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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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 Section 240.14a-11(c) or Section
240.14a-12
INTELLIQUEST INFORMATION 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/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of 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 determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / 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:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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INTELLIQUEST INFORMATION GROUP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 15, 1997
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
INTELLIQUEST INFORMATION GROUP, INC., a Delaware corporation (the "Company"),
will be held on Thursday, May 15, 1997 at 10:00 a.m. local time, at the
Company's principal executive offices, 1250 Capital of Texas Hwy. South,
Building One, Austin, Texas, 78746, for the following purposes:
1. To elect a Board of Directors to serve until the next Annual Meeting
of Stockholders and until their successors are elected.
2. To amend the Company's 1996 Stock Plan to increase the number of
shares available for issuance thereunder by 400,000 to an aggregate of
700,000.
3. To ratify the appointment of Price Waterhouse LLP as independent
public accountants of the Company for the fiscal year ending December 31,
1997.
4. 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.
The Board of Directors has fixed the close of business on April 1, 1997 as
the record date for the determination of stockholders entitled to notice of and
to vote at this meeting. Only stockholders of record at the close of business on
April 1, 1997 are entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed Proxy as promptly as possible in the postage
prepaid envelope enclosed for that purpose. Any stockholder attending the
meeting may vote in person even if he or she has returned a Proxy.
Sincerely,
James Schellhase
SECRETARY
YOUR VOTE IS IMPORTANT.
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING,
YOU ARE REQUESTED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY
AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED ENVELOPE.
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INTELLIQUEST INFORMATION GROUP, INC.
PROXY STATEMENT FOR 1997 ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
INTELLIQUEST INFORMATION GROUP, INC., a Delaware corporation (the "Company"),
for use at the Annual Meeting of Stockholders to be held Thursday, May 15, 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 Company's principal executive offices,
1250 Capital of Texas Hwy. South, Building One, Austin, Texas, 78746. The
Company's telephone number at that location is (512) 329-0808.
These proxy solicitation materials and the Annual Report on Form 10-K for
the year ended December 31, 1996, including financial statements, were first
mailed on or about April 14, 1997 to all stockholders entitled to vote at the
meeting.
RECORD DATE AND PRINCIPAL SHARE OWNERSHIP
Stockholders of record at the close of business on April 1, 1997 (the
"Record Date") are entitled to notice of and to vote at the meeting. The Company
has one series of Common Shares outstanding, designated Common Stock, $0.0001
par value. At the Record Date, 8,345,708 shares of the Company's authorized
Common Stock were issued and outstanding and held of record by 50 stockholders.
The following table sets forth certain information regarding the beneficial
ownership of Common Stock of the Company as of April 1, 1997 as to (i) each
person who is known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) each director and each nominee for
director of the Company, (iii) each of the executive officers named in the
Summary Compensation Table in "Executive Compensation and Other Matters" below
and (iv) all directors and executive officers as a group.
<TABLE>
<CAPTION>
FIVE PERCENT STOCKHOLDERS, NUMBER OF SHARES
DIRECTORS AND BENEFICIALLY PERCENTAGE OF SHARES
EXECUTIVE OFFICERS OWNED(1) BENEFICIALLY OWNED(%)
- --------------------------------------------------------------------- -------------------- -----------------------
<S> <C> <C>
Janus Capital Corporation............................................ 712,700(2) 8.5
100 Fillmore Street, Suite 300
Denver, CO 80206-4923
Peter Zandan......................................................... 681,505(3) 8.2
c/o IntelliQuest Information Group, Inc.
1250 Capital of Texas Hwy. South
Building One
Austin, Texas 78746
William Blair & Company, L.L.C....................................... 675,922(4) 8.1
222 West Adams Street, 34th Floor
Chicago, IL 60606-5312
A I M Management Group, Inc.......................................... 445,000(5) 5.3
11 Greenway Plaza, Suite 1919
Houston, TX 77046
</TABLE>
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<TABLE>
<CAPTION>
FIVE PERCENT STOCKHOLDERS, NUMBER OF SHARES
DIRECTORS AND BENEFICIALLY PERCENTAGE OF SHARES
EXECUTIVE OFFICERS OWNED(1) BENEFICIALLY OWNED(%)
- --------------------------------------------------------------------- -------------------- -----------------------
<S> <C> <C>
Brian Sharples....................................................... 438,785 5.3
c/o IntelliQuest Information Group, Inc.
1250 Capital of Texas Hwy. South
Building One
Austin, Texas 78746
HLM Management Co. Inc............................................... 425,000 5.1
222 Berkeley Street
Boston, MA 02116
James Schellhase..................................................... 84,311(6) *
William Wood......................................................... 6,973(7) *
Lee Walker........................................................... -0- *
All directors and executive officers as a group (5 persons).......... 1,211,574 14.5
</TABLE>
- ------------------------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to options, warrants and convertible notes currently exercisable or
convertible, or exercisable or convertible within 60 days of April 1, 1997,
are deemed outstanding for computing the percentage of the person holding
such option, warrant or convertible note but are not outstanding for
computing the percentage of any other person. Except as indicated by
footnote, and subject to community property laws where applicable, the
persons named in the table above have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
(2) Includes 476,800 shares of Common Stock held by Janus Mercury Fund, an
investment company registered under the Investment Company Act of 1940, to
which Janus Capital Corporation provides investment advice. Also includes
235,900 shares of Common Stock held by various individual and institutional
stockholders to whom Janus Capital Corporation provides investment advice.
