Mobil Corp.
and Amerada Hess Corp. Mr. Vassalluzzo
currently serves as an independent director and non-executive Chairman of the
Board of Federal Realty Investment Trust, a publicly-held REIT, as an
independent director of Life Time Fitness, Inc., as an independent
director of Commerce Bancorp., Inc., and as a director of Zoots, Inc.,
a privately-held dry cleaning chain, and Olly Shoes, Inc., a privately
held childrens shoe chain. Mr. Vassalluzzo
holds a B.S. degree in Marketing from Pennsylvania State University and an
M.B.A. from Temple University.
Robert W. Jevon, Jr.
, age 55, has served as a director of
iParty since 2006 and previously served as a director of iParty from 2000 to
2001. Since 2000, Mr. Jevon has served as a Partner of Boston Millennia
Partners, LP, a venture capital firm, having first joined the firm in 1997 as a
Principal. Mr. Jevons primary
investment focus is business services, health care and life sciences. Mr. Jevon currently serves on the Board
of Directors of Athenix
16
Corp., MedAptus, Inc. and PHT Corporation. Prior
to his current position, Mr. Jevon was a Venture Affiliate of Boston
Capital Ventures from 1995 to 1996 and was a Principal of Watch Hill
Corporation from 1993 to 1995. From 1989
to 1992, he was the Controller of Bolt Beranek & Newmans
Communications Division. He is a
graduate of Haverford College and holds an M.B.A. from Amos Tuck School at
Dartmouth College.
Director Independence
Our Board of
Directors has determined that each of our director-nominees is an independent
director as defined under applicable rules of the SEC and American Stock
Exchange,
except for
(1) Mr. Perisano,
who serves as our Chief Executive Officer, and (2) Mr. Jevon, who is
an employee of Boston Millennia Partners, LP, which beneficially owns all of
the outstanding shares of our Series C Preferred Stock, which is entitled
to designate the Series C Director. As a result, the Board of Directors
has determined that a majority of the director-nominees are independent under
applicable rules of the SEC and American Stock Exchange.
Attendance at Annual Meeting and at Meetings of the Board and
Its Committees
Although we do not
have a policy on our directors attending our annual meeting, we normally expect
each of our directors to be present at the stockholders meeting. At last
years annual meeting, all of our directors attended the meeting, with the
exception of Ms. Vest, who was the Series D Director representative
at that time. Our Board held a total of five meetings during 2007.
Each director attended 75% or more of all board meetings and committee meetings
on which he served during 2007.
Board Committee Matters
Our Board of Directors met five (5) times during
2007. Our Board of Directors has three
principal committees: the Audit Committee, the Compensation Committee, and the
Nominating Committee. All of the members
of each of these committees are independent directors as defined under
applicable American Stock Exchange rules and rules of the SEC,
including, in the case of the Audit Committee, the additional independence
criteria for determining eligibility for director service on audit committees
under applicable American Stock Exchange and SEC rules.
In addition to the principal committees described
above, our Board of Directors also has a Real Estate Committee, consisting of Messrs. Perisano
and Vassalluzzo, which considers, from time to time, certain store location and
store lease issues in conjunction with our senior management.
Our Board of
Directors has adopted certain corporate governance guidelines which are
available on the Investor Relations page on our licensed website at
www.iparty.com.
The following
charts describe the function and number of times that each committee of the
Board of Directors met in 2007 and the membership of each committee:
Audit Committee 4 Meetings
Function
|
|
Members
|
·
|
Engage the independent registered public accounting
firm
|
|
Frank W. Haydu III
(Chairman)
|
·
|
Review
the annual and quarterly financial statements
|
|
Daniel I. De Wolf
|
·
|
Review
control procedures and accounting practices
|
|
Eric Schindler
|
·
|
Monitor
accounting and reporting practices
|
|
|
·
|
Review
compliance with the conflict-of-interest policy
|
|
|
·
|
Review
our capital structure
|
|
|
·
|
Exercise such other
functions as mandated by the Sarbanes-Oxley Act and other applicable laws and
regulations
|
|
|
We have a separately - designated standing audit
committee established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934. Each member of our Audit Committee is independent
as
17
defined under applicable rules of
the SEC and the American Stock Exchange.
Our Board of Directors has also determined that each of Messrs. Haydu,
De Wolf and Schindler is an audit committee financial expert as defined by
applicable regulations promulgated by the SEC pursuant to Section 407 of
the Sarbanes-Oxley Act.
The Audit Committee has adopted a charter which is
available on the Investor Relations page on our licensed website at
www.iparty.com. We have also adopted a whistleblower policy which is
available on the Investor Relations page on our licensed website at
www.iparty.com.
See the report of the
Audit Committee on page 19 below.
Compensation Committee 2 Meetings
Function
|
|
Members
|
·
Review and approve compensation and
benefit programs
|
|
Daniel I. De Wolf
(Chairman)
|
·
Determine compensation of senior
executives
|
|
Frank W. Haydu III
|
·
Make recommendations to the full Board
regarding director compensation
|
|
Eric Schindler
|
·
Administer stock option plans
|
|
|
The Compensation
Committee, currently composed of three non-employee directors who qualify as independent
under applicable SEC and American Stock Exchange rules, is responsible for
approving all matters concerning our total compensation practices and
philosophy, including the conducting of periodic reviews of those practices and
the philosophy that underlies them to ensure that they support the objectives
of iParty and the interests of its stockholders. In particular, the Compensation
Committee is responsible for the review and recommendation to the full Board of
Directors of the compensation of iPartys Chief Executive Officer, review and
approval of the compensation of our other executive officers pursuant to
employment agreements between iParty and such executive officers, and review
and approval of other employee benefit plans. The Committee is also
primarily responsible for assisting the full Board in administering and
interpreting our Amended and Restated 1998 Incentive and Non-Qualified Stock
Option Plan (our only stock option plan). The Committee also reviews and makes
recommendations to the full Board regarding compensation arrangements involving
iPartys directors.
