<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
CKS Group, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as specified in its charter)
- --------------------------------------------------------------------------------
(Name of person(s) filing proxy statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(7), 14a-16(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: N/A
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: N/A
(2) Form, Schedule or Registration Statement No.: N/A
(3) Filing Party: N/A
(4) Date Filed: N/A
<PAGE> 2
CKS GROUP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
April 23, 1997
TO THE STOCKHOLDERS OF CKS GROUP, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of CKS
Group, Inc., a Delaware corporation (the "Company"), will be held on Wednesday,
April 23, 1997 at 10:00 a.m., local time, at the Palo Alto Holiday Inn Hotel,
625 El Camino Real, Palo Alto, California (phone no. (415) 328-2800), for the
following purposes:
1. To elect one Class I director to serve for a two-year term and
until his successor is duly elected and qualified, and to elect two Class
II directors to serve for three-year terms and until their successors are
duly elected and qualified.
2. To ratify the appointment of KPMG Peat Marwick LLP as the
independent auditors of the Company for the fiscal year ending November 30,
1997; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on February 26, 1997
are entitled to notice of, and to vote at, the meeting and any adjournment
thereof.
All stockholders are cordially invited to attend the meeting in person.
HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO MARK,
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE
POSTAGE PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. You may revoke your proxy at
any time before it has been voted, and if you attend the meeting you may vote in
person even if you have previously return your proxy card. Your prompt
cooperation will be greatly appreciated.
Sincerely,
CARLTON H. BAAB
Executive Vice President,
Chief Financial Officer and Secretary
Cupertino, California
March 4, 1997
<PAGE> 3
CKS GROUP, INC.
10441 BANDLEY DRIVE
CUPERTINO, CALIFORNIA 95014
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of CKS Group, Inc., a Delaware
corporation (the "Company") for use at the Annual Meeting of Stockholders (the
"Annual Meeting") to be held on Wednesday, April 23, 1997 at 10:00 a.m. local
time, or at any adjournment thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting
will be held at the Palo Alto Holiday Inn Hotel, 625 El Camino Real, Palo Alto,
California (phone no. (415) 328-2800).
These proxy solicitation materials will be mailed on or about March 19,
1997 to all stockholders entitled to vote at the meeting.
RECORD DATE AND OUTSTANDING SHARES
Stockholders of record at the close of business on February 26, 1997 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting.
On January 31, 1997, 14,114,653 shares of the Company's Common Stock, $0.01
par value, were issued and outstanding. The only persons known by the Company to
be the beneficial owners of more than 5% of the Company's Common Stock as of the
Record Date were The Interpublic Group of Companies, Inc. ("IPG"), William T.
Cleary, Mark D. Kvamme, Thomas K. Suiter, Jennison Associates Capital Corp. and
Waddell & Reed, Inc. See "ELECTION OF DIRECTORS -- Security Ownership."
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the meeting and voting in person.
VOTING AND SOLICITATION
The cost of this solicitation will be borne by the Company. The Company
will reimburse brokerage firms and other persons representing beneficial owners
of shares for their expenses in forwarding solicitation material to such
beneficial owners in accordance with applicable regulations. Proxies may also be
solicited by certain of the Company's directors, officers and regular employees,
without additional compensation, personally or by telephone, electronic mail or
facsimile.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting
is a majority of the shares of Common Stock issued and outstanding on the Record
Date. Shares that are voted "FOR," "AGAINST" or "WITHHELD FROM" a matter are
treated as being present at the meeting for purposes of establishing a quorum
and are also treated as shares "represented and voting" at the Annual Meeting
(the "Votes Cast") with respect to such matter.
While there is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both the presence or absence of a
quorum for the transaction of business and the total number of Votes Cast with
respect to a particular matter. In the absence of controlling precedent to the
contrary, the Company intends to treat abstentions in this manner. However,
because directors are elected by a plurality vote, abstentions in the
<PAGE> 4
election of directors have no import once a quorum exists. In a 1988 Delaware
case, Berlin v. Emerald Partners, the Delaware Supreme Court held that, while
broker non-votes may be counted for purposes of determining the presence or
absence of a quorum for the transaction of business, broker non-votes should not
be counted for purposes of determining the number of Votes Cast with respect to
the particular proposal on which the broker has expressly not voted. Broker
non-votes with respect to proposals set forth in this Proxy Statement will
therefore not be considered "Votes Cast" and, accordingly, will not affect the
determination as to whether the requisite majority of Votes Cast has been
obtained with respect to a particular matter.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date, or by attending the meeting and voting in person. This Proxy Statement and
form of proxy will first be sent or given to stockholders on or about March 19,
1997, together with the Notice of Annual Meeting of Stockholders and the
Company's 1996 Annual Report to Stockholders.
