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:
Not applicable
2) Aggregate number of securities to which transaction applies: Not applicable
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11(set forth the amount on which filing fee is
calculated and state how it was determined): Not Applicable
4) Proposed maximum aggregate value of transaction: Not applicable
5) Total fee paid: Not applicable
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: _______________________________
(2) Form, Schedule or Registration Statement No.: __________
(3) Filing Party: __________________________________________
(4) Date filed: __________________________________________
<PAGE>
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 JANUARY 7, 1999
________________________________________
TO THE STOCKHOLDERS OF THINK NEW IDEAS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of THINK New Ideas, Inc., a Delaware corporation (the
"Company"), will be held at the Atlanta Marriott Marquis, 265 Peachtree Center
Avenue, Atlanta, Georgia 30303 on Thursday, January 7, 1999 at 10:00 a.m.
(Eastern Time) and thereafter as it may from time to time be adjourned, for the
following purposes:
1. To elect seven (7) directors to serve for a period of one (1) year or
until their successors have been duly elected and qualified;
2. To approve and ratify adoption of the THINK New Ideas, Inc. Amended and
Restated 1998 Stock Option Plan, which provides for the issuance of
Qualified Incentive Stock Options and Non-Qualified Stock Options;
3. To ratify the selection of Ernst & Young, LLP as independent accountants
for the Company; and
4. To transact such other business as may properly come before the meeting or
any adjournment thereof.
Only stockholders of record at the close of business on November 9, 1998,
are entitled to notice of and to vote at the Annual Meeting.
Stockholders 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 stockholders 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 such annual meeting.
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 Board of Directors,
/s/ Melvin L. Epstein
Melvin L. Epstein, Secretary
New York, New York
December 8, 1998
<PAGE>
THINK NEW IDEAS, INC.
45 West 36th Street, 12th Floor
New York, New York 10018
PROXY STATEMENT
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 Thursday, January 7, 1999 at 10:00 a.m. (Eastern
Time) at the Atlanta Marriott Marquis, 265 Peachtree Center Avenue, Atlanta,
Georgia 30303 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 on or about December 8, 1998, to
stockholders of the Company entitled to notice of and to vote at the Annual
Meeting. The principal executive offices of the Company are located at 45 West
36th Street, 12th Floor, New York, New York 10018 and its phone number is (212)
629-6800.
The Annual Meeting has been called to consider and take action on the
following proposals:
1. To elect seven (7) directors to serve for a period of one (1) year or
until their successors have been duly elected and qualified;
2. To approve and ratify the adoption of the THINK New Ideas, Inc. Amended
and Restated 1998 Stock Option Plan, which provides for the issuance of
Qualified Incentive Stock Options and Non-Qualified Stock Options (the
"1998 Plan");
3. To ratify the selection of Ernst & Young, LLP as independent accountants
for the Company; and
4. To transact such other business as may properly come before the meeting or
any adjournment thereof.
Election of directors requires the affirmative vote of a plurality of the
votes cast by stockholders entitled to vote at the Annual Meeting. Ratification
of the Company's selection of independent accountants requires the vote of a
majority of the votes cast by stockholders entitled to vote at the Annual
Meeting, as does approval and ratification of the 1998 Plan.
Affirmative action with respect to each of the above proposals has been
taken by unanimous action of the Board of Directors. 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, 1998 is enclosed herewith. Additional copies thereof may be 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
herein and in the accompanying Notice of Annual Meeting.
RECORD DATE
The close of business on November 9, 1998, 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 issued
and outstanding 8,442,573 shares of common stock, par value $.0001 per share, of
the Company (the "Common Stock"). 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 (which have
not been 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 be counted as an affirmative vote
for purposes of determining whether a proposal has been approved.
The Company will appoint inspectors to act at the Annual Meeting. The
duties of such inspectors will include determination of the number of shares
represented at the Annual Meeting, the presence (or absence) of a quorum and
tabulation of the votes cast at the Annual Meeting.
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 delivering to the Company 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, at any time up to and including the
last business day preceding the day of the Annual Meeting (or any adjournment
thereof) or with the chairman of such meeting on the day thereof (or any
adjournment thereof). Upon delivery of such notice, the proxy shall be revoked.
As of the Record Date, the six (6) directors of the Company owned
beneficially in the aggregate 502,508 shares of Common Stock (5.95% of the total
outstanding shares of Common Stock) and all of the current eleven (11) directors
and executive officers of the Company owned beneficially in the aggregate
2
<PAGE>
886,233 shares (10.5% 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, Ronald Bloom is the only executive officer,
director and nominee for director who owned beneficially five percent (5%) or
more of the Company's outstanding shares of Common Stock. See "Security
Ownership of Certain Beneficial Owners and Management."
EXPENSES OF SOLICITATION
All expenses of solicitation of proxies 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
stockholders and soliciting them to execute the proxies. The Company has
retained the services of Georgeson & Company Inc. to assist in the solicitation
of proxies and will pay a fee of $6,500 plus reimbursement of out-of-pocket
expenses for such services. 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.
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 stockholder with the right to dissent and obtain payment for shares.
INTEREST OF OFFICERS AND DIRECTORS
IN MATTERS TO BE ACTED UPON
Officers or directors of the Company have a substantial interest in the
matters to be acted upon at the Annual Meeting. Ronald Bloom, Adam Curry, Larry
Kopald, Richard Char, Barry Wagner and Scott Metcalf are currently directors of
the Company and have 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
approval and ratification of the 1998 Plan that is the subject of Proposal Two
to the extent that such persons will be eligible to participate in such plan.
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.
3
<PAGE>
PROPOSAL ONE:
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. Six
(6) of the nominees, Ronald Bloom, Adam Curry, Barry Wagner, Larry Kopald,
Richard Char and Scott Metcalf, currently serve as members of the Board of
Directors and are standing for re-election. On November 23, 1998, the Board of
Directors elected Scott Metcalf to fill a vacancy. Howard Tullman is standing
for election to the Board of Directors for the first time. 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 plurality of votes
cast.
The nominees for directors are: Ronald Bloom, Adam Curry, Barry Wagner,
Larry Kopald, Richard Char, Scott Metcalf and Howard Tullman.