The Compensation
Committee has sole authority to retain and/or terminate all external
consultants to the Compensation Committee and to commission surveys or analyses
that it determines necessary to fulfill its responsibilities. Additionally, the
Compensation Committee has sole authority to approve the fees of the external
consultants. The Compensation Committee
has adopted a charter which is available on the Investor Relations page on
our licensed website at www.iparty.com
.
Nominating Committee 1 Meeting
Function
|
|
Members
|
·
Review and recommend to the full Board
nominations for election to the Board of Directors
|
|
Eric Schindler
(Chairman)
|
|
|
Daniel I. De Wolf
|
|
|
Frank W. Haydu III
|
|
|
Joseph S. Vassalluzzo
|
The Nominating Committee has adopted a charter which
is available on the Investor Relations page on our licensed website at
www.iparty.com.
The Nominating Committee will consider candidates for
our Board that are recommended by our stockholders to the extent such
nominations are provided no later than the deadline for stockholder proposals
and in the manner for stockholder proposals outlined above on page 6. The Nominating Committee is committed to
evaluating nominees recommended by our stockholders no differently than other
nominees. The Nominating Committee
believes that all
18
nominees must possess, as a minimum qualification, the
personal integrity necessary to comply with all applicable legal and regulatory
duties imposed on directors of public companies, including without limitation,
the fiduciary duties of care and loyalty, and must possess sufficient business
and other relevant experience to be able to exercise business judgment in the
best interests of iParty and its stockholders.
Stockholder recommendations for director should
include: (i) the name and address of the stockholder recommending the
person to be nominated; (ii) a representation that the stockholder is a
holder of record of stock of iParty, including the number of shares held and
the period of holding; (iii) a description of all arrangements or
understandings between the stockholder and the recommended nominee; (iv) such
other information regarding the recommended nominee as would be required to be
included in a proxy statement filed pursuant to Regulation 14A promulgated
by the SEC pursuant to the Securities Exchange Act of 1934, as amended; and (v) the
consent of the recommended nominee to serve as a director of iParty, if so
elected.
It is expected that the Nominating Committee will have
direct input from the Chief Executive Officer on Director nominees. Input on
nominees will also be solicited from the other members of the Board. Management
and other external sources may also identify prospective Director nominees.
Report of the Audit Committee
The Audit Committee hereby states that it:
·
Has reviewed and discussed the audited financial statements as of and for the year ended December 29, 2007 with iPartys management;
·
Has discussed with iPartys independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees), as may be modified or supplemented;
·
Has received the written disclosures and the letter from the independent auditors required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), as may be modified or supplemented, and has discussed with the independent auditors the independent auditors independence; and
·
Based upon the above mentioned reviews and discussions, has recommended to the Board of Directors of iParty (and the Board of Directors approved) that the audited financial statements be included in iPartys Annual Report on Form 10-K for the fiscal year ended December 29, 2007 for filing with the Securities and Exchange Commission, which was filed with the SEC on March 13, 2008.
The Audit Committee is solely responsible for the selection, compensation and oversight of the work of the independent registered public accounting firm for the purpose of preparing and issuing an audit report.
Management has primary responsibility for iPartys financial statements and the overall reporting process, including iPartys system of internal controls.
The independent auditors audit the annual financial statements prepared by management, express an opinion as to whether those financial statements fairly present the financial position, results of operations and cash flows of iParty in conformity with generally accepted accounting principles and discuss with us any issues they believe should be raised with us.
The Audit Committee oversees the financial reporting process on behalf of the Board of Directors, reviews iPartys financial disclosures, and meets privately, outside the presence of management, with the independent auditors to discuss internal accounting control policies and procedures. These discussions address the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in iPartys financial statements. The Audit Committee reports on these meetings to the Board of Directors.
19
Pursuant to applicable
American Stock Exchange rules, the Audit Committee certifies that it has
adopted a formal written Audit Committee Charter and that the Audit Committee
has a policy in accordance with said rules of the American Stock Exchange
of reviewing and reassessing the adequacy of the Audit Committee Charter on an
annual basis.
During 2007, iParty paid
no fees to Ernst & Young LLP for consulting work outside the review
and audit of their financial statements and related tax research and compliance
tax return preparation.
Submitted
by:
Frank W. Haydu III,
Chairman
Daniel I. De Wolf
Eric Schindler
DIRECTOR
COMPENSATION
Section 3(b) of our Amended and Restated
1998 Incentive and Non-Qualified Stock Option Plan (the Stock Option Plan)
provides that each non-employee director shall be granted, on the effective
date of the commencement of his term as director, an option to purchase 25,000
shares of our common stock. It further
provides that each of our directors who is not an executive officer shall be
granted, on an annual basis on the last trading date in August of each
year, options to acquire 25,000 shares of common stock, at an exercise price
equal to the fair market value of the underlying common stock on the date of
grant.
Pursuant to Section 14(b) of
the Stock Option Plan, beginning in 2004, our Board of Directors has voted
that, in lieu of the stock option grants described in the preceding paragraph,
only independent directors shall be eligible to receive stock options by virtue
of their service as directors in amounts to be determined annually by the Board
of Directors. Accordingly, at a meeting
held on June 6, 2007 our Board of Directors (on recommendation of the
Compensation Committee) voted that each independent director (determined to be
each of Messrs. De Wolf, Haydu, Schindler and Vassalluzzo) would be
granted an option on June 6, 2007 exercisable for the purchase of 25,000
shares of our common stock and be paid a $25,000 cash payment in respect of his
service as a director and for serving on the committees of our Board of
Directors. The Board of Directors
approved the Compensation Committees recommendation that each such option
would vest quarterly over a one-year period and the $25,000 cash payment would
be paid quarterly over a one-year period.
As a result of these determinations, each of Messrs. De Wolf,
Haydu, Schindler, and Vassalluzzo was granted an option exercisable for 25,000
shares. Each of these stock option
grants was made pursuant to the Stock Option Plan, at an exercise price equal
to the market price of our common stock at the close of business on the grant
date.