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's next Annual Meeting of Stockholders must
be received by the Company no later than December 12, 1997 in order to be
considered for possible inclusion in the Company's proxy statement and form of
proxy relating to that meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
DIRECTORS AND NOMINEES FOR DIRECTOR
The Company's Board of Directors currently consists of six persons, divided
into three classes serving staggered terms of office. Currently there are two
directors in each of Class I, Class II and Class III. One Class I director and
two Class II directors are to be elected at the Annual Meeting. The Class I
director elected at the Annual Meeting will serve for a two-year term, or until
his successor has been duly elected and qualified, and the Class II directors
elected at the Annual Meeting will serve for three-year terms, or until their
successors have been duly elected and qualified.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the Company's nominees: Michael B. Slade as a Class I
director, and Alexandre Balkanski and Barry R. Linsky as Class II directors.
Alexandre Balkanski has been a member of the Company's Board of Directors
since March 1995. Dr. Balkanski is the President and CEO of C-Cube Microsystems,
Inc. ("C-Cube"), a publicly held company specializing in digital video
compression solutions, which he co-founded in July 1988. Dr. Balkanski was named
Senior Vice President of C-Cube in August 1989, served as its Vice President of
Worldwide Sales and Marketing from February 1994 to June 1995, and served as its
Executive Vice President and Chief Operating Officer from February 1994 to June
1995. Dr. Balkanski currently serves on the board of directors of both C-Cube
and Sierra Semiconductor Corporation. Dr. Balkanski holds graduate degrees from
Harvard University in Physics, Economics and Business, as well as a B.A. in
Physics from Harvard College.
Barry R. Linsky has been a member of the Company's Board of Directors since
January 1995. Mr. Linsky has served as Senior Vice President, Planning and
Business Development of The Interpublic Group of Companies, Inc. ("IPG") since
December 1990. Prior to joining IPG at the parent company level, Mr. Linsky was
Executive Vice President, Account Service, of Lowe & Partners (formerly The
Marschalk Company, a subsidiary of IPG), from 1980 until 1990. From 1972 to
1980, Mr. Linsky held various positions at The Marschalk Company, including
Senior Vice President and Director of the agency's New Products Group and
positions in account management. Previously, Mr. Linsky had worked in consumer
marketing for Lever Brothers Co., Bristol-Myers Company and Squibb Beech-Nut,
Inc. He holds a B.A. in Liberal Arts from Dartmouth College and an M.B.A. from
the Amos Tuck School of Business.
2
<PAGE> 5
Michael B. Slade has been a member of the Company's Board of Directors
since June 1996. Mr. Slade has served as President and Chief Executive Officer
of Starwave Corp., a developer of multimedia information services for the
Internet, since February 1993. Prior to joining Starwave, Mr. Slade was Vice
President of Special Projects at Asymetrix, a multimedia software developer,
from October 1992 to February 1993. From May 1991 to October 1992, Mr. Slade
served as Vice President of Marketing at NeXT Computer, Inc., a developer of
object-oriented software. Mr. Slade holds a B.A. in Economics from Colorado
College and an M.B.A. from Stanford University.
In the event that any nominee is unable or declines to serve as a director
at the time of the Annual Meeting, the proxy holders will vote the proxies in
their discretion for any nominee who is designated by the current Board of
Directors to fill the vacancy. It is not expected that any nominee will be
unable or will decline to serve as a director.
During fiscal 1996, the Board of Directors held seven meetings. The
standard committees of the Board of Directors include an Audit Committee and a
Compensation Committee. There is no nominating committee.
The Audit Committee held one meeting in fiscal 1996. The functions of the
Audit Committee include recommending appointment of the Company's independent
auditors to the Board of Directors and reviewing (i) the scope of the
independent auditors' annual audit and their compensation, (ii) the general
policies and procedures of the Company with respect to internal auditing,
accounting and financial controls and (iii) any change in accounting principles,
significant audit adjustments proposed by the auditors and any recommendations
that the auditors may have with respect to policies and procedures.
The Compensation Committee held two meetings in fiscal 1996. The
Compensation Committee monitors the nature and levels of compensation paid by
the Company to its executive personnel.
During fiscal 1996 (or such portion of fiscal 1996 during which a director
served as a member of the Board of Directors), no director attended fewer than
seventy-five percent (75%) of the aggregate of (i) the total number of meetings
of the Board of Directors held and (ii) the total number of meetings held by all
committees of the Board of Directors on which such director served.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE COMPANY'S
NOMINEES FOR DIRECTORS.
VOTE REQUIRED
The nominee for Class I director and the two nominees for Class II director
receiving the highest number of affirmative votes of the shares entitled to be
voted for them shall be elected as directors. Votes withheld from any nominee
are counted for purposes of determining the presence or absence of a quorum, but
have no other legal effect under Delaware law.
