SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
File No. 000-21775
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement (revised)
[ ] 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
THINK NEW IDEAS, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of Filing Fee (Check the appropriate box):
[X] 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:
N/A
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2) Aggregate number of securities to which transaction applies:
N/A
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
N/A
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4) Proposed maximum aggregate value of transaction:
N/A
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5) Total fee paid: N/A
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[ ] Fee paid previously with preliminary materials.
<PAGE>
THINK NEW IDEAS, INC.
45 WEST 36TH STREET, 12TH FLOOR
NEW YORK, NEW YORK 10018
November 10, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
THINK New Ideas, Inc. (the "Company") on December 11, 1997. The meeting will
begin at 10:00 a.m. (Pacific Time) at THINK New Ideas, Inc., 8000 Sunset
Boulevard, Penthouse East, Los Angeles, California 90046.
Information regarding each of the matters to be voted upon at the Annual
Meeting is contained in the attached Proxy Statement. We urge you to read the
Proxy Statement carefully. The Proxy Statement is being mailed to all
stockholders of the Company on or about November 10, 1997.
Because it is important that your shares be voted at the Annual Meeting,
whether or not you plan to attend in person, we urge you to complete, date, and
sign the enclosed Proxy Card and return it as promptly as possible in the
accompanying envelope. If you are a stockholder of record and do attend the
Annual Meeting and wish to vote your shares in person, even after returning your
Proxy Card, you still may do so.
We look forward to seeing you in Los Angeles on December 11, 1997.
Very truly yours,
/s/ Scott A. Mednick
-----------------------
Scott A. Mednick
Chief Executive Officer
<PAGE>
THINK NEW IDEAS, INC.
45 WEST 36TH STREET, 12TH FLOOR
NEW YORK, NEW YORK 10018
----------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 11, 1997
----------------------------------------
TO THE STOCKHOLDERS OF THINK NEW IDEAS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of THINK New
Ideas, Inc., a Delaware corporation (the "Company"), will be held at THINK New
Ideas, Inc., 8000 Sunset Boulevard, Penthouse East, Los Angeles, California
90046, on December 11, 1997, at 10:00 a.m. (Pacific Time) and thereafter as it
may from time to time be adjourned, for the following purposes:
1. To elect seven directors to serve for a period of one year or until
their successors have been duly elected and qualified;
2. To approve the adoption of the THINK New Ideas, Inc. Amended and
Restated 1997 Stock Option Plan which provides for the issuance of
Qualified Incentive Stock Options and Non-Qualified Stock Options; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders should note that the Bylaws of the Company provide that no
proposals or nominations of directors by stockholders shall be presented for
vote at an Annual Meeting of Shareholders unless written notice complying with
the requirements in the Bylaws is provided to the Board of Directors or the
Secretary no later than the close of business on the last business day of the
month of January prior to the Annual Meeting of Stockholders.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE DATE AND
SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE TO
CONTINENTAL STOCK TRANSFER & TRUST COMPANY, 2 BROADWAY, 19TH FLOOR, NEW YORK,
NEW YORK 10004.
By Order of the Executive Committee
of the Board of Directors,
/s/ Melvin L. Epstein
----------------------------
Melvin L. Epstein, Secretary
New York, New York
November 10, 1997
<PAGE>
THINK NEW IDEAS, INC.
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF STOCKHOLDERS
This proxy statement (the "Proxy Statement") is being furnished to
stockholders of THINK New Ideas, Inc., a Delaware corporation (the "Company") in
connection with the solicitation of proxies by the board of directors (the
"Board of Directors") of the Company, for use at the Annual Meeting of
Stockholders to be held on December 11, 1997 at 10:00 a.m. (Pacific Time) at
THINK New Ideas, Inc., 8000 Sunset Boulevard, Penthouse East, Los Angeles,
California 90046 (Phone: 213-866-8000) or at any adjournment thereof (the
"Annual Meeting"), as set forth in the accompanying Notice of Annual Meeting.
This Proxy Statement and the accompanying Proxy Card are first being mailed to
stockholders of the Company on or about November 11, 1997. The principal
executive offices of the Company are located at 45 West 36th Street, 12th Floor,
New York, New York 10018.
The Annual Meeting has been called to consider and take action on the
following proposals:
1. To elect seven directors to serve for a period of one year or until their
successors have been duly elected and qualified;
2. To approve the adoption of the THINK New Ideas, Inc. Amended and Restated
1997 Stock Option Plan which provides for the issuance of Qualified
Incentive Stock Options and Non-Qualified Stock Options; and
3. To transact such other business as may properly come before the meeting or
any adjournment thereof.
Affirmative action with respect to each of the above proposals has been
taken by unanimous action of the executive committee of the Board of Directors
(the "Executive Committee"). The Board of Directors established the Executive
Committee in June 1997 and empowered such committee with all of the rights,
powers, privileges, duties and responsibilities of the Board of Directors in the
management of the business and affairs of the Company to the extent not assigned
to other committees and as permitted by Delaware law, the Certificate of
Incorporation and the Bylaws of the Company. Accordingly, unless otherwise noted
or the context otherwise requires, references to the Board of Directors should
be construed to mean the Executive Committee thereof. The Board of Directors
recommends that the stockholders vote in favor of each of the proposals.
The Company's Annual Report on Form 10-KSB for the fiscal year ended June
30, 1997 is enclosed herewith. Additional copies thereof maybe obtained at no
extra cost upon written request delivered to Mr. Melvin Epstein, Secretary, at
THINK New Ideas, Inc., 45 West 36th Street, 12th Floor, New York, New York
10018.
<PAGE>
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement is being furnished to stockholders of the Company in
connection with the solicitation of proxies by the Board of Directors for use at
the Annual Meeting to be held at the time, place, and for the purposes set forth
in the accompanying Notice of Annual Meeting (including any adjournments
thereof).
RECORD DATE
The close of business on October 13, 1997, has been fixed as the record
date for the determination of stockholders entitled to notice of and to vote at
the Annual Meeting (the "Record Date"). As of the Record Date, there were
6,611,668 shares of Common Stock, par value $.0001 per share, of the Company
(the "Common Stock") issued and outstanding. Each share of Common Stock of
record as of the Record Date is entitled to one vote on each matter properly
brought before the Annual Meeting. Only holders of record of shares of Common
Stock as of the close of business on the Record Date will be entitled to vote at
the Annual Meeting. The Company's stock transfer books will not be closed.
QUORUM; VOTING
The holders of a majority of all of the shares of Common Stock entitled to
vote at the Annual Meeting (present in person or by proxy) will constitute a
quorum for the transaction of business at the Annual Meeting. If a quorum should
not be present, the Annual Meeting may be adjourned from time to time until a
quorum is obtained. Each share of Common Stock entitled to vote and represented
by properly executed proxies received prior to the Annual Meeting, and not
revoked, will be voted at the Annual Meeting in accordance with the instructions
indicated on such proxies. If no instructions are indicated on an otherwise
properly executed proxy, the shares of Common Stock represented by such proxy
will be voted as recommended by the Board of Directors. Shares of Common Stock
as to which authority to vote has been withheld with respect to the election of
any nominee for director will not be counted as a vote for such nominee.
Abstentions and broker non-votes will be counted for purposes of determining the
presence or absence of a quorum for the transaction of business at the Annual
Meeting but will not counted as an affirmative vote for purposes of determining
whether a proposal has been approved.
REVOCATION
Proxies given by stockholders of record for use at the Annual Meeting may
be revoked at any time prior to the exercise of the powers conferred therein. In
addition to revocation in any other manner permitted by law, stockholders of
record giving a proxy may revoke the proxy by an instrument in writing, executed
by the stockholder or his attorney authorized in writing or, if the stockholder
is a corporation, under its corporate seal, by an officer or attorney thereof
duly authorized, and deposited either at the corporate headquarters of the
Company at any time up to and including the last business day preceding the day
of the Annual Meeting, or any adjournment thereof, that the proxy is to be used,
or with the chairman of such meeting on the day thereof or on the adjournment
thereof, and upon either of such deposits the proxy is revoked.
<PAGE>
As of the Record Date, all of the present directors, as a group of seven
(7) persons, own beneficially 1,744,625 shares of Common Stock (26.4% of the
total outstanding shares of Common Stock) and all of the present directors and
executive officers of the Company, as a group of ten (10) persons, owned
beneficially 2,261,234 shares (32.5 % of the total outstanding shares of Common
Stock). The Company believes that such officers and directors intend to vote
their shares of Common Stock for each of the proposals set forth herein. To the
knowledge of management, as of the Record Date, the only executive officers,
directors and nominees for director who owned beneficially five percent (5%) or
more of the Company's outstanding shares of Common Stock were Scott Mednick and
Ronald Bloom. Frank DeLape, a former director of the Company, is an officer,
director and principal stockholder of Benchmark Equity Group, Inc.
("Benchmark"), which owned beneficially 14% of the outstanding shares of Common
Stock. In addition to the foregoing, Omnicom Group Inc. ("Omnicom") owned
beneficially 18.2% of the outstanding shares of Common Stock. Barry Wagner, a
director of the Company, is the Secretary of and General Counsel to Omnicom
Group Inc. See "Security Ownership of Certain Beneficial Owners and Management."
EXPENSES OF SOLICITATION
All expenses of this solicitation including the costs of preparing and
mailing this Proxy Statement, will be borne by the Company. The Company may
reimburse brokerage firms, custodians, nominees, fiduciaries and others for
their reasonable expenses in forwarding proxy materials to the beneficial owners
and soliciting them to execute the proxies. Directors, officers and employees of
the Company may also solicit proxies, in person or by telephone, telegram,
letter, facsimile or other means of communication. Such persons will not be
compensated for doing so, but may receive reimbursement for reasonable
out-of-pocket expenses in connection with such solicitation.
ALL PROXIES RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED
ON SUCH PROXIES. PROXIES WILL BE VOTED IN FAVOR OF A PROPOSAL IF NO CONTRARY
SPECIFICATION IS MADE. ABSTENTIONS AND BROKER NON-VOTES ARE COUNTED FOR PURPOSES
OF DETERMINING THE PRESENCE OR ABSENCE OF A QUORUM BUT ARE NOT COUNTED AS AN
AFFIRMATIVE VOTE FOR PURPOSES OF DETERMINING WHETHER A PROPOSAL HAS BEEN
APPROVED. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE DISCRETION OF THE
BOARD OF DIRECTORS WITH RESPECT TO ANY OTHER BUSINESS THAT MAY COME BEFORE THE
MEETING.
DISSENTERS' RIGHTS OF APPRAISAL
The Board of Directors has not proposed any action for which the laws of
the State of Delaware, the Certificate of Incorporation or Bylaws of the Company
provide a right of a stockholder to dissent and obtain payment for shares.
<PAGE>
INTEREST OF OFFICERS AND DIRECTORS
IN MATTERS TO BE ACTED UPON
Officers or directors of the Company have a substantial interest in both of
the matters to be acted upon at the Annual Meeting. Each of the nominees is
currently a director of the Company and has been nominated for re-election for a
period of one (1) year as set forth in Proposal One. Every officer and director
has an interest in the approval and ratification of the adoption of the THINK
New Ideas, Inc. Amended and Restated 1997 Stock Option Plan that is the subject
of Proposal Two to the extent that such persons are or will be eligible to
participate in such plan.
PROPOSAL 1:
TO ELECT SEVEN DIRECTORS TO SERVE
FOR A PERIOD OF ONE YEAR OR UNTIL THEIR
SUCCESSORS HAVE BEEN DULY ELECTED AND QUALIFIED
Seven (7) directors are being nominated for election at the Annual Meeting.