Janus Capital Corporation disclaims beneficial ownership of all such shares.
(3) Includes 2,352 shares of Common Stock held by Mr. Zandan as custodian for
Mr. Zandan's children. Mr. Zandan disclaims beneficial ownership of all such
shares.
(4) Includes 161,500 shares of Common Stock held by William Blair & Company,
L.L.C. over which William Blair & Company, L.L.C. has sole voting power.
William Blair & Company, L.L.C. disclaims voting power over the remaining
514,422 shares of Common Stock.
(5) Consists of 445,000 shares of Common Stock held by A I M Advisors, Inc. and
A I M Capital Management, Inc., subsidiaries of A I M Management Group, Inc.
(6) Includes 44,047 shares issuable pursuant to stock options exercisable within
60 days of April 1, 1997.
(7) Includes 536 shares of Common Stock held by Mr. Wood as custodian for Mr.
Wood's children. Mr. Wood disclaims beneficial ownership of all such shares.
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 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.
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VOTING AND SOLICITATION
Each holder of Common Stock is entitled to one vote for each share held.
This solicitation of proxies is made on behalf of the Company by the Company
and its proxy solicitors, ChaseMellon Shareholder Services ("ChaseMellon").
ChaseMellon will provide consultation pertaining to the planning and
organization of the meeting and will solicit proxies from brokers, banks,
nominees and other institutional holders. The anticipated cost of this
solicitation, including the costs and expenses associated with the services
provided by ChaseMellon, is $8,500 and all such costs will be borne by the
Company. In addition, the Company may reimburse brokerage firms and other
persons representing beneficial owners of shares for their expenses in
forwarding solicitation material to such beneficial owners. Proxies may also be
solicited by certain of the Company's directors, officers and regular employees,
without additional compensation, personally or by telephone or telefacsimile.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 1998 Annual Meeting of Stockholders must
be received by the Company no later than December 14, 1997 in order that they
may be considered for inclusion in the proxy statement and form of proxy
relating to that meeting.
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PROPOSAL ONE
ELECTION OF DIRECTORS
A board of five (5) directors is to be elected at the Annual Meeting of
Stockholders. Unless otherwise instructed, the proxy holders will vote the
proxies received by them for the Company's five (5) nominees named below, all of
whom are presently directors of the Company. In the event that any nominee of
the Company is unable or declines to serve as a director at the time of the
Annual Meeting of Stockholders, the proxies will be voted for any nominee who
shall be designated by the present Board of Directors to fill the vacancy. The
Company is not aware of any nominee who will be unable or will decline to serve
as a director. In the event that additional persons are nominated for election
as directors, the proxy holders intend to vote all proxies received by them in
such a manner as will assure the election of as many of the nominees listed
below as possible, and, in such event, the specific nominees to be voted for
will be determined by the proxy holders. The term of office for each person
elected as a director will continue until the next Annual Meeting of
Stockholders or until a successor has been elected and qualified.
VOTE REQUIRED
If a quorum is present and voting, the five (5) nominees receiving the
highest number of votes will be elected to the Board of Directors. Votes
withheld from any nominee, abstentions and shares held by brokers that are
present but not voted because the brokers were prohibited from exercising
discretionary authority ("broker non-votes") will be counted for purposes of
determining the presence or absence of a quorum.
NOMINEES
The names of the nominees and certain information about them as of April 1,
1997 are set forth below:
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE POSITION
- ------------------------------------ --- -----------------------------------------------------------
<S> <C> <C>
Peter Zandan........................ 44 Chairman and Chief Executive Officer
Brian Sharples...................... 36 President and Director
James Schellhase.................... 38 Chief Operating Officer, Secretary and Director
Lee Walker(1)(2).................... 55 Director
William Wood(1)(2).................. 41 Director
</TABLE>
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(1) Member of the Compensation Committee
(2) Member of the Audit Committee
PETER ZANDAN founded the Company and has been Chairman and Chief Executive
Officer since 1985. Prior to founding IntelliQuest, he was an industry
consultant and lectured at the University of Texas at Austin from 1985 to 1986.
Mr. Zandan received a B.A. in history from the University of Massachusetts in
1975, and a Ph.D. in evaluation research and an M.B.A. from the University of
Texas at Austin in 1982 and 1983, respectively.
BRIAN SHARPLES joined IntelliQuest as Senior Vice President in 1990, was
named President in 1991 and became a director in 1992. Prior to joining
IntelliQuest, he was a consultant in the high technology practice of Bain &
Company, Inc. and Chief Executive Officer of Practical Productions, Inc., an
event-based automotive distribution business. Mr. Sharples received a B.A. in
economics and mathematics from Colby College in 1982 and an M.B.A. from the
Stanford Graduate School of Business with a concentration in marketing and
finance in 1986.