If any of the nominees 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 hereinafter 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, including those individuals who are nominees, is set forth below.
There are no family relationships between or among any of such persons. The
current directors, executive officers and nominees of the Company are:
Name Age Position with the Company
- -------------------- --- ----------------------------------------------
Ronald Bloom 46 Chief Executive Officer, Chairman of the
Board, Director, and Nominee
Melvin Epstein 53 Chief Financial Officer and Secretary
Adam Curry 34 Chief Technology Officer, Director and Nominee
Larry Kopald 44 Chief Creative Officer, Director and Nominee
Joseph Nicholson 39 Chief Operating Officer
James Grannan 35 Executive Vice President
Susan Goodman 43 Executive Vice President
James Carlisle 51 Executive Vice President
Richard Char 39 Director and Nominee
Marc Canter 41 Director and Nominee
Barry Wagner 58 Director and Nominee
Scott Metcalf 43 Director and Nominee
Howard Tullman 53 Nominee
4
<PAGE>
RONALD BLOOM has been a Director since June 1996. He served as President
and Chief Operating Officer of the Company from June 1996 until May 1998, when
he was appointed Chairman of the Board of Directors and Chief Executive Officer.
From 1995 to 1996, Mr. Bloom was Chief Operating Officer and General Manager of
On Ramp, Inc., which was acquired by the Company in June 1996 and was primarily
engaged in the provision of Internet and intranet systems and services. Prior to
joining On Ramp, Inc., Mr. Bloom founded and served as President of Ron Bloom
Productions, a production company and consulting firm, from 1989 to 1994.
MELVIN EPSTEIN has been the Chief Financial Officer of the Company since
August 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 and is a Certified
Public Accountant.
ADAM CURRY has been a Director and the Chief Technology Officer of the
Company since June 1996. Mr. Curry founded and was Chairman of the Board of
Directors of On Ramp, Inc. from 1994 to 1996 and was its President from March
1996. Mr. Curry served as an On-Air Personality for MTV Networks in New York
from 1987 to 1992.
LARRY KOPALD has been a Director and the Chief Creative Officer of the
Company since September 1997. Prior to joining the Company, Mr. Kopald was the
Executive Creative Officer of Fathom Advertising, a division of Ketchum
Communications, Inc. from 1995 to 1997. Prior to joining Fathom Advertising, 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.A. in Journalism from Drake University and an M.A. in Journalism from
Northwestern University.
JOSEPH NICHOLSON has been the Chief Operating Officer of the Company since
October 1998. In 1985, Mr. Nicholson founded and was an officer of BBG New
Media, Inc., which was acquired by the Company in November 1997. He holds a B.S.
in Mechanical Engineering from Tufts University and an M.B.A. from Suffolk
University.
SUSAN GOODMAN has been an Executive Vice President of the Company since
June 1996. In 1993, Ms. Goodman founded the S.D. Goodman Group, Inc. (the
"Goodman Group"), which was acquired by the Company in June 1996 and was
primarily engaged in the provision of strategic marketing and corporate and
brand positioning services. Previously, Ms. Goodman 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 an M.B.A. in Marketing, Finance and Strategic Planning from
Northwestern University's Kellogg School of Management.
JAMES GRANNAN has been an Executive Vice President of the Company since
June 1996. Mr. Grannan founded Creative Resources, Inc., which was acquired by
the Company in June 1996 and was primarily engaged in the provision of strategic
marketing and corporate and brand positioning services. Mr. Grannan was Creative
Manager for the Coca-Cola Company from 1992 to 1994. Mr. Grannan holds a B.A. in
Advertising Design from the Atlanta College of Art.
DR. JAMES CARLISLE has been an Executive Vice President of the Company
since 1996. In 1978, Dr. Carlisle founded NetCube Corporation, which was
acquired by the Company in June 1996 and was primarily engaged in the provision
of database and information management and utilization services. Dr. Carlisle
5
<PAGE>
received a B.S. in Engineering (with honors) from Princeton University and a
Ph.D. and M.Phil. from Yale University's Graduate School of Arts and Sciences.
RICHARD CHAR has been a Director of the Company since August 1997. Mr.
Char joined Cowen & Company in May 1997 and is a Managing Director and the Head
of Technology Investment Banking there. In July 1998, Cowen & Company merged
with Societe Generale and became SG Cowen Securities Corporation ("SG Cowen").
Prior to joining SG Cowen, Mr. Char was an attorney with Wilson Sonsini Goodrich
& Rosati for thirteen (13) 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. Mr. Canter holds a B.F.A. from the Oberlin Conservatory of Music.
BARRY WAGNER has been a Director of the Company since September 1996. Mr.
Wagner has been an employee of Omnicom Group Inc. ("Omincom") 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. Mr. Wagner is a graduate of
Hamilton College and Harvard Law School.
SCOTT MEDNICK, formerly Chairman of the Board of Directors and Chief
Executive Officer of the Company, resigned from his positions effective May 15,
1998, pursuant to an agreement with the Company. See "Employment and Related
Agreements" below. Mr. Mednick founded Scott A. Mednick & Associates, Inc.,
which was acquired by the Company in June 1996 and was primarily engaged in the
provision of strategic marketing and corporate brand positioning.
SCOTT METCALF has been a Director of the Company since November 1998 and
an independent consultant since June 1998. From January 1997 to June 1998, he
was the Chairman and Chief Executive Officer of Digitivity, Inc., which was
acquired by Citrix, Inc. From 1991 to 1996, Mr. Metcalf was the President of HaL
Computer Systems, which was acquired by Fujitsu Ltd. Previously, Mr. Metcalf was
President and Chief Executive Officer of Dynabook, Inc. and held a number of
senior executive positions at Sun Microsystems, Inc.
HOWARD TULLMAN, a nominee, has been Chief Executive Officer of JAMTV
Corporation since he co-founded it in September 1996. He was the President and
Chief Executive Officer of Imagination Pilots, Inc. from October 1993 to April
1998. Mr. Tullman received his B.A. in Economics (with honors) from Northwestern
University and his J.D. (with honors) from the Northwestern School of Law.
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 of the Company provide that the
number of directors of the Company shall not be less than two (2) nor more than
twelve (12). Currently, the Board of Directors has seven (7) members, three (3)
of whom (Messrs. Char, Canter and Metcalf) are independent directors.