There are currently seven (7) members on the Board of Directors. All of the
nominees for directors currently serve as members of the Board of Directors and
are standing for re-election. Each director will serve for a period of one (1)
year or until a successor has been duly elected and qualified. Proxies in the
accompanying form will be voted for the nominees listed herein, except where the
authority to do so is withheld by the stockholder. The election of directors
will be decided by a majority of votes cast.
The nominees for directors are: Scott Mednick, Ronald Bloom, Adam Curry,
Barry Wagner, Larry Kopald, Richard Char and Marc Canter.
If any of the nominees should become unable to accept election, the persons
named in the proxy may vote for such other person or persons, or a lesser number
of persons, as may be designated by the Board of Directors. Management of the
Company has no reason to believe that any of the nominees will be unable to
serve.
Biographical information with respect to the nominees is set forth in the
section of this Proxy Statement entitled "Directors and Executive Officers."
THE BOARD OF DIRECTORS URGES STOCKHOLDERS TO VOTE FOR EACH OF THE NOMINEES
FOR DIRECTOR SET FORTH ABOVE.
DIRECTORS AND EXECUTIVE OFFICERS
Biographical information with respect to the current executive officers and
directors, and the nominees for directors, is set forth below. There are no
family relationships between or among any of such persons. The current directors
and executive officers of the Company are:
<PAGE>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
Scott Mednick 41 Chief Executive Officer and Chairman of
the Board
Ronald Bloom 45 President, Chief Operating Officer and
Director
Melvin Epstein 50 Chief Financial Officer and Secretary
Adam Curry 33 Chief Technology Officer and Director
Larry Kopald 43 Chief Creative Officer and Director
James Grannan 34 Executive Vice President
Susan Goodman 42 Executive Vice President
James Carlisle 50 Executive Vice President
Richard Char 38 Director
Marc Canter 40 Director
Barry Wagner 57 Director
SCOTT MEDNICK has been Chairman of the Board of Directors and Chief Executive
Officer of the Company since its inception in January 1996. Mr. Mednick founded
The Mednick Group a subsidiary primarily engaged in the provision of strategic
marketing and corporate and brand positioning, in 1985. Mr. Mednick is an
officer and director of The Mednick Group. Mr. Mednick holds a B.F.A. Degree
from the Rhode Island School of Design and a M.A. from the University of Santa
Monica.
RONALD BLOOM has been a Director and the President and Chief Operating Officer
of the Company since June 1996. From 1995 to 1996, Mr. Bloom was Chief Operating
Officer and General Manager of On Ramp, a subsidiary primarily engaged in the
provision of Internet and intranet systems and services and presently serves as
its Vice President and Secretary. Prior to joining On Ramp, Mr. Bloom founded
and served as the President of Ron Bloom Productions, a production company and
consulting firm founded by Mr. Bloom from 1989 to 1994.
MELVIN EPSTEIN has been the Chief Financial Officer of the Company since
November 1996. From 1994 to August 1996, Mr. Epstein was Managing Director of TN
Services, a unit of True North Communications, an advertising agency. Prior to
joining TN Services, Mr. Epstein was the Chief Financial Officer of Backer
Spielvogel Bates, a subsidiary of Saatchi & Saatchi, P.L.C., from 1987 to 1994.
Mr. Epstein holds a B.S. in Accounting from Queens College.
ADAM CURRY has been a Director and the Chief Technical Officer of the Company
since June 1996. Mr. Curry founded and has been Chairman of the Board of
Directors of On Ramp since 1994 and its President since March 1996. From 1987 to
1992, Mr. Curry served as an On-Air Personality for MTV Networks in New York.
JAMES GRANNAN has been Executive Vice President of the Company since June 1996.
Mr. Grannan founded Creative Resources, a Subsidiary primarily engaged in the
provision of strategic marketing and corporate and brand positioning services,
in 1994. Mr. Grannan was Creative Manager for the Coca-Cola Company from 1992 to
1994 and Promotional Packaging and Design Manager for the Coca- Cola Company
from 1988 to 1992. Mr. Grannan holds a B.A. Degree in Advertising Design from
the Atlanta College of Art.
<PAGE>
SUSAN GOODMAN has been Executive Vice President of the Company since June 1996.
Ms. Goodman founded The Goodman Group, a subsidiary primarily engaged in the
provision of strategic marketing and corporate and brand positioning services,
in 1993. Previously she was Director of Client Services at Chiat Day Direct
Marketing from February 1992 through July 1992. Ms. Goodman serves on the
Operating Committee of the Direct Marketing Association's Business to Business
Council. Ms. Goodman has a B.A. in history from Tufts University and received
her M.B.A. in Marketing, Finance and Strategic Planning from Northwestern
University's Kellogg School of Management.
JAMES CARLISLE has been Executive Vice President of the Company since June 1996.
Dr. Carlisle founded NetCube Corporation, a Subsidiary primarily engaged in the
provision of database and information management and utilization services, in
1978. Dr. Carlisle received his Ph.D. and M.Phil. from Yale University's School
of Organization and Management and a B.S. in Engineering with Honors from
Princeton University.
BARRY WAGNER has been a Director of the Company since September 1996. Mr. Wagner
has been an employee of Omnicom and its predecessor companies since 1974, and
currently serves as Secretary and General Counsel of Omnicom. Mr. Wagner also
serves as Secretary and Chief Legal Officer of BBDO Worldwide Inc. and is Senior
Vice President and Chief Legal Officer of BBDO New York, both of which are part
of Omnicom. Prior to joining Omnicom, Mr. Wagner was an attorney with the
National Broadcasting Company and the Federal Reserve Bank of New York. Mr.
Wagner is a graduate of Hamilton College and Harvard Law School.
RICHARD CHAR has been a director of the Company since August 1997. Mr. Char is
Managing Director and Head of Technology Investment Banking at Cowen & Company.
Prior to joining Cowen & Company, Mr. Char was an attorney for Wilson Sonsini
Goodrich & Rosati for thirteen years. Mr. Char holds an A.B. from Harvard
University and a J.D. from Stanford University.
MARC CANTER has been a director of the Company since August 1997. Mr. Canter has
been the Chairman of Canter Technology since founding the company in 1992. Prior
to forming Canter Technology, Mr. Canter was the founder and chairman of
MacroMind, which merged into MacroMedia, until he retired in 1991. Mr. Canter
holds a B.F.A. from Oberlin Conservatory of Music.
LARRY KOPALD has been a director of the Company since September 1997. Mr. Kopald
is the Chief Creative Officer of the Company and the President of the Company's
Los Angeles office. Prior to joining the Company, Mr. Kopald was the Executive
Creative Officer of Fathom, a division of Ketchum Communications, Inc. from 1995
to 1997. Prior to joining Fathom, Mr. Kopald was the Executive Creative
Director/Executive Vice President of Foote, Coyne & Belding from 1987 to 1994.
In 1994, Mr. Kopald founded The Kopald Group, a consulting firm specializing in
strategic and creative issues. Mr. Kopald holds a B.S. in Pre-Med. from Drake
and a Masters degree in Journalism form Northwestern University.
ANGEL MARTINEZ, formerly a director of the Company, resigned from his position
on the Board of Directors in February 1997.
<PAGE>
MICHAEL RIBERO, formerly a director of the Company, resigned from his position
on the Board of Directors in August 1997.
FRANK DELAPE, formerly a director of the Company, resigned from his position on
the Board of Directors in September 1997.
COMPOSITION OF THE BOARD OF DIRECTORS
All directors of the Company are elected to serve in such capacities until
the subsequent annual meeting of stockholders of the Company or until their
successors are duly elected and qualified. Officers of the Company serve at the
discretion of the Board of Directors. The Bylaws provide that the number of
directors of the Company shall not be less than two nor more than twelve.
Currently, the Board of Directors has seven (7) members, two of whom (Messrs.
Char and Canter) are independent directors.
Pursuant to the rules of the Nasdaq National Market Systemsm, the Company
is required to have two independent directors. In February 1997, Angel Martinez,
an independent director, resigned, leaving one independent director on the Board
of Directors. In August 1997, Michael Ribero, the remaining independent
director, resigned from the Board of Directors. In August 1997, Richard Char and
Marc Canter, both independent directors, were elected to fill the vacancies on
the Board of Directors created by the resignations of Messrs. Martinez and
Ribero. One of the purposes of the Annual Meeting is to elect two independent
directors in compliance with the rules of the Nasdaq National Market Systemsm.
Two of the nominees for directors (Messrs. Char and Canter) are independent.
The Board of Directors held thirteen (13) meetings during the fiscal year
ended June 30, 1997. During such year, two former directors (Messrs. Martinez
and Ribero) attended fewer than seventy-five percent (75%) of the meetings of
the Board of Directors. No incumbent director attended fewer than ninety percent
(90%) of the meetings of the Board of Directors.
COMMITTEES OF THE BOARD OF DIRECTORS
AUDIT COMMITTEE. The Company's audit committee (the "Audit Committee") is
responsible for making recommendations to the Board of Directors concerning the
selection and engagement of the Company's independent certified public
accountants and for reviewing the scope of the annual audit, audit fees, and
results of the audit. The Audit Committee also includes review and discussion
with management and the Board of Directors of such matters as accounting
policies, internal accounting controls and procedures for preparation of
financial statements. Prior to his resignation, Mr. Ribero served on the Audit
Committee. Currently, Messrs. Char and Wagner serve as members of the Audit
Committee, having recently replaced Mr. Ribero. The Audit Committee held no
meetings during the fiscal year ended June 30, 1997. However, matters which
would otherwise be addressed by the Audit Committee were addressed at meetings
of the Board of Directors.
<PAGE>
COMPENSATION COMMITTEE. The Company's compensation committee (the
"Compensation Committee") approves the compensation for executive employees of
the Company. The Compensation Committee reviews and recommends to the Board of
Directors the compensation and benefits of all officers of the Company, reviews
general policy matters relating to compensation and benefits of employees of the
Company and administers the Company's Amended and Restated 1997 Stock Option
Plan. Prior to their resignations, Messrs. Ribero and Martinez served on the
Compensation Committee. Currently, Messrs. Char and Canter serve as members of
the Compensation Committee. The Compensation Committee held one meeting during
the fiscal year ended June 30, 1997.
EXECUTIVE COMMITTEE. The Executive Committee has the rights, privileges,
duties and responsibilities to exercise the full power and authority of the
Board of Directors in the management of the business and affairs of the Company,
to the extent not assigned to other committees of the Board of Directors and to
the extent permitted by Delaware law, the Articles of Incorporation of the
Company and the Bylaws of the Company. Messrs. Mednick, Bloom and Wagner are
currently members of the Executive Committee. The Executive Committee held one
meeting during the fiscal year ended June 30, 1997. The Company has no
nominating committee; however, the Executive Committee currently addresses
matters which would otherwise be addressed by a nominating committee.
MATERIAL PROCEEDINGS
There are no material proceedings to which any director, officer or
affiliate of the Company, any owner of record or beneficially of more than five
percent of any class of voting securities of the Company, or any associate of
any such director, officer, affiliate of the Company or security holder is a
party adverse to the Company or any of its subsidiaries or has a material
interest adverse to the Company or any of its subsidiaries.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act of 1934, as amended (the "Exchange Act")
requires the Company's officers and directors, and persons who own more than ten
percent (10%) of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership of equity securities of the
Company with the Securities and Exchange Commission ("SEC"). Officers,
directors, and greater than ten percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms that
they file.
Based solely upon a review of Forms 3, Forms 4 and Forms 5 furnished to the
Company pursuant to Rule 16a-3 under the Exchange Act, it is the Company's
belief that, other than as set forth below, any such forms required to be filed
pursuant to Section 16(a) of the Exchange Act were filed, as necessary, by the
officers, directors and securityholders required to file the same but some were
filed late as set forth below.