JAMES SCHELLHASE joined IntelliQuest in 1994 as its Chief Operating Officer
and Chief Financial Officer and was appointed as a director in May 1995. From
1989 to 1994, prior to joining IntelliQuest, he served as the Chief Financial
Officer at Jones & Neuse, Inc., a full-service environmental consulting firm.
Prior to
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joining Jones & Neuse, Mr. Schellhase was employed as the interim Chief
Financial Officer at Guaranty Federal Savings Bank, Austin, Texas, and prior to
that he was employed as an audit manager at Touche Ross & Co. (now Deloitte &
Touche). Mr. Schellhase received a B.B.A. in accounting and an M.P.A. in
financial reporting from the University of Texas at Austin in 1980 and 1981,
respectively. Mr. Schellhase is a certified public accountant.
LEE WALKER was elected a director of IntelliQuest in July 1996. Since 1991,
he has been a lecturer at the University of Texas Graduate School of Business.
From 1986 to 1991, he was President and Chief Operating Officer of Dell Computer
Corporation, a manufacturer of personal computers. Mr. Walker is a director of
Mobile Telecommunications Technologies Corp., a manufacturer of mobile
telecommunications products. Mr. Walker received a B.S. in Physics from Texas
A&M University in 1965 and an M.B.A. from Harvard University in 1967.
WILLIAM WOOD has served as a director of the Company since May 1993. Since
1984, Mr. Wood has been a general partner of Austin Ventures, a venture capital
firm. Mr. Wood is a director of Matrix Service, a publicly held industrial
services company. Mr. Wood received an A.B. in history from Brown University in
1978 and an M.B.A. from Harvard University in 1982.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of eighteen meetings
during fiscal 1996, of which nine were by unanimous written consent. No director
attended fewer than 75% of the meetings of the Board of Directors and committees
thereof, if any, upon which such director served. The Board of Directors has a
Compensation Committee and an Audit Committee. The Board of Directors has no
nominating committee or any committee performing such functions.
The Compensation Committee, which consisted of directors Lee Walker and
William Wood, met two times by written consent during the fiscal year. This
Committee is responsible for determining salaries, incentives and other forms of
compensation for directors and officers of the Company and administers various
incentive compensation and benefit plans.
The Audit Committee, which consisted of directors Lee Walker and William
Wood, did not meet during fiscal 1996. This Committee is responsible for
overseeing actions taken by the Company's independent auditors and reviews the
Company's internal financial controls.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consisted of the following directors during
fiscal 1996: Lee Walker and William Wood. The Compensation Committee makes
recommendations to the Board of Directors concerning salaries and incentive
compensation for directors and officers of the Company. Mr. Zandan, Chairman and
Chief Executive Officer of the Company, is not a member of the Compensation
Committee and cannot vote on matters decided by the Committee. He is invited to
participate in some discussions and decisions regarding salaries and incentive
compensation for employees of and consultants to the Company, except that Mr.
Zandan is excluded from discussions and decisions regarding his own salary and
incentive compensation.
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PROPOSAL TWO
APPROVAL OF AMENDMENT TO 1996 STOCK PLAN
The Company's Board of Directors (the "Board") and stockholders have
previously adopted and approved the Company's 1996 Stock Plan (the "1996 Plan").
A total of 300,000 shares of Common Stock are presently reserved for issuance
under the 1996 Plan. In February 1997, the Board of Directors approved an
amendment to the 1996 Plan, subject to stockholder approval, to increase the
shares reserved for issuance thereunder by 400,000 shares, bringing the total
number of shares issuable under the 1996 Plan to 700,000.
As of April 1, 1997, options to purchase 245,000 shares were outstanding
under the 1996 Plan and 55,000 shares were available for future issuance under
the 1996 Plan.
At the Annual Meeting, the stockholders are being requested to consider and
approve the proposed amendment to the 1996 Plan to increase the number of shares
of Common Stock reserved for issuance thereunder by 400,000 shares, bringing the
total number of shares issuable under the 1996 Plan to 700,000. The Board
believes that the amendment will enable the Company to continue its policy of
widespread employee stock ownership as a means to motivate high levels of
performance and to recognize key employee accomplishments.
VOTE REQUIRED; RECOMMENDATION OF BOARD OF DIRECTORS
The affirmative vote of a majority of the shares of the Company's Common
Stock voting in person or by proxy on this proposal at the annual meeting is
required to approve the amendment to the 1996 Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE AMENDMENT OF
THE 1996 PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER.
DESCRIPTION OF THE 1996 STOCK PLAN
GENERAL. The 1996 Plan was adopted by the Board and approved by the
stockholders of the Company in March 1996. The 1996 Plan was amended by the
Board in February 1997. The following summary is qualified in its entirety by
reference to the copy of the 1996 Plan which is available from the Company upon
written request.