At that same meeting held on June 6, 2007, the
Board of Directors also voted to accept the Compensation Committees
recommendation that Mr. Haydu be paid a $10,000 cash payment for serving
as Chairman of the Audit Committee. Mr. Haydu
recused himself from this vote. In addition, the Compensation Committee
recommended to the Board of Directors that it accept our managements proposal
to engage Mr. Vassalluzzo as a part-time consultant to our company for a
one-year period at an annual fee of $60,000.
The Board of Directors voted in favor of the Compensation Committees
recommendation and our managements proposal in this regard. Pursuant to this
arrangement, our Chairman and CEO, Mr. Perisano, consults with Mr. Vassalluzzo
with respect to various retail, operational, strategic, real estate and store
location issues, as may from time to time be necessary and appropriate. Such services on occasion require Mr. Vassalluzzos
presence at our corporate headquarters in Dedham, Massachusetts and/or current
or proposed store location sites, principally in New England and Florida.
20
At a meeting held on September 26, 2007, the
Board of Directors (on recommendation of the Compensation Committee) voted
that, effective October 1, 2007, the annual cash payments to be paid to
each independent director for serving on the committees of our Board of
Directors be increased to the following amounts, which are in addition to the
$25,000 cash payment described above for board service:
Director
|
|
Annual
Committee
Compensation
|
|
Frank W. Haydu III
|
|
$
|
20,000
|
|
|
|
|
|
Eric Schindler
|
|
$
|
10,000
|
|
|
|
|
|
Daniel I. De Wolf
|
|
$
|
10,000
|
|
|
|
|
|
Joseph S. Vassalluzzo
|
|
$
|
25,000
|
|
DIRECTOR COMPENSATION TABLE
The table below
summarizes the compensation that we paid our non-employee, independent
directors for the fiscal year ended December 29, 2007. Our one employee-director, our Chairman of
the Board and Chief Executive Officer, Mr. Perisano, earned no
compensation for his service as a director in 2007. Similarly, our other non-independent
director, Mr. Jevon, earned no compensation for his services as a director
in 2007.
Name
|
|
Fees
Earned
or Paid in
Cash
|
|
Stock
Awards
|
|
Option
Awards
|
|
Non-Equity
Incentive
Plan
Compensation
|
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
|
|
All Other
Compensation
|
|
Total
|
|
Daniel I. De Wolf
|
|
$
|
27,500
|
|
|
|
$
|
7,815
|
(1)
|
|
|
|
|
|
|
$
|
35,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank W. Haydu III
|
|
37,500
|
|
|
|
7,815
|
(1)
|
|
|
|
|
|
|
45,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric Schindler
|
|
27,500
|
|
|
|
7,815
|
(1)
|
|
|
|
|
|
|
35,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph S. Vassalluzzo
|
|
31,250
|
|
|
|
7,815
|
(1)
|
|
|
|
|
$
|
60,000
|
(2)
|
99,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Reflects the value of options granted, in
amounts equal to the expense recognized for financial reporting purposes in
accordance with Statement of Financial Accounting Standards No. 123(R),
Share Based Payment
. For a description of the assumptions
made in the valuation of these awards, see footnote 12 of iPartys financial
statements for the fiscal year ended December 29, 2007 contained in Item 8 of
the Annual Report on Form 10-K for the fiscal year ended December 29, 2007. There
can be no assurance that the options will ever be exercised (in which case no
value will be realized by the holder). Additionally, there can be no assurance
that the FAS 123R amounts shown in the table will ever be realized by the
holder.
(2)
Reflects payments for consulting services
rendered to us by Mr. Vassalluzzo pursuant to consulting agreements in
effect.
21
EXECUTIVE COMPENSATION
Executive
Officers
The following sets forth
our current executive officers, their ages, the positions and offices held by each
person, and the year each person first served as an executive officer of
iParty. The officers serve at the
discretion of the Board of Directors.
Mr. Perisanos
background is
summarized on page 15 and 16 above.
Dorice P. Dionne,
age 55, has been iPartys Senior Vice
President, Merchandising and Marketing since April 1999. She co-founded The Big Party Corporation with
her husband, Sal Perisano, in 1992 in Boston.
She served as chief merchant and creative director of The Big Party and
has been involved in the party retailing industry since 1985. She is a graduate of Boston College.
David E. Robertson,
age 58, has served as iPartys Chief
Financial Officer since April 2007.
From January 2005 until April 2007, Mr. Robertson was
employed as a private accounting consultant, primarily in the area of Sarbanes-Oxley compliance, for a variety of
public and private companies. From 1999 to 2005, Mr. Robertson
served as Vice President and Chief Financial Officer of Kitchen Etc. Inc., a
specialty (cooking and dining) retailer, headquartered in Exeter, New
Hampshire, which filed for Chapter 11 bankruptcy protection in 2004. From
1996 to 1999, he established and operated a professional services firm based in
Nashua, New Hampshire. From 1985 to 1996, he held a variety of positions
in the audit, accounting, and financial operations of Lechmere, Inc.
From 1980 to 1985, Mr. Robertson worked as an audit and accounting manager
at Zayre Corp. (now TJX Companies). From 1975 to 1979, he was employed in
the audit division of Ernst & Young. Mr. Robertson is a
Certified Public Accountant. He holds a bachelors degree from Harvard
College, and a masters degree from Northeastern University.
22
SUMMARY COMPENSATION TABLE
The
following table summarizes the aggregate cash compensation earned during 2006
and 2007 (see footnote below) by our Chief Executive Officer, Chief Financial
Officer and other executive officers that received compensation during 2006 and
2007 in excess of $100,000 in salary and bonus.
Currently, options have been granted to management as indicated below.
Name and Principal Position
|
|
Year
|
|
Salary
|
|
Bonus (1)
|
|
Option Awards (2)
|
|
All Other Compensation
|
|
Total
|
|
Sal V. Perisano,
Chief Executive Officer
|
|
2007
|
|
$
|
309,135
|
|
$
|
20,650
|
|
$
|
28,580
|
|
$
|
2,129
|
(3)
|
$
|
360,494
|
|
|
|
2006
|
|
$
|
296,875
|
|
$
|
29,687
|
|
|
|
|
|
$
|
326,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dorice P.