SECURITY OWNERSHIP
The following table sets forth the beneficial ownership of Common Stock of
the Company as of January 31, 1997, (i) each person known by the Company to
beneficially own more than 5% of the Company's Common Stock, (ii) each director,
(iii) the executive officers of the Company named in the Summary
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<PAGE> 6
Compensation Table below (the "Named Executive Officers"), and (iv) all
directors and executive officers as a group:
<TABLE>
<CAPTION>
SHARES OF CKS COMMON STOCK
BENEFICIALLY OWNED(1)
------------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OF TOTAL
- ------------------------------------------------------------------ ---------- ----------------
<S> <C> <C>
The Interpublic Group of Companies, Inc.(2)....................... 2,472,765 17.5%
1271 Avenue of the Americas
New York, NY 10020
Jennison Associates Capital Corp.(3).............................. 1,369,300 9.7%
466 Lexington Avenue
New York, NY 10017
Waddell & Reed, Inc.(4)........................................... 855,950 6.1%
6300 Lamar
Shawnee Mission, KS 66201
Mark D. Kvamme(5)................................................. 1,789,293 12.7%
10441 Bandley Drive
Cupertino, CA 95014
Thomas K. Suiter(6)............................................... 1,412,103 10.0%
10441 Bandley Drive
Cupertino, CA 95014
William T. Cleary................................................. 1,006,161 7.1%
10441 Bandley Drive
Cupertino, CA 95014
Carlton H. Baab(7)................................................ 67,395 *
Pierre R. Lamond(8)............................................... 285,728 *
Alexandre Balkanski(9)............................................ 9,582 2.0%
Barry R. Linsky(10)............................................... 3,750 *
Michael B. Slade.................................................. 1,000 *
All Executive Officers and Directors as a Group (8
persons)(7)(8)(9)(10)........................................... 3,571,444 25.3%
</TABLE>
- ---------------
* Less than 1%.
(1) Except pursuant to applicable community property laws or as indicated in
the footnotes to this table, to the Company's knowledge, each stockholder
identified in the table possesses sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by such
stockholder.
(2) Includes 259,470 shares held by each of Ammirati & Puris/Lintas, Inc.
("Ammirati") and Scali, McCabe, Sloves, Inc. ("Scali"). Ammirati and Scali
are wholly-owned subsidiaries of IPG. Also includes 2,500 shares held by
each of Mr. Barry R. Linsky, who is a director of the Company and an
officer of IPG, and Mr. Richard Villante, who is an officer of IPG. Also
includes options to purchase 1,250 shares exercisable within 60 days of the
Record Date held by Mr. Linsky.
(3) Based on information provided by Jennison Associates Capital Corp. All such
shares are beneficially owned by Prudential Insurance Company of America,
751 Broad Street, Newark, New Jersey 07102-3777.
(4) Based on information provided by Waddell & Reed, Inc.
(5) Includes 159,888 shares held by trusts for the benefit of Mr. Kvamme's
children.
(6) Includes 200,000 shares held by trusts for the benefit of Mr. Suiter's
children.
(7) Includes options to purchase 16,666 shares exercisable within 60 days of
the Record Date.
(8) Includes 275,478 shares held by the Pierre R. and Christine E. Lamond Trust
dated 11/22/85. Includes options to purchase 1,250 shares exercisable
within 60 days of the Record Date. Also includes 9,000 shares held by David
Lamond, Pierre R. Lamond's son, as to which Pierre R. Lamond disclaims
beneficial ownership.
(9) Consists of options to purchase 9,582 shares exercisable within 60 days of
the Record Date.
4
<PAGE> 7
(10) Does not include 2,466,515 shares held by IPG and its subsidiaries, of
which Mr. Linsky is Senior Vice President, Planning and Business
Development. Includes options to purchase 1,250 shares exercisable within
60 days of the Record Date.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities ("10% Stockholders") to
file reports of ownership on Form 3 and changes in ownership on Form 4 or 5 with
the Securities and Exchange Commission (the "SEC") and the National Association
of Securities Dealers. Such officers, directors and 10% Stockholders are also
required by SEC rules to furnish the Company with copies of Section 16(a) forms
that they file.
Based solely on its review of the copies of such forms received by it, the
Company believes that, during the fiscal year ended November 30, 1996, all
Section 16(a) filing requirements applicable to its officers, directors and 10%
Stockholders were satisfied.
DIRECTORS' COMPENSATION; DIRECTORS' OPTION PLAN
Directors who are not employees of the Company receive compensation for
their services as directors at a rate of $1,000 per year and $2,500 per Board
meeting attended. Nonemployee directors also are eligible to participate in the
1995 Directors' Option Plan (the "Directors' Option Plan").
The Directors' Option Plan was adopted by the Board of Directors in October
1995. A total of 100,000 shares of Common Stock has been reserved for issuance
under the Directors' Option Plan. The Directors' Option Plan provides for the
grant of nonstatutory stock options to nonemployee directors of the Company. The
Directors' Option Plan is designed to work automatically, without
administration; however, to the extent administration is necessary, it will be
provided by the Board of Directors.
The Directors' Option Plan provides that each nonemployee director shall be
granted an option to purchase 20,000 shares of Common Stock (the "First Option")
on the date upon which the optionee first becomes a director of the Company.
Thereafter, each nonemployee director will be granted an option to purchase
5,000 shares of Common Stock (a "Subsequent Option") each year following
announcement of the Company's operating results for the previous fiscal year.