PURPOSES. The purposes of the 1996 Plan are to ensure the retention of the
services of officers, employees and consultants to attract and retain competent
new executive personnel and employees, and to provide incentive to all such
personnel to devote their utmost effort to the betterment of the Company.
ELIGIBILITY; LIMITATIONS. The 1996 Plan provides that options may be
granted to any officer, employee or consultant of the Company or any of its
subsidiaries. On April 1, 1997, there were approximately 240 officers, employees
and consultants of the Company eligible for stock option grants. Incentive stock
options may be granted only to employees of the Company or any of its
subsidiaries.
The 1996 Plan places specific limitations on the discretion allowed to the
Board in granting options to employees of the Company. These limitations are
intended to preserve the Company's ability to deduct for federal income tax
purposes the compensation expense relating to stock options granted to certain
executive officers under the 1996 Plan. Without these provisions in the 1996
Plan, the Company's ability to deduct such compensation expense may be limited
under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). The limitations provide that no employee shall be granted in any fiscal
year options to purchase more than 300,000 shares of Common Stock, except that
an employee may be granted options to purchase up to an additional 300,000
shares in connection with his or her initial employment, which grant will not
count against the foregoing limitation. See the discussion below under "Tax
Information" for a summary of the more general rules governing the availability
to the Company of tax deductions in connection with stock options granted under
the 1996 Plan.
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ADMINISTRATION. The 1996 Plan provides for administration by the Board or
by a committee (the "Committee") of the Board. The 1996 Plan is administered so
as to satisfy certain requirements of Rule 16b-3, promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), applicable
Delaware corporate law, and the Code. Except as noted below, the Board has full
power to select the persons to whom incentive or nonqualified options will be
granted, the specific terms of each grant, and the number of shares for which
incentive or nonqualified options will be granted, subject to the provisions of
the 1996 Plan. The interpretation and construction of any provision of the 1996
Plan will be within the sole discretion of the Board, whose determination will
be final and binding.
EXERCISE PRICE OF OPTION SHARES. The exercise price of each incentive stock
option granted under the 1996 Plan may not be less than 100% of the fair market
value of the Company's Common Stock on the date of the grant of the option;
provided, however, that the exercise price may not be less than 110% of the fair
market value if the person to whom such option is granted owns 10% or more of
the total combined voting power of all classes of stock of the Company. The
exercise price of nonqualified stock options is determined by the Board. The
fair market value of the Company's Common Stock is the closing sale price on the
Nasdaq National Market or, during such times as there was no market price
available on the Nasdaq National Market, the fair market value of the Company's
Common Stock as determined by the Board.
TERMS AND CONDITIONS OF OPTIONS. Each option is evidenced by a written
stock option agreement between the Company and the optionee and is subject to
the terms and conditions listed below, but specific terms may vary:
DATE OF EXERCISE. The Board determines the exercisability of
options granted under the 1996 Plan. An option is exercised by giving
written notice of exercise to the Company, specifying the number of full
shares of Common Stock to be purchased and tendering payment to the Company
of the purchase price. Payment for shares issued upon exercise of an option
may consist of cash, check, promissory note, exchange of shares of the
Company's Common Stock or any combination thereof. The Company's written
stock option agreements generally provide for payment only in the form of
cash or check.
TERMINATION OF ASSOCIATION. The 1996 Plan provides that if the
optionee's employment or other association with the Company is terminated
for any reason, other than death or permanent disability, an option may
thereafter be exercised (to the extent it was then exercisable) at any time
within three months of such termination, subject to the stated term of the
option.
DEATH OR DISABILITY OF OPTIONEE. If the optionee's employment or
association with the Company terminates as a result of the optionee's
permanent disability, the optionee may exercise an option at any time within
one year following the date of such termination (but in no event later than
the expiration of the term of the option), but only to the extent that the
optionee was entitled to exercise the option on the date of such
termination. At the end of such one-year period, all options held by such
optionee, to the extent they remain unexercised, terminate and become void.
TERM OF OPTIONS. The terms of options granted under the 1996 Plan may
not exceed ten years from the date of grant. However, any incentive stock
option granted to an optionee who, at the time such option is granted, owns
more than 10% of the total combined voting power of all classes of stock of
the Company may not have a term of more than five years. No option may be
exercised by any person after such expiration.
NONASSIGNABILITY OF RIGHTS. All options are non-transferable by the
optionee, other than by will or by the laws of descent and distribution, and
during the lifetime of the optionee may be exercised only by such optionee.
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RIGHTS UPON EXERCISE. Until an option has been properly exercised, no
rights to vote or receive dividends or any other rights as a stockholder
shall exist with respect to the shares subject to the unexercised option.
OTHER PROVISIONS. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the 1996 Plan as may be
determined by the Board.