Dionne, Senior Vice President, Merchandising and Marketing
|
|
2007
|
|
$
|
185,481
|
|
$
|
12,390
|
|
$
|
11,432
|
|
$
|
1,983
|
(3)
|
$
|
211,286
|
|
|
|
2006
|
|
$
|
178,125
|
|
$
|
17,813
|
|
|
|
|
|
$
|
195,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David E.
Robertson, Chief Financial Officer (4)
|
|
2007
|
|
$
|
116,923
|
|
$
|
7,810
|
|
$
|
5,849
|
|
$
|
328
|
(3)
|
$
|
130,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick Farrell,
former President and Chief Financial Officer (5)
|
|
2007
|
|
$
|
196,518
|
|
$
|
5,507
|
|
$
|
14,569
|
|
$
|
4,526
|
(6)
|
$
|
221,120
|
|
|
|
2006
|
|
$
|
192,500
|
|
$
|
19,250
|
|
|
|
$
|
11,735
|
(7)
|
$
|
223,485
|
|
1.
These amounts reflect bonuses earned in
fiscal 2007 under the Companys Executive Incentive Compensation Plan.
2.
These amounts reflect the value of
options granted, in amounts equal to the expense recognized in fiscal 2007 for
financial reporting purposes in accordance with Statement of Financial
Accounting Standards No. 123(R),
Share Based Payment
.
For a description of the assumptions made in the valuation of these awards, see
footnote 12 of iPartys financial statements for the fiscal year ended December
29, 2007 contained in Item 8 of the Annual Report on Form 10-K for the fiscal
year ended December 29, 2007. There can be no assurance that the options will
ever be exercised (in which case no value will be realized by the holder).
Additionally, there can be no assurance that the FAS 123R amounts shown in the
table will ever be realized by the holder.
3.
These amounts are for additional term
life insurance.
4.
Mr. Robertson
joined iParty in April 2007.
5.
Mr. Farrell
separated from iParty effective November 15, 2007. See the discussion below on Mr. Farrell.
6.
This
amount includes $208 for automobile allowances, $2,333 for supplemental
retirement plan contributions, $1,597 for supplemental retirement plan tax
gross-up, and $388 for additional term life insurance.
7.
This
amount includes $5,408 for automobile allowances, $3,356 for supplemental
retirement plan contributions, $2,301 for supplemental retirement plan tax
gross-up, and $670 for additional term life insurance.
Individual Compensation of Executive Officers
Sal V.
Perisano (Chief Executive Officer).
At the beginning of fiscal 2006, we paid Mr. Perisano
at an annualized base salary rate of $287,500, which increased on March 31,
2006 to $300,000 pursuant to the terms of our then-current employment agreement
with Mr. Perisano, dated May 14, 2004. Under the terms of our new three-year
employment agreement with Mr. Perisano, dated March 22, 2007, we
increased Mr. Perisanos annualized base salary rate to $312,500 effective
April 1, 2007, and to $325,000 on April 1, 2008. The agreement
further provides that Mr. Perisanos annualized base salary will increase
to $337,500 for the period April 1, 2009 through March 31,
23
2010. The employment agreement provides that Mr. Perisano
is also eligible to participate in bonus plans as the Compensation Committee of
the Board may establish from time to time for our senior executive
officers. Under the terms of his
employment agreement, in the event of a termination not for cause (as defined
in the agreement), Mr. Perisano would be entitled to receive a severance
payment equal to 12 months salary at the base salary rate then in effect,
payable in 12 equal monthly installments, as well as the continuation of his
then current health, life and disability insurance benefits or, in the case of
health insurance benefits, payment by us of applicable COBRA payments, for a
period of 12 months. The agreement also provides that in the event of a
termination not for cause that occurs within 13 months of a change in control
(as defined in the agreement), Mr. Perisano would be entitled to receive a
severance payment equal to not less than 2.5 times and not more than 3.0 times
his annual salary rate then in effect, payable in a lump sum, as well as the
continuation of his then current health, life and disability insurance benefits
or, in the case of health insurance benefits, payment by us of applicable COBRA
payments, for a period of 12 months. The agreement also provides for certain
payments to Mr. Perisano in the event he terminates his employment with us
for good reason (as defined in the agreement) and contains certain
non-competition and non-solicitation provisions. Pursuant to our employment agreement with Mr. Perisano
dated March 22, 2007, our Board of Directors granted Mr. Perisano a
stock option on June 6, 2007 exercisable for 375,000 shares of our common
stock, at an exercise price per share equal to the closing price of the common
stock on that date.
Dorice
P. Dionne (Senior Vice President, Merchandising and Marketing).
At the beginning of fiscal 2006, we paid
Dorice Dionne at an annualized base salary rate of $172,500, which increased on
March 31, 2006 to $180,000 pursuant to the terms of our then-current
employment agreement with Ms. Dionne, dated May 14, 2004. On March 22, 2007, we entered a new
three-year employment agreement with Ms. Dionne pursuant to which Ms. Dionnes
annualized base salary rate was further increased to $187,500 on April 1,
2007, and to $195,000 on April 1, 2008. The agreement further provides
that Ms. Dionnes annualized base salary will increase to $202,500 for the
period April 1, 2009 through March 31, 2010. The employment agreement provides that Ms. Dionne
is also eligible to participate in bonus plans as the Compensation Committee of
the Board may establish from time to time for our senior executive
officers. Under the terms of her
employment agreement, in the event of a termination not for cause (as defined
in the agreement), Ms. Dionne would be entitled to receive a severance
payment equal to 12 months salary at the base salary rate then in effect,
payable in 12 equal monthly installments, as well as the continuation of her
then current health, life and disability insurance benefits or, in the case of
health insurance benefits, payment by us of applicable COBRA payments, for a
period of 12 months. The agreement also provides that in the event of a
termination not for cause that occurs within 13 months of a change in control
(as defined in the agreement), Ms. Dionne would be entitled to receive a
severance payment equal to eighteen (18) months of her base salary, payable in
a lump sum, as well as the continuation of her then current health, life and
disability insurance benefits or, in the case of health insurance benefits,
payment by us of applicable COBRA payments, for a period of 12 months. The
agreement also provides for certain payments to Ms. Dionne in the event
she terminates her employment with us for good reason (as defined in the
agreement) and contains certain non-competition and non-solicitation
provisions. Pursuant to our employment
agreement dated March 22, 2007, our Board of Directors granted Ms. Dionne
a stock option on June 6, 2007 exercisable for 150,000 shares of our
common stock, at an exercise price per share equal to the closing price of the
common stock on that date.