<PAGE>
Based on the Company's knowledge, Messrs. Mednick, Bloom, Curry, Epstein,
Wagner, DeLape, Ribero and Martinez were required to file Forms 5 for the fiscal
year ended June 30, 1996. Each of Messrs. Mednick, Bloom, Curry, DeLape, Wagner
and Epstein filed such forms late. To the Company's knowledge, Messrs. Ribero
and Martinez did not file Forms 5. Other than Mr. Epstein who received options
to purchase 133,333 shares of Common Stock, each of the foregoing individuals
received during the fiscal year ended June 30, 1997, options to acquire 20,000
shares of Common Stock, which transactions would have been the subject of such
Forms 5.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the aggregate cash compensation paid for
services rendered to the Company during the last two fiscal years by each person
serving as the Chief Executive Officer of the Company and the five most highly
compensated executive officers serving at June 30, 1997 whose compensation was
in excess of $100,000 (the "Named Executive Officers").
<TABLE>
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------------- ---------------------- ---------
SECURITIES
NAME AND RESTRICTED UNDERLYING
PRINCIPAL OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION($) (AWARDS($) SARS(#) PAYOUTS($) COMPENSATION($)
-------- ---- --------- -------- --------------- ---------- ------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Scott A 1997 225,000 28,782 -- -- 20,000(2) -- 9,600(3)
Mednick(1)
Chairman and 1996 225,000 11,376 20,000 -- -- -- 9,600(3)
CEO
Ronald E 1997 125,000 69,696(5) -- -- 20,000(2) -- 9,600(3)
Bloom(4)
President 1996 106,250 58,234 -- -- -- -- 9,600(3)
Adam C 1997 125,000 81,480(5) -- -- 20,000(2) -- 9,600(3)
Curry(6)
Chief 1996 125,000 2,684 -- -- -- -- 9,600(3)
Technology
Officer
Melvin 1997 156,923 -- -- -- 133,333(2) -- --
Epstein(7)
Chief 1996 -- -- -- -- -- -- --
Financial
Officer
Susan 1997 195,000 46,825 -- -- 36,667(2) -- --
Goodman(8)
Executive 1996 138,000 -- -- -- -- -- 130,000(9)
Vice
President
Larry 1997 300,000 -- -- -- 250,000 -- 9,600(3)
Kopald(10)
President, 1996 -- -- -- -- -- -- --
The
Mednick Group
</TABLE>
- ----------
1 Mr. Mednick commenced his employment with the Company in March 1996 and was
appointed Chairman and Chief Executive Officer in March 1996.
2 Represents shares of Common Stock issuable upon exercise of options granted
to the noted officer pursuant to the Amended and Restated 1997 Stock Option
Plan at an exercise price of $4.05 per share for each individual, other
than Mr. Bloom, who owned in excess of ten (10) percent of the outstanding
Common Stock on the date of grant and whose options have an exercise price
of $4.46 per share (representing the fair market value of the Common Stock
at the time of grant as determined in accordance with the provisions of
such plan).
3 Represents car allowances provided to the noted individuals.
4 Mr. Bloom commenced his employment with the Company in June 1996 and was
appointed President in July 1996.
5 Represents a bonus as determined by the Compensation Committee of the Board
of Directors.
<PAGE>
6 Mr. Curry commenced his employment with the Company in June 1996 and was
appointed Chief Technology Officer in June 1996.
7 Mr. Epstein commenced his employment with the Company in August 1996.
8 Ms. Goodman commenced her employment with the Company in June 1996.
9 Represents distributions to the noted executive as the former sole
stockholder of the S.D. Goodman Group, Inc., a Subsidiary and previously a
Subchapter S corporation.
10 Mr. Kopald commenced his employment with the Company effective as of May
31, 1997; consequently, prior to the end of fiscal 1997, Mr. Kopald
received approximately $25,000 of the salary noted above.
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1997)
The following table sets forth certain information with respect to the
options granted during the fiscal year ended June 30, 1997 for the Named
Executive Officers:
<TABLE>
NUMBER OF SECURITIES PERCENT OF TOTAL (1)EXERCISE
UNDERLYING OPTIONS/SARS GRANTED TO OR BASE
NAME OPTIONS/SARS GRANTED (#)EMPLOYEES IN FISCAL YEAR PRICE($/SH) EXPIRATION DATE
---- -------------------- --------------------------- ----------- ---------------
<S> <C> <C> <C> <C>
Scott Mednick 20,000 1.76 4.05 2002
Ronald Bloom 20,000 1.76 4.46 2002
Adam Curry 20,000 1.76 4.05 2002
Melvin Epstein 133,333 11.72 4.05 2007
Susan Goodman 36,667 3.22 4.05 2007
Larry Kopald 250,000 21.97 3.69 2002
</TABLE>
- ----------
1 Based upon the closing sales price of the Company's Common Stock on the day
prior to the grant date as quoted by the Nasdaq National Market
System.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
There were no options exercised during the fiscal year ended June 30, 1997
by the Named Executive Officers. The following table sets forth certain
information with respect to unexercised options held by such persons at the end
of fiscal 1997.
<TABLE>
NUMBER OF SECURITIES UNDERLYING
SHARES UNEXERCISED OPTIONS/SARS AT VALUE OF UNEXERCISED IN THE MONEY
ACQUIRED ON VALUE FY-END(#) OPTIONS/SARS AT FY-END($)(1)
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Scott Mednick None None None 20,000 None $ 1,600
Ronald Bloom None None None 20,000 None $ 1,600
Adam Curry None None None 20,000 None $ 1,600
Melvin Epstein None None None 133,333 None $ 10,667
Susan Goodman None None None 36,667 None $ 2,933
Larry Kopald None None None 250,000 None $110,000
</TABLE>
- ----------
1 The calculations of the value of unexercised options are based on the
difference between the closing sales price quoted by the Nasdaq National
Market System of the Common Stock on June 30, 1997 and the exercise price
of each option, multiplied by the number of shares of Common Stock covered
by the option.
DIRECTOR COMPENSATION
Employee directors receive no compensation for acting as directors or
attending meetings of directors. Non-employee directors receive $1,000 per year
<PAGE>
for each year such director serves on the Board of Directors and $2,500 per
meeting attended. In addition, all directors are currently entitled on June 30
each year to receive options to purchase 20,000 shares of Common Stock, after at
least one full year of service and are eligible to receive options under the
Company's stock option plans. All directors are entitled to reimbursement of
reasonable expenses related to attending meetings of the directors. Frank
DeLape, a former director of the Company, is a principal and director of
Benchmark, which received a $500,000 finder's fee during the fiscal year ended
June 30, 1997 and receives consulting fees of $7,000 per month from the Company.
See "Certain Transactions-Consulting and Finder's Agreements."
EMPLOYMENT AGREEMENTS
In June 1996, the Company entered into an employment agreement with each of
Scott Mednick, Ronald Bloom, Adam Curry and James Carlisle, each of which
provides for an initial term of three (3) years, subject to automatic extension
for a period of two years in the absence of notice to the contrary at the option
of the Company. Mr. Mednick's employment agreement provides that he is entitled
to receive an annual salary of $225,000. Pursuant to the terms of their
respective employment agreements, each of Messrs. Bloom, Curry and Carlisle
receives an annual salary of $125,000 and are entitled to receive bonuses as
determined by the Board of Directors. The Compensation Committee has granted
bonuses to each of Messrs. Mednick, Bloom and Curry in the aggregate amounts,
respectively, of $28,782; $69,696 and $81,480 In connection with renegotiation
of such agreements, the Compensation Committee recently authorized increases to
become effective January 1998 in the salaries of Messrs. Mednick, Bloom and
Curry to $260,000 per year respectively (with up to ten percent (10%) annual
increases thereafter).
The Company also entered into an employment agreement with James Grannan
which provided for a term of one year, subject to renewal for a period of one
year at the discretion of the Company. On July 31, 1997, Mr. Grannan's
employment agreement was renewed for a period of one year. Pursuant to the terms
of such agreement, Mr. Grannan receives an annual salary of $125,000 and bonuses
as determined by the Board of Directors. In connection with the recent renewal,
Mr. Grannan was granted a $15,000 bonus and options to acquire 10,000 shares of
Common Stock under the 1997 Plan (as hereinafter defined).
The Company is also a party to an employment agreement with Susan Goodman,
entered into in June 1996, which provides for an initial term of three years.
Pursuant to the terms of the employment agreement, Ms. Goodman is entitled to
receive an annual salary of $195,000 and bonuses thereafter as determined by the
Board of Directors. In addition, Ms. Goodman has received bonuses pursuant to
the terms of her employment agreement with the Company. Recently, in connection
with renegotiation of such agreement, the Compensation Committee authorized an
increase to become effective January 1998 of Ms. Goodman's salary to $215,000
and 25,000 shares of Common Stock under the 1997 Plan (as hereinafter defined).
The Company also entered into an employment letter with Melvin Epstein,
which provides for a term of one year, subject to renewal for periods of one (1)
<PAGE>
year at the discretion of the Company. Pursuant to the terms of such agreement,
Mr. Epstein receives an annual salary of $180,000.
In April 1997, the Company and David Hieb, formerly the owner of Internet
One, entered into an agreement pursuant to which Mr. Hieb's employment with the
Company was terminated in exchange for the payment to Mr. Hieb of $40,000 and
acceleration of the vesting of options previously granted to him under the 1997
Plan to acquire 10,470 shares of Common Stock.
In May 1997, in connection with the Company's acquisition of certain assets
of Ketchum, the Company reached an agreement with Larry Kopald, pursuant to
which Mr. Kopald is entitled to receive an annual salary of $300,000 the first
year of his employment and $350,000 the second year of his employment. In
addition, Mr. Kopald is entitled to receive bonuses of up to $150,000 in the
first year of his employment and up to $100,000 in the second year of his
employment based upon a principal account entering into advertising services
agreements. Mr. Kopald is also entitled to receive bonuses of up to ten percent
(10%) of profits on billings on the such account in excess of $16 million
dollars in the first year of his employment agreement and up to ten percent
(10%) of profits on billings on the such account in excess of $20 million
dollars in the second year of his employment, and options exercisable to
purchase up to 250,000 shares of Common Stock in equal increments over a period
of four years at an exercise price of $3.69 per share, the market price of the
Common Stock at the date of grant.
The Company's employment agreements provide for termination by the Company
upon death or disability of the individual and may be terminated with or without
cause (as defined therein). Such agreements also provide for severance payments
upon termination without cause based upon a multiple of the monthly salaries
provided for therein (for up to twelve (12) months following the number of
months otherwise remaining under such agreements). In addition, all of the
foregoing employment agreements contain non-competition and confidentiality
provisions that extend beyond the respective terms of such agreements for
periods of up to one year.
CONSULTING AGREEMENTS
See "Certain Transactions" for a description of the consulting and similar
agreements to which the Company is a party.
LIMITATION ON LIABILITY; INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Certificate of Incorporation limits the personal liability of directors
to the fullest extent permitted by Section 102(b)(7) of the Delaware General
Corporation Law. Section 145 of the Delaware General Corporation Law provides
that a corporation's certificate of incorporation may limit the personal
liability of its directors for monetary damages for breach of their fiduciary
duties as directors except for liability: (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) arising under Section 174 of the Delaware General
Corporation Law; or (iv) for any transaction from which the director derived an
improper personal benefit.