Pursuant to the rules of the Nasdaq National Market Systemsm, the Company
is required to have two (2) independent directors on the Board of Directors. In
August 1997, Richard Char and Marc Canter, both independent directors, were
elected to fill vacancies on the Board of Directors. One of the purposes of the
6
<PAGE>
Annual Meeting is to elect two (2) independent directors in compliance with the
rules of the Nasdaq National Market Systemsm. Three (3) of the nominees for
directors (Messrs. Char, Metcalf and Tullman) are independent. If elected, Mr.
Tullman will fill the vacancy created by Mr. Canter's departure from the Board
of Directors and the committees thereof.
The Board of Directors held seven (7) meetings during the fiscal year
ended June 30, 1998. Prior to Mr. Kopald filling a vacancy on the Board of
Directors created by the departure of a director in September 1997, the Board of
Directors met one (1) time. Of the six (6) remaining meetings of the Board of
Directors, Mr. Kopald attended four (4) meetings, representing sixty-seven
percent (67%) of the meetings held. No other incumbent director attended fewer
than eighty-nine percent (89%) of the meetings of the Board of Directors and the
committees thereof.
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 reviews and discusses with
management and the Board of Directors such matters as accounting policies,
internal accounting controls and procedures for preparation of financial
statements. Currently Messrs. Char and Wagner serve as members of the Audit
Committee. The Audit Committee held two (2) meetings during the fiscal year
ended June 30, 1998.
COMPENSATION COMMITTEE. The Company's compensation committee (the
"Compensation Committee") approves the compensation for executive officers 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 stock option plans. Currently, Messrs.
Char and Canter serve as members of the Compensation Committee. If elected, Mr.
Tullman will fill the vacancy left on the Compensation Committee by Mr. Canter's
departure. The Compensation Committee held ten (10) meetings during the fiscal
year ended June 30, 1998.
EXECUTIVE COMMITTEE. The Company's 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 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 Certificate
of Incorporation and the Bylaws of the Company. Currently, Messrs. Bloom, Wagner
and Curry serve as members of the Executive Committee. The Executive Committee
held ten (10) meetings during the fiscal year ended June 30, 1998. The Company
has no nominating committee, but the Executive Committee currently serves the
function that a nominating committee would be created to serve.
LITIGATION COMMITTEE. The Company's litigation committee (the "Litigation
Committee") was formed by the Board of Directors in October 1998 to handle any
and all matters it deems appropriate in connection with, relating to or arising
out of certain pending litigation and any litigation filed thereafter.
Currently, Messrs. Char and Wagner serve as members of the Litigation Committee.
Since its recent formation, the Litigation Committee has not convened any
meetings. See "Material Proceedings" below.
7
<PAGE>
MATERIAL PROCEEDINGS
On September 25, 1998, Michael R. Farrell, a stockholder of the Company,
filed a putative class action suit, styled FARRELL V. THINK NEW IDEAS, INC.,
SCOTT MEDNICK, MELVIN EPSTEIN AND RONALD BLOOM, No. 98 Civ. 6809, against the
Company, Ronald Bloom, Melvin Epstein and Scott Mednick. The suit was filed in
the United States District Court for the Southern District of New York on behalf
of all persons who purchased or otherwise acquired shares of Common Stock in the
class period from November 14, 1997 through September 21, 1998. The complaint
alleges that the Company and Messrs. Bloom, Epstein and Mednick disseminated
materially false and misleading information about the Company's financial
position and results of operations through certain public statements and in
certain documents filed by the Company with the SEC. Plaintiff alleges that
these statements and documents caused the market price of the Common Stock to be
artificially inflated. Plaintiff further alleges that he purchased his shares of
Common Stock at such artificially inflated prices and suffered damages as a
result.
Subsequently, on October 16, 1998 and October 19, 1998, two (2) additional
putative class action suits, styled SAINT OURS V. THINK NEW IDEAS, INC., ET.
AL., No. 98 Civ. 7306; and HENZEL V. THINK NEW IDEAS, INC., ET. AL., No. 98 Civ.
7362, respectively, were filed by stockholders of the Company. These subsequent
suits, which have substantially similar class periods (the class period in
HENZEL V. THINK NEW IDEAS, INC., ET. AL. is from November 5, 1998 through
September 21, 1998), make similar allegations to those made in Farrell v. Think
New Ideas, Inc., et. al. with only minor differences. The relief sought in each
of the three lawsuits is unspecified, but includes pleas for compensatory
damages and interest, punitive damages (the plaintiff in HENZEL V. THINK NEW
IDEAS, INC., ET. AL. has not sought punitive damages), reasonable costs and
expenses associated with the action (including attorneys' fees and experts'
fees) and such other relief as the court may deem proper.
The Company is aware that at least four (4) additional putative class
action complaints making what appear to be similar allegations against the
Company have been filed in the same court, although the Company has not yet been
served with any complaints other than the three identified in the preceding
paragraphs.
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 (10%) 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.
One Form 4 covering the sale of 9,166 shares of Common Stock in April 1998
was not timely filed by Susan Goodman, an executive officer of the Company. The
transaction was reported on a Form 5 filed on behalf of Ms. Goodman in August
1998.
8
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the aggregate cash compensation awarded to,
earned by or paid for services rendered to the Company during the last three (3)
fiscal years by each person who served as the Company's chief executive officer
during the Company's fiscal year ended June 30, 1998, and the four (4) other
most highly compensated executive officers of the Company whose salary and bonus
for the fiscal year ended June 30, 1998, was in excess of $100,000 (the "Named
Executive Officers").