David
E. Robertson (Chief Financial Officer).
On March 22,
2007, we entered into a letter agreement with David E. Robertson, pursuant to
which Mr. Robertson commenced employment with us as our Chief Financial
Officer effective April 2, 2007.
Our letter agreement with Mr. Robertson provides that we shall pay
him an annualized salary of $160,000. Pursuant to the letter agreement,
our Board of Directors granted Mr. Robertson a stock option on June 6,
2007 exercisable for 125,000 shares of our common stock, at an exercise price
per share equal to the closing price of the common stock on that date. Our
letter agreement with Mr. Robertson also entitles him to participate in
iPartys Executive Incentive Compensation Plan and various additional employee
benefits, including health, dental and life insurance and participation in our
401(k) defined contribution retirement savings plan. Under the terms of
the letter agreement, in the event of termination not for cause, as defined in
the letter agreement, Mr. Robertson would be entitled to receive 6 months
of severance pay, payable in accordance with the normal payroll policies and
procedures of the Company, as well as the continuation of health, dental and
life insurance benefits on the Companys plans for a period of 6 months.
24
Patrick
Farrell (former President and Chief Financial Officer).
At the beginning of fiscal 2006, we paid Mr. Farrell at an
annualized base salary rate of $185,000, which increased on March 31, 2006
to $195,000 pursuant to the terms of our then-current employment agreement with
Mr. Farrell, dated May 14, 2004.
On January 8, 2007, we entered into a new employment agreement with
Mr. Farrell for a term beginning January 8, 2007, at an annualized
salary of $200,400 through November 15, 2007. Pursuant to the terms of our new agreement
with Mr. Farrell, he continued to be employed by us on a full-time basis
through May 15, 2007 and thereafter on a part-time basis through November 15,
2007. The agreement provided that his service to us after May 15,
2007 could be performed by telecommuting. The agreement with Mr. Farrell
reflected the fact that he had informed us that personal, family reasons would
require him to relocate from the Boston area to New York during 2007 and
reflected his desire to assist us in effecting a smooth transition with our new
Chief Financial Officer, David E. Robertson.
The employment agreement provided that Mr. Farrell remained
eligible to participate in bonus plans as the Compensation Committee of the
Board might establish from time to time for our senior executive officers. Under the terms of his employment agreement,
in the event of a termination not for cause (as defined in the agreement), Mr. Farrell
would have been entitled to receive the amount of salary he would have been
entitled to had he remained an iParty employee through November 15, 2007,
payable in accordance with our regular payroll practices, as well as the
continuation of his then current health, life and disability insurance benefits
or, in the case of health insurance benefits, payment by us of applicable COBRA
payments, for a similar period. At the time of the expiration of his employment
agreement, Mr. Farrell held vested options to purchase an aggregate of
970,087 shares of our common stock.
Under the terms of the option plan and agreements, these options would
have expired on February 15, 2008, three months from the termination of Mr. Farrells
employment on November 15, 2007.
However, the Board of Directors, at its regularly scheduled meeting on September 26,
2007, with the approval and upon the recommendation of the Compensation
Committee, voted to extend the expiration date of Mr. Farrells options
for an additional six months, to August 15, 2008.
Indemnification
of Directors and Executive Officers
Our certificate of incorporation, as amended, and by-laws
provide that iParty shall indemnify all of its directors and officers to the
fullest extent permitted by the Delaware General Corporation Law. Under our certificate of incorporation, as
amended, and
by-laws, any director or officer, who in his or her capacity as such is made or
threatened to be made, party to any suit or proceeding, will be
indemnified. A director or officer will
be indemnified if it is determined that the director or officer acted in good
faith and in a manner he or she reasonably believed to be in, or not opposed
to, iPartys best interests. Insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended, may be permitted to directors, officers and persons controlling iParty
pursuant to the foregoing provision, or otherwise, we have been advised that in
the opinion of the SEC such indemnification is against public policy and is,
therefore, unenforceable.
We maintain a directors and officers liability
insurance policy covering certain liabilities that may be incurred by directors
and officers in connection with the performance of their duties. We pay the entire premium for the liability
insurance. We have key-person life
insurance policies on the lives of each of Mr. Perisano and Ms. Dionne
in the amount of $2,000,000 each.
