<PAGE>
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 (S)240.14a-11(c) or (S)240.14a-12
BOSTON COMMUNICATIONS GROUP, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[_] No fee required
[_] 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:
________________________________________________________________________
(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.:
________________________________________________________________________
(3) Filing Party:
________________________________________________________________________
(4) Date Filed:
________________________________________________________________________
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON THURSDAY, MAY 22, 1997
The Annual Meeting of Shareholders of Boston Communications Group, Inc. (the
"Company") will be held at the Company at 100 Sylvan Road, Woburn
Massachusetts at 9:00 a.m., local time, to consider and act upon the following
matters:
1. To elect Craig L. Burr and Gerald Segel as Class I Directors, to serve
for a three-year term.
2. To ratify the selection of Ernst & Young LLP by the Board of Directors as
the Company's independent auditors for the current fiscal year.
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Shareholders of record at the close of business on April 14, 1997 will be
entitled to notice of and to vote at the meeting or any adjournment thereof.
The stock transfer books of the Company will remain open.
By Order of the Board of Directors,
Alan J. Bouffard,
Clerk
Woburn, Massachusetts
April 18, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE
PROXY IS MAILED IN THE UNITED STATES.
<PAGE>
BOSTON COMMUNICATIONS GROUP, INC.
100 SYLVAN ROAD
WOBURN, MASSACHUSETTS 01801
PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 22, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Boston Communications Group, Inc. (the
"Company") for use at the Annual Meeting of Shareholders to be held on May 22,
1997 and at any adjournments of that meeting (the "Annual Meeting"). All
proxies will be voted in accordance with the shareholders' instructions, and
if no choice is specified, the proxies will be voted in favor of the matters
set forth in the accompanying Notice of Meeting. Any proxy may be revoked by a
shareholder at any time before its exercise by delivery of written revocation
or a subsequently dated proxy to the Clerk of the Company or by voting in
person at the Annual Meeting.
The Company's Annual Report to Shareholders for 1997 is being mailed to
shareholders concurrently with this Proxy Statement.
A copy of the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, as filed with the Securities and Exchange Commission,
except for exhibits, will be furnished without charge to any stockholder upon
written request to the Clerk of the Company, Boston Communications Group,
Inc., 100 Sylvan Road, Woburn, Massachusetts 01801.
VOTING SECURITIES AND VOTES REQUIRED
At the close of business on April 14, 1997, the record date for the
determination of shareholders entitled to vote at the Annual Meeting, there
were outstanding and entitled to vote an aggregate of 12,731,162 shares of
common stock, $.01 par value per share, of the Company (the "Common Stock"),
constituting all of the voting stock of the Company. Holders of Common Stock
are entitled to one vote per share.
The presence or representation by proxy of the holders of a majority of the
number of shares of Common Stock issued, outstanding and entitled to vote at
the Annual Meeting constitutes a quorum for the transaction of business at the
Annual Meeting. Shares of Common Stock represented in person or by proxy
(including shares which abstain or do not vote with respect to one or more of
the matters presented for shareholder approval) will be counted for purposes
of determining whether a quorum is present.
The affirmative vote of the holders of a majority of the shares of Common
Stock present at the Annual Meeting is required for the election of directors
and the ratification of the selection of Ernst & Young LLP as the Company's
independent auditors for the current fiscal year.
Shares that abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees who indicate on their proxies that
they do not have discretionary authority to vote such shares as to a
particular matter, will not be counted as votes in favor of such matter and
will also not be counted as votes cast or shares voting on such matter.
Accordingly, abstentions and "broker non-votes" will have no effect on the
voting on matters, such as the ones presented for shareholder approval at this
Annual Meeting, that require the affirmative vote of a certain percentage of
the shares voting on the matter.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of January 31, 1997,
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person known by the Company to beneficially own more than 5% of the
outstanding shares of Common Stock, (ii) each director and each person
nominated to become a director of the Company, (iii) each executive officer of
the Company named in the Summary
<PAGE>
Compensation Table set forth under the caption "Executive Compensation" below
and (iv) all current directors and executive officers of the Company as a
group:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
BENEFICIALLY COMMON STOCK
BENEFICIAL OWNER OWNED(1) OUTSTANDING(2)
------------------ ---------------- --------------
<S> <C> <C>
Entities Affiliated with Burr, Egan, Deleage &
Co.(3)....................................... 2,497,230 19.6%
Highland Capital Partners L.P.(4)............. 1,963,572 15.4%
Paul J. Tobin(5).............................. 824,331 6.5%
Robert J. Sullivan............................ 637,535 5.0%
Frederick E. von Mering(6).................... 593,464 4.6%
George K. Hertz(7)............................ 553,810 4.2%
Brian E. Boyle(8)............................. 435,425 3.4%
Jerrold D. Adams.............................. 2,000 *
Paul R. Gudonis............................... 2,000 *
Gerald Segel.................................. 2,500 *
Craig L. Burr(9).............................. -- --
James L. McLean(10)........................... -- --
All current directors and executive officers
as a group (9 persons)(11)................... 6,874,332 51.1%
</TABLE>
- --------
* Less than 1%
(1) Each person has sole investment and voting power with respect to the
shares indicated, except as otherwise noted. The number of shares of Common
Stock beneficially owned is determined under the rules of the Securities
and Exchange Commission and is not necessarily indicative of beneficial
ownership for any other purpose. The inclusion herein of any shares of
Common Stock deemed beneficially owned does not constitute an admission of
beneficial ownership of such shares. Any reference in the footnotes below
to stock options held by the person in question relates to stock options
which are currently exercisable or exercisable within 60 days after January
31, 1997.
(2) The number of shares deemed outstanding with respect to a named person
includes 12,722,685 shares outstanding as of January 31, 1997 plus any
shares subject to options held by the person in question that are
currently exercisable or exercisable within 60 days after January 31,
1997.
(3) Comprised of 2,083,812 shares, 212,859 shares, 177,027 shares, 22,326
shares and 1,206 shares held by Alta III Limited Partnership, C.V.
Sofinnova Partners Four, Gallion Partners II, Alta Jami Boston Ltd.
Partnership and Golden Coins N.V., respectively, each of which entities is
affiliated with Burr, Egan, Deleage & Co. Craig L. Burr, a Director of the
Company, is a Managing General Partner of Burr, Egan, Deleage & Co. Mr.
Burr disclaims beneficial ownership of such shares, except to the extent
of his direct pecuniary interest therein.
(4) James L. McLean, a Director of the Company, is affiliated with the general
partner of Highland Capital Partners, L.P. and may be deemed to
beneficially own the shares of Common Stock held by Highland Capital
Partners, L.P. Mr. McLean disclaims beneficial ownership of such shares,
except to the extent of his direct pecuniary interest therein.