<PAGE>
The effect of the foregoing is to require the Company to indemnify the
officers and directors of the Company for any claim arising against such persons
in their official capacities if such person acted in good faith and in a manner
that he reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The Company is in the
process of entering into indemnification agreements with its officers and
directors reflecting the foregoing.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGMENT
Shares of Common Stock are the only outstanding voting securities of the
Company. As of the Record Date (the close of business on October 13, 1997),
there were 6,611,668 shares of Common Stock issued and outstanding.
The following table sets forth certain information, to the best of the
Company's knowledge, with respect to the stock ownership of: (a) each person
known by the Company to be the beneficial owner of five percent (5%) or more of
the outstanding Common Stock; (b) each of the Company's directors and executive
officers; and (c) all directors and executive officers as a group, as reported
by each such person, as of the Record Date.
NUMBER OF SHARES % OF OUTSTANDING
NAME AND ADDRESS OF COMMON STOCK SHARES OF COMMON
OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) STOCK BENEFICIALLY OWNED
- ------------------- --------------------- ------------------------
Frank M. DeLape(2) 898,898(3) 13.6%
16406 Brook Forest Drive
Houston, Texas 77059
Benchmark Equity Group, Inc. 682,231(4) 10.3%
700 Gemini
Houston, Texas 77058
Ronald Bloom(5) 955,933(6) 14.3%
45 West 36th Street
New York, New York 10018
Scott A. Mednick(5) 710,467(6) 10.6%
8000 Sunset Boulevard,
Penthouse East
Los Angeles, California 90046
Adam Curry(5) 258,225(6) 3.9%
30 Glen Road
Verona, New Jersey 07044
<PAGE>
NUMBER OF SHARES % OF OUTSTANDING
NAME AND ADDRESS OF COMMON STOCK SHARES OF COMMON
OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) STOCK BENEFICIALLY OWNED
- ------------------- --------------------- ------------------------
Melvin Epstein(7) 33,333(8) *
45 West 36th Street
New York. New York 10018
Larry Kopald(5) 250,000(9) *
8000 Sunset Boulevard,
Penthouse East
Los Angeles, California 90046
James Carlisle(10) 211,849(11) 3.2%
45 Allison Road
Alpine, New Jersey 07620
Susan Goodman(10) 58,790(12) *
45 West 36th Street
New York. New York 10018
James Grannan(10) 12,637(13) *
500 Bishop Street, Suite 5A
Atlanta, GA 30305
Omnicom Group Inc. 1,183,333(14) 17.9%
437 Madison Avenue
New York, New York 10022
Barry Wagner(15) 20,000(16) *
437 Madison Avenue, 9th Floor
New York, New York 10022
Richard Char(15) 20,000(16) *
14 Sunkist Lane
Los Altos, California 94022
Marc Canter(15) 20,000(16) *
701 Rhode Island
San Francisco, California
94107
All Directors and Executive 2,261,234 32.7%
Officers as a Group (11
persons)
- ----------
* Denotes less than one percent.
1 Unless otherwise noted, all of such shares of Common Stock listed above are
owned of record by each individual named as beneficial owner and each such
individual has sole voting and dispositive power with respect to the shares
of Common Stock owned. The percentage of ownership is determined by
assuming that any options or convertible securities held by the noted
securityholder which are exercisable within 60 days from the date hereof
have been exercised or converted, as the case may be.
2 Former director of the Company. See "Directors and Executive Officers"
below.
3 Includes 682,231 shares and 180,000 shares of Common Stock beneficially
owned by Benchmark Equity Group, Inc. and Trident II, L.L.C., respectively
and 16,667 shares of Common Stock beneficially owned by Frank DeLape. Also
includes options to acquire 20,000 shares of Common Stock granted to Frank
DeLape as a director of the Company prior to his resignation. Mr. DeLape is
an officer, director and principal stockholder of Benchmark Equity Group,
<PAGE>
Inc., a principal stockholder of the Company, and is an officer, director
and principal of Oak Tree Capital, Inc., which is the manager and a member
of Trident II, L.L.C. Mr. DeLape may be deemed to be beneficial owner of
all such shares. Excludes 97,461 shares held by Christopher Efird, a
principal of Benchmark Equity Group, Inc., and a former director of the
Company.
4 Excludes 180,000 shares of Common Stock owned by Trident II, L.L.C., 16,667
shares of Common Stock owned by Frank DeLape and 20,000 shares of Common
Stock issuable upon exercise of options granted to Mr. DeLape.
5 Officer and director of the Company. See "Directors and Executive Officers"
below.
6 Includes 80,000 shares of Common Stock issuable upon exercise of currently
exercisable options granted to the noted securityholder, but excludes
20,000 shares of Common Stock subject to options which are not currently
exercisable. See "Executive Compensation."
7 Chief Financial Officer of the Company. See "Directors and Executive
Officers" below.
8 Includes 33,333 shares of Common Stock issuable upon exercise of currently
exercisable options granted to the noted securityholder, but excludes
125,000 shares of Common Stock subject to options which are not currently
exercisable. See "Executive Compensation."
9 Includes 250,000 shares of Common Stock issuable upon exercise of options
granted to the noted securityholder, which options are not currently
exercisable. See "Executive Compensation."
10 Officer of the Company.
11 Includes 16,667 shares of Common Stock issuable upon exercise of currently
exercisable options granted to the noted securityholder, but excludes
50,000 shares of Common Stock subject to options which are not currently
exercisable.
12 Includes 9,167 shares of Common Stock issuable upon exercise of options
granted to the noted securityholder but excludes 52,500 shares of Common
Stock subject to options which are not currently exercisable.
13 Includes 8,667 shares of Common Stock issuable upon exercise of options
granted to the noted securityholder but excludes 36,000 shares of Common
Stock subject to options which are not currently exercisable.
14 Includes 120,000 shares issued to Omnicom Group Inc. in connection with the
Company's acquisition of the assets and operations of Fathom Advertising
from Ketchum Communications, Inc., a wholly-owned subsidiary of Omnicom
Group Inc.
15 Director of the Company. See "Directors and Executive Officers" below.
16 Includes 20,000 shares of Common Stock issuable upon exercise of options
granted to the noted securityholder, which options are not currently
exercisable.
CERTAIN TRANSACTIONS
ISSUANCE OF FOUNDERS' STOCK
In January 1996, Scott Mednick, Ronald Bloom, Benchmark Equity Group, Inc.
and Christopher Efird, as the founding stockholders of the Company, acquired an
aggregate of 2,171,506 shares of Common Stock in exchange for payment of an
aggregate of $656 therefor.
CORPORATE REORGANIZATION
In connection with the Company's acquisition of its subsidiaries in June
1996, the Company issued to Scott Mednick, as the sole stockholder of Scott A.
Mednick and Associates, Inc., an aggregate of 208,084 shares of Common Stock. In
addition, in June 1996, the Company issued: (a) an aggregate of 200,405 shares
of Common Stock for the benefit of Adam Curry in connection with the Company's
acquisition of On Ramp, Inc.; (b) an aggregate of 195,182 shares of Common Stock
<PAGE>
to James Carlisle in connection with the Company's acquisition of NetCube
Corporation; (c) an aggregate of 3,970 shares of Common Stock to James Grannan
in connection with the Company's acquisition of Creative Resources, Inc.; and
(d) an aggregate of 49,623 shares of Common Stock to Susan Goodman in connection
with the Company's acquisition of The Goodman Group. Each of the foregoing
individuals is an officer and/or director of the Company.
FINANCINGS
In March 1996, the Company obtained a loan in the aggregate principal
amount of $270,000 from three separate lenders, including Trident II, L.L.C. and
Frank M. DeLape. In exchange for extension of the loan, the Company issued 10%
convertible promissory notes (the "10% Notes"), including one in the principal
amount of $225,000 to Trident II, L.L.C. and one in the principal amount of
$20,000 to Mr. DeLape. Mr. DeLape, a founder of the Company and a former
director, is an officer, director and principal of Benchmark Equity Group, Inc.
("Benchmark") and Oak Tree Capital, Inc., which is the manager and a member of
Trident II, L.L.C. In August 1996, an aggregate of $27,000 in principal amount
of the 10% Notes was converted into an aggregate of 216,667 shares of Common
Stock. In July 1996, Trident II, L.L.C. loaned the Company an additional $75,000
evidenced by a separate non-convertible promissory note. Principal and interest
outstanding under the 10% Notes and the $75,000 non-convertible promissory note
were repaid out of the proceeds of a transaction with Omnicom Group Inc. in
August 1996, described below.
In April 1996, the Company loaned an aggregate of $1,000,000 to On Ramp,
Inc. ("On Ramp") in connection with the redemption by On Ramp of 100 shares of
its common stock (which shares of common stock represented 66% of the issued and
outstanding capital stock of On Ramp). Such redemption was the result of an
agreement previously reached among the former stockholders of On Ramp arising
out of fundamental differences among such individuals relating to the operation
and business strategy of On Ramp. In addition, the Company agreed to make
available to On Ramp an additional $600,000. Such loans are evidenced by
promissory notes executed on behalf of On Ramp in favor of the Company in the
principal amounts of $1,000,000 and $600,000, respectively (the "On Ramp
Notes"). Amounts outstanding under the On Ramp Notes accrue interest at the rate
of 12% per annum. Payment of principal and interest on the On Ramp Notes was due
on August 16, 1996, subject to a six-month cure period. Repayment of amounts
outstanding under the On Ramp Notes was secured by the pledge in favor of the
Company of 26 shares of common stock of On Ramp by Adam Curry (who, as a result
of the foregoing redemption, became the sole stockholder of On Ramp).
Subsequently, in connection with the Company's acquisition of On Ramp, the
Company acquired all of the issued and outstanding capital stock of On Ramp,
including the shares of common stock subject to the pledge .
In May 1996, the Company loaned $70,000 to Internet One, Inc. ("Internet
One"). Such loan is evidenced by a promissory note executed by Internet One in
favor of the Company (the "Internet One Note"). Amounts outstanding under the
Internet One Note accrue interest at the rate of 12% per annum. Payment of
<PAGE>
principal and interest on the Internet One Note was due on September 30, 1996.
Repayment of amounts outstanding under the Internet One Note was secured by the
pledge in favor of the Company of 132,000 shares of common stock of Internet One
by David R. Hieb. Subsequently, in connection with the Company's acquisition of
Internet One, the Company acquired all of the outstanding shares of capital
stock of Internet One, including the shares of common stock subject to the
pledge.
In connection with the Company's acquisition of NetCube Corporation
("NetCube") in June 1996, Dr. James Carlisle agreed to forgive an aggregate of
approximately $1,220,000 in debt owed to him by NetCube. In addition, the
Company agreed to issue three promissory notes providing for repayment of
amounts owed to each of Dr. Carlisle and his father, Dan Carlisle. Each of such
promissory notes accrued interest at the rate of 8% per annum and was
convertible into shares of Common Stock prior to expiration thereof at the rate
of $7.50 per share. The principal amount of the promissory note issued to Dr.
Carlisle was $132,000 and the principal amounts of the two promissory notes
issued to Dan Carlisle were $288,000 and $515,760, respectively. The $132,000
promissory note issued to Dr. Carlisle and the $288,000 promissory note issued
to Dan Carlisle were repaid prior to the Company's initial public offering in
November 1996. The $515,760 convertible promissory note issued to Dan Carlisle
is payable on March 31, 1998 (or earlier, upon the Company's receipt of
$3,000,000 from a private offering of securities, the sale of 50% of the assets
of the Company or another public offering).
Pursuant to the terms of an agreement with Omnicom: (a) Omnicom purchased
938,667 shares of Common Stock from the Company in exchange for net proceeds of
$4,948,000; (b) the Company appointed Barry Wagner to represent Omnicom on the
Board of Directors; (c) Omnicom agreed not to increase its ownership interest in
the Company absent the approval of the Board of Directors; and (d) Omnicom
granted the Company a right of first refusal to purchase the shares of Common
Stock owned by Omnicom.