<TABLE>
Long-Term Compensation
---------------------------------------
Annual Compensation Awards Payouts
---------------------------------------- --------------------------- ----------
Securities
Restricted Underlying
Name and Other Annual Stock Options/ LTIP All Other
Principal Position Year Salary($) Bonus($) Compensation (Awards($) SARs(#) Payouts($) Compensation($)
- ------------------ ---- -------- ------- ------------ ---------- ---------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronald E. Bloom(1) 1998 192,375 67,125 -- -- 80,000(2) -- 764(10)
Chairman of the 1997 125,000 69,696 -- -- 20,000(3) -- 237(10)
Board and Chief 1996 106,250 58,234 -- -- -- -- 1,250(10)
Executive Officer
Adam C. Curry(4) 1998 192,375 67,125 -- -- 80,000(2) -- 3,676(10)
Chief Technology 1997 125,000 81,480 -- -- 20,000(3) -- --
Officer 1996 125,000 2,500 -- -- -- -- --
Melvin Epstein(5) 1998 180,000 -- -- -- 25,000(2) -- 2,521(10)
Chief Financial 1997 156,923 -- -- -- 133,333(3) -- --
Officer 1996 -- -- -- -- -- -- --
Susan Goodman(6) 1998 203,330 -- -- -- 25,000(2) -- 5,160(10)
Executive Vice 1997 195,000 46,825 -- -- 36,667(3) -- --
President 1996 138,000 130,000(7) -- -- -- -- --
Larry Kopald(8) 1998 304,166 150,000(11 -- -- -- -- --
Chief Creative 1997 25,000 -- -- -- 250,000(3) -- --
Officer and 1996 -- -- -- -- -- -- --
President, The
Mednick Group
Scott Mednick(9) 1998 268,508 20,000 -- -- 80,000(2) -- 2,192(10)
Former Chairman 1997 225,000 -- -- -- 20,000(3) -- 4,750(10)
of the Board and 1996 225,000 11,376 -- -- -- -- 4,598(10)
Chief Executive
Officer
</TABLE>
________________________
(1) Mr. Bloom commenced his employment with the Company in June 1996, was
appointed President in July 1996 and Chairman and Chief Executive Officer
on May 24, 1998, upon the resignation of Scott A. Mednick.
(2) Represents shares of Common Stock issuable upon exercise of options granted
to the noted officers pursuant to the THINK New Ideas, Inc. Amended and
Restated 1997 Stock Option Plan (the "1997 Plan") at an exercise price of
$8.88 per share for each individual, other than Mr. Bloom, who owned in
excess of ten percent (10%) of the outstanding Common Stock on the date of
grant and whose options, therefore, have an exercise price of $9.77 per
share.
(3) Represents shares of Common Stock issuable upon exercise of options granted
to the noted officer pursuant to the 1997 Plan at an exercise price of
$4.05 per share for each individual, other than: (a) Mr. Bloom, who owned
in excess of ten percent (10%) of the outstanding Common Stock on the date
of grant and whose options, therefore, have an exercise price of $4.46 per
share; (b) and Mr. Kopald, whose options have an exercise price of $3.69
per share (representing the fair market value of the Common Stock at the
time of grant as determined in accordance with the provisions of the 1997
Plan).
(4) Mr. Curry commenced his employment with the Company and was appointed Chief
Technology Officer in June 1996.
(5) Mr. Epstein commenced his employment with the Company in August 1996.
9
<PAGE>
(6) Ms. Goodman commenced her employment with the Company in June 1996.
(7) Represents distributions to the noted executive as the former sole
stockholder of the Goodman Group.
(8) 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 $25,000 of the salary noted above.
(9) Mr. Mednick commenced his employment with the Company and was appointed
Chairman and Chief Executive Officer in March 1996. Mr. Mednick resigned as
Chairman and Chief Executive Officer in May 1998 pursuant to an agreement
with the Company. See "Employment and Related Agreements" and "Certain
Transactions" below.
(10) Represents contributions to the Company's 401(k) plan on behalf of the
named individual.
(11) Represents a bonus earned pursuant to Mr. Kopald's employment agreement.
See "Employment and Related Agreements" below.
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1998)
The following table sets forth certain information with respect to the
options granted during the fiscal year ended June 30, 1998, to the Named
Executive Officers. No stock appreciation rights ("SARs") have been granted by
the Company.
<TABLE>
Individual Grants
----------------------------------------------------------------------------------------
Percent of Total
Number of Securities Options/SARs Granted
Underlying Options/SARs to Employees in Exercise or Base Expiration
Name Granted(#) Fiscal Year Price ($/Sh) Date
---- --------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Ronald Bloom 80,000 5.1% 9.77 1/28/2008
Adam Curry 80,000 5.1% 8.88 1/28/2008
Melvin Epstein 25,000 1.6% 8.88 1/28/2008
Susan Goodman 25,000 1.6% 8.88 1/28/2008
Scott Mednick 80,000 5.1% 8.88 1/28/2008
</TABLE>
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR; FISCAL YEAR-END
OPTION/SAR VALUES
Set forth below is the number of options exercised by the Named Executive
Officers during the fiscal year ended June 30, 1998, and the number and value of
exercisable and unexercisable options as of June 30, 1998. No SARs have been
granted by the Company.
<TABLE>
Number of Securities Underlying
Shares Unexercised Options/SARs at FY- Value of Unexercised In-the-Money
Acquired on Value End (#) Options/SARs at FY-End ($)(1)
Exercise Realized ------------------------------- ---------------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- --------- ------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ronald Bloom 0 0 40,000 60,000 760,400 981,300
Adam Curry 0 0 40,000 60,000 786,400 1,034,700
Melvin Epstein 0 0 133,333 25,000 2,943,326 431,125
Susan Goodman 9,166 $224,659 0 27,501 0 1,038,210
Larry Kopald 0 0 125,000 125,000 2,804,375 2,804,375
Scott Mednick 0 0 100,000 0 1,821,100 0
</TABLE>
________________________
(1) The calculations of the value of unexercised options are based on the
difference between the closing sales price of $26.125 of the Common Stock
on June 30, 1998, as quoted by the Nasdaq National Market Systemsm and the
exercise price of each option multiplied by the number of shares of Common
Stock covered by such option.
10
<PAGE>
DIRECTOR COMPENSATION
Employee directors of the Company receive no cash compensation for acting
as directors or attending meetings of the Board of Directors. Each non-employee
director is entitled to receive $1,000 per year for each year such director
serves on the Board of Directors and $2,500 per meeting attended. All directors
are entitled to reimbursement of reasonable expenses related to attending
meetings of the directors.