The Directors' Option Plan sets neither a maximum nor a minimum number of
shares subject to options that may be granted to any one nonemployee director,
but does stipulate the number of shares that may be included in any grant and
the method of making a grant. No option granted under the Directors' Option Plan
is transferable by the optionee other than by will or the laws of descent and
distribution, and each option is exercisable, during the lifetime of the
optionee, only by such optionee. The Directors' Option Plan provides that each
Option shall become exercisable as to 25% of the shares subject to such Option
on the anniversary of the date of grant of such Option. Each Option will become
exercisable in full on the fourth anniversary of its date of grant. The exercise
price of all Options granted under the Directors' Option Plan will be equal to
the fair market value of a share of the Company's Common Stock on the date of
grant of the Option. Options granted under the Directors' Option Plan have a
term of 10 years.
In the event of a merger of the Company with or into another corporation or
a sale of substantially all of the company's assets, each option would be
assumed or an equivalent option substituted by the successor corporation. The
Directors' Option Plan will terminate in October 2005. The board of Directors
may amend or terminate the Directors' Option Plan, provided, however, that no
such action may adversely affect any outstanding option and provided further
that the provisions affecting the grant and terms of options may not be amended
more than once during any six-month period. As of the date of this Prospectus,
no options have been granted under the Directors' Option Plan. Executive
officers of the Company are not eligible to participate in the Directors' Option
Plan.
5
<PAGE> 8
In January 1996, directors Pierre R. Lamond, Alexandre Balkanski and Barry
R. Linsky each received a Subsequent Option to purchase 5,000 shares of Common
Stock. Upon joining the Board in June 1996, Michael B. Slade received a First
Option to purchase 20,000 shares of Common Stock.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid by the Company for services rendered during the fiscal year 1996 by the
Chief Executive Officer of the Company and each of the three additional
executive officers of the Company whose total compensation in fiscal 1996
equaled or exceeded $100,000 ("Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION
- ------------------------------------------- ----- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Mark D. Kvamme............................. 1996 $ 187,917 $ 159,922 $3,344(1) $ --
Chief Executive Officer 1995 165,000 116,370 3,236(1) 1,268(2)
1994 161,188 60,750 430(1) 3,382(2)
Carlton H. Baab............................ 1996 173,751 121,607 3,614(1) 2,665(2)
Executive Vice President, 1995 137,600 75,774 7,464(1) 2,665(2)
Chief Financial Officer and Secretary 1994 66,857 7,500 143(1) 1,333(2)
Thomas K. Suiter........................... 1996 183,334 143,983 2,668(1) 107,000(3)
President, CKS Partners 1995 165,000 74,517 2,668(1) --
1994 164,104 60,750 896(1) --
William T. Cleary.......................... 1996 177,916 58,979 3,216(1) --
Former Chief Marketing Officer 1995 165,000 54,390 3,216(1) 1,777(2)
1994 161,554 60,750 1,316(1) 2,030(2)
</TABLE>
- ---------------
(1) Consisted of automobile allowance and life insurance premiums paid by the
Company.
(2) Consisted of forgiveness of interest due on loans payable to the Company.
(3) Consisted of a gift of an original artwork from the Company.
OPTION GRANTS IN FISCAL 1996
The following table sets forth information as to the option granted to
Carlton H. Baab in the fiscal year ended November 30, 1996. No other options
were granted in fiscal 1996 to any Named Executive Officer.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES % OF TOTAL ANNUAL RATES
UNDERLYING OPTIONS EXERCISE OF STOCK APPRECIATION
OPTIONS GRANTED TO PRICE PER FOR OPTION TERM(5)
GRANTED EMPLOYEES IN SHARE EXPIRATION ----------------------
NAME (#)(1) FISCAL YEAR(2) ($)(3) DATE(4) 5% 10%
- ----------------------- ---------- --------------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Carlton H. Baab........ 40,000 4.3% $20.00 05/08/2006 $503,116 $1,274,994
</TABLE>
- ---------------
(1) This option to purchase shares of Common Stock was granted under the 1995
Stock Plan and provides for vesting as to 25% of the underlying Common Stock
one year after the date of grant, then ratably over 36 months thereafter.
(2) Options to purchase an aggregate of 934,700 shares of Common Stock of the
Company were granted to employees during the fiscal year ended November 30,
1996.
(3) Options were granted at an exercise price equal to 100% of the fair market
value of the Company's Common Stock on the date of grant, as determined by
the closing price of the Common Stock on the Nasdaq National Market on the
date of grant. The original exercise price of the option was $32.00. The
option was repriced in November, 1996.
(4) Options may terminate before their expiration dates if the optionee's status
as an employee or consultant is terminated, upon the optionee's death or
upon an acquisition of the Company.
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<PAGE> 9
(5) This column shows the hypothetical gains or option spreads for the option
granted based on assumed annual compound stock appreciation rats of 5% and
10% over the full ten-year term of the option. The assumed rates of
appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent the company's estimate or projection of
future Common Stock prices.
AGGREGATE STOCK OPTION EXERCISES IN FISCAL 1996 AND FISCAL YEAR-END VALUES
The following table sets forth, information concerning the value of options
held at November 30, 1996 for Carlton H. Baab, the only Named Executive Officer
holding options to purchase shares of the Company's capital stock.