In November 1996, four principal stockholders of the Company transferred an
aggregate of 124,667 shares of Common Stock to Omnicom for no cash
consideration. In connection therewith, Omnicom consented to a stock split by
the Company and related amendments to the Omnicom Agreement and the Company
agreed to decrease the number of shares available under the Company's 1996 Stock
Option Plan (which was subsequently terminated and replaced with the Company's
Amended and Restated 1997 Stock Option Plan, which is the subject hereof). See
the description of the Company's stock option plans under Proposal 2
hereinbelow.
CONSULTING AND FINDER'S AGREEMENTS
In March 1996, the Company entered into consulting agreements with
Benchmark pursuant to which the Company paid Benchmark $500,000 in finders fees
and pays $7,000 per month in consulting fees. As of the date hereof, only one of
such agreements (the $7,000 per month agreement) remains in effect and is
scheduled to expire in March 1998. Frank DeLape, a stockholder and former
director of the Company, is a principal and director of Benchmark.
In June 1997, the Company entered into a consulting agreement with Jason H.
Pollak, pursuant to which Mr. Pollak agreed to render to the Company for a
<PAGE>
period of one (1) year certain consulting services, including, among other
things, providing merger and acquisition and investor and public relations
services. In exchange therefor, the Company issued, in July 1997, 50,000 shares
of Common Stock and agreed to issue an aggregate of 150,000 shares of Common
Stock and options to acquire up to 150,000 additional shares of Common Stock.
The securities subject to the consulting agreement are issuable in equal monthly
installments and the option exercise prices are based upon the closing bid price
of the Common Stock in each month that the corresponding options are issued.
ACQUISITION OF ASSETS OF KETCHUM COMMUNICATIONS, INC.
In May 1997, the Company acquired certain of the assets of Ketchum
Communications, Inc., a Pennsylvania corporation and wholly-owned subsidiary of
Omnicom ("Ketchum"). Pursuant to the terms of an Asset Purchase and Forbearance
Agreement, dated May 31, 1997, between the Company and Ketchum, the Company
purchased all of Ketchum's right, title and interest in Fathom Advertising in
Los Angeles, California in exchange for 120,000 shares of Common Stock.
PROPOSAL 2:
TO APPROVE AND RATIFY THE COMPANY'S ADOPTION OF THE
THINK NEW IDEAS, INC. AMENDED AND RESTATED 1997 STOCK OPTION PLAN
In July 1996, the Board of Directors adopted and the stockholders of the
Company approved the THINK New Ideas, Inc. 1996 Stock Option Plan (the "1996
Plan"). Subsequently, in February, 1997, by resolution of the Board of
Directors, the 1996 Plan was terminated and the participants therein were
granted options (identical to those held in the 1996 Plan) in the THINK New
Ideas, Inc. Amended and Restated 1997 Stock Option Plan (the "1997 Plan") which
was adopted by resolution of the Board of Directors in September 1997. The 1997
Plan provides for the grant of options which qualify as incentive stock options
("Incentive Options") under Section 422 of the Internal Revenue Code of 1986, as
amended, to officers and employees of the Company (and its subsidiaries) and
options which do not so qualify ("Non-Qualified Options") to officers,
directors, employees and consultants of the Company (and its subsidiaries). The
Board of Directors deemed it advisable and in the best interests of the Company
and its stockholders to establish the 1997 Plan and has, by resolution, directed
that adoption of the 1997 Plan be presented to the stockholders of the Company
for approval and ratification at the Annual Meeting. Pursuant to the terms of
the 1997 Plan, the Company may grant options exercisable to purchase up to
2,000,000 shares of Common Stock. As of October 31, 1997, the Company had
granted options exercisable to purchase up to 1,446,138 shares of Common Stock,
which options had an aggregate market value, based on the closing sales price of
the Common Stock underlying such options as quoted by the Nasdaq National Market
System on such date, of $17,180,119.44. Such options become exercisable one year
after the date of grant and are exercisable over a four-year period in equal
annual increments. Options to purchase an aggregate of 192,554 shares of Common
Stock are currently exercisable. The exercise prices of the options granted to
date range from $3.69 to $12.52.
<PAGE>
The following summary of the material provisions of the 1997 Plan set forth
herein is not intended to be complete and is qualified in its entirety by
reference to such plan, a copy of which is attached hereto as Exhibit A.
GENERAL
The 1997 Plan provides for the grant of Incentive Options and Non-Qualified
Options with respect to, in the aggregate, up to 2,000,000 shares of Common
Stock (which number is subject to adjustment in the event of stock dividends,
stock splits and other similar events). To the extent that an Incentive Option
or Non-Qualified Option is not exercised within the period of exercisability
specified therein, it will expire as to the then unexercised portion. If any
Incentive Option or Non-Qualified Option terminates prior to exercise thereof
and during the duration of the 1997 Plan, the shares of Common Stock as to which
such option or right was not exercised will again become available under the
1997 Plan for the grant of additional options or rights to any eligible
employee. The shares of Common Stock subject to the 1997 Plan may be made
available from authorized but unissued shares, treasury shares, or both. The
1997 Plan became effective upon adoption by the Board of Directors, subject to
its approval by the affirmative vote of the holders of a majority of the
Company's outstanding voting stock entitled to vote thereon. In the event that
the 1997 Plan is not approved by the stockholders, the 1997 Plan shall remain in
force; however, an options granted thereunder shall automatically be deemed to
be Non-Qualified Options.
During the fiscal year ended June 30, 1997, the Board of Directors granted
options to purchase 20,000 shares of Common Stock at exercise prices ranging
from $4.05 to $4.46 to all directors serving at June 30, 1997, including four
(4) non-employee directors. Additionally, an option to purchase an aggregate of
250,000 shares of Common Stock at an exercise price of $3.69 was granted to Mr.
Larry Kopald, an employee-director, in connection with negotiation of the terms
of his employment with the Company. See "Executive Compensation." As of the date
hereof, an aggregate of one hundred thirty-five (135) persons (including four
(4) employee-directors) are eligible to participate in the 1997 Plan. Such
persons include eight (8) executive officers and/or directors of the Company and
one hundred twenty-seven (127) other employees of the Company who are eligible
to receive Incentive Options. The foregoing individuals are also eligible to
receive Non-Qualified Options under the 1997 Plan, as are non-employee
consultants of the Company. Although the Company has not to date issued options
under the 1997 Plan to any non-employee consultants, the Company may from time
to time issue Non-Qualified Options under the 1997 Plan to such individuals.
ADMINISTRATION
Pursuant to its terms, the 1997 Plan may be administered by: (a) the Board
of Directors; or (b) in the discretion of the Board of Directors, a committee
(the "Committee") consisting of two or more members of the Board of Directors,
each of whom must be a "Non-Employee" director as such term is defined by Rule
16b-3 (as amended from time to time, "Rule 16b-3") under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). The Board of Directors or the
Committee (by a majority vote or, in the case two members, unanimous vote)
<PAGE>
generally has the authority to determine the individuals to whom and the date on
which options are to be granted, the number of shares of stock to be subject to
each option, the exercise price of such options, the terms of any vesting or
forfeiture schedule and the other terms and provisions of each option.
SECTION 16(B) COMPLIANCE
It is intended that transactions pursuant to the 1997 Plan will satisfy the
conditions of Rule 16b-3, as amended, promulgated under Section 16 of the
Exchange Act. Section 16(b) of the Exchange Act provides that any so-called
"short-swing profits," that is, a profit realized by an officer, director or
owner of ten percent (10%) or more of the outstanding securities on a purchase
and a sale of stock within a six-month period, are recoverable by the issuer of
the securities. Although the application of Section 16(b) (and the rules
promulgated thereunder) is complex, Rule 16b-3 generally mitigates the impact of
Section 16(b) by providing an exemption from the liability provisions for
transactions which satisfy the conditions of Rule 16b-3
ELIGIBILITY AND EXTENT OF PARTICIPATION
Incentive Options may be granted pursuant to the 1997 Plan only to
employees (including officers and directors) of the Company (and its
subsidiaries). Non-Qualified Options may be granted pursuant to the 1997 Plan to
officers, directors, employees or consultants of the Company (and its
subsidiaries).
There is no minimum number of shares of Common Stock with respect to which
an option may be granted. However, if the aggregate fair market value (as of the
time of grant) of shares of Common Stock with respect to which Incentive Options
are exercisable for the first time by any individual during any calendar year
(under all stock option plans of the Company) exceeds $100,000, such excess
options shall be treated as Non-Qualified Options.
PURCHASE PRICE AND EXERCISE OF OPTIONS
The price at which shares of Common Stock subject to an option may be
purchased is determined by the Board of Directors (or the Committee); however,
the exercise price of shares of Common Stock issuable upon exercise of an
Incentive Option may not be less than one hundred percent (100%) of the fair
market value of the Common Stock on the date of grant. However, if an Incentive
Option is granted to an optionee who owns more than ten percent (10%) of the
voting power of the capital stock of the Company, the minimum exercise price may
not be less than one hundred ten percent (110%) of the fair market value of the
Common Stock on the date of grant. Any cash proceeds received by the Company
from the exercise of the options will be used for general corporate purposes.
EXPIRATION AND TRANSFER OF OPTIONS
The Board of Directors (or the Committee) has the sole discretion to fix
the period within which any Incentive or Non-Qualified Option may be exercised.
<PAGE>
Any Incentive Option granted under the 1997 Plan to a ten percent (10%) or less
stockholder and any Non-Qualified Option shall be exercised during a period of
not more than ten years from the date of grant and any Incentive Option granted
to a greater than ten percent (10%) stockholder shall be exercised within five
(5) years from the date of grant. No Incentive Options may be granted under the
1997 Plan more than ten (10) years after the date of adoption of the 1997 Plan.
Options granted under the 1997 Plan are not transferable except upon death.
Options generally may be exercised only while the option holder is employed by
the Company, or in some cases, within three months of termination of employment.
In the event of disability of an option holder, options may be exercised to the
extent of the accrued right to exercise the option within one year of
termination of employment due to disability. In the event of the death of an
option holder, options may be exercised subject to expiration of the option
within three (3) years after the date of death, to the extent of the accrued
right to exercise the option at the date of death.
Upon a reorganization, merger or consolidation of the Company as a result
of which the outstanding Common Stock is changed into or exchanged for cash or
property or securities not of the Company's issue, or upon a sale of
substantially all the property of the Company, the 1997 Plan will terminate and
all outstanding options previously granted thereunder shall terminate, unless
provision is made in connection with such transaction for the continuance of the
1997 Plan or for the assumption of options theretofore granted. If the 1997 Plan
and unexercised options are to terminate pursuant to such transaction, persons
owning any unexercised portions of options then outstanding will have the right,
prior to the consummation of the transaction, to exercise the unexercised
portions of their options, including the portions thereof which would, but for
such transaction, not yet be exercisable.
FEDERAL INCOME TAX CONSIDERATIONS
In the case of Incentive Options, no taxable gain will be realized by an
option holder upon grant or exercise of the option, and the Company will not be
entitled to a tax deduction at the time any such option is granted or exercised.
However, the excess of the fair market value of any Common Stock received over
the exercise price will constitute an adjustment in computing alternative
minimum taxable income at the time of the transfer of stock pursuant to the
exercise of the option, or if later, at the earlier of the time that the stock
is transferable or is not subject to a substantial risk of forfeiture.