Each director in office on June 30 of each year is entitled to receive an
option exercisable to purchase up to 20,000 shares of Common Stock at an
exercise price based upon the last transaction price of the Common Stock as
quoted on the Nasdaq National Market Systemsm on the date of grant or on the day
immediately preceding the date of grant. The options become exercisable in four
equal annual increments commencing one (1) year after the date of grant and
expire five (5) years from the date of grant. Although it has been the Company's
practice to grant options to directors on June 30 of each year, the Company and
the incumbent directors determined to forego this year's options.
In addition to the foregoing, directors are eligible to receive options
under the 1997 Plan and, upon approval and ratification by the stockholders of
the Company as contemplated herein, the directors will be entitled to receive
options under the 1998 Plan. See Proposal Two below.
EMPLOYMENT AND RELATED AGREEMENTS
On June 30, 1996, the Company entered into an employment agreement with
each of Ronald Bloom, Adam Curry, Susan Goodman, James Grannan, James Carlisle
and Scott Mednick.
Each of the Company's employment agreements with Messrs. Bloom and Curry
provides for an initial term of three (3) years, subject to automatic extension
for a period of two (2) years in the absence of notice to the contrary at the
option of the Company. Pursuant to the terms of their respective employment
agreements, as amended, each of Messrs. Bloom and Curry is entitled to receive
an annual salary of $260,000 and bonuses as determined by the Board of
Directors.
The employment agreement with Ms. Goodman provides for an initial term of
three (3) years and entitles Ms. Goodman to receive an annual salary of $215,000
and bonuses as determined by the Board of Directors.
The employment agreement with Mr. Grannan provides for an initial term of
one (1) year, with the option to renew for successive one (1) year periods. Mr.
Grannan's employment agreement was renewed on June 30, 1997. Under the terms of
the agreement, as amended, Mr. Grannan was entitled to receive an annual salary
of $125,000 and bonuses as determined by the Board of Directors. Since July 1,
1998, when the term of his employment agreement expired, Mr. Grannan has been an
at-will employee of the Company.
The employment agreement with Dr. Carlisle provides for an initial term of
three (3) years, with the option to renew for a two (2) year period. Under the
terms of the agreement, as amended, Dr. Carlisle is entitled to receive an
annual salary of $195,000 and bonuses as determined by the Board of Directors.
In August 1996, the Company entered into an employment letter with Melvin
Epstein. Pursuant to the terms of such letter, Mr. Epstein is entitled to
receive an annual salary of $180,000, subject to annual review and evaluation.
The agreement may be terminated by either party upon prior notice.
11
<PAGE>
In May 1997, in connection with the Company's acquisition of Fathom
Advertising, the Company reached an agreement with Larry Kopald, pursuant to
which Mr. Kopald received an annual salary of $300,000 during the first year of
his employment and receives $350,000 currently. In addition, pursuant to the
terms of his employment agreement, Mr. Kopald: (i) earned a bonus of $150,000 in
the first year of his employment; and (ii) received options exercisable to
purchase up to 250,000 shares of Common Stock in equal increments over a period
of four (4) years at an exercise price of $3.69 per share (the market price of
the Common Stock on the date of grant). Mr. Kopald is entitled this year to
receive additional bonuses of up to ten percent (10%) of profits on billings on
the account of a significant client in excess of $20,000,000.
The Company's employment agreements with its executive officers 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, other than
Mr. Epstein's, contain non-competition and confidentiality provisions that
extend beyond the respective terms of such agreements for periods of up to one
(1) year.
In connection with Mr. Mednick's resignation as Chairman and Chief
Executive Officer of the Company in May 1998, the Company entered into a
settlement agreement with Mr. Mednick terminating Mr. Mednick's employment
agreement. Under the terms of the settlement agreement, as amended in July 1998,
the Company agreed to accelerate the exercise dates of options to acquire up to
60,000 shares of Common Stock owned by Mr. Mednick in exchange for Mr. Mednick's
agreement to be bound by the non-compete and confidentiality provisions of such
agreement. Although the original terms of the settlement agreement provided for
payment to Mr. Mednick of $936,130 over a twenty-four (24) month period, payment
of such amount was eliminated by amendment to the agreement in July 1998.
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 145 of the Delaware General
Corporation Law. Section 102(b)(7) 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.
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
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act") may be permitted to directors,
officers or persons controlling the registrant pursuant to the foregoing
provisions, the registrant has been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
12
<PAGE>
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, there were 8,442,573 shares of Common Stock
issued and outstanding.
The following table sets forth certain information as of the Record Date
with respect to the beneficial ownership of the Common Stock by: (i) each of the
Company's directors and nominees; (ii) each of the Named Executive Officers (as
previously defined under "Executive Compensation"); (iii) each person or entity
who is known to the Company to beneficially own five percent (5%) or more of the
outstanding Common Stock; and (iv) all directors and executive officers of the
Company as a group.
13
<PAGE>
Number of Shares of Percentage of
Common Stock Outstanding Shares
Name and Address Beneficially Beneficially
of Beneficial Owner Owned Owned
- -------------------------------- --------------------- ----------------------
Ronald Bloom 495,433(1) 5.9%
45 West 36th Street
New York, New York 10018
Adam Curry 87,075(2) 1.0%
45 West 36th Street
New York, New York 10018
James Carlisle 230,516(3) 2.7%
45 West 36th Street
New York, New York 10018
Susan Goodman 58,790(4) *
45 West 36th Street
New York, New York 10018
Melvin Epstein 134,333(5) 1.6%
45 West 36th Street
New York, New York 10018
James Grannan 21,304(6) *
45 West 36th Street
New York, New York 10018
Larry S. Kopald 125,000(7) 1.5%
45 West 36th Street
New York, New York 10018
Joseph Nicholson 156,950(8) 1.9%
92 Montvale
Stoneham, Massachusetts 02180
Omnicom Group Inc. 1,183,333 14.0%
437 Madison Avenue
New York, New York 10022
Barry Wagner 20,000(9) *
437 Madison Avenue
New York, New York 10022
Marc Canter 20,000(9) *
45 West 36th Street
New York, New York 10018
Richard Char 20,000(9) *
45 West 36th Street
New York, New York 10018
Scott Metcalf 0 -
1876 Grand Teton Drive
Milpitas, California 95035
Howard Tullman 2,000 *
640 North LaSalle, Suite 560
Chicago, Illinois 60610
All Directors and Executive 1,369,401
Officers as a Group (11 persons)
______________________
* denotes less than one percent.