(5) Includes 424,331 shares held by the Paul J. Tobin 1988 Trust and 400,000
shares held by the Margaret M. Tobin 1988 Trust. Mr. Tobin is the trustee
of the Paul J. Tobin 1988 Trust. Margaret M. Tobin, the spouse of Paul J.
Tobin, is trustee of the Margaret M. Tobin 1988 Trust.
(6) Includes 130,654 shares issuable pursuant to stock options which are
currently exercisable.
(7) Comprised solely of 522,624 shares issuable pursuant to options which are
currently exercisable or exercisable within 60 days after January 31,
1997.
(8) Comprised of 58,675 shares held in trust for the benefit of Mr. Boyle's
children and 376,750 shares owned by Sand Drift, Ltd. of which Mr. Boyle
is a limited partner. Mr. Boyle disclaims beneficial ownership of these
shares, except to the extent of his direct pecuniary interest therein.
(9) Excludes an aggregate of 2,497,230 shares held by entities affiliated with
Burr, Egan, Deleage & Co. Mr. Burr is a Managing General Partner of Burr,
Egan, Deleage & Co. and may be deemed to beneficially
2
<PAGE>
own such shares. Mr. Burr disclaims beneficial ownership of such shares,
except to the extent of his direct pecuniary interest therein.
(10) Excludes 1,963,572 shares held by Highland Capital Partners, L.P. Mr.
McLean is affiliated with the general partner of Highland Capital
Partners L.P. and may be deemed to beneficially own such shares. Mr.
McLean disclaims beneficial ownership of such shares, except to the
extent of his direct pecuniary interest therein. Mr. McLean will not be
standing for re-election to the Board of Directors.
(11) Includes an aggregate of 2,497,230 shares held by entities affiliated
with Burr, Egan, Deleage & Co. Mr. Burr is a Managing General Partner of
Burr, Egan, Deleage & Co. Includes 1,963,573 shares held by Highland
Capital Partners, L.P. Mr. McLean is affiliated with the general partner
of Highland Capital Partners, L.P. Messrs. Burr and McLean disclaim
beneficial ownership of such shares, except to the extent of their direct
pecuniary interest therein. Also includes an aggregate of 684,464 shares
issuable pursuant to options exercisable within 60 days after January 31,
1997.
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes, with members
of each class holding office for staggered three-year terms. The Board
currently consists of three Class I Directors, whose terms expire at the 1997
Annual Meeting of Shareholders, three Class II Directors, whose terms expire
at the 1998 Annual Meeting of Shareholders and three Class III Directors whose
terms expire at the 1999 Annual Meeting of Shareholders (in all cases subject
to the election of their successors and to their earlier death, resignation or
removal).
The persons named in the enclosed proxy will vote to elect Craig L. Burr and
Gerald Segel as Class I Directors, unless authority to vote for the election
of the nominees is withheld by marking the proxy to that effect. Mr. McLean, a
Class I Director, will not be standing for re-election to the Board of
Directors. The Company has no nominating committee, and all nominations are
made by the Board of Directors. Each nominee has indicated his willingness to
serve, if elected, but if any nominee should be unable to stand for election,
proxies may be voted for a substitute nominee designated by the Board of
Directors.
Set forth below are the name, age and certain other information with respect
to each director and nominee for director of the Company.
NOMINEES FOR CLASS I DIRECTORS
Craig L. Burr, 51, has served as a Director of the Company since April 1993.
Mr. Burr has been a Managing General Partner of Burr, Egan, Deleage & Co., a
venture capital firm, since 1979. Mr. Burr received his B.A. from Harvard
College and his M.B.A. from Harvard Graduate School of Business
Administration. Mr. Burr is a Director of several privately-held companies
affiliated with Burr, Egan, Deleage & Co. Mr. Burr is a nominee for re-
election to the Board of Directors as a Class I Director.
Gerald Segel, 76, has served as a Director of the Company since October
1996. Prior to his retirement in May 1990, Mr. Segel was Chairman of Tucker
Anthony Incorporated from January 1987 to May 1990. From 1983 to January 1987
he served as President of Tucker Anthony Incorporated. Mr. Segel is also a
director of Litchfield Financial Inc., Hologic, Inc. and Vivid Technologies,
Inc. He is a nominee for re-election to the Board of Directors as a Class I
Director.
CLASS I DIRECTOR
James L. McLean, 35, has served as a Director of the Company since May 1995.
Mr. McLean has been employed by Highland Capital Partners, Incorporated, a
venture capital firm, since December 1994. From December 1993 to December
1994, he was an associate with Highland Capital Partners. Prior to that, Mr.
McLean was an associate with Accel Partners, a venture capital firm, from
October 1990 to December 1993. Mr. McLean received his B.S. from Harvard
University and his M.B.A. from the University of California, Berkeley. Mr.
McLean has declined to stand for re-election to the Board of Directors.
3
<PAGE>
CLASS II DIRECTORS
Jerrold D. Adams, 57, has served as a Director of the Company since April
1996. Mr. Adams was President and Chief Operating Officer of Iridium, Inc., an
international consortium developing a worldwide communications system for
portable hand-held telephones, from 1991 until 1997. Prior to that, Mr. Adams
served as Director of PCN Operations in Europe of Motorola from 1990 to 1991,
Senior Vice President of McCaw Cellular, a national non-wireline cellular
company, from 1988 to 1990 and General Manager of Metro One, a New York non-
wireline cellular carrier, from 1986 to 1988. Mr. Adams received his B.A. from
Coe College and attended the Wharton School of Business and the University of
Illinois.
Paul R. Gudonis, 43, has served as a Director of the Company since April
1996. Mr. Gudonis has been President and General Manager of BBN Planet, an
internet service provider, since November 1994. Mr. Gudonis is also a
Corporate Vice President of BBN Corporation, the parent corporation of BBN
Planet. Mr. Gudonis previously served from 1991 to November 1994 as General
Manager of the Communications Industry Group International division of EDS
Corporation, and as Senior Vice President and General Manager of APPEX Corp.
from January 1989 until it was acquired by EDS Corporation in October 1990.
Mr. Gudonis received his B.S. from Northwestern University and his M.B.A. from
Harvard Graduate School of Business Administration.
Frederick E. von Mering, 44, has served as a Director of the Company and as
its Vice President, Finance and Administration since 1989. Prior to joining
the Company, Mr. von Mering served as Regional Vice President and General
Manager for the paging division of Metromedia, Inc., a communications company,
from 1980 to 1986. From 1975 to 1979, Mr. von Mering was employed at Coopers &
Lybrand LLP. Mr. von Mering earned his B.A. degree in accounting from Boston
College and his M.B.A. from Babson College.