The treatment for federal income tax purposes of Non-Qualified Options
depends on whether the option has a readily ascertainable fair market value at
the time it is granted. Because the Non-Qualified Options are not actively
traded on an established market and because it is likely that the Non-Qualified
Options will be nontransferable by the option holder or will not be immediately
exercisable, it is expected that the Non-Qualified Options will not have a
readily ascertainable fair market value. If a Non-Qualified Option does not have
a readily ascertainable fair market value at the time of grant, there is no
taxable event at grant; rather, the excess of: (i) the fair market value of the
Common Stock on the date it is acquired pursuant to exercise of the option over
(ii) the exercise price, plus the amount, if any, paid for the option must be
included in the optionee's gross income at the time of the receipt of stock
<PAGE>
pursuant to exercise of the option, or if later, at the earlier of the time that
the stock is transferable or is not subject to a substantial risk of forfeiture.
If stock received pursuant to the exercise of a Non-Qualified Option is not
taxable at receipt because the stock is nontransferable and subject to a
substantial risk of forfeiture, the optionee may nevertheless elect to include
such amount in gross income when the stock is received pursuant to exercise of
the option.
Under Section 280G of the Code, certain persons who receive compensation
payments in connection with a change in control of a company may be subject to a
twenty percent (20%) excise tax and the issuer may lose its tax deduction with
respect to such payments. These rules may apply to options and rights granted
under the 1997 Plan. The determination of the application of these rules will
depend upon a number of factual maters not determinable at this time. It should
be realized, however, that these rules may affect the ability of the Company to
secure a tax deduction on the exercise of certain Non-Qualified Options granted
under the 1997 Plan.
The tax consequences summarized above may change in the event of amendment
to the Code or the regulations adopted thereunder.
EXERCISE OF OPTIONS
Generally, an option will be exercised by the tender of written notice of
the option holder's intention to exercise and payment in cash of the aggregate
exercise price for the shares of Common Stock for which the option is being
exercised. The Board of Directors (or the Committee) may, however, permit an
optionee to pay all or a portion of the exercise price by delivering to the
Company shares of Common Stock having an aggregate fair market value at least
equal to such aggregate exercise price. An option may also be exercised by
tender to the Company of a written notice of exercise together with advice of
the delivery of an order to broker to sell part or all of the shares of Common
Stock subject to such exercise notice and an irrevocable order to such broker to
deliver to the Company sufficient proceeds from the sale of such shares to pay
the exercise price and any withholding taxes (a "cashless exercise") provide all
documentation and procedures are approved in advance by the Board of Directors
(or the Committee). The Company has the authority under the 1997 Plan to assist
any employee of the Company with the payment of the purchase price of the Common
Stock by lending the amount of the purchase price to the employee, on terms,
including rate of interest and security for the loan, as the Board of Directors
shall authorize.
The Board of Directors (or the Committee) may, in its discretion, at any
time prior to the exercise of an option, grant in connection with such option
the right to surrender part or all of such option to the extent the option is
exercisable and receive an amount (payable in cash, shares of Common Stock or
combination thereof as determined by the Board of Directors or the Committee)
equal to the difference between the then fair market value of the shares
issuable upon the exercise of the option (or portions thereof) and the aggregate
exercise price thereof.
<PAGE>
AMENDMENTS TO THE 1997 PLAN
The Board of Directors may at any time terminate the 1997 Plan or make such
amendments thereto as its deems advisable and in the best interests of the
Company, without action on the part of the Company's stockholders, unless such
approval is required pursuant to Section 422 of the Code or other federal or
state law, rule or regulation and, provided that, no such action may be taken if
it affects or impairs the rights of an individual holding options previously
granted (absent such holder's consent). Such amendments may include, without
limitation, changes in the number of shares reserved for issuance under the
plan, the class or classes of individuals eligible to participate therein and
the manner of administration and duration of the plan.
VOTE REQUIRED FOR APPROVAL. Approval and ratification of the Company's
adoption of the 1997 Plan will require the affirmative vote of the holders of at
least a majority of the outstanding shares of Common Stock entitled to vote
thereon. The enclosed Proxy will be voted as specified, but if no specification
is made with respect to the proposal, it will be voted in favor of the proposal
to approve the 1997 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL AND RATIFICATION OF THE
THINK NEW IDEAS, INC. AMENDED AND RESTATED 1997 STOCK OPTION PLAN AS SET FORTH
IN EXHIBIT A HERETO, AND, UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED FROM
THE STOCKHOLDERS WILL BE VOTED IN FAVOR OF ADOPTION OF SUCH PLAN.
OTHER PROPOSED ACTION
The Board of Directors does not intend to bring any other matters before
the Annual Meeting, nor does the Board of Directors know of any matters that
other persons intend to bring before the Annual Meeting. If, however, other
matters not mentioned in this Proxy Statement were to properly come before the
Annual Meeting, the persons named in the accompanying form of proxy will vote
thereon in accordance with the recommendation of the Board of Directors.
Stockholders should note, however, that the Bylaws of the Company provide that
no proposals or nominations of Directors by stockholders shall be presented for
vote at the Annual Meeting unless notice complying with the requirements in the
Bylaws was provided to the Board of Directors or the Secretary of the Company no
later than the close of business on the last business day of the month of
January prior to the Annual Meeting.
SHAREHOLDER PROPOSALS GENERALLY
If any stockholder wishes to present a proposal for inclusion in the proxy
materials to be solicited by the Board of Directors with respect to any meeting
of stockholders, such proposal must be in conformity with applicable rules and
regulations and must be presented to the Secretary of the Company no later than:
(a) the close of business on the fifth (5th) day following the day that notice
of such meeting is first given to stockholders with respect to a special
<PAGE>
meeting; or (b) the close of business on the last business day of the month of
January with respect to an annual meeting.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE SIGN AND
RETURN THE ENCLOSED PROXY PROMPTLY. YOUR VOTE IS IMPORTANT. IF YOU ARE A
SHAREHOLDER OF RECORD AND ATTEND THE MEETING AND WISH TO VOTE IN PERSON, YOU MAY
WITHDRAW YOUR PROXY AT ANY TIME PRIOR TO THE VOTE.
THINK NEW IDEAS, INC.
BY: /S/ MELVIN EPSTEIN
-------------------------
MELVIN EPSTEIN, SECRETARY
<PAGE>
PROXY
ANNUAL MEETING OF SHAREHOLDERS OF
THINK NEW IDEAS, INC. ON DECEMBER 11, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE
EXECUTIVE COMMITTEE OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Scott Mednick, Ronald Bloom and Barry Wagner and
each or any of them proxies, with power of substitution, to vote all shares of
the undersigned at the Annual Meeting of Shareholders to be held on December 11,
1997, at 10:00 a.m. (Pacific Time) at THINK New Ideas, Inc., 8000 Sunset
Boulevard, Penthouse East, Los Angeles, California 90046, or at any adjournment
thereof, upon the matters set forth in the Proxy Statement for such meeting, and
in their discretion, or such other business as may properly come before the
meeting.
1. TO ELECT SEVEN DIRECTORS TO SERVE FOR A PERIOD OF ONE YEAR OR UNTIL
SUCCESSORS HAVE BEEN DULY ELECTED AND QUALIFIED.
__ __
/_/ FOR ALL NOMINEES LISTED BELOW /_/ WITHHOLD AUTHORITY FOR
ALL NOMINEES LISTED BELOW
INSTRUCTION: To withhold authority to vote for the nominee, strike through
the nominee's name:
Scott Mednick . Ronald Bloom . Adam Curry . Barry Wagner
Larry Kopald . Richard Char . Marc Canter
2. TO APPROVE THE ADOPTION OF THE THINK NEW IDEAS, INC. AMENDED AND RESTATED
1997 STOCK OPTION PLAN (which provides for the issuance of Incentive Stock
Options and Non-Qualified Stock Options).
__ __ __
/_/ FOR /_/ AGAINST /_/ ABSTAIN
Dated: ______________, 1997 ____________________________________
Signature
Dated: ______________, 1997 ____________________________________
Signature if held jointly
NOTE: When shares are held by joint tenants, both should sign. Persons signing
as executor, administrator, trustee, etc. should so indicate. Please sign
exactly as the name appears on the proxy.
IF NO CONTRARY SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1
AND 2.
PLEASE MARK, SIGN AND RETURN THIS PROXY CARD PROMPILY USING THE ENCLOSED
ENVELOPE.
<PAGE>
EXHIBIT A
<PAGE>
- --------------------------------------------------------------------------------
THINK NEW IDEAS, INC.
AMENDED AND RESTATED
1997 STOCK OPTION PLAN
- --------------------------------------------------------------------------------
<PAGE>
THINK NEW IDEAS, INC.
AMENDED AND RESTATED
1997 STOCK OPTION PLAN
ARTICLE I
---------
ESTABLISHMENT AND PURPOSE
-------------------------
Section 1.1. THINK New Ideas, Inc., a Delaware corporation (the "Company"),
hereby establishes a stock option plan to be named the Amended and Restated
THINK New Ideas, Inc. 1997 Stock Option Plan (the "Plan").
Section 1.2. The purpose of this Plan is to induce persons who are
officers, directors, employees and consultants of the Company (or any of its
subsidiaries) who are in a position to contribute materially to the Company's
prosperity to remain with the Company, to offer said persons incentives and
rewards in recognition of their contributions to the Company's progress, and to
encourage said persons to continue to promote the best interests of the Company.
This Plan provides for the grant of options to purchase shares of common stock
of the Company, par value $.0001 per share (the "Common Stock") which qualify as
incentive stock options ("Incentive Options") under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), to persons who are employees, as
well as options which do not so qualify ("Non-Qualified Options") to be issued
to persons, including those who are not employees. Incentive Options and
Non-Qualified Options may be collectively referred to hereinafter as the
"Options" as the context may require. Persons granted Options hereunder may be
referred to hereinafter as the "Optionees."
Section 1.3. All Options granted on or after the date that this Plan has
been approved and adopted by the Company's board of directors (the "Board of
Directors") shall be governed by the terms and conditions of this Plan unless
the terms of any such Option specifically indicate that it is not to be so
governed.
Section 1.4. Any Option granted hereunder which is intended to qualify as
an Incentive Option which, for any reason whatsoever, fails to so qualify, shall
be deemed to be a Non-Qualified Option granted hereunder.
ARTICLE II
----------
ADMINISTRATION
--------------
Section 2.1. All determinations hereunder concerning the selection of
persons eligible to receive awards under this Plan and determinations with
respect to the timing, pricing and amount of an award hereunder (other than
pursuant to a non-discretionary formula hereinafter set forth, shall be made by
an administrator (the "Administrator"). The Administrator shall be either: (a)
the Board of Directors, or (b) in the discretion of the Board of Directors, a
committee of not less than two members of the Board of Directors (the
"Committee"), each of whom is a "Non-Employee" Director as such term is defined
<PAGE>
in Rule 16b-3 (as such rule may be amended from time to time, "Rule 16b-3")
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In
the event this Plan is administered by the Committee, the Committee shall select
one of its members to serve as the chairman thereof and shall hold its meetings
at such times and places as it may determine. In such case, a majority of the
total number of members of the Committee shall be necessary to constitute a
quorum; and (i) the affirmative act of a majority of the members present at any
meeting at which a quorum is present, or (ii) the approval in writing by a
majority of the members of the Committee, shall be necessary to constitute
action by the Committee.