CHANGES IN CAPITAL STRUCTURE; MERGER OR ASSET SALE. In the event any
change, such as a stock split or dividend, is made in the Company's
capitalization which results in an increase or decrease in the number of
outstanding shares of Common Stock or a change in the kind of shares or other
securities of the Company, an appropriate adjustment shall be made to the
exercise price and number or kind of shares subject to each outstanding option
and to the number or kind of shares which have been reserved for issuance under
the 1996 Plan. In the event of a merger of the Company with another corporation,
or the sale of substantially all of the assets of the Company, the 1996 Plan
provides that each outstanding option shall be assumed or an equivalent option
substituted by the successor corporation. If the successor corporation does not
agree to assume the option or to substitute an equivalent option, the Board
shall provide for the optionee to have the right to exercise the option as to
all of the optioned stock, including shares as to which the option would not
otherwise be exercisable.
AMENDMENT AND TERMINATION. The Board may amend, alter, suspend or terminate
the 1996 Plan at any time or from time to time, but any such amendment,
alteration, suspension or termination shall not adversely affect any option then
outstanding under the 1996 Plan, without the consent of the holder of the
option. In any event, the 1996 Plan will terminate in March 2006. In addition,
to the extent necessary to comply with Rule 16b-3 under the Exchange Act or with
Section 422 of the Code (or any other applicable law or regulation), the Company
shall obtain stockholder approval of any amendment of the 1996 Plan in such a
manner and to such a degree as required.
TAX INFORMATION. Options granted under the 1996 Plan may be either
incentive stock options, within the meaning of Section 422 of the Code, or
nonqualified stock options.
INCENTIVE STOCK OPTIONS. The holder of an incentive stock option will
recognize no income upon grant of the incentive stock option and will incur
no tax liability due to the exercise unless the optionee is subject to the
alternative minimum tax. The Company will not be allowed a deduction for
federal income tax purposes as a result of the exercise of an incentive
stock option regardless of the applicability of the alternative minimum tax.
Upon the sale or exchange of the shares at least two years after grant of
the option and one year after exercise of the option, any gain will be
treated as long-term capital gain. Under current law, generally the tax on
long-term capital gains is capped at 28%. If the statutory holding periods
are not satisfied, the optionee will recognize ordinary income equal to the
difference between the exercise price and the lower of the fair market value
of the stock at the date of the option exercise or the sale price of the
stock. A different rule for measuring ordinary income upon such a premature
disposition may apply if the optionee is also an officer, director or 10%
stockholder of the Company. The Company will be entitled to a deduction in
the same amount as the ordinary income recognized by the optionee. Any gain
recognized on such a premature disposition of the shares in excess of the
amount treated as ordinary income will be characterized as capital gain.
NONQUALIFIED STOCK OPTIONS. The holder of a nonqualified stock option
("NSO") will not recognize any taxable income at the time he or she is
granted a NSO. However, upon exercise of the NSO, the optionee will
generally recognize ordinary income for tax purposes measured by the excess
of the then fair market value of the shares over the exercise price. In
certain circumstances, where the shares are subject to a substantial risk of
forfeiture when acquired or where the optionee is an officer, director or
10% stockholder of the Company, the date of taxation may be deferred unless
the optionee files an election with the Internal Revenue Service under
Section 83(b) of the Code. The income recognized by an optionee who is also
an employee of the Company will be subject to tax
8
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withholding by the Company by payment in cash or Company stock or out of the
current earnings paid to the optionee. Upon resale of such shares by the
optionee, any difference between the sale price and the exercise price, to
the extent not recognized as ordinary income as provided above, will be
treated as capital gain or loss. The Company will be entitled to a tax
deduction in the same amount as the ordinary income recognized by the
optionee with respect to shares acquired upon exercise of a NSO.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF UNITED STATES FEDERAL
INCOME TAXATION UPON OPTIONEES AND THE COMPANY WITH RESPECT TO THE GRANT AND
EXERCISE OF OPTIONS UNDER THE 1996 PLAN AND DOES NOT PURPORT TO BE COMPLETE.
REFERENCE SHOULD BE MADE TO THE APPLICABLE PROVISIONS OF THE CODE. IN ADDITION,
THIS SUMMARY DOES NOT DISCUSS THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR
FOREIGN COUNTRY IN WHICH AN OPTIONEE MAY RESIDE.
PARTICIPATION IN THE 1996 PLAN. Please see "Executive Compensation and
Other Matters--Executive Compensation--Option Grants During Fiscal 1996" for
information with respect to the grant of options to the Named Executive Officers
during fiscal 1996. During fiscal 1996, all executive officers as a group and
all other employees as a group were granted options to purchase 110,000 shares
and 140,000 shares, respectively, pursuant to the 1996 Plan.
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PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Price Waterhouse LLP, independent public
accountants, to audit the financial statements of the Company for the fiscal
year ending December 31, 1997, and recommends that stockholders vote for
ratification of such appointment. In the event of a negative vote on
ratification, the Board of Directors will reconsider its selection.
Price Waterhouse LLP has audited the Company's financial statements annually
since 1992. Representatives of Price Waterhouse LLP are expected to be present
at the meeting with the opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate questions.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock voting in person or by proxy on this proposal at the
annual meeting is required to approve the appointment of the independent
auditors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE RATIFICATION
OF THE APPOINTMENT OF PRICE WATERHOUSE LLP AS INDEPENDENT PUBLIC ACCOUNTANTS.