CLASS III DIRECTORS
Brian E. Boyle, 49, has served as Vice Chairman of the Company since
February 1996 and as Chairman, New Wireless Services of the Company from
January 1994 to February 1996. From July 1990 to September 1993, Mr. Boyle
served as Chairman and Chief Executive Officer of Credit Technologies, Inc., a
supplier of customer application software for the cellular telephone industry.
Prior to 1990, Mr. Boyle founded and operated a number of ventures servicing
the telecommunications industry, including APPEX Corp. (now EDS Personal
Communications Division of EDS Corporation, a global telecommunications
service company) and Leasecomm Corp., a micro-ticket leasing company. Mr.
Boyle earned his B.A. in mathematics from Amherst College and his B.S., M.S.
and Ph.D. in electrical engineering and operations research from M.I.T. Mr.
Boyle is also a Director of Saville Systems PLC, a provider of customized
billing solutions to telecommunications providers, as well as of several
private companies.
George K. Hertz, 50, has served as a Director and Chief Executive Officer
and President of the Company since February 1996. From April 1988 to March
1996, Mr. Hertz served as President of Advanced MobileCom, a wholly-owned
subsidiary of Fidelity Investment Corp., focusing on pursuing opportunities in
the wireless communications industry. Mr. Hertz also served as President of
PhaseOne Development Corporation, a communications and entertainment company,
from 1984 to 1987 and in various capacities at Zip-Call, Inc., a paging
company, from 1982 to 1983. Mr. Hertz received his B.A. and M.A. in political
science and public administration from the University of Massachusetts.
Paul J. Tobin, 53, has served as Chairman of the Board of Directors since
February 1996 and served as the Company's President and Chief Executive
Officer from 1990 until February 1996. Prior to joining the Company, Mr. Tobin
served as President of Cellular One Boston/Worcester from July 1984 to January
1990 and as a Regional Marketing Manager for Satellite Business Systems, a
joint venture of IBM, Comsat Corp. and Aetna Life & Casualty from April 1980
to June 1984. Mr. Tobin received his undergraduate degree in economics from
Stonehill College and his M.B.A. in marketing and finance from Northeastern
University. Mr. Tobin also serves as a member of the Board of Trustees at
Stonehill College.
4
<PAGE>
BOARD AND COMMITTEE MEETINGS
The Company has a standing Audit Committee of the Board of Directors, which
reviews the Company's internal accounting control policies and procedures, the
performance of the Company's independent auditors in the annual audit and
auditors' fees; considers and recommends the selection of the Company's
independent auditors; reviews and approves any major accounting policy changes
affecting the Company's operating results and provides the opportunity for
direct contact between the Company's independent auditors and the Board of
Directors. The Company's consolidated financial statements are currently
audited by Ernst & Young LLP. The Audit Committee met two times during fiscal
1996. The current members of the Audit Committee are Messrs. Adams, McLean,
Segel and Gudonis. Mr. McLean is not standing for re-election to the Board of
Directors at this Annual Meeting.
The Company has a standing Compensation Committee of the Board of Directors,
which provides recommendations to the Board regarding compensation programs of
the Company and administers and has authority to grant stock options under the
Company's 1996 Stock Option Plan (the "1996 Option Plan") to all employees,
directors and officers of the Company, including those persons who are
required to file reports ("Reporting Persons") pursuant to Section 16(a) of
the Exchange Act. The Compensation Committee also administers the Company's
1996 Employee Stock Purchase Plan (the "1996 Purchase Plan"). The Compensation
Committee met one time during fiscal 1996. The current members of the
Compensation Committee are Messrs. Adams, Burr, Segel and Gudonis.
The Board of Directors held seven meetings during fiscal 1996. Each director
attended at least 75% of the aggregate number of Board meetings and meetings
held by all committees on which he then served.
DIRECTOR COMPENSATION AND STOCK OPTIONS
Non-employee directors (which consist of Messrs. Adams, Gudonis, Segel, Burr
and McLean) receive $1,000 per meeting attended for their services as members
of the Board of Directors and are reimbursed for their expenses incurred in
connection with attending Board and committee meetings. Directors who serve on
the Audit Committee or Compensation Committee receive $500 for each such
committee meeting attended.
Under the terms of the 1996 Option Plan options to purchase shares of Common
Stock may be granted to members of the Board of Directors. Pursuant to the
1996 Option Plan, on June 17, 1996, the Company granted to each of Messrs.
Adams and Gudonis an option to purchase 15,000 shares of the Company's Common
Stock at an exercise price of $14.00 per share (the fair market value on the
date of grant). On February 10, 1997, the Company granted to Gerald Segel an
option to purchase 15,000 shares of the Company's Common Stock at an exercise
price of $6.00 per share (the fair market value on the date of grant).
5
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth certain compensation information, for the
fiscal years indicated, of the Company's Chief Executive Officer and the
Company's three other most highly compensated executive officers whose cash
compensation exceeded $100,000 during the fiscal year ended December 31, 1996
(collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION(1) COMPENSATION
--------------- ------------
SECURITIES
FISCAL SALARY BONUS UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) OPTIONS COMPENSATION(2)
--------------------------- ------ -------- ------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
Paul J. Tobin(3)............ 1996 $159,794 -- 25,000 --
Chairman of the Board of
Directors and 1995 160,000 60,000 -- --
former President and Chief
Executive Officer
Brian E. Boyle.............. 1996 145,307 -- 125,000 --
Vice Chairman of the Board
of Directors 1995 150,000 -- -- --
George K. Hertz(4).......... 1996 201,922 666,175 --
President, Chief Executive
Officer 1995 -- -- -- --
and Director
Frederick E. von Mering(5).. 1996 149,807 -- 155,654 --
Vice President, Finance and 1995 150,000 40,000 -- --
Administration and Director
</TABLE>
- --------
(1) All amounts reflected in this table for the year ended December 31, 1995,
and for a portion of 1996, were paid to the Named Executive Officers by
Boston Communications Capital Corp. ("BCCC") for services rendered by the
Named Executive Officers on behalf of the Company, pursuant to a
Management Agreement between the Company and BCCC. This Management
Agreement terminated on March 31, 1996. See "Certain Transactions."
(2) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted because such perquisites and other personal benefits
constitute less than the lesser of $50,000 or ten percent of the total
salary and bonus reported for the executive officer during the years ended
December 31, 1995 and 1996.