Section 2.2. The provisions hereof relating to Incentive Options are
intended to comply in every respect with Section 422 of the Code ("Section 422")
and the regulations promulgated thereunder. In the event that any future statute
or regulation shall modify Section 422, this Plan shall be deemed to incorporate
by reference such modification. Any agreement relating to the grant of any
Incentive Option hereunder, which Option is outstanding and unexercised at the
time that any modifying statute or regulation becomes effective, shall also be
deemed to incorporate by reference such modification and no notice of such
modification need be given to the Optionee. Any agreement relating to an
Incentive Option granted hereunder shall provide that the Optionee hold the
stock received upon exercise of such Incentive Option for a minimum of two years
from the date of grant of the Incentive Option and one year from the date of
exercise of such Incentive Option, absent the written approval, consent or
waiver of the Administrator.
Section 2.3. If any provision of this Plan is determined to disqualify the
shares of Common Stock purchasable upon exercise of an Incentive Option granted
hereunder from the special tax treatment provided by Section 422, such provision
shall be deemed to incorporate by reference the modification required to qualify
such shares of Common Stock for said tax treatment.
Section 2.4. The Company shall grant Options hereunder in accordance with
determinations made by the Administrator pursuant to the provisions hereof. All
Options granted pursuant hereto shall be clearly identified as Incentive Options
or Non-Qualified Options. The Administrator may from time to time adopt (and
thereafter amend or rescind) such rules and regulations for carrying out this
Plan and take such action in the administration of this Plan, not inconsistent
with the provisions hereof, as it shall deem proper. The Board of Directors or,
subject to the supervision of the Board of Directors, the Committee, as the
Administrator, shall have plenary discretion, subject to the express provisions
of this Plan, to determine which officers, directors, employees and consultants
shall be granted Options, the number of shares subject to each Option, the time
or times when an Option may be exercised (whether in whole or in installments),
the terms and provisions of the respective agreements relating to the grant of
Options (which need not be identical), including such terms and provisions which
may be amended from time to time as shall be required, in the judgment of the
Administrator, to conform to any change in any law or regulation applicable
hereto, and to make all other determinations deemed necessary or advisable for
the administration of this Plan. The interpretation and construction of any
provision of this Plan by the Administrator (unless otherwise determined by the
Board of Directors) shall be final, conclusive and binding upon all persons.
<PAGE>
Section 2.5. No member of the Administrator shall be liable for any action
or determination made in good faith with respect to administration of this Plan
or the Options granted hereunder. Members of the Board of Directors and/or the
Committee, as the Administrator, shall be indemnified by the Company, pursuant
to the Company's bylaws, for any expenses, judgments or other costs incurred as
a result of a lawsuit filed against such member claiming any rights or remedies
arising out of such member's participation in the administration of this Plan.
ARTICLE III
-----------
TOTAL NUMBER OF SHARES TO BE OPTIONED
-------------------------------------
Section 3.1. There shall be reserved for issuance or transfer upon exercise
of the Options granted from time to time hereunder an aggregate of 2,000,000
shares of Common Stock (subject to adjustment as provided in Article VIII
hereof). The shares of Common Stock issued upon exercise of any Option granted
hereunder may be shares of Common Stock previously issued and reacquired by the
Company at any time or authorized but unissued shares of Common Stock, as the
Board of Directors from time to time may determine.
Section 3.2. In the event that any Options outstanding under this Plan for
any reason expire or are terminated without having been exercised in full, the
unpurchased shares of Common Stock subject to such Option and any such
surrendered shares of Common Stock may again be available for transfer
hereunder.
Section 3.3. No Options shall be granted pursuant hereto to any Optionee
after the tenth anniversary of the earlier of: (a) the date that this Plan is
adopted by the Board of Directors, or (b) the date that this Plan is approved by
the stockholders of the Company.
ARTICLE IV
----------
ELIGIBILITY
-----------
Section 4.1. Non-Qualified Options may be granted hereunder to officers,
directors, employees and consultants of the Company (or any of its subsidiaries)
selected by the Administrator, and Incentive Options may be granted hereunder
only to employees (including officers and directors who are employees) of the
Company (or any of its subsidiaries) selected by the Administrator. For purposes
of determining who is an employee with respect to eligibility for Incentive
Options, the provisions of Section 422 of the Code shall govern. The
Administrator may determine (in its sole discretion) that any person who would
otherwise be eligible to be granted Options shall, nonetheless, be ineligible to
receive any award under this Plan.
Section 4.2. The Administrator shall (in its discretion) determine the
persons to be granted Options, the time or times at which Options shall be
granted, the number of shares of Common Stock subject to each Option, the terms
of a vesting or forfeiture schedule, if any, the type of Option issued, the
<PAGE>
period during which such Options may be exercised, the manner in which Options
may be exercised and all other terms and conditions of the Options; PROVIDED,
HOWEVER, no Option shall be granted which has terms or conditions inconsistent
with those stated in Articles V and VI hereof. Relevant factors in making such
determinations may include the value of the services rendered by the respective
Optionee, his or her present and potential contributions to the Company, and
such other factors which are deemed relevant by the Administrator in
accomplishing the purpose of this Plan.
ARTICLE V
---------
TERMS AND CONDITIONS OF OPTIONS
-------------------------------
Section 5.1. Each Option granted under this Plan shall be evidenced by a
stock option certificate and agreement (the "Option Agreement") in a form
consistent with this Plan, provided that the following terms and conditions
shall apply:
(a) The price at which each share of Common Stock covered by an Option
may be purchased shall be set forth in the Option Agreement and shall be
determined by the Administrator, provided that the option price for any
Incentive Option shall not be less than the "fair market value" of the shares of
Common Stock at the time of grant determined. Notwithstanding the foregoing, if
an Incentive Option to purchase shares of Common Stock is granted hereunder to
an Optionee who, on the date of the grant, directly or indirectly owns more than
ten percent (10%) of the voting power of all classes of capital stock of the
Company (or its parent or subsidiary), not including the shares of Common Stock
obtainable upon exercise of the Option, the minimum exercise price of such
Option shall be not less than one hundred ten percent (110%) of the "fair market
value" of the shares of Common Stock on the date of grant determined in
accordance with Section 5.1(b) below.
(b) The "fair market value" shall be determined by the Administrator,
which determination shall be binding upon the Company and its officers,
directors, employees and consultants. The determination of the "fair market
value" shall be based upon the following: (i) if the Common Stock is not listed
and traded upon a recognized securities exchange and there is no report of stock
prices with respect to the Common Stock published by a recognized stock
quotation service, on the basis of the recent purchases and sales of the Common
Stock in arms-length transactions; (ii) if the Common Stock is not then listed
and traded upon a recognized securities exchange or quoted on the NASDAQ
National Market System, and there are reports of stock prices by a recognized
quotation service, upon the basis of the last reported sale or transaction price
of the Common Stock on the date of grant as reported by a recognized quotation
service, or, if there is no last reported sale or transaction price on that day,
then upon the basis of the mean of the last reported closing bid and closing
asked prices for the Common Stock on that day or on the date nearest preceding
that day; or (iii) if the Common Stock shall then be listed and traded upon a
recognized securities exchange or quoted on the NASDAQ National Market System,
upon the basis of the last reported sale or transaction price at which shares of
Common Stock were traded on such recognized securities exchange on the date of
grant or, if the Common Stock was not traded on such date, upon the basis of the
<PAGE>
last reported sale or transaction price on the date nearest preceding that date.
The Administrator shall also consider such other factors relating to the "fair
market value" of the Common Stock as it shall deem appropriate.
(c) For the purpose of determining whether an Optionee owns more than
ten percent (10%) of the voting power of all classes of stock of the Company, an
Optionee shall be considered to own those shares of stock which are owned
directly or indirectly through brothers and sisters (including half-blooded
siblings), spouse, ancestors and lineal descendants; and proportionately as a
shareholder of a corporation, a partner of a partnership, and/or a beneficiary
of a trust or an estate that owns shares of capital stock of the Company.
(d) Notwithstanding any other provision hereof, in accordance with the
provisions of Section 422(d) of the Code, to the extent that the aggregate "fair
market value" (determined at the time the Option is granted) of the shares of
Common Stock with respect to which Incentive Options (without reference to this
provision) are exercisable for the first time by any individual in any calendar
year under any and all stock option plans of the Company (and its subsidiary
corporations and its parent, if any) exceeds $100,000, such Options shall be
treated as Non-Qualified Options.
(e) An Optionee may, in the Administrator's discretion, be granted
more than one Incentive Option or Non-Qualified Option during the duration of
this Plan, and may be issued a combination of Non-Qualified Options and
Incentive Options; PROVIDED, HOWEVER, that non-employees are not eligible to
receive Incentive Options.
(f) The duration of any Option shall be within the sole discretion of
the Administrator; PROVIDED, HOWEVER, that any Incentive Option granted to a ten
percent (10%) or less stockholder or any Non-Qualified Option shall, by its
terms, be exercised within ten years after the date the Option is granted and
any Incentive Option granted to a greater than ten percent (10%) stockholder
shall, by its terms, be exercised within five years after the date the Option is
granted.
(g) An Option shall not be transferable by the Optionee other than by
will, or by the laws of descent and distribution. An Option may be exercised
during the Optionee's lifetime only by the Optionee.
(h) At least six (6) months shall elapse from the date on which an
Option is granted to an officer, director, or beneficial owner of more than ten
percent (10%) of the outstanding shares of Common Stock of the Company under
this Plan by the Administrator to the date on which any share of Common Stock
underlying such Option is sold, unless the Administrator otherwise consents in
writing.
<PAGE>
ARTICLE VI
----------
EMPLOYMENT OR SERVICE OF OPTIONEE
---------------------------------
Section 6.1. If the employment or service of an Optionee is terminated for
cause, the option rights of such Optionee, both accrued and future, under any
then outstanding Non- Qualified or Incentive Option shall terminate immediately,
subject to the provisions of any employment agreement between the Company (or
any subsidiary) and an Optionee which, by its terms, provides otherwise. In the
event that an employee who is an Optionee hereunder has entered into an
employment agreement with the Company (or a subsidiary), "cause" shall have the
meaning attributed thereto in such employment agreement; otherwise, "cause"
shall mean incompetence in the performance of duties, disloyalty, dishonesty,
theft, embezzlement, unauthorized disclosure of patents, processes or trade
secrets of the Company, individually or as an employee, partner, associate,
officer or director of any organization. The determination of the existence and
the proof of "cause" shall be made by the Administrator and, subject to the
review of any determination made by the Administrator, such determination shall
be binding on the Optionee and the Company.
Section 6.2. Subject to the provisions of any employment agreement between
the Company (or a subsidiary) and an Optionee, if the employment or service of
an Optionee is terminated by either the Optionee or the Company for any reason
other than cause, death, or for disability (as defined in Section 22(e)(3) of
the Code or pursuant to the terms of such an employment agreement), the option
rights of such Optionee under any then outstanding Non-Qualified or Incentive
Option shall, subject to the provisions of Section 5.1(h) hereof, be exercisable
by such Optionee at any time prior to the expiration of the Option or within
three months after the date of such termination, whichever period of time is
shorter, but only to the extent of the accrued right to exercise an Option at
the date of such termination.
Section 6.3. Subject to the provisions of any employment agreement between
the Company (or a subsidiary) and an Optionee, in the case of an Optionee who
becomes disabled (as defined by Section 22(e)(3) of the Code or pursuant to the
terms of such an employment agreement), the option rights of such Optionee under
any then outstanding Non-Qualified or Incentive Option shall, subject to the
provisions of Section 5.1(h) hereof, be exercisable by such Optionee at any time
prior to the expiration of the Option or within one year after the date of
termination of employment or service due to disability, whichever period of time
is shorter, but only to the extent of the accrued right to exercise an Option at
the date of such termination
Section 6.4. In the event of the death of an Optionee, the option rights of
such Optionee under any then outstanding Non-Qualified or Incentive Option shall
be exercisable by the person or persons to whom these rights pass by will or by
the laws of descent and distribution, at any time prior to the expiration of the
Option or within three years after the date of death, whichever period of time
is shorter, but only to the extent of the accrued right to exercise an Option at
the date of death. If a person or estate acquires the right to exercise a
Non-Qualified or Incentive Option by bequest or inheritance, the Administrator
may require reasonable evidence as to the ownership of such Option, and may
require such consents and releases of taxing authorities as the Administrator
may deem advisable.