14
<PAGE>
(1) Includes 40,000 shares of Common Stock issuable upon exercise of options
that are presently exercisable or that will become exercisable within
sixty (60) days of the Record Date ("Presently Exercisable") and 5,000
shares beneficially owned by the Ron Bloom Charitable Foundation. Does not
include 80,000 shares of Common Stock issuable upon exercise of options
that are not Presently Exercisable.
(2) Includes 40,000 shares of Common Stock issuable upon exercise of options
that are Presently Exercisable. Does not include 80,000 shares of Common
Stock issuable upon exercise of options that are not Presently
Exercisable.
(3) Includes 2,000 shares owned by the members of the individual's immediate
family and 33,334 shares of Common Stock issuable upon exercise of options
that are Presently Exercisable. Does not include 33,333 shares of Common
Stock issuable upon exercise of options that are not Presently
Exercisable.
(4) Includes 9,167 shares of Common Stock issuable upon exercise of options
that are Presently Exercisable. Does not include 43,333 shares of Common
Stock issuable upon exercise of options that are not Presently
Exercisable.
(5) Includes 133,333 shares of Common Stock issuable upon exercise of options
that are Presently Exercisable. Does not include 25,000 shares of Common
Stock issuable upon exercise of options that are not Presently
Exercisable.
(6) Includes 17,334 shares of Common Stock issuable upon exercise of options
that are Presently Exercisable. Does not include 27,333 shares of Common
Stock that are not Presently Exercisable.
(7) Includes 125,000 shares of Common Stock issuable upon exercise of options
that are Presently Exercisable. Does not include 125,000 shares of Common
Stock issuable upon exercise of options shares that are not Presently
Exercisable.
(8) Includes 25,000 shares of Common Stock issuable upon exercise of options
that are Presently Exercisable. Does not include 75,000 shares of Common
Stock that are not Presently Exercisable.
(9) Includes 20,000 shares of Common Stock issuable upon exercise of options
that are Presently Exercisable.
CERTAIN TRANSACTIONS
In March 1996, the Company entered into a consulting agreement with
Benchmark Equity Group, Inc. ("Benchmark") pursuant to which the Company paid
Benchmark $35,000 upon execution and agreed to pay Benchmark $7,000 per month in
consulting fees. Frank DeLape, formerly a principal stockholder and director of
the Company, is a principal and director of Benchmark. The consulting agreement
expired by its terms on March 28, 1998. Benchmark ceased providing services to
the Company prior thereto, at which time the Company discontinued payment to
Benchmark.
In May 1997, the Company acquired Fathom Advertising from 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
exchange for issuance of 120,000 shares of Common Stock.
In November 1997, the Company acquired all of the outstanding capital
stock of BBG New Media, Inc., a Massachusetts corporation that provides
interactive marketing services ("BBG"), in exchange for the issuance of 303,334
shares of Common Stock and payment of $175,000 in cash pursuant to an Agreement
and Plan of Merger, dated November 3, 1997 (the "BBG Agreement"). In addition,
under the terms of the BBG Agreement, the Company will issue additional shares
of Common Stock to the former stockholders of BBG if the Company achieves
certain sales growth during the period from November 1, 1998 through October 31,
1999.
In April 1998, the Company acquired all of the outstanding capital stock
of Herring/Newman, Inc., a Washington corporation that provides advertising
services ("Herring/Newman"), in exchange for the issuance of 127,799 shares of
Common Stock and payment of $400,000 in cash pursuant to an Agreement and Plan
of Merger, dated April 2, 1998 (the "HN Acquisition"). In addition, the Company
issued 77,220 shares of Common Stock, which are being held in escrow and will be
released to the former stockholders of Herring/Newman on the first anniversary
of the HN Acquisition upon fulfillment of certain conditions.
15
<PAGE>
In June 1998, the Company acquired all of the outstanding capital stock of
Interweb, Inc., a Georgia corporation that provides Web-based solutions
("Interweb"), and UbiCube Group, Inc., a Delaware interactive marketing
corporation ("UbiCube"). The Company acquired Interweb pursuant to an Agreement
and Plan of Merger, dated June 2, 1998, in exchange for the issuance of 600,000
shares of Common Stock and $200,000 in cash (the "Interweb Acquisition"). The
Company acquired UbiCube pursuant to an Agreement and Plan of Merger, dated June
27, 1998 (the "UbiCube Agreement") through a wholly-owned subsidiary, UbiCube
Acquisition Corp., in exchange for the issuance of 154,257 shares of Common
Stock (the "UbiCube Acquisition"). Pursuant to the UbiCube Agreement, 154,257
shares of Common Stock were placed in escrow and will be released to the former
stockholders of UbiCube based on the attainment of certain milestones on January
15, 1999, January 15, 2000, and January 15, 2001. In addition, in connection
with the UbiCube Acquisition, the Company may issue additional shares to the
former stockholders of UbiCube subject to the attainment of certain revenue and
profit targets during the three years ending June 2001.
On March 17, 1998, the Company entered into a loan agreement with Omnicom
pursuant to which Omnicom agreed to lend $500,000 to the Company. Amounts
outstanding from time to time under the loan accrue interest at eight percent
(8%) per annum and are due and payable (together with interest) on January 31,
1999. As of the Record Date, there was outstanding $500,000 under the loan
agreement with Omnicom.
PROPOSAL TWO:
TO APPROVE AND RATIFY THE COMPANY'S ADOPTION OF THE
THINK NEW IDEAS, INC. AMENDED AND RESTATED
1998 STOCK OPTION PLAN
In September 1997, the Board of Directors adopted the 1997 Plan, which was
ratified by the stockholders of the Company on December 11, 1997. As of the
Record Date, options to purchase 1,770,461 shares of Common Stock were granted
pursuant to the 1997 Plan.