Related
Party Transactions
Under SEC rules, we are
required to disclose transactions in excess of $120,000 in which iParty was a
participant in which related persons had or will have a direct or indirect
material interest. Related persons include any of our directors, nominees for
director, or executive officers, and any immediate family members of such
persons and any person (including any group as such term is used in Section 13(d) of
the Exchange Act) who is known to iParty as a beneficial owner of more than 5%
of its voting common stock, and any immediate family member of a
significant shareholder. The term transaction is broadly defined under SEC rules to
include any financial transaction, arrangement or relationship, including any
indebtedness transaction or guarantee of indebtedness. Based on information
available to us and provided to us by our directors and executive officers, we
do not believe that there were any such transactions in effect since December 29,
2006, or any such transactions proposed to be entered into during fiscal year
2008 except as follows:
25
·
On September 15, 2006, we entered into a Securities Purchase
Agreement pursuant to which we raised $2.5 million through a combination of
subordinated debt and warrants issued on September 15, 2006 to Highbridge
International LLC (Highbridge), an institutional accredited investor. Under
the terms of the financing, we issued Highbridge a three-year subordinated note
(the Highbridge Note) that bears interest at an interest rate of prime plus
one percent. The note matures on September 15, 2009. Interest is
payable quarterly in arrears and the entire principal is due at the maturity
date. In addition, we issued Highbridge a warrant (the Highbridge Warrant)
exercisable for 2,083,334 shares of iParty common stock at an exercise price of
$0.475 per share, or 125% of the closing price of iPartys common stock on the
day immediately prior to the closing of the transaction. The agreements
entered into by iParty and Highbridge in connection with the financing provide
for certain restrictions and covenants consistent with Highbridges status as a
subordinated lender, and also grant Highbridge resale registration rights with
respect to the shares of common stock underlying the Highbridge Warrant. In connection with the foregoing financing,
we also amended our Rights Agreement dated as of November 9, 2001, as
amended September 15, 2006 (the
Rights
Agreement
) to clarify that issuance of the Highbridge Warrant does
not constitute a triggering event under our Rights Agreement.
·
On July 13, 2007, HMTF Holdings, the sole holder of the Companys Series D
Preferred Stock at that time, sold all of its shares of Series D Preferred
Stock, or 250,000 shares, to Robert H. Lessin Venture Capital LLC, an affiliate
of Robert H. Lessin, at a per share price of $8.00. The Companys Series D
Preferred Stock is entitled to vote alone for the election of a Series D
Director. As noted above, Mr. Lessin
has informed the Company that as the new beneficial holder of all of the
outstanding shares of Series D Preferred Stock he does not intend to
exercise his right to designate a new Series D Director at this time, but
will continue to avail himself from time to time of the Boards invitation to
participate in its meetings as a non-voting observer. Pursuant to the terms of
the Companys Rights Agreement, the Companys Board of Directors approved the
private sale transaction by and between Robert H. Lessin Venture Capital LLC
and HMTF Holdings involving all the outstanding shares of the Companys Series D
Preferred Stock so that neither Robert H. Lessin Venture Capital LLC nor Robert
H. Lessin would be, become, be deemed or considered to be, or be treated as an Acquiring
Person under the Rights Agreement in connection with such transaction.
26
Compensation Committee Interlocks and Insider
Participation
None of our executive officers serves as a member of
the compensation committee of any other company that has an executive officer
serving as a member of our Board of Directors. None of our executive officers
serves as a member of the board of directors of any other company that has an
executive officer serving as a member of our Boards Compensation
Committee. None of the Directors is a
director or executive officer of any other corporation that has a director or
executive officer who is also a director of the Company.
Outstanding
Equity Awards at end of Fiscal 2007
The following table sets forth information concerning
outstanding equity awards as of the end of fiscal 2007 on December 29,
2007:
Name
|
|
Number of
Securities
Underlying
Unexercised
Options Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
|
|
Option Exercise
Price
|
|
Option Expiration
Date
|
|
Sal V. Perisano
|
|
25,000
|
|
|
|
$
|
1.43
|
|
9/15/2008
|
|
|
|
25,000
|
|
|
|
$
|
1.81
|
|
9/15/2008
|
|
|
|
464,260
|
|
|
|
$
|
0.69
|
|
6/16/2010
|
|
|
|
1,478,772
|
|
|
|
$
|
0.25
|
|
3/9/2011
|
|
|
|
201,613
|
|
|
|
$
|
0.31
|
|
5/2/2012
|
|
|
|
460,000
|
|
|
|
$
|
0.95
|
|
3/31/2014
|
|
|
|
|
|
375,000
|
|
$
|
0.42
|
|
3/31/2016
|
|
|
|
|
|
|
|
|
|
|
|
Patrick Farrell
|
|
165,657
|
|
|
|
$
|
0.69
|
|
8/15/2008
|
|
|
|
574,430
|
|
|
|
$
|
0.25
|
|
8/15/2008
|
|
|
|
230,000
|
|
|
|
$
|
0.95
|
|
8/15/2008
|
|
|
|
|
|
|
|
|
|
|
|
Dorice P. Dionne
|
|
299,245
|
|
|
|
$
|
0.69
|
|
6/16/2010
|
|
|
|
913,400
|
|
|
|
$
|
0.25
|
|
3/9/2011
|
|
|
|
120,968
|
|
|
|
$
|
0.31
|
|
5/2/2012
|
|
|
|
230,000
|
|
|
|
$
|
0.95
|
|
3/31/2014
|
|
|
|
|
|
150,000
|
|
$
|
0.42
|
|
3/31/2016
|
|
|
|
|
|
|
|
|
|
|
|
David E. Robertson
|
|
|
|
125,000
|
|
$
|
0.42
|
|
6/6/2016
|
|
(1) Mr. Perisano and Ms.
Dionnes options vest in three equal installements on each of March 31, 2008, March
31, 2009 and March 31, 2010. Mr. Robertsons options vest 25% on the
aniversary of the grant date and then in equal monthly increments over the
subsequent three years, vesting in full on June 11, 2011.
27
Other Potential Post Employment
Payments
Upon the occurrence of certain triggering events, our
current employment agreements with each of Mr. Perisano and Ms. Dionne
and our letter agreement with Mr. Robertson require us to pay certain
amounts related to salary and insurance benefits to or on behalf of those
executive officers, as described below. The payments are subject to certain
non-competition, non-solicitation and confidentiality provisions. As required
under applicable SEC rules, the following table presents estimates of the
amounts that would have been payable under our new agreements upon the
occurrence of each such event as of the end of our last fiscal year ended December 29,
2007 (assuming each such agreement had been in effect on such date):
Name
|
|
Termination Without Cause
|
|
Change in Control (1)
|
|
Non-Renewal of Employment Contract
|
|
Disability
|
|
Sal V. Perisano
|
|
$
|
318,515
|
|
$
|
943,515
|
|
$
|
159,257
|
|
$
|
188,515
|
|
Dorice P. Dionne
|
|
$
|
193,276
|
|
$
|
287,026
|
|
$
|
96,638
|
|
$
|
40,388
|
|
David E. Robertson
|
|
$
|
85,666
|
|
|
|
|
|
|
|
(1)
In the event of a change of control, the
salary related amounts would be paid as a lump sum, and the insurance related
amounts in monthly installments. For all other triggering events, all amounts
would be paid in monthly or weekly installments.