<PAGE>
Section 6.5. The Administrator may also provide that an employee must be
continuously employed by the Company for such period of time as the
Administrator, in its discretion, deems advisable before the right to exercise
any portion of an Option granted to such employee will accrue, and may also set
such other targets, restrictions or other terms relating to the employment of
the Optionee which targets, restrictions, or terms must be fulfilled or complied
with, as the case may be, prior to the exercise of any portion of an Option
granted to any employee.
Section 6.6. Options granted hereunder shall not be affected by any change
of duties or position, so long as the Optionee continues in the service of the
Company.
Section 6.7. Nothing contained in this Plan or in any Option granted
pursuant hereto shall confer upon any Optionee any right with respect to
continuance of employment or service by the Company nor interfere in any way
with the right of the Company to terminate the Optionee's employment or service
or change the Optionee's compensation at any time.
ARTICLE VII
-----------
PURCHASE OF SHARES
------------------
Section 7.1. Except as provided in this Article VII, an Option shall be
exercised by tender to the Company of the full exercise price of the shares of
Common Stock with respect to which an Option is exercised and written notice of
the exercise. The right to purchase shares of Common Stock shall be cumulative
so that, once the right to purchase any shares of Common Stock has accrued, such
shares or any part thereof may be purchased at any time thereafter until the
expiration or termination of the Option. A partial exercise of an Option shall
not affect the right of the Optionee to subsequently exercise his or her Option
from time to time, in accordance with this Plan, as to the remaining number of
shares of Common Stock subject to the Option. The purchase price payable upon
exercise of an Option shall be in United States dollars and shall be payable in
cash or by certified bank check. Notwithstanding the foregoing, in lieu of cash,
an Optionee may, with the approval of the Administrator, exercise his or her
Option by tendering to the Company shares of Common Stock owned by him or her
having an aggregate fair market value at least equal to the aggregate purchase
price. The "fair market value" of any shares of Common Stock so surrendered
shall be determined by the Administrator in accordance with Section 5.1(b)
hereof.
Section 7.2. Except as provided in Article VI above, an Option may not be
exercised unless the holder thereof is an officer, director, employee, or
consultant of the Company at the time of exercise.
Section 7.3. No Optionee, or Optionee's executor, administrator, legatee,
or distributee or other permitted transferee, shall be deemed to be a holder of
any shares of Common Stock subject to an Option for any purpose whatsoever
unless and until such Option has been exercised and a stock certificate or
certificates for the shares of Common Stock purchased by the Optionee are issued
<PAGE>
to the Optionee in accordance with the terms of this Plan. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights for which the record date is
prior to the date that any such stock certificate is issued, except as provided
in Article VIII hereof.
Section 7.4. If: (i) the listing, registration or qualification of the
Options issued hereunder or of any securities issuable upon exercise of such
Options (the "Subject Securities") upon any securities exchange or quotation
system or under federal or state law is necessary as a condition of or in
connection with the issuance or exercise of the Options; or (ii) the consent or
approval of any governmental regulatory body is necessary as a condition of or
in connection with the issuance or exercise of the Options, the Company shall
not be obligated to deliver the certificates representing the Subject Securities
or to accept or to recognize an Option exercise unless and until such listing,
registration, qualification, consent or approval shall have been effected or
obtained. The Company will take reasonable action to so list, register, or
qualify the Options and the Subject Securities, or effect or obtain such consent
or approval, so as to allow for issuance and/or exercise.
Section 7.5. An Optionee may be required to represent to the Company as a
condition of his or her exercise of Options issued under this Plan that: (i) the
Subject Securities acquired upon exercise of his or her Option are being
acquired by him or her for investment purposes only and not with a view to
distribution or resale, unless counsel for the Company is then of the view that
such a representation is not necessary and is not required under the Securities
Act of 1933, as amended (the "Securities Act"), or any other applicable statute,
law, regulation or rule; and (ii) that the Optionee shall make no exercise or
disposition of an Option or of the Subject Securities in contravention of the
Securities Act, the Exchange Act of 1934, or the rules and regulations
thereunder. Optionees may also be required to provide (as a condition precedent
to exercise of an Option) such documentation as may be reasonably requested by
the Company to assure compliance with applicable law and the terms and
conditions of this Plan and the subject Option.
Section 7.6. An Option may be exercised by tender to the Administrator of a
written notice of exercise together with advice of the delivery of an order to a
broker to sell part or all of the shares of Common Stock subject to such
exercise notice and an irrevocable order to such broker to deliver to the
Company (or its transfer agent) sufficient proceeds from the sale of such shares
to pay the exercise price and any withholding taxes. All documentation and
procedures to be followed in connection with such a "cashless exercise" shall be
approved in advance by the Administrator.
ARTICLE VIII
------------
CHANGE IN NUMBER OF OUTSTANDING SHARES OF
-----------------------------------------
STOCK, ADJUSTMENTS, REORGANIZATIONS, ETC.
-----------------------------------------
Section 8.1. In the event that the outstanding shares of Common Stock of
the Company are hereafter increased or decreased or changed into or exchanged
for a different number of shares or kind of shares or other securities of the
Company or of another corporation by reason of reorganization, merger,
<PAGE>
consolidation, recapitalization, reclassification, stock split, combination of
shares, or a dividend payable in capital stock, appropriate adjustment shall be
made by the Administrator in the number and kind of shares for the purchase of
which Options may be granted under this Plan, including the maximum number that
may be granted to any one person. In addition, the Administrator shall make
appropriate adjustments in the number and kind of shares as to which outstanding
Options, or portions thereof then unexercised, shall be exercisable, to the end
that the Optionee's proportionate interest shall be maintained as before the
occurrence to the unexercised portion of the Option and with a corresponding
adjustment in the option price per share. Any such adjustment made by the
Administrator shall be conclusive.
Section 8.2. The grant of an Option hereunder shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
Section 8.3. Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company as a result of which the
outstanding securities of the class then subject to Options hereunder are
changed into or exchanged for cash or property or securities not of the
Company's issue, or upon a sale of substantially all the property of the Company
to an association, person, party, corporation, partnership, or control group as
that term is construed for purposes of the Exchange Act, this Plan shall
terminate, and all Options theretofore granted hereunder shall terminate, unless
provision be made in writing in connection with such transaction for the
continuance of this Plan and/or for the assumption of Options theretofore
granted, or the substitution for such Options of options covering the stock of a
successor employer corporation, or a parent or a subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices, in which
event this Plan and options theretofore granted shall continue in the manner and
under the terms so provided. If this Plan and unexercised Options shall
terminate pursuant to the foregoing sentence, all persons owning any unexercised
portions of Options then outstanding shall have the right, at such time prior to
the consummation of the transaction causing such termination as the Company
shall designate, to exercise the unexercised portions of their Options,
including the portions thereof which would, but for this Section 8.3 not yet be
exercisable.
ARTICLE IX
----------
DURATION, AMENDMENT AND TERMINATION
-----------------------------------
Section 9.1. The Board of Directors may at any time terminate this Plan or
make such amendments hereto as it shall deem advisable and in the best interests
of the Company, without action on the part of the stockholders of the Company
unless such approval is required pursuant to Section 422 of the Code or the
regulations thereunder; PROVIDED, HOWEVER, that no such termination or amendment
shall, without the consent of the individual to whom any Option shall
theretofore have been granted, affect or impair the rights of such individual
<PAGE>
under such Option. Pursuant to (SECTION)422(b) of the Code, no Incentive Option
may be granted pursuant to this Plan after ten years from the date this Plan is
adopted or the date this Plan is approved by the stockholders of the Company,
whichever is earlier.
ARTICLE X
---------
RESTRICTIONS
------------
Section 10.1. Any Options and shares of Common Stock issued pursuant hereto
shall be subject to such restrictions on transfer and limitations as shall, in
the opinion of the Administrator, be necessary or advisable to assure compliance
with the laws, rules and regulations of the United States government or any
state or jurisdiction thereof. In addition, the Administrator may in any Option
Agreement impose such other restrictions upon the disposition or exercise of an
Option or upon the sale or other disposition of the shares of Common Stock
deliverable upon exercise thereof as the Administrator may, in its sole
discretion, determine. By accepting the grant of an Option or SAR pursuant
hereto, each Optionee shall agree to any such restrictions.
Section 10.2. Any certificate evidencing shares of Common Stock issued
pursuant to exercise of an Option shall bear such legends and statements as the
Administrator, the Board of Directors or counsel to the Company shall deem
advisable to assure compliance with the laws, rules and regulations of the
United States government or any state or jurisdiction thereof. No certificate
evidencing shares of Common Stock shall be delivered pursuant to exercise of the
Options granted under this Plan until the Company has obtained such consents or
approvals from such regulatory bodies of the United States government or any
state or jurisdiction thereof as the Administrator, the Board of Directors or
counsel to the Company deems necessary or advisable.
ARTICLE XI
----------
FINANCIAL ASSISTANCE
--------------------
Section 11.1 The Company is vested with the authority hereunder to assist
any employee to whom an Option is granted hereunder (including any officer or
director of the Company or any of its subsidiaries who is also an employee) in
the payment of the purchase price payable upon exercise of such Option, by
lending the amount of such purchase price to such employee on such terms and at
such rates of interest and upon such security (or unsecured) as shall have been
authorized by or under authority of the Board of Directors. Any such assistance
shall comply with the requirements of Regulation G promulgated by the Board of
the Federal Reserve System, as amended from time to time, and any other
applicable law, rule or regulation.
ARTICLE XII
-----------
APPLICATION OF FUNDS
--------------------
Section 12.1. The proceeds received by the Company from the issuance and
sale of Common Stock upon exercise of Options granted pursuant to this Plan are
to be added to the general funds of the Company and used for its corporate
purposes as determined by the Board of Directors.
<PAGE>
ARTICLE XIII
------------
EFFECTIVENESS OF PLAN
---------------------
Section 13.1 This Plan shall become effective upon adoption by the Board of
Directors, and Options may be issued hereunder from and after that date subject
to the provisions of Section 3.3 above. This Plan must be approved by the
Company's stockholders in accordance with the applicable provisions (relating to
the issuance of stock or options) of the Company's governing documents and state
law or, if no such approval is prescribed therein, by the affirmative vote of
the holders of a majority of the votes cast at a duly held stockholders meeting
at which a quorum representing a majority of all the Company's outstanding
voting stock is present and voting (in person or by proxy) or, without regard to
any required time period for approval, by any other method permitted by Section
422 of the Code and the regulations thereunder. If such stockholder approval is
not obtained within one year of the adoption of this Plan by the Board of
Directors or within such other time period required under Section 422 of the
Code and the regulations thereunder, this Plan shall remain in force, provided
however, that all Options issued and issuable hereunder shall automatically be
deemed to be Non-Qualified Options.
IN WITNESS WHEREOF, pursuant to the approval of this Plan by the Board of
Directors, this Plan is executed and adopted the 30th day of September, 1997.
THINK NEW IDEAS, INC.
[CORPORATE SEAL]
By: /S/ SCOTT A. MEDNICK
-----------------------------------------
Scott A. Mednick, Chief Executive Officer
ATTEST:
By: /S/ MELVIN EPSTEIN
------------------
Melvin Epstein