In June 1998, the Board of Directors adopted the THINK New Ideas, Inc. New
Employee Stock Option Plan (the "New Employee Plan"). The purpose of the New
Employee Plan was to provide for the grant of options to induce individuals to
become employees of the Company and to offer such new employees incentives to
contribute to the Company's progress and to promote the Company's best
interests. The New Employee Plan provides for the grant of options that qualify
as incentive stock options ("Incentive Options") under the Internal Revenue Code
of 1986, as amended (the "Code") and options that do not so qualify
("Non-Qualified Options"). Pursuant to the terms of the New Employee Plan, the
Company may grant options exercisable to purchase up to 1,500,000 shares of
Common Stock. As of the Record Date, the Company had granted options exercisable
to purchase up to 595,981 shares of Common Stock under the New Employee Plan,
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
Systemsm on such date, of $6,406,796. Such options become exercisable one (1)
year after the date of grant, are exercisable over a four (4) year period in
equal annual increments and expire ten (10) years from the date of grant. None
of the options are currently exercisable. The exercise prices of the options
granted to date range from $6.38 to $18.69.
The Board of Directors has authorized amendment of the New Employee Plan
as set forth in the Amended and Restated 1998 Stock Option Plan, a copy of which
has been attached hereto as Exhibit A (the "1998 Plan") subject to stockholder
approval and ratification as contemplated herein. As amended, the 1998 Plan
provides for the grant of Incentive Options and Non-Qualified Options to
officers, directors, existing employees and consultants of the Company. Pursuant
16
<PAGE>
to the rules and regulations of the Nasdaq National Market Systemsm, the
foregoing amendment requires approval of the stockholders of the Company.
The following summary of the material provisions of the 1998 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 1998 Plan provides for the grant of Incentive Options and
Non-Qualified Options with respect to, in the aggregate, up to 1,500,000 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 1998 Plan, the shares of Common
Stock as to which such option or right was not exercised will again become
available under the 1998 Plan for the grant of additional options or rights to
any eligible employee. The shares of Common Stock subject to the 1998 Plan may
be made available from authorized but unissued shares, treasury shares, or both.
In the event that the 1998 Plan is not approved and ratified by the
stockholders, the New Employee Plan shall remain in force without amendment and
any options granted thereunder shall automatically be deemed to be Non-Qualified
Options.
As of the Record Date, an aggregate of one-hundred fifty-six (156) persons
(none of whom are directors or executive officers) were eligible to participate
in the New Employee Plan. Upon amendment of such plan as set forth in the 1998
Plan, all executive officers and directors will be eligible to receive options,
provided that non-employees will only be entitled to receive Non-Qualified
Options.
ADMINISTRATION
Pursuant to its terms, the 1998 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 (2) 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
Exchange Act. The Board of Directors or the Committee (by a majority vote or, in
the case of two (2) members, by unanimous vote) 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. Currently, each of the
Company's stock option plans is administered by the Compensation Committee.
SECTION 16(B) COMPLIANCE
It is intended that transactions pursuant to the 1998 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 that satisfy the conditions of Rule 16b-3.
17
<PAGE>
ELIGIBILITY AND EXTENT OF PARTICIPATION
Incentive Options may be granted pursuant to the 1998 Plan only to
employees (including officers and directors) of the Company (and its
subsidiaries). Non-Qualified Options may be granted pursuant to the 1998 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.
Any Incentive Option granted under the 1998 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
1998 Plan more than ten (10) years after the date of adoption of the 1998 Plan.
Options granted under the 1998 Plan are not transferable except upon
death. Options generally may be exercised only while the optionholder is
employed by the Company, or in some cases, within three (3) months of
termination of employment. In the event of disability of an optionholder,
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 optionholder, 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 1998 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
1998 Plan or for the assumption of options theretofore granted. If the 1998 Plan
and unexercised options are to terminate pursuant to such transaction, persons
owning any unexercised portions of options then outstanding will have the right,
18
<PAGE>
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
optionholder 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 optionholder 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
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 1998 Plan. The determination of the application of these rules will
depend upon a number of factual matters 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 1998 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 optionholder'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 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 sufficient proceeds from the sale of such shares to pay
the exercise price and any withholding taxes (a "cashless exercise") provided
all documentation and procedures are approved in advance by the Board of
Directors (or the Committee). The Company has the authority under the 1998 Plan
19
<PAGE>
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 (or the Committee) shall authorize.
AMENDMENTS TO THE 1998 PLAN
The Board of Directors may at any time terminate the 1998 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 1998 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 1998 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL AND RATIFICATION OF
THE THINK NEW IDEAS, INC. AMENDED AND RESTATED 1998 STOCK OPTION PLAN AS SET
FORTH IN EXHIBIT A HERETO, AND, UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED
FROM STOCKHOLDERS WILL BE VOTED IN FAVOR OF SUCH PLAN.
PROPOSAL THREE:
TO RATIFY THE SELECTION OF ERNST & YOUNG, LLP
AS INDEPENDENT ACCOUNTANTS FOR THE COMPANY
The Company's financial statements for the year ended June 30, 1997, were
audited by the firm of BDO Seidman, LLP ("BDO Seidman"). Pursuant to the
decision of the Board of Directors, effective February 13, 1998, the Company
dismissed the accounting firm of BDO Seidman as the Company's independent
accountants. The report of BDO Seidman on the financial statements of the
Company for the fiscal years ended June 30, 1996 and 1997 did not contain an
adverse opinion or a disclaimer of opinion and was not qualified or modified as
to uncertainty, audit scope or accounting principles. The Board of Directors
selected the firm of Ernst & Young, LLP ("Ernst & Young") to replace BDO Seidman
to serve at the pleasure of the Board of Directors. Ernst & Young audited the
Company's financial statements for the year ended June 30, 1998. The Board of
Directors, on the recommendation of the Audit Committee, is proposing that the
stockholders approve and ratify the selection of Ernst & Young as the Company's
auditors.