AGGREGATE OPTION EXERCISE IN FISCAL 1996 AND FISCAL 1996
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
NOVEMBER 30, 1996 NOVEMBER 30, 1996(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
Carlton H. Baab......................... 15,000 65,000 $296,250 $523,750
</TABLE>
- ---------------
(1) Calculated by determining the difference between the closing price of the
Company's Common Stock on the Nasdaq National Market on November 29, 1996
($20.75) and the weighted-average exercise price of the options.
The following table summarizes information regarding the only stock option
granted to an executive officer of the Company that has been repriced during the
past ten fiscal years:
<TABLE>
<CAPTION>
NUMBER OF MARKET
SECURITIES PRICE OF EXERCISE LENGTH OF
UNDERLYING STOCK AT PRICE AT ORIGINAL OPTION
OPTIONS TIME OF TIME OF NEW TERM REMAINING
REPRICING REPRICED REPRICING REPRICING EXERCISE AT DATE OF
NAME DATE (#) ($) ($) PRICE($) REPRICING
- ----------------------- ---------- ------------ ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
11/18/96 40,000 $20.00 $32.00 $20.00 9 yrs., 172
Carlton H. Baab........ days
Executive Vice
President, Chief
Financial Officer
and Secretary
</TABLE>
BENEFIT PLANS
1995 Stock Plan
The 1995 Stock Plan of the Company (the "Stock Plan") provides for the
grant of stock options and stock purchase rights to employees, officers and
consultants of the Company and its subsidiaries. Under the Stock Plan, the
Company may grant options that are intended to qualify as incentive stock
options within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), options not intended to qualify as incentive stock
options and rights to purchase restricted stock. Incentive stock options granted
under the Stock Plan must be granted by September 2005. As of January 31, 1997,
options to purchase 1,195,700 shares of Common Stock were outstanding under to
the Stock Plan and options to purchase 1,404,300 shares of Common Stock were
available for future grant under the Stock Plan. The Stock Plan was approved by
the Board of Directors in October 1995 and approved by the stockholders of
Company in November 1995. An amendment to the Stock Plan increasing the number
of shares of Common Stock available for issuance thereunder by 1,600,000 shares
was approved by the Board of Directors in October 1996 and by the Company's
stockholders in December 1996.
The Stock Plan is administered by the Board of Directors or a committee
thereof. Subject to the provisions of the Stock Plan, the Board of Directors or
a committee thereof has the authority to select the persons to whom awards are
granted and determine the terms of each award, including (i) the number of
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<PAGE> 10
shares of Common Stock covered by the award, (ii) when the award becomes
exercisable, (iii) the exercise price of the award and (iv) the duration of the
option (which may not exceed ten years). Generally options vest over four years
and must be exercised within 10 years. All options are nontransferable other
than by will or the laws of descent and distribution.
The Stock Plan provides that, in the event of a merger of the Company with
or into another corporation, the sale of more than fifty persons (50%) of the
Company's voting stock, a sale of substantially all of the Company's assets or a
liquidation or dissolution of the Company ("Transfer of Control"), the acquiring
or successor corporation may assume or substitute substantially equivalent
awards for the awards outstanding. To the extent awards are not assumed or
substituted for, they will vest in full prior to the Transfer of Control. To the
extent options are not assumed, substituted for or exercised prior to the
Transfer of Control, they will terminate.
1995 Employee Stock Purchase Plan
The Company's 1995 Employee Stock Purchase Plan (the "Purchase Plan")
provides for the purchase by eligible employees of shares of the Company's
Common Stock. The Purchase Plan was adopted by the Board of Directors in October
1995 and approved by the stockholders in November 1995. A total of 300,000
shares of Common Stock have been reserved for issuance under the Purchase Plan.
The Purchase Plan, which is intended to qualify under Section 423 of the Code,
is administered by the Board of Directors or by a committee appointed by the
Board. Employees (including officers and employee directors) of the Company or
any subsidiary of the Company designated by the Board for participation in the
Purchase Plan are eligible to participate in the Purchase Plan if they are
customarily employed for more than 20 hours per week and more than five months
per year. The Purchase Plan is implemented during concurrent 24-month offering
periods, each of which is divided into four consecutive six month purchase
periods, subject to change by the Board of Directors. Offering periods generally
begin on January 1 and July 1 of each year. The initial offering period
commenced at the time of the Company's initial public offering and will end on
November 30, 1997. The Purchase Plan permits eligible employees to purchase
Common Stock through payroll deductions, which may not exceed 15% of an
employee's compensation. Shares are purchased on the last day of each purchase
period. The price at which stock may be purchased under the Purchase Plan is
equal to 85% of the lower of the fair market value of the Company's Common Stock
on the first day of the offering period or the last day of the purchase period.
Employees may end their participation in the offering at any time during the
offering period, and participation ends automatically on termination of
employment with the Company. In addition, participants generally may not
purchase stock having a value (measured at the beginning of the offering period)
greater than $12,500 in any purchase period, except the first offering period,
during which an employee may purchase stock having a value of up to $25,000.
Executive Bonus Program
Certain officers and employees of the Company are eligible to receive
quarterly bonus compensation under an Executive Bonus Program maintained by the
Company. Bonus compensation payments under the Executive Bonus Program are based
on attainment of sales revenue and profitability targets during the fiscal year
to date, and are keyed to each eligible employee's base salary. Bonuses paid
under the Executive Bonus Program totaled approximately $808,654 in fiscal 1996.