Pension
Benefits
We did not have any plan that provides for payments or
other benefits at, following, or in connection with retirement with any of our
named executive officers during the fiscal year ended December 29, 2007.
Accordingly, we have omitted the table otherwise required to be included
detailing such compensation to our named executive officers during our most
recently completed fiscal year.
Nonqualified
Deferred Compensation
We did not give any nonqualified deferred compensation
to any of our named executive officers during the fiscal year ended December 29,
2007. Accordingly, we have omitted the table otherwise required to be included
detailing such compensation made for the last fiscal year to our named
executive officers.
INDEPENDENT REGISTERED ACCOUNTING FIRMS FEES AND SERVICES
The following table represents fees for professional
services rendered by E&Y for the audit of our annual financial statements
for fiscal 2006 and fiscal 2007 and fees billed for audit-related services, tax
services, and all other services by E&Y in fiscal 2006 and fiscal 2007.
|
|
Fiscal 2006
|
|
Fiscal 2007
|
|
Audit Fees
|
|
$
|
302,784
|
|
$
|
290,000
|
|
Audit Related Fees
|
|
|
|
|
|
Tax Fees
|
|
32,500
|
|
47,020
|
|
All Other Fees
|
|
|
|
|
|
Totals
|
|
$
|
335,284
|
|
$
|
337,020
|
|
28
Audit
Fees
These are fees related to
professional services rendered in connection with the audit of our annual
financial statements included in our Annual Report on Form 10-K for fiscal
2006 and fiscal 2007, the audit of managements assessment of our internal
control over financial reporting, the reviews of the financial statements
included in each of our Quarterly Reports on Form 10-Q, and accounting
consultations that relate to the audited financial statements and are necessary
to comply with generally accepted auditing standards. E&Y expresses its views concerning, but
does not audit, and is not required to audit, our internal control over
financial reporting.
Audit-Related
Fees
We did not pay E&Y
for any audit-related fees in fiscal 2006 or fiscal 2007. Audit-related fees would be fees for things
such as assurance and related services, such as audits of employee benefit
plans.
Tax
Fees
These are fees for
professional services related to tax return preparation services and tax
compliance services.
Audit
Committees Pre-approval Policy and Procedures
The Audit Committee of
our Board of Directors has adopted policies and procedures for the pre-approval
of audit and non-audit services for the purpose of maintaining the independence
of our independent auditors. We may not engage our independent auditors to
render any audit or non-audit service unless either the service is approved in
advance by the Audit Committee or the engagement to render the service is
entered into pursuant to the Audit Committees pre-approval policies and
procedures. The Audit Committee may pre-approve services that are expected to
be provided to iParty by the independent auditors during the following
12 months. At the time such pre-approval is granted, the Audit Committee
must (1) identify the particular pre-approved services in a sufficient
level of detail so that management will not be called upon to make judgment as
to whether a proposed service fits within the pre-approved services and (2) establish
a monetary limit with respect to each particular pre-approved service, which
limit may not be exceeded without obtaining further pre-approval under the
policy. At regularly scheduled meetings of the Audit Committee, management or
the independent auditors must report to the Audit Committee regarding each
service actually provided to iParty.
During fiscal 2007, no
services were provided to iParty by E&Y other than in accordance with the
pre-approval policies and procedures described above.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
No person who, during the fiscal year ended December 29,
2007, was a director, officer or beneficial owner of more than ten percent of
our common stock (which is the only class of our securities registered under Section 12
of the Exchange Act), failed to file on a timely basis, reports required by Section 16
of the Exchange Act during the most recent fiscal year except as follows: Mr. Lessin
filed a Form 4 late reporting the purchase of all of the Series D
Preferred Stock by Robert H. Lessin Venture Capital LLC, an affiliate of Robert
H. Lessin, from HMTF Holdings, who was the sole holder of the Companys Series D
Preferred Stock. The foregoing is based
solely upon our review of Forms 3 and 4 during the most recent fiscal year as
furnished to us under Rule 16a-3(d) under the Act, and Forms 5 and
amendments thereto furnished to us with respect to our most recent fiscal year.
OTHER MATTERS
The Board of Directors is
not aware of any other matters, which may come before the annual meeting. If any other matters should properly come
before the annual meeting, the persons named in the enclosed proxy will vote on
such matters as they may determine, in their discretion
29
CERTIFICATE
OF AMENDMENT
TO
THE
RESTATED
CERTIFICATE OF INCORPORATION
OF
iPARTY
CORP.
(Pursuant to Section 242 of the Delaware
Corporation Law)
Pursuant to
Section 242 of the General Corporation Law of the State of Delaware,
iParty Corp., a corporation organized and existing under the laws of the State
of Delaware (the
Corporation
),
does hereby certify as follows:
FIRST:
By unanimous written consent
of the Board of Directors dated April 14, 2008, resolutions were duly
adopted pursuant to Sections 141(f) and 242 of the General Corporation Law
of the State of Delaware setting forth proposed amendments to the Restated
Certificate of Incorporation of the Corporation and declaring said amendments
to be advisable. The resolutions setting
forth the proposed amendments are as follows:
|
|
RESOLVED
:
|
|
That Paragraph 4(c) of the Certificate of the
Designations, Powers, Preferences and Rights of the Series B Convertible
Preferred Stock of the Restated Certificate of Incorporation of the
Corporation is hereby amended and restated in its entirety to read:
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) For purposes of this Paragraph 4, a
merger or consolidation or a sale of all or substantially all of the assets
of the Corporation shall be considered a Liquidation except in the event that
in such a transaction, the holders of the Series B Preferred Stock
receive securities of the surviving corporation having substantially similar
rights as the Series B Preferred Stock. Notwithstanding Paragraph 7
hereof, such provision may be waived on behalf of all holders of the
Series B Preferred Stock by the affirmative written consent or vote of
the holders of at least a majority of the shares of Series B Preferred
Stock then outstanding.