The foregoing was reported by the Company on Forms 8-K/A as required by
the Exchange Act. As previously disclosed therein, there were no disagreements
at the decision making level (i.e., between personnel of the Company responsible
for the presentation of its financial statements and personnel of BDO Seidman
responsible for rendering its report) with BDO Seidman on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
BDO Seidman, would have caused it to make reference to the subject matter of
such disagreements in connection with its reports. In addition, there was no
20
<PAGE>
information or event required to be reported pursuant to Subsection
(a)(1)(iv)(B) of Rule 304 of Regulation S-B, except for certain potential
material weaknesses, which BDO Seidman advised the Company of in a draft
management letter dated January 6, 1998, relating to BDO Seidman's audit of the
Company's June 30, 1997 financial statements. As previously noted, the Company
believes the following points have been remedied as part of the further
development of the Company's infrastructure. The points included: (i) general
ledger maintenance and account reconciliations were not performed on a timely
basis, including reconciliations of a certain subsidiary of subledgers to
general ledger control accounts (in particular, unbilled accounts receivable,
certain intercompany accounts and work-in-process accounts were not currently
analyzed and reconciled); (ii) there was no formal job cost system in place to
track the status of web-site development projects and the related percentage of
completion information; (iii) certain invoices had not been submitted to clients
on a timely basis; and (iv) there was no formal written policy regarding the
processing and payment of vendor invoices and employee expense reimbursements.
Some of these areas resulted in the performance of additional procedures during
the course of the audit by BDO Seidman and certain material year-end audit
adjustments. Management of the Company believes that it has addressed and
satisfactorily resolved the foregoing matters.
At the time of the filing of the applicable Form 8-K/A, the Company
provided BDO Seidman with a copy of this disclosure and requested that BDO
Seidman furnish the Company with a letter addressed to the SEC stating whether
BDO Seidman agreed with the statements made by the Company hereinabove and, if
not, stating the respects in which it did not agree. A copy of the letter of BDO
Seidman was previously filed with the SEC. In connection with the preparation of
this Proxy Statement, the Company again furnished BDO Seidman with this
disclosure and provided BDO Seidman with the opportunity to submit to the
Company, for inclusion in this Proxy Statement, a statement of up to 200 words
addressing any matters discussed herein as to which BDO Seidman believed the
disclosure was incomplete or inaccurate. BDO Seidman did not request the
inclusion of any such statement.
During the fiscal years ended June 30, 1996 and 1997, the Company did not
consult with Ernst & Young regarding: (i) the application of accounting
principles to a specified transaction; (ii) the type of opinion that might be
rendered on the Company's financial statements; or (iii) any matter that was the
subject of a disagreement with the Company's former accountant or a reportable
event (as contemplated by Item 304 of Regulation S-B).
In connection with the preparation of this Proxy Statement, the Company
furnished Ernst & Young with this disclosure and provided Ernst & Young with the
opportunity to submit to the Company, for inclusion in this Proxy Statement, a
statement of up to 200 words addressing any matters discussed herein as to which
Ernst & Young believed the disclosure was incomplete or inaccurate. Ernst &
Young did not request the inclusion of any such statement.
The affirmative vote of a majority of votes cast by the holders of Common
Stock entitled to vote thereon is required for approval and ratification of the
appointment of Ernst & Young. Representatives of Ernst & Young are expected to
be present at the Annual Meeting, have been given the opportunity to make a
statement if they so desire and will be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL AND RATIFICATION
OF ERNST & YOUNG, LLP AS INDEPENDENT ACCOUNTANTS FOR THE COMPANY.
21
<PAGE>
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 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 not 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 not 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
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 ANNUAL MEETING, PLEASE SIGN
AND RETURN THE ENCLOSED PROXY PROMPTLY. YOUR VOTE IS IMPORTANT. IF YOU ARE A
SHAREHOLDER OF RECORD AND ATTEND THE ANNUAL 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
22
<PAGE>
EXHIBIT A
THINK NEW IDEAS, INC.
AMENDED AND RESTATED
1998 STOCK OPTION PLAN
<PAGE>
THINK NEW IDEAS, INC.
AMENDED AND RESTATED
1998 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 THINK New
Ideas, Inc. Amended and Restated 1998 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 (2) members of the Board of Directors (the
"Committee"), each of whom is a "Non-Employee" Director as such term is defined
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 (1) 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
1
<PAGE>
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 (2)
years from the date of grant of the Incentive Option and one (1) 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.
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.
2
<PAGE>
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
1,500,000 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
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, that 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:
3
<PAGE>
(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
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 (1) 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.
4
<PAGE>
(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 (10) 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 (5) 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.
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 (3) 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 (1) 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
5
<PAGE>
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 (3) 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.
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
to the Optionee in accordance with the terms of this Plan. No adjustment shall
6
<PAGE>
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,
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 (1) 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
7
<PAGE>
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
under such Option. Pursuant to ss. 422(b) of the Code, no Incentive Option may
be granted pursuant to this Plan after ten (10) years from the date this Plan is
adopted or the date this Plan is approved by the stockholders of the Company,
whichever is earlier.
8
<PAGE>
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.
9
<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 (1) 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 this 4th day of November, 1998.
THINK NEW IDEAS, INC.
[CORPORATE SEAL]
By: /s/ Ronald E. Bloom
________________________________________
Ronald E. Bloom, Chief Executive Officer
ATTEST:
By: /s/ Melvin Epstein
__________________________
Melvin Epstein, Secretary
10
<PAGE>
PROXY
ANNUAL MEETING OF STOCKHOLDERS OF
THINK NEW IDEAS, INC. ON JANUARY 7, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints 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 Stockholders to be held on January 7, 1999,
at 10:00 a.m. (Eastern Time) at the Atlanta Marriott Marquis, 265 Peachtree
Center Avenue, Atlanta, Georgia 30303 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 a given nominee, strike through
the nominee's name:
Ronald Bloom . Adam Curry . Barry Wagner . Larry Kopald . Richard Char .
Scott Metcalf . Howard Tullman
2. TO APPROVE AND RATIFY THE ADOPTION OF THE THINK NEW IDEAS, INC. AMENDED
AND RESTATED 1998 STOCK OPTION PLAN.
/ / FOR / / AGAINST / / ABSTAIN
3. TO RATIFY THE SELECTION OF ERNST & YOUNG, LLP AS INDEPENDENT ACCOUNTANTS
FOR THE COMPANY.
/ / FOR / / AGAINST / / ABSTAIN
Dated: ___________________ ____________________________________
Signature
Dated: ___________________ ____________________________________
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
ONE, TWO and THREE.
PLEASE MARK, SIGN AND RETURN THIS PROXY CARD PROMPILY USING THE ENCLOSED
ENVELOPE.
<PAGE>