10
<PAGE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the Company's two other executive officers
(collectively, the "Named Executive Officers") for services rendered in all
capacities to the Company during the years ended December 31, 1994, 1995 and
1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS(1)
-------------
SECURITIES ALL OTHER
UNDERLYING COMPEN-
OPTIONS/ SARS SATION ($)
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) (#) (2)
- ------------------------------------------------------- --------- ---------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Peter Zandan........................................... 1996 $ 213,772 $ -0- 30,000 $ 9,645
Chairman and Chief Executive Officer 1995 205,900 100,000 -- 9,470
1994 199,000 37,500 -- 9,200
Brian Sharples......................................... 1996 218,772 -0- 30,000 11,143
President and Director 1995 212,400 100,000 -- 8,750
1994 206,000 37,500 -- 8,700
James Schellhase....................................... 1996 110,000 -0- 50,000 --
Chief Operating Officer, Secretary and Director 1995 103,500 96,350 32,991 --
1994 53,722 5,368 51,320 --
</TABLE>
- ------------------------
(1) The Company did not grant any restricted stock awards or stock appreciation
rights or make any long-term incentive plan payouts during 1994, 1995 or
1996.
(2) Includes automobile allowances, life insurance premiums and miscellaneous
other income.
OPTION GRANTS DURING FISCAL 1996
The following table provides information with respect to stock option grants
during fiscal 1996 to the Named Executive Officers.
OPTION GRANTS DURING FISCAL 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS(1) VALUE AT ASSUMED
-------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS GRANTED APPRECIATION FOR
UNDERLYING TO EMPLOYEES IN OPTION TERM($)(4)
OPTIONS FISCAL YEAR EXERCISE PRICE EXPIRATION --------------------
NAME GRANTED (%)(1) ($/SH)(2) DATE(3) 5% 10%
- ----------------------------------- ------------- ----------------- --------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Peter Zandan....................... 30,000(5) 12% $ 21.50 12/18/06 $405,637 $1,027,963
Brian Sharples..................... 30,000(6) 12% 21.50 12/18/06 405,637 1,027,963
James Schellhase................... 40,000(7) 16% 25.625 10/01/06 644,600 1,633,400
10,000(8) 4% 21.50 12/18/06 135,212 342,655
</TABLE>
- ------------------------------
(1) The Company granted options to employees to purchase 250,000 shares of
Common Stock during fiscal 1996.
(2) The exercise price may be paid in cash or by check.
(3) An option may terminate before its expiration date if the optionee's status
as an employee is terminated or upon the optionee's death or disability.
11
<PAGE>
(4) The 5% and 10% assumed annual compound rates of stock price appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of future prices of its
Common Stock.
(5) Mr. Zandan's option to purchase 30,000 shares vests and is exercisable as to
12,000 shares on December 18, 1998, and as to an additional 6,000 shares on
each of December 18, 1999, December 18, 2000 and December 18, 2001.
(6) Mr. Sharples' option to purchase 30,000 shares vests and is exercisable as
to 12,000 shares on December 18, 1998, and as to an additional 6,000 shares
on each of December 18, 1999, December 18, 2000 and December 18, 2001.
(7) Mr. Schellhase's option to purchase 40,000 shares vests and is exercisable
as to 16,000 shares on October 1, 1998, and as to an additional 8,000 shares
on each of October 1, 1999, October 1, 2000 and October 1, 2001.
(8) Mr. Schellhase's option to purchase 10,000 shares vests and is exercisable
as to 4,000 shares on December 18, 1998, and as to an additional 2,000
shares on each of December 18, 1999, December 18, 2000 and December 18,
2001.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information concerning option holdings for
the fiscal year ended December 31, 1996 with respect to each Named Executive
Officer.
AGGREGATED OPTION EXERCISES IN FISCAL 1996
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED OPTIONS VALUE OF UNEXERCISED IN-THE-
SHARES AT FY-END MONEY OPTIONS AT FY-END(2)
ACQUIRED ON VALUE ------------------------------ --------------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE($) UNEXERCISABLE($)
- ------------------------ ------------- -------------- ------------- --------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Peter Zandan............ -0- -- -- 30,000 -- $ 37,500
Brian Sharples.......... -0- -- -- 30,000 -- 37,500
James Schellhase........ 40,264 $ 917,824 44,047 50,000 $ 978,061 12,500
</TABLE>
- ------------------------------
(1) Calculated by determining the difference between the fair market value, at
the date of exercise, of the securities underlying the option and the
exercise price of the option.
(2) Calculated by determining the difference between the fair market value, at
December 31, 1996, of the securities underlying the option and the exercise
price of the option.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Pursuant to the Delaware General Corporation Law ("Delaware Law"), the
Company has adopted provisions in its Certificate of Incorporation which limit
the personal liability of its directors to the maximum extent permitted by
Delaware Law. Delaware Law provides that directors of a company will not be
personally liable for monetary damages for breach of their fiduciary duties as
directors, except for liability (i) for any breach of their duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
unlawful payments or dividends or unlawful stock repurchases or redemption as
provided in Section 174 of Delaware Law or (iv) for transactions from which the
director derived an improper personal benefit.