The financial performance targets on which bonus payments are based are set on
an annual basis by the Company's Chief Executive Officer and approved by the
Compensation Committee of the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors of CKS consists of
Messrs. Lamond and Linsky. Mr. Lamond is the father-in-law of Mark D. Kvamme,
the Company's Chairman, President and Chief Executive Officer. Mr. Linsky is a
Senior Vice President of IPG.
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<PAGE> 11
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted by the Delaware General Corporation Law, the Company has
included in its Certificate of Incorporation a provision to eliminate the
personal liability of its directors for monetary damages for breach or alleged
breach of their fiduciary duties as directors, subject to certain exceptions. In
addition, the Bylaws of the Company provide that the Company is required to
indemnify its officers and directors under certain circumstances, including
those circumstances in which indemnification would otherwise be discretionary,
and the Company is required to advance expenses to its officers and directors as
incurred in connection with proceedings against them for which they may be
indemnified. The Company has entered into indemnification agreements with its
officers and directors containing provisions that are in some respects broader
than the specific indemnification provisions contained in the Delaware General
Corporation Law. The indemnification agreements require the Company, among other
things, to indemnify such officers and directors against certain liabilities
that may arise by reason of their status or service as directors or officers
(other than liabilities arising from willful misconduct of a culpable nature),
to advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified, and to obtain directors' and officers'
insurance if available on reasonable terms. At present, the Company is not aware
of any pending or threatened litigation or proceeding involving a director,
officer, employee or agent of the Company in which indemnification would be
required or permitted. The Company believes that its charter provisions and
indemnification agreements are necessary to attract and retain qualified persons
as directors and officers.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected KPMG Peat Marwick LLP, independent
auditors, to audit the financial statements of the Company for the fiscal year
ending November 30, 1997. If the stockholders do not ratify the appointment of
KPMG Peat Marwick LLP, the selection of independent auditors will be
reconsidered by the Board of Directors. Representatives of KPMG Peat Marwick LLP
are expected to be present at the meeting, will have the opportunity to make a
statement if they desire to do so, and are expected to be available to respond
to appropriate questions.
RECOMMENDATION
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE APPOINTMENT OF KPMG
PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR FISCAL 1997 AND
RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THIS PROPOSAL.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Act of 1934, as amended, that might incorporate future filings, including this
Proxy Statement, in whole or in part, the following report shall not be
incorporated by reference into any such filings.
INTRODUCTION
The Compensation Committee of the Board of Directors establishes the
general compensation policies of the Company, and establishes the compensation
plans and specific compensation levels for executive officers. The Committee
strives to ensure that the Company's executive compensation programs will enable
the Company to attract and retain key people and motivate them to achieve or
exceed certain key objectives of the Company by making individual compensation
directly dependent on the Company's achievement of certain financial goals, such
as profitability and asset management and by providing rewards for exceeding
those goals.
9
<PAGE> 12
COMPENSATION PROGRAMS
Base Salary. The Committee establishes base salaries for executive
officers, normally within ten percent of the average paid for comparable
positions at other similarly sized companies as set forth in national and local
compensation surveys. Base pay increases vary according to individual
contributions to the Company's success and comparisons to similar positions
within the Company and at other comparable companies.
Bonus Plans. Each executive officer is eligible to participate in the
Company's Executive Bonus Program which provides for the payment of a quarterly
bonus determined by a formula based on improvements of sales revenue and
profitability over preset threshold levels for the executive officer's operating
group or business unit, and for the Company as a whole. (See "Executive
Compensation -- Benefit Plans.")
Stock Options. The Committee believes that stock options provide
additional incentive to officers to work towards maximizing stockholder value.
The Committee views stock options as one of the more important components of the
Company's long-term, performance-based compensation philosophy. These options
are provided through initial grants at or near the date of hire and through
subsequent periodic grants. Options granted by the Company to its executive
officers and other employees have exercise prices equal to the fair market value
at the time of grant. Stock options generally vest over a four year period. The
initial option grant is designed to be competitive with those of comparable
companies for the level of the job that the executive holds and is designed to
motivate the officer to make the kind of decisions and implement strategies and
programs that will contribute to an increase in the Company's stock price over
time. Periodic additional stock options within the comparable range for the job
are granted to reflect the executives ongoing contributions to the Company, to
create an incentive to remain at the Company and to provide a long-term
incentive to achieve or exceed the Company's financial goals.
Option Repricing. In November 1996, the Compensation Committee authorized
the reduction of the exercise price under options granted to employees,
including executives, which had an exercise price higher than the current market
price of the Company's Common Stock at the time of the repricing ($20.00). The
options granted to employees were designed to provide incentive to the employees
to work to achieve long term success for the Company. The decline in the market
price of the Company's Common Stock since the date the options were granted
frustrated the purpose of the options and the Committee deemed it to be in the
best interests of the Company to allow the amendment of the options to reduce
the exercise price to the market price at the time of the reissue. All repriced
options are subject to a six-month prohibition on exercise beginning on the date
of the repricing. The other terms of such options remained unchanged.