(3) Mr. Tobin resigned as President and Chief Executive Officer of the Company
effective February 6, 1996. In January 1997, Mr. Tobin surrendered his
options to purchase 25,000 shares of the Company's Common Stock.
(4) Mr. Hertz was elected President and Chief Executive Officer of the Company
effective February 6, 1996.
(5) In January 1997, Mr. von Mering surrendered his options to purchase 25,000
shares of the Company's Common Stock.
6
<PAGE>
Option Grants
The following table sets forth certain information concerning option grants
during the fiscal year ended December 31, 1996 to the Named Executive Officers
and the number and value of the unexercised options held by such persons on
December 31, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED RATES OF
SECURITIES TOTAL OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ---------------------------
NAME GRANTED(#) FISCAL YEAR PRICE($/SH) DATE 5%($) 10%
---- ---------- ------------- ----------- ---------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Paul J. Tobin(2)......... 25,000 1.6% $14.00 6/17/2006 $ 220,112 $ 557,809
Brian E. Boyle........... 125,000 8.2 14.00 6/17/2006 1,100,558 2,789,045
George K. Hertz.......... 522,624 34.4 5.75 2/6/2011 3,242,280 9,547,916
93,551 6.2 10.00 3/31/2006 588,333 1,490,960
50,000 3.3 14.00 6/17/2006 440,223 1,115,618
Frederick E. von
Mering(2)............... 130,654 8.6 5.75 2/6/2011 810,557 2,386,942
25,000 1.6 14.00 6/17/2006 220,112 557,809
</TABLE>
- --------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. 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 stock prices. This table does
not take into account any appreciation or depreciation in the price of the
Common Stock to date. Actual gain, if any, on stock option exercises will
depend on future performance of the Common Stock and the date on which the
options are exercised. Values shown are net of the option exercise price,
but do not include deductions for tax or other expenses associated with
the exercise.
(2) In January 1997, both Messrs. Tobin and von Mering surrendered their
respective options to purchase 25,000 shares of the Company's Common
Stock.
7
<PAGE>
Option Exercises and Holdings
The following table sets forth certain information concerning each exercise
of a stock option during the fiscal year ended December 31, 1996 by each of
the Named Executive Officers, and the number and value of unexercised options
held by each of the Named Executive Officers on December 31, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY
AT FISCAL OPTIONS AT FISCAL
YEAR-END(#) YEAR-END($)(1)
-------------------- -----------------
SHARES
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
---- ----------- ----------- -------------------- -----------------
<S> <C> <C> <C> <C>
George K. Hertz................. -- -- 522,624/143,551 --/--
Paul J. Tobin(2)................ -- -- -- /25,000 --/--
Brian E. Boyle.................. -- -- --/125,000 --/--
Frederick E. von Mering(2)...... -- -- 130,654/25,000 --/--
</TABLE>
- --------
(1) The per share value of unexercised in-the-money options is calculated by
subtracting the per share option exercise price from the last per share
sale price of the Company's Common Stock on the Nasdaq National Market on
December 31, 1996 ($5.75).
(2) In January 1997, Messrs. Tobin and von Mering surrendered their respective
Options reflected in this Table to purchase 25,000 shares of the Company's
Common Stock.
EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
The Company entered into an employment letter agreement with George K.
Hertz, effective February 6, 1996, pursuant to which Mr. Hertz was made the
President and Chief Executive Officer and a Director of the Company. The
agreement provides for an initial base salary of $250,000, plus an annual
performance-based bonus. In addition, pursuant to the agreement, Mr. Hertz was
granted (i) a non-qualified stock option to purchase 522,624 shares of Common
Stock at an exercise price of $5.75 per share, which vested in full
immediately upon the closing of the Company's initial public offering, and
(ii) a stock option which is in part an incentive stock option and in part a
non-qualified stock option to purchase 93,551 shares of Common Stock, at an
exercise price of $10.00 per share, vesting in three equal annual installments
commencing on March 31, 1997, the first anniversary of the date of grant.
CERTAIN TRANSACTIONS
Messrs. Tobin, Sullivan, Boyle and von Mering are each Directors and 25%
shareholders of BCG Enterprises Corp. During the year ended December 31, 1996,
the Company paid rent in an aggregate amount of $39,902 to BCG Enterprises
Corp. for premises at One McKinley Square in Boston, Massachusetts under a
lease with BCG Enterprises Corp. The Company surrendered the premises to BCG
Enterprises Corp. and the lease terminated on July 31, 1996.
The Company entered into a Management Agreement with Boston Communications
Capital Corporation ("BCCC") in December 1992, which was amended in March
1994. Pursuant to the Management Agreement, the Company retained BCCC to
provide management services by Messrs. Tobin, Boyle, von Mering and Robert J.
Sullivan, among others. The Company paid BCCC a monthly management fee ranging
from $70,000 to $84,000 per month in return for such services, which included
the planning, management and operations of the Company. All amounts set forth
in the Summary Compensation Table for 1995 and a portion of such amounts for
1996 were paid by BCCC from these monthly fees. The Management Agreement was
terminated on March 31, 1996.
8
<PAGE>
The Company used a portion of the proceeds of its initial public offering to
redeem its Redeemable Preferred Stock, including all accrued dividends
thereon. In connection with this redemption, Messrs. Tobin and Sullivan, BCG
Investments, Inc. (a company whose officers were Messrs. Tobin, von Mering and
Sullivan and whose sole shareholder is Mr. Tobin) Highland Capital Partners,
L.P. and entities affiliated with Burr, Egan, Deleage & Co. received $398,061,
$165,497, $424,779, $5,854,148, and $7,382,402, respectively.
On October 23, 1996, the Company acquired 62.5% of the outstanding capital
stock of Wireless Americas Corp. ("WAC"), a Delaware corporation, from Robert
Sproul, the then President of WAC, for an aggregate purchase price of $916,500
(the "Stock Purchase"). The purchase price was the agreed upon fair market
value of the stock and was paid by the Company in cash. The Company previously
owned 17.5% of the capital stock of WAC, which it purchased in February 1996
for $35,000.
Of the total purchase price, $508,603 was used by Mr. Sproul to repay his
debt to certain officers of the Company who held notes in the principal amount
of $495,192, bearing interest at the rate of 6.5% per annum, compounded
annually. These notes were secured by pledges of the stock that was purchased
by the Company, which pledges were discharged at the closing of the Stock
Purchase.