The Company's Bylaws provide that the Company shall indemnify its officers
and directors and may indemnify its employees and other agents to the fullest
extent provided by Delaware Law, including those circumstances where
indemnification would otherwise be discretionary under Delaware Law. The Company
believes that indemnification under its Bylaws covers at least negligence on the
part of the indemnified parties. The Bylaws authorize the use of indemnification
agreements and the Company has entered into such agreements with each of its
directors and officers.
The Company carries officer and director liability insurance with respect to
certain matters, including matters arising under the Securities Act.
12
<PAGE>
At present, there is no pending litigation or proceeding involving a
director or officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened litigation
or proceeding which may result in a claim for such indemnification.
COMPENSATION OF DIRECTORS
The Company's directors do not receive any cash compensation for service on
the Board of Directors or any committee thereof, but directors may be reimbursed
for reasonable expenses incurred in connection with attendance at Board and
committee meetings.
Non-employee directors are entitled to participate in the Company's 1996
Director Option Plan (the "Director Plan"). The Director Plan was adopted by the
Board of Directors and approved by the stockholders in February 1996, and
amended by the Board of Directors in August 1996. A total of 100,000 shares of
Common Stock has been reserved for issuance under the Director Plan, options to
purchase 27,250 of which were issued and outstanding as of December 31, 1996.
The Director Plan provides that each non-employee director shall be granted, at
the discretion of the Board of Directors, a nonstatutory option to purchase
shares of Common Stock (the "First Option") upon the date such non-employee
director first becomes a director (other than an employee director who ceases to
be an employee but remains a director). In addition, each non-employee director
who has been a non-employee director for longer than six months will annually be
granted, at the discretion of the Board of Directors, a nonstatutory option to
purchase shares of Common Stock (a "Subsequent Option"). Each non-employee
director will be eligible to receive a Subsequent Option, regardless of whether
such non-employee director was eligible to receive a First Option. Each First
Option and Subsequent Option will have a term expiring on the earlier of the
tenth anniversary of the date of grant or twelve months after the date on which
the optionee ends his service as a director. The vesting terms of both the First
Option and the Subsequent Option shall be at the discretion of the Board of
Directors. The exercise price of a director option will be 100% of the fair
market value per share of the Company's Common Stock on the date of the grant of
the option. The exercise price of a director option granted to a director who
owns more than 10% of the voting power of all classes of the Company's
outstanding capital stock must be equal to at least 110% of the fair market
value of the Common Stock on the date of grant.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
During the fiscal year ended December 31, 1996, the Compensation Committee
of the Board of Directors was comprised of two non-employee directors. The
Compensation Committee is responsible for setting compensation levels for the
Company's executive officers and for overseeing the administration of certain of
the Company's stock option plans. In making compensation decisions, it has been
the practice of the Compensation Committee to meet with the Company's chief
executive officer, as appropriate. All decisions by the Compensation Committee
are reviewed by the entire Board of Directors.
The Compensation Committee believes that executive officer compensation
should be closely aligned with the performance of the Company on both a
short-term and long-term basis and that such compensation should assist the
Company in attracting and retaining key executives critical to its long-term
success. To that end, the Compensation Committee's policy is that the
compensation package for executive officers should consist of three components:
(i) an annual base salary; (ii) the potential to earn incentive bonuses each
fiscal year, the amount of which is dependent on the Company's overall
performance; and (iii) stock option awards designed to align stockholder
interests with those of management by providing long-term incentives for the
Company's key employees. For fiscal 1996, the Compensation Committee determined
that total direct compensation (base salary, incentive bonus, and stock option
awards) should be at levels commensurate with total direct compensation paid by
comparable companies to their officers, and it is again the intent of the
Compensation Committee to set total direct compensation for fiscal 1997 at
levels commensurate with total direct compensation paid by comparable companies
to their officers.
13
<PAGE>
Base salary is based upon the responsibilities of the particular executive
officers targeted at the median of comparable companies and is reviewed on an
annual basis.
Incentive bonuses represent an opportunity for each executive officer to
earn additional annual cash compensation in an amount reflective of such
officer's accomplishments. Any such bonuses are generally determined and awarded
by the Compensation Committee shortly after the end of each fiscal year. No
incentive bonus payments were made for fiscal 1996. Shortly after the end of
fiscal 1997, the Compensation Committee will review each officer's
accomplishments and make bonus determinations.