Other. In addition to the foregoing, officers participate in compensation
plans available to all employees, such as a quarterly profit sharing plan and
participation in both the Company's 401(k) retirement plan and employee stock
purchase plan. See "Executive Compensation -- Benefit Plans."
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The factors considered by the Compensation Committee in determining the
compensation of the Chief Executive Officer, in addition to survey data, include
the Company's operating and financial performance, as well as his leadership and
establishment and implementation of strategic direction for the Company.
THE COMPENSATION COMMITTEE
Pierre R. Lamond
Barry R. Linsky
Dated: March 4, 1997
10
<PAGE> 13
COMPARISON OF TOTAL CUMULATIVE STOCKHOLDER RETURN
The following graph sets forth the Company's total cumulative stockholder
return as compared to the S&P 500 Index and the Dow Jones Technology Index since
inception of trading of the Company's Common Stock on the Nasdaq National Market
on December 14, 1995 through January 31, 1997. The total stockholder return
assumes $100 invested at the beginning of the period in Common Stock of the
Company, the S&P 500 Index, and the Dow Jones Technology Index. Total return
assumes reinvestment of dividends. Historical stock price performance is not
necessarily indicative of future stock price performance.
<TABLE>
<CAPTION>
CKS GROUP, INC. S&P 500 INDEX DOW JONES TECHNOLOGY INDEX
<S> <C> <C> <C>
12/14/95 100.00 100.00 100.00
Dec-95 229.41 99.84 99.98
Jan-96 211.76 103.10 102.63
Feb-96 195.59 103.81 106.79
Mar-96 150.00 104.63 103.41
Apr-96 183.82 106.04 109.77
May-96 227.21 108.46 112.76
Jun-96 189.71 108.99 109.55
Jul-96 157.35 103.73 103.18
Aug-96 158.82 105.68 106.90
Sep-96 138.97 111.41 116.48
Oct-96 113.97 114.32 116.30
Nov-96 122.06 122.71 130.23
Dec-96 163.97 120.07 143.65
Jan-97 182.35 127.43 157.33
</TABLE>
OTHER INFORMATION
CERTAIN TRANSACTIONS
Relationship with The Interpublic Group of Companies, Inc.
On January 13, 1995, CKS, certain stockholders of CKS (the "Participating
Stockholders") and IPG entered into a Purchase Agreement (the "Purchase
Agreement"), pursuant to which IPG purchased 739,437 shares of CKS Series A
Common Stock from the Company and 2,375,000 shares of CKS Common Stock from the
Participating Stockholders. Barry R. Linsky, a Senior Vice President of IPG,
serves on the Board of Directors of the Company. The Participating Stockholders
included Mark D. Kvamme, Chairman and Chief Executive Officer of the Company,
Thomas K. Suiter, President, CKS Partners and a director of the Company, and
William T. Cleary, who was then an executive officer and a director of the
Company.
Pursuant to the Purchase Agreement, IPG further agreed to pay the
Participating Stockholders an aggregate of up to $1.5 million at the end of each
of the 1995 and 1996 fiscal years, conditioned upon the attainment of certain
financial performance benchmarks. In accordance with this provision, IPG in
February 1996 made a payment of $1,500,000 to the Participating Stockholders. In
February 1996, IPG also made an additional payment of $1,500,000 to the
Participating Stockholders, in full satisfaction of its remaining obligations
under the Purchase Agreement.
Pursuant to the Purchase Agreement, IPG received a right to purchase,
immediately prior to the Company's initial public offering, such amount of
additional shares of CKS Series A Common Stock as would bring its total
percentage ownership of CKS to 37%, at a purchase price per share equal to 66.7%
of the
11
<PAGE> 14
estimated offering price to the public, as measured by the midpoint price of a
valuation range supplied by the managing underwriter of the Company's initial
public offering. CKS further agreed, for so long as IPG's ownership in the
Company remained at 20% or higher, not to accept any new broadcast, print or
interactive media advertising business that is competitive with the core
businesses of certain major clients of IPG. This restriction terminated in June
1996. IPG was also granted certain other protective rights, all of which
terminated upon consummation of the Company's initial public offering ("IPO").
On January 27, 1995, CKS, IPG and the Participating Stockholders entered
into several additional agreements in connection with the Purchase Agreement,
including a Shareholder Rights Agreement pursuant to which CKS agreed to grant
IPG and all other CKS stockholders certain registration rights with respect to
the CKS stock held by them, and to grant IPG a right of first refusal to
purchase a pro rata portion of certain new issuances of stock by the Company
(which terminated upon the IPO), and IPG agreed to limit its ownership of CKS
capital stock to no more than 37% of all outstanding voting shares of CKS, and
to vote its shares for election of the slate of nominees for the Board of
Directors of the Company selected by the Company, provided that such slate
includes a nominee selected by IPG.