The Company now owns 80% of the capital stock of WAC and has an option to
purchase the remaining 20% of such capital stock from Mr. Sproul at its fair
market value, as determined by the parties or by appraisal if the parties
cannot agree, in either case, subject to certain minimum values if the
revenues of WAC exceed certain amounts. The option is exercisable (i) during
the period from November 1, 1998 until February 28, 2002 or (ii) upon the
earlier termination of Mr. Sproul's employment with WAC, either voluntarily by
Mr. Sproul or by WAC for cause.
In addition, Mr. Sproul has the option to require the Company to purchase
his 20% of the capital stock of WAC for the same price as provided for in the
Company's option. Mr. Sproul's option is exercisable (i) during the period
from November 1, 1998 until February 28, 2002, (ii) upon the termination of
Mr. Sproul's employment with WAC, either voluntarily by Mr. Sproul or by WAC
for any reason or (iii) if WAC is sold or merged.
Mr. Sproul's employment with WAC terminated in March 1997. The Company and
Mr. Sproul are currently in discussions regarding the sale of Mr. Sproul's
stock in WAC to the Company.
The Company has a Distribution Agreement with WAC, pursuant to which WAC is
a non-exclusive distributor of the Company's products in Latin America. The
term of the Distribution Agreement, which was originally entered into on
January 31, 1996, extends through January 31, 2001.
Prior to May 1996 Messrs. Tobin, Hertz, Boyle, von Mering, Sullivan and
certain other employees of the Company owned 62.5% of the capital stock of
WAC. In May 1996, certain of those individuals sold 62.5% of the capital stock
of WAC to Mr. Sproul for an aggregate purchase price of $500,000. Mr. Sproul
paid $4,808 in cash for such shares and executed promissory notes for the
remaining balance, which were repaid as described above.
The Company is party to a Registration Rights Agreement dated March 9, 1994,
as amended, (the "1994 Registration Agreement") with certain of its
shareholders, including certain of its executive officers, directors and their
affiliates (the "Rightsholders"), who, at the time of execution of the
Registration Rights Agreement, held an aggregate of 7,965,678 shares of Common
Stock (the "Registrable Securities"). The 1994 Registration Agreement provides
that in the event the Company registers any of its securities under the
Securities Act, the Rightsholders will be entitled to include Registrable
Securities in such registration.
The Company believes that the terms of the foregoing transactions were no
less favorable to the Company than could have been obtained from unaffiliated
third parties. Company policy dictates that transactions, if any, between the
Company and its officers, directors and other affiliates (i) be approved by a
majority of the members
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<PAGE>
of the Company's Board of Directors and by a majority of the disinterested
members of the Company's Board of Directors and (ii) be on terms no less
favorable to the Company than could be obtained from unaffiliated third
parties. In addition, this policy requires that any loans by the Company to
its officers, directors or other affiliates be for bona fide business purposes
only.
STOCK PLANS
1996 Stock Option Plan. The Company's 1996 Option Plan was adopted by the
Board of Directors and approved by the shareholders of the Company in March
1996. The 1996 Option Plan provides for the grant of stock options to
employees, officers and directors of, and consultants or advisers to, the
Company and its subsidiaries. Under the 1996 Option 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") ("incentive stock options"), or options not intended to qualify
as incentive stock options ("non-statutory options"). Incentive stock options
may only be granted to employees of the Company. A total of 1,264,792 shares
of Common Stock have been reserved for issuance under the 1996 Option Plan.
The maximum number of shares with respect to which options may be granted to
any employee under the 1996 Option Plan shall not exceed 200,000 shares of
Common Stock during any calendar year.
The 1996 Option Plan is administered by the Compensation Committee of the
Board of Directors. Subject to the provisions of the 1996 Option Plan, the
Compensation Committee has the authority to select the employees to whom
options are granted and determine the terms of each option, including (i) the
number of shares of Common Stock subject to the option, (ii) when the option
becomes exercisable, (iii) the option exercise price, which, in the case of
incentive stock options, must be at least 100% (110% in the case of incentive
stock options granted to a shareholder owning in excess of 10% of the
Company's Common Stock) of the fair market value of the Common Stock as of the
date of grant, and (iv) the duration of the option (which, in the case of
incentive stock options, may not exceed ten years). The Compensation Committee
may, in its sole discretion, include additional provisions in any option or
award granted or made under the 1996 Option Plan, including without
limitation, restrictions on transfer, repurchase rights, commitments to pay
cash bonuses, to make, arrange for or guaranty loans or to transfer other
property to optionees upon exercise of options, or such other provisions as
shall be determined by the Compensation Committee, so long as such provisions
are not inconsistent with the 1996 Option Plan or applicable law. The
Compensation Committee may also, in its sole discretion, accelerate or extend
the date or dates on which all or any particular option or options granted
under the 1996 Option Plan may be exercised.
Payment of the option exercise price may be made in cash, shares of Common
Stock, a combination of cash or stock or by any other method (including
delivery of a promissory note payable on terms specified by the Compensation
Committee) approved by the Compensation Committee consistent with Section 422
of the Code and Rule 16b-3 ("Rule 16b-3") under the Securities Exchange Act of
1934, as amended. Options are not assignable or transferable except by will or
the laws of descent and distribution and, in the case of non-statutory
options, pursuant to a qualified domestic relations order (as defined in the
Code).
As of December 31, 1996, the Company had approximately 707 employees
(including executive officers) and five non-employee directors, all of whom
were eligible to participate in the 1996 Option Plan. As option grants under
the 1996 Option Plan are discretionary, the number of individuals receiving
stock options will vary from year to year depending on various factors, and
thus the Company cannot now determine award recipients.
During 1996, the Named Executives (which includes all executive officers)
received options under the 1996 Option Plan to purchase an aggregate of
318,551 (of which 50,000 have been surrendered) shares of Common Stock, at a
weighted average exercise price of $12.83 per share, all employees, excluding
current executive officers as a group, received options to purchase an
aggregate of 510,000 shares of Common Stock at a weighted average exercise
price of $12.97 per share, and all non-employee directors as a group received
options to purchase an aggregate of 30,000 shares of Common Stock, at a
weighted average exercise price of $14.00 per share. For additional
information regarding the ownership of options by the Named Executives, see
"Executive
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Compensation--Option Grants" and "--Option Exercises and Holdings". On
December 31, 1996, the closing price of the Company's Common Stock on the
Nasdaq National Market was $5.75 and options to purchase an aggregate of
858,551 shares of Common Stock were outstanding under the 1996 Option Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to grants of stock options
under the 1996 Option Plan and with respect to the sale of Common Stock
acquired under the 1996 Option Plan.
Incentive Stock Options
In general, a participant will not recognize taxable income upon the grant
or exercise of an incentive stock option. Instead, a participant will
recognize taxable income with respect to an incentive stock option only upon
the sale of Common Stock acquired through the exercise of the option ("ISO
Stock"). The exercise of an incentive stock option may, however, subject the
participant to the alternative minimum tax.