The long-term performance based compensation of executive officers takes the
form of option awards under the Company's 1996 Stock Plan. The Compensation
Committee believes that equity-based compensation ensures that the Company's
executive officers have a continuing stake in the long-term success of the
Company. All options granted by the Company have been granted with an exercise
price equal to the market price of the Company's Common Stock on the date of
grant and, accordingly, have value only if the Company's stock price increases
after such date. In granting options under the 1996 Stock Plan, the Committee
takes into account each executive's responsibilities, relative position in the
Company, and past grants. For fiscal 1996, Mr. Zandan was granted options to
purchase 30,000 shares of Common Stock at fair market value as of the date of
the grant. For fiscal 1996, Mr. Sharples was granted options to purchase 30,000
shares of Common Stock at fair market value as of the date of the grant. For
fiscal 1996, Mr. Schellhase was granted options to purchase an aggregate of
50,000 shares of Common Stock at fair market value as of the date of the grant.
These options vest 40% on the first anniversary of the grant and 20% on
successive anniversaries until the option is fully vested.
LEE WALKER
WILLIAM WOOD
14
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the annual percentage change in
the cumulative return to the stockholders of the Company's Common Stock with the
cumulative return of (i) the Nasdaq U.S. Index and (ii) a peer group, the
Hambrecht & Quist Technology Index, consisting of approximately 275 companies,
for the period commencing March 22, 1996 (the date of the Company's initial
public offering) and ending on December 31, 1996. The information contained in
the performance graph shall not be deemed to be "soliciting material" or to be
"filed" with the Securities and Exchange Commission, nor shall such information
be incorporated by reference into any future filing under the Securities Act or
Exchange Act, except to the extent that the Company specifically incorporates it
by reference into such filing.
COMPARISON OF 9 MONTH CUMULATIVE TOTAL RETURN*
AMONG INTELLIQUEST INFORMATION GROUP, INC., THE NASDAQ STOCK MARKET-US
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INTELLIQUEST INFORMATION GROUP, INC. NASDAQ STOCK MARKET-US HAMBRECHT & QUIST TECHNOLOGY
<S> <C> <C> <C>
3/22/96 $100 $100 $100
12/31/96 134 118 117
</TABLE>
- ------------------------
* $100 INVESTED ON 3/22/96 IN STOCK OR INDEX--INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's executive officers and directors, and persons who own
more than ten percent of a registered class of the Company's equity securities
to file reports of ownership and changes in ownership with the Securities and
Exchange Commission ("SEC") and the National Association of Securities Dealers,
Inc. Executive officers, directors and greater than ten percent stockholders are
required by SEC regulation to furnish the
15
<PAGE>
Company with copies of all Section 16(a) forms they file. Based solely in its
review of the copies of such forms received by it, or written representations
from certain reporting persons, the Company believes that, during fiscal 1996,
all filing requirements applicable to its executive officers and directors were
complied with, except that the Forms 4 filed by Mr. Zandan, Mr. Sharples and Mr.
Wood in connection with their sale of Company Common Stock in the Company's
initial public offering were filed late.
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: April 11, 1997
16
<PAGE>
PROXY
INTELLIQUEST INFORMATION GROUP, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of IntelliQuest Information Group, Inc., a
Delaware corporation (the "Company"), hereby acknowledges receipt of the Notice
of Annual Meeting of Stockholders and Proxy Statement, each dated April 14,
1997, and hereby appoints Susan Georgen-Saad and James Schellhase, and each of
them, proxies, with full power of substitution, to represent the undersigned and
to vote as designated on the reverse side, all shares of Company Common Stock
that the undersigned is entitled to vote at the Annual Meeting of Stockholders
of the Company to be held on May 15, 1997 at 10:00 a.m., Central Standard Time,
at the Company's principal executive offices at 1250 Capital of Texas Hwy.
South, Building One, Austin, Texas, 78746, and at any adjournment thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS INDICATED, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
FOR EACH OF THE PROPOSALS ON THE REVERSE SIDE HEREOF AND FOR SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING AS THE PROXIES DEEM ADVISABLE.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE.
A vote FOR the following proposals, proposed by IntelliQuest Information
Group, Inc. (the "Company"), is recommended by the Board of Directors.
1. Election of five Directors.
Nominees: Peter Zandan, Brian Sharples, James Schellhase, Lee Walker and
William Wood.
FOR ALL NOMINEES / / WITHHELD FROM ALL NOMINEES / / ______________
FOR ALL NOMINEES EXCEPT AS NOTED ABOVE
2. Proposal to amend the Company's 1996 Stock Plan to increase the number of
shares reserved thereunder by 400,000, bringing the total number of shares
issuable thereunder to 700,000.
FOR / / AGAINST / / ABSTAIN / /
3. Proposal to ratify the appointment of Price Waterhouse LLP as the Company's
independent auditors for the fiscal year ending December 31, 1997.
FOR / / AGAINST / / ABSTAIN / /
4. To vote or otherwise represent the shares on any and all such other business
which may properly come before the meeting or any adjournment thereof,
according to their discretion and in their discretion.
Please sign exactly as your name
appears on your stock certificate.
If the stock is held by joint
tenants or as community property,
both should sign. Executors,
administrators, trustees,
guardians, attorneys and corporate
officers should insert their
titles.
Signature: ______ Date: __________
Signature: ______ Date: __________