|
|
|
|
|
|
|
|
|
|
|
RESOLVED
:
|
|
That Paragraph 7(c) of the Certificate of the
Designations, Powers, Preferences and Rights of the Series B Convertible
Preferred Stock of the Restated Certificate of Incorporation of the
Corporation is hereby amended and restated in its entirety to read:
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) So long as any shares of the
Series B Preferred Stock remain outstanding, the affirmative vote of the
holders of at least a majority of the Series B Preferred Stock then
outstanding, voting together as one class, either expressed in writing or at
a meeting called for that purpose, shall be necessary to repeal, amend or
otherwise change this Designation or the
|
|
A-1
Certificate of Incorporation of the Corporation, as amended, in a
manner which would alter or change the powers, preferences, rights, privileges,
restrictions and conditions of the Series B Preferred Stock so as to
adversely affect the Series B Preferred Stock. Notwithstanding any other provision of the
Designation or Certificate of Incorporation, any of the rights, powers,
preferences and other terms of the Series B Preferred Stock set forth therein
may be waived on behalf of all holders of Series B Preferred Stock by the
affirmative written consent or vote of the holders of at least a majority of
the shares of Series B Preferred Stock then outstanding.
SECOND
: That
the requisite stockholders of the Corporation duly approved said proposed
amendment at a meeting of the stockholders of the Corporation called and held
in accordance with Sections 222 and 242 of the General Corporation Law of the
State of Delaware.
THIRD:
That this Amendment was duly
adopted in accordance with the provisions of Section 242 of the General
Corporations Law of the State of Delaware.
[
Remainder of this page left blank intentionally
]
A-2
IN WITNESS WHEREOF
, this Certificate of Amendment has
been executed by a duly authorized officer of this corporation on this__ day of
June, 2008.
|
IPARTY
CORP.
|
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
A-3
iParty Corp.
THIS
PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF iPARTY CORP. FOR THE
ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 4, 2008
The undersigned, as a
holder of shares of common stock, par value $.001 per share, and/or shares of Series B
convertible preferred stock, par value $.001 per share, and/or shares of Series C
convertible preferred stock, par value $.001 per share, and/or shares of Series D
convertible preferred stock, par value $.001 per share, and/or shares of Series E
convertible preferred stock, par value $.001 per share, and/or shares of Series F
convertible preferred stock, par value $.001 per share (collectively, Shares),
of iParty Corp., a Delaware corporation (the Company), hereby appoints Mr. Sal
V. Perisano and Mr. David E. Robertson, and each of them individually, as
proxies for the undersigned, with full power of substitution in each of them,
to attend the Annual Meeting of Stockholders of the Company to be held at the
offices of Posternak Blankstein & Lund LLP located at Prudential
Tower, 800 Boylston St., 33rd Floor, Boston, MA 02199, on Wednesday, June 4,
2008 at 11:00 a.m., local time, and any adjournments or postponements
thereof (the Annual Meeting), to cast on behalf of the undersigned all votes
that the undersigned is entitled to cast at such meeting with respect to
Proposals 1, 2 and 3 set forth below and to vote and otherwise represent the
undersigned on any other matter that may properly come before the meeting or
any adjournment or postponement thereof in the discretion of the Proxy
holder. The undersigned hereby
acknowledges receipt of the accompanying Proxy Statement and revokes any proxy
heretofore given with respect to such meeting.
You may revoke
this proxy at any time before it has been exercised by filing a written
revocation with the Secretary of the Company at the address of the Company, by
filing a duly executed proxy bearing a later date or by appearing in person and
voting by ballot at the Annual Meeting.
The votes entitled to be cast by the undersigned
will be cast as instructed below. If
this Proxy is executed but no instruction is given, the votes entitled to be
cast by the undersigned will be cast for each of the nominees for director in
Proposal 1 and for Proposals 2 and 3 and in the discretion of the Proxy
holder on any other matter that may properly come before the meeting or any
adjournment or postponement thereof.
Please mark your choice like this:
ý
YOUR BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSALS 1, 2 and 3.
Proposal 1
-
¨
For
each of the following nominees for director: Sal V. Perisano, Daniel I. De
Wolf, Frank W. Haydu III, Eric Schindler, Joseph S. Vassalluzzo, and Robert W.
Jevon, Jr.* and as more fully described in the accompanying Proxy
Statement.
¨
Withhold
authority as to all listed nominees.
¨
For
all nominees
except
the following:
* To be elected only by a
vote of the holders of the Series C convertible preferred stock.
Proposal 2
-
Approval to amend the
Certificate of the Designations, Powers, Preferences and Rights of the Series B
convertible preferred stock to change the requisite number of shares or holders
to amend or waive certain provisions therein, as more fully described in the
accompanying Proxy Statement.
(check one box)
¨
For
¨
Against
¨
Abstain
Proposal 3
-
Ratification
of the selection of Ernst & Young LLP as the independent registered
public accounting firm for the fiscal year ending December 27, 2008, as
more fully described in the accompanying Proxy Statement.
(check one box)
¨
For
¨
Against
¨
Abstain
¨
CHECK HERE
ONLY IF YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON
Print and sign your name
below exactly as it appears on the records of iParty Corp. and date this
card. When signing as attorney,
executor, administrator, trustee, guardian or in another representative
capacity, please give full title, as such.
Joint owners should each sign. If
a corporation, please sign in full corporate name by president or authorized
officer. If a partnership, please sign
in partnership name by an authorized person.
|
Date:
,
2008
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Signature (title, if any)
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Signature, if held
jointly
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2
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