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least
two years from the date the option was granted (the "Grant Date") and one year
from the date the option was exercised (the "Exercise Date"), then the
participant will recognize long-term capital gain in an amount equal to the
excess of the sale price of the ISO Stock over the exercise price.
If the participant sells ISO Stock for more than the exercise price prior to
having owned it for at least two years from the Grant Date and one year from
the Exercise Date (a "Disqualifying Disposition"), then all or a portion of
the gain recognized by the participant will be ordinary compensation income
and the remaining gain, if any, will be a capital gain. This capital gain will
be a long-term capital gain if the participant has held the ISO Stock for more
than one year prior to the date of sale.
If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss equal to the excess of the exercise
price over the sale price of the ISO Stock. This capital loss will be a long-
term capital loss if the participant has held the ISO Stock for more than one
year prior to the date of sale.
Non-qualified Stock Options
As in the case of an incentive stock option, a participant will not
recognize taxable income upon the grant of a non-qualified stock option.
Unlike the case of an incentive stock option, however, a participant who
exercises a non-qualified stock option generally will recognize ordinary
compensation income in an amount equal to the excess of the fair market value
of the Common Stock acquired through the exercise of the option ("NQO Stock")
on the Exercise Date over the exercise price.
With respect to any NQO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NQO Stock, a participant generally will recognize capital gain or
loss in an amount equal to the excess of the sale price of the NQO Stock over
the participant's tax basis in the NQO Stock. This capital gain or loss will
be a long-term gain or loss if the participant has held the NQO stock for more
than one year prior to the date of the sale .
Tax Consequences to the Company
The grant of a stock option under the 1996 Option Plan will have no tax
consequences to the Company. Moreover, in general, neither the exercise of an
incentive stock option nor the sale of any Common Stock acquired under the
1996 Option Plan will have any tax consequences to the Company. The Company
generally will be entitled to a business-expense deduction, however, with
respect to any ordinary compensation income recognized by a participant under
the 1996 Option Plan, including as a result of the exercise of a non-qualified
11
<PAGE>
stock option or a Disqualifying Disposition. Any such deduction will be
subject to the limitations of Section 162(m) of the Code. The Company will
have a withholding obligation with respect to ordinary compensation income
recognized with respect to non-qualified stock options by participants under
the 1996 Option Plan who are employees or otherwise subject to withholding.
1996 Employee Stock Purchase Plan. The Company's 1996 Purchase Plan was
adopted by the Board of Directors and approved by the shareholders of the
Company in April 1996 and became effective upon the closing of the Company's
initial public offering. The 1996 Purchase Plan authorizes the issuance of up
to a total of 225,000 shares of Common Stock to participating employees.
All employees of the Company who have been regularly employed by the Company
for a minimum of 12 months, including directors of the Company who are
employees, are eligible to participate in the 1996 Purchase Plan. Employees
who would own 5% or more of the total combined voting power or value of the
stock of the Company or any subsidiary immediately after a grant of Common
Stock under the Purchase Plan are not eligible to participate. As of December
31, 1996, approximately 303 of the Company's employees were eligible to
participate in the Purchase Plan.
On the first day of a designated payroll deduction period (the "Offering
Period"), the Company will grant to each eligible employee who has elected to
participate in the Purchase Plan an option to purchase shares of Common Stock
as follows: the employee may authorize an amount (up to a maximum of 10% of
such employee's regular pay) to be deducted by the Company from such pay
during the Offering Period. On the last day of the Offering Period, the
employee is deemed to have exercised the option, at the option exercise price,
to the extent of accumulated payroll deductions. Under the terms of the
Purchase Plan, the option price is an amount equal to 90% of the fair market
value per share of the Common Stock on either the first day or the last day of
the Offering Period, whichever is lower. In no event may an employee purchase
in any one Offering Period a number of shares which has an aggregate market
value (determined on the last day of the Offering Period) in excess of
$25,000. The Compensation Committee may, in its discretion, choose an Offering
Period of 12 months or less for each of the Offerings and choose a different
Offering Period for each Offering.
If an employee is not a participant on the last day of the Offering Period,
such employee is not entitled to exercise any option, and the amount of such
employee's accumulated payroll deductions will be refunded. An employee's
rights under the Purchase Plan terminate upon voluntary withdrawal from the
Purchase Plan at any time, or when such employee ceases employment for any
reason, except that upon termination of employment because of death, the
employee's beneficiary has certain rights to elect to exercise the option to
purchase the shares which the accumulated payroll deductions in the
participant's account would purchase at the date of death.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to participation in the
1996 Purchase Plan and with respect to the sale of Common Stock acquired under
the 1996 Purchase Plan.
The 1996 Purchase Plan is intended to qualify as an "Employee Stock Purchase
Plan" within the meaning of Section 423 of the Code.
Tax Consequences to Participants
In general, a participant will not recognize taxable income upon enrolling
in the 1996 Purchase Plan or upon purchasing shares of Common Stock at the end
of an Offering. Instead, if a participant sells Common Stock acquired under
the 1996 Purchase Plan at a sale price that exceeds the price at which the
participant purchased the Common Stock, then the participant will recognize
taxable income. A portion of that taxable income will be ordinary income, and
a portion may be capital gain.
12
<PAGE>
If the participant sells the Common Stock more than one year after acquiring
it and more than two years after the date on which the Offering commenced (the
"Grant Date"), then the participant will be taxed as follows. If the sale
price of the Common Stock is higher than the price at which the participant
purchased the Common Stock, then the participant will recognize ordinary
compensation income in an amount equal to the lesser of:
(i) the excess of the fair market value of the Common Stock on the Grant
Date over the price at which the participant purchased the Common Stock;
and
(ii) the excess of the sale price of the Common Stock over the price at
which the participant purchased the Common Stock.
Any further income will be long-term capital gain. If the sale price of the
Common Stock is less than the price at which the participant purchased the
Common Stock, then the participant will recognize long-term capital loss in an
amount equal to the excess of the price at which the participant purchased the
Common Stock over the sale price of the Common Stock.
If the participant sells the Common Stock within one year after acquiring it
or within two years after the Grant Date (a "Disqualifying Disposition"), then
the participant will recognize ordinary compensation income in an amount equal
to the excess of the fair market value of the Common Stock on the date that it
was purchased over the price at which the participant purchased the Common
Stock. The participant will also recognize capital gain in an amount equal to
the excess of the sale price of the Common Stock over the fair market value of
the Common Stock on the date that it was purchased, or capital loss in an
amount equal to the excess of the fair market value of the Common Stock on the
date that it was purchased over the sale price of the Common Stock. This
capital gain or loss will be a long-term capital gain or loss if the
participant has held the Common Stock for more than one year prior to the date
of the sale and will be a short-term capital gain or loss if the participant
has held the Common Stock for a shorter period.