On January 27, 1995, the Company and IPG also entered into a Management
Service Agreement, pursuant which IPG agreed to provide the Company with certain
management and consulting services. In consideration for the services to be
provided by IPG under the Management Service Agreement, the Company agreed to
pay IPG a fee equal to 1% of the Company's annual gross margin, up to a maximum
of $500,000 per year, payable on a quarterly basis. In addition, the Company
agreed to reimburse IPG for all out-of-pocket expenses incurred by IPG in
connection with services performed under the Management Service Agreement. The
Company's obligation to pay IPG a fee pursuant to the Management Services
Agreement terminated upon the closing of the IPO in December 1995.
Certain Professional Services Accounts
Since January 1995, the Company has provided certain creative design and
production services to the McCann-Erickson Worldwide advertising agency
("McCann"). For the fiscal year ended November 30, 1996, the Company invoiced
McCann a total of $97,865 for such services. McCann is a subsidiary of IPG.
The Company has performed certain advertising and marketing services on
behalf of C-Cube Microsystems. The Company billed C-Cube a total of $90,553
during the 1996 fiscal year. Alexandre Balkanski is a member of the Company's
Board of Directors and President, Chief Executive Officer and a member of the
Board of Directors of C-Cube.
The Company has performed certain advertising and marketing services on
behalf of Starwave Corporation. The Company billed Starwave a total of $298,765
during the 1996 fiscal year. Michael B. Slade is a member of the Company's Board
of Directors and President, Chief Executive Officer and a member of the Board of
Directors of Starwave.
The Company has performed certain advertising and marketing services on
behalf of Prudential Insurance Company of America. The Company billed Prudential
a total of $1,146,482 during the 1996 fiscal year. Prudential is a stockholder
of the Company.
The Company believes that the compensation received for services performed
on behalf of McCann, C-Cube, Starwave and Prudential was no less favorable than
would be obtained for similar services provided to unrelated third parties. Any
future transactions between the Company and its executive officers, directors
and affiliates will be on terms no less favorable to the Company than can be
obtained from unaffiliated third parties, and any material transactions with
such persons will be approved by a majority of the disinterested members of the
Company's Board of Directors.
Indemnification Agreements
The Company has entered into indemnification agreements with each of its
directors and executive officers. Such agreements require the Company to
indemnify such individuals to the fullest extent permitted by law.
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<PAGE> 15
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: March 4, 1997
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<PAGE> 16
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
----------------------------------------------
CKS GROUP, INC.
PROXY FOR 1997 ANNUAL MEETING OF STOCKHOLDERS
APRIL 23, 1997
The undersigned stockholder of CKS Group, Inc. (the "Company") hereby
acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy
Statement for the 1997 Annual Meeting of Stockholders of the Company to be held
on Wednesday, April 23, 1997 at 10:00 a.m., local time, at the Palo Alto
Holiday Inn Hotel, 625 El Camino Real, Palo Alto, California, and hereby revokes
all previous proxies and appoints Mark D. Kvamme and Carlton H. Baab, or either
of them, with full power of substitution, Proxies and Attorneys-in-Fact, on
behalf and in the name of the undersigned, to vote and otherwise represent all
of the shares registered in the name of the undersigned at said Annual Meeting,
or any adjournment thereof, with the same effect as if the undersigned were
present and voting such shares, on the following matters and in the following
manner:
1. Election of Directors
/ / FOR all of the nominees listed below (except as indicated)
/ / WITHHOLD authority to vote for all of the nominees listed below.
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW:
ALEXANDRE BALKANSKI; BARRY R. LINSKY; MICHAEL B. SLADE
2. Proposal to ratify the appointment of KPMG Peat Marwick LLP as the
independent auditors of the Company for the fiscal year ending
November 30, 1997.
/ / FOR / / AGAINST / / ABSTAIN
In their discretion, the Proxies are entitled to vote upon such other matters
as may properly come before the Annual Meeting or any adjournments thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE. IF NO SPECIFICATION IS MADE, THE SHARES REPRESENTED BY
THIS PROXY WILL BE VOTED FOR EACH OF THE ABOVE PERSONS AND PROPOSALS, AND FOR
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING AS THE PROXYHOLDERS
DEEM ADVISABLE.
(Continued and to be signed on the reverse side)
<PAGE> 17
Dated __________________, 1997
Signature: ____________________________
Signature: ____________________________
I Plan to attend the meeting: / /
(THIS PROXY SHOULD BE MARKED, DATED AND SIGNED BY EACH STOCKHOLDER EXACTLY AS
SUCH STOCKHOLDER'S NAME APPEARS HEREON, AND RETURNED PROMPTLY IN THE ENCLOSED
ENVELOPE. PERSONS SIGNING IN A FIDUCIARY CAPACITY SHOULD SO INDICATE. A
CORPORATION IS REQUESTED TO SIGN ITS NAME BY ITS PRESIDENT OR OTHER AUTHORIZED
OFFICER, WITH THE OFFICE HELD DESIGNATED. IF SHARES ARE HELD BY JOINT TENANTS
OR AS COMMUNITY PROPERTY, BOTH HOLDERS SHOULD SIGN.)
TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE MARK, SIGN
AND DATE THIS PROXY AND RETURN IT AS PROMPTLY AS POSSIBLE.