Tax Consequences to the Company
The offering of Common Stock under the 1996 Purchase Plan will have no tax
consequences to the Company. Moreover, in general, neither the purchase nor
the sale of Common Stock acquired under the 1996 Purchase Plan will have any
tax consequences to the Company except that the Company will be entitled to a
business-expense deduction with respect to any ordinary compensation income
recognized by a participant upon making a Disqualifying Disposition. Any such
deduction will be subject to the limitations of Section 162(m) of the Code.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the "Compensation
Committee") is currently composed of four non-employee directors, Jerrold D.
Adams, Paul R. Gudonis, Craig L. Burr and Gerald Segel. The Compensation
Committee is responsible for establishing and administering the policies which
govern both annual compensation and performance-based equity ownership of the
Company's executive officers.
This report is submitted by the Compensation Committee and addresses the
Company's policies for 1996 as they apply to the Named Executive Officers.
Policies and Philosophy
The Company's executive compensation program is structured and administered
to achieve three broad goals in a manner consistent with shareholder
interests. First, the Compensation Committee structures executive compensation
programs and decisions regarding individual compensation in a manner that the
Compensation Committee believes will enable the Company to attract and retain
key executives. Second, the Compensation Committee establishes compensation
programs that are designed to reward executives for the achievement of
13
<PAGE>
specified business objectives of the Company. Finally, the Compensation
Committee designs the Company's executive compensation programs to provide
executives with long-term ownership opportunities in the Company in an attempt
to align executive and shareholder interests.
In evaluating both individual and corporate performance for purposes of
determining salary and bonus levels and stock option grants, the Compensation
Committee places significant emphasis on the extent to which strategic and
business plan goals are met, including the progress and success of the Company
with respect to matters such as achieving operating budgets, establishing
strategic marketing, distribution and development alliances, product
development and enhancement of the Company's strategic position, as well as on
the Company's overall financial performance.
Executive Compensation in Fiscal 1996
The compensation programs for the Company's executives established by the
Compensation Committee consist of three elements based upon the foregoing
objectives: (i) base salary and benefits competitive with the marketplace;
(ii) bonus grants; and (iii) stock-based equity incentive in the form of
participation in the 1996 Option Plan. The Compensation Committee believes
that providing a base salary and benefits to its executive officers that are
competitive with the marketplace enables the Company to attract and retain key
executives. In addition, the Compensation Committee believes that bonuses
based on both corporate and individual performance provide incentives to its
executive officers that align their interests with those of the Company as a
whole. The Compensation Committee generally provides executive officers
discretionary stock option awards to reward them for achieving specified
business objectives and to provide them with long-term ownership
opportunities. In evaluating the salary level, bonuses and equity incentives
to award to each current executive officer, the Compensation Committee
examines the progress which the Company has made in areas under the particular
executive officer's supervision, such as development or sales, and the overall
performance of the Company. The Compensation Committee does not establish
specific goals or milestones which automatically trigger additional
compensation for the executive officer to accomplish established Company
goals. The Compensation Committee opted not to award bonuses in 1996.
In determining the salary and bonuses of each executive officer, including
the Named Executive Officers, the Compensation Committee and the Board of
Directors consider numerous factors such as (i) the individual's performance,
including the expected contribution of the executive officer to the Company's
goals, (ii) the Company's long-term needs and goals, including attracting and
retaining key management personnel, and (iii) the Company's competitive
position, including data on the payment of executive officers at comparable
companies that are familiar to members of the Compensation Committee. The
companies used by the Compensation Committee to compare executive compensation
are companies of which the members of the Compensation Committee have specific
knowledge and are considered as of the time those companies were at similar
stages of development as the Company. To the extent determined to be
appropriate, the Compensation Committee also considers general economic
conditions and the historic compensation levels of the individual. The
Compensation Committee believes that the salary levels of its executive
officers are in the middle third when compared to the compensation levels of
companies at similar stages of development as the Company.
Stock option grants made pursuant to the 1996 Option Plan in the fiscal year
ended December 31, 1996 were designed to make a portion of the overall
compensation of the executive officers receiving such awards vary depending
upon the performance of the Company's Common Stock. Such grants, as a result
of vesting arrangements applicable to such stock options, also serve as a
means of retaining these individuals. In making stock option grants to
executives, the Compensation Committee considers a number of factors,
including the performance of the executive, the responsibilities of the
executive, and the executive's current stock or option holdings.
Benefits
The Company's executive officers are entitled to receive medical benefits
and life insurance benefits and to participate in the Company's 401(k) Savings
Plan on the same basis as other full-time employees of the
14
<PAGE>
Company. The Company's 1996 Employee Stock Purchase Plan, which is available to
virtually all employees, including certain executive officers and directors who
are employees, allows participants to purchase shares at a discount of
approximately 10% from the fair market value at the beginning or end of the
applicable purchase period.
Compensation of the Chief Executive Officers in Fiscal 1996
The compensation philosophy applied by the Compensation Committee in
establishing the compensation for the Company's President and Chief Executive
Officer is the same as for the other senior management of the Company--to
provide a competitive compensation opportunity that rewards performance.
The Company employed two persons as Chief Executive Officer during fiscal
1996. Until February 1996, Mr. Tobin served as President and Chief Executive
Officer of the Company and was paid a salary of $159,794 for fiscal 1996. Mr.
Tobin resigned both positions effective February 6, 1996 to become Chairman of
the Board of Directors, and Mr. Hertz succeeded him.
Mr. Hertz served in the positions of President, Chief Executive Officer and a
director of the Company during the remainder of the fiscal year ended December
31, 1996 and he received a salary of $201,922 for fiscal 1996. The Compensation
Committee established Mr. Hertz's base salary during fiscal 1996 at $250,000
considered by the Compensation Committee to be in the middle third of the
compensation of Chief Executive Officers at other publicly-traded companies at
the same stage of development as the Company. As part of Mr. Hertz's employment
agreement he contracted to receive a bonus and options to purchase an aggregate
of 616,175 shares of Common Stock at a weighted average exercise price of $6.40
per share. See "Employment Agreement with Executive Officers." Mr. Hertz was
also granted an option to purchase 50,000 shares of Common Stock at an exercise
price of $14.00 per share under the Option Plan. The Company did not pay Mr.
Hertz a bonus in 1996.
Compliance with Section 162(m) of the Code
Section 162(m) of the Code, enacted in 1993, generally disallows tax
deductions to publicly-traded corporations for compensation over $1,000,000
paid to the corporation's Chief Executive Officer or any of its other four most
highly compensated executive officers. Qualifying performance-based
compensation will not be subject to this disallowance if certain requirements
are met. The Company currently intends to structure the compensation
arrangements of its executive officers in a manner that will avoid
disallowances under Section 162(m).
COMPENSATION COMMITTEE
Jerrold D. Adams, Chairman
Craig L. Burr
Paul R. Gudonis
Gerald Segel
Reports Under Section 16(a) of the Exchange Act
Based solely on its review of copies of reports filed by persons ("Reporting
Persons") required to file such reports pursuant to Section 16(a) of the
Exchange Act, the Company believes that all filings required to be made by
Reporting Persons of the Company were timely made in accordance with the
requirements of the Exchange Act, except that Gerald Segel, a Director of the
Company, as of October 28, 1996, filed a Form 3 on February 14, 1997 in
connection with his appointment to the Board of Directors, and an amended Form
3 on April 11, 1997, relating to his purchase of 2,500 shares of Common Stock
which occurred on December 17, 1996, and Jerrold D. Adams, a Director of the
Company, filed a Form 5 on February 14, 1997, relating to his purchase of 2,000
shares of Common Stock which occurred on December 23, 1996.
15
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
Common Stock of the Company during the period from June 18, 1996 (the date on
which the Company's Common Stock began trading on the Nasdaq National Market)
to December 31, 1996 with the cumulative total return over the same period of
(i) the Nasdaq National Market (U.S. Companies) (the "Nasdaq Composite Index")
and (ii) a Peer Group Index* selected by the Company. This comparison assumes
the investment of $100 on June 18, 1996 in the Company's Common Stock, the
Nasdaq Composite Index and the Peer Group Index and assumes dividends, if any,
are reinvested.
[STOCK PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
JUNE 18, 1996 DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
Boston Communications Group, Inc................ $100.00 $ 37.41
Nasdaq Stock Market--US......................... $100.00 $108.65
Peer Group...................................... $100.00 $ 65.72
</TABLE>
- --------
* The Peer Group Index reflects stock performance of Brite Voice Systems,
Lightbridge, Inc. and Metro One Telecommunications.
16
<PAGE>
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, at the recommendation of the Audit Committee, has
selected the firm of Ernst & Young LLP as the Company's independent auditors
for the current fiscal year. Ernst & Young LLP has served as the Company's
independent auditors since 1988. Although shareholder ratification of the
Board of Directors' selection of Ernst & Young LLP is not required by law, the
Board of Directors believes that it is advisable to give shareholders the
opportunity to ratify this selection. If this proposal is not approved at the
Annual Meeting, the Board of Directors may reconsider its selection of Ernst &
Young LLP.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting. They will have the opportunity to make a statement if they
desire to do so and will also be available to respond to appropriate questions
from shareholders.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the Annual Meeting. However, if any other matters are properly
presented to the Annual Meeting, it is the intention of the persons named in
the accompanying proxy to vote, or otherwise act, in accordance with their
judgment on such matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and
regular employees, without additional remuneration, may solicit proxies by
telephone, telegraph and personal interviews, and the Company reserves the
right to retain outside agencies for the purpose of soliciting proxies.
Brokers, custodians and fiduciaries will be requested to forward proxy
soliciting material to the owners of shares held in their names, and the
Company will reimburse them for out-of-pocket expenses incurred on behalf of
the Company.
Proposals of shareholders intended to be presented at the 1998 Annual
Meeting of Shareholders must be received by the Company at its principal
office in Woburn, Massachusetts not later than December 19, 1997 for inclusion
in the proxy statement for that meeting.
By Order of the Board of Directors,
Alan J. Bouffard,
Clerk
April 18, 1997
THE BOARD OF DIRECTORS HOPES THAT SHAREHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT SHAREHOLDERS PLAN TO ATTEND, SHAREHOLDERS ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE. SHAREHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR SHARES PERSONALLY
EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
17
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
BOSTON COMMUNICATION GROUP, INC.
1997 ANNUAL MEETING OF SHAREHOLDERS
MAY 22, 1997
P The undersigned shareholder of BOSTON COMMUNICATIONS GROUP, INC.
hereby acknowledges receipt of this Notice of Annual Meeting of
Shareholders and Proxy Statement, dated April 18, 1997, and hereby appoints
Alan J. Bouffard and Fredrick von Mering, and each of them, proxies and
attorneys-in-fact, with full power of substitution, on behalf and in the
R name of the undersigned, to represent the undersigned at the 1997 Annual
Meeting of Shareholders of BOSTON COMMUNICATIONS GROUP, INC., to be held on
May 22, 1997 at 9:00 a.m. (EST), local time, at the Company at 100 Sylvan
Road, Woburn, Massachusetts, and at any adjournments thereof, and to vote
all shares of Common Stock which the undersigned would be entitled to vote
O if then and there personally present, on the matters set forth on the
reverse side.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS GIVEN WITH RESPECT TO A PARTICULAR PROPOSAL, THIS PROXY WILL
X BE VOTED FOR SUCH PROPOSAL. WITH RESPECT TO ANY OTHER MATTERS WHICH MAY
ARISE, THIS PROXY WILL BE VOTED IN THE DISCRETION OF THE PERSON(S) NAMED
ABOVE.
PLEASE MARK, DATE, SIGN, AND RETURN THIS PROXY CARD PROMPTLY, USING THE
Y ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
[X] Please mark votes as in this example.
The Board of Directors recommends a vote "FOR all nominees" in
Item 1, and "FOR" Item 2.
1. Election of Directors
Nominees: Craig L. Burr and Gerald Segel.
FOR WITHHELD
[_] [_]
[_]
-----------------------------------------
For both nominees except as noted above
2. To ratify the appointment of Ernst & Young LLP FOR AGAINST ABSTAIN
by the Board of Directors as the Company's [_] [_] [_]
independent auditors for the current year.
3. To transact such other business as may properly come before the meeting or
any adjournment thereof.
MARK HERE FOR [_] MARK HERE IF YOU [_]
ADDRESS CHANGE PLAN TO ATTEND THE
AND NOTE AT LEFT MEETING
Please sign exactly as name appears hereon. Joint owners should each sign.
Executors, administrators, trustees, guardians or other fiduciaries should give
full title as such. If signing for a corporation, please sign in full corporate
name by a duly authorized officer.
Signature Date Signature Date
------------------- ------- --------------- ------
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