<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
HEALTHWORLD CORPORATION
- --------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- --------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11: N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: N/A
[ ] Fee paid previously with preliminary materials: N/A
[ ] 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>
HEALTHWORLD CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 10, 1998
TO THE STOCKHOLDERS OF
HEALTHWORLD CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
'Meeting') of Healthworld Corporation, a Delaware corporation (the 'Company'),
will be held at 100 Avenue of the Americas, New York, New York 10013, on
Wednesday, June 10, 1998 at 10:30 A.M., Local Time, to consider and act upon the
following:
1. To elect seven directors of the Company to serve as the Board of
Directors until the next annual meeting of stockholders and until
their successors have been duly elected and qualified;
2. To consider and vote upon a proposed amendment to the Company's
1997 Stock Option Plan to increase the number of shares of the
Company's Common Stock, $.01 par value (the 'Common Stock'),
available under the Plan by an aggregate of 700,000 shares;
3. To ratify the selection of Arthur Andersen LLP as independent
auditors of the Company for the 1998 fiscal year; and
4. To consider and act upon such other matters as may properly come
before the Meeting or any adjournment thereof.
Only stockholders of record of the Company's Common Stock at the close of
business on April 16, 1998 shall be entitled to receive notice of, and to vote
at, the Meeting, and at any adjournment or adjournments thereof. A list of the
stockholders of the Company as of the close of business on April 16, 1998 will
be available for inspection during business hours for ten days prior to the
Meeting at the Company's principal executive offices located at 100 Avenue of
the Americas, New York, New York 10013. A Proxy and a Proxy Statement for the
Meeting are enclosed herewith.
All stockholders are cordially invited to attend the Meeting. Whether or
not you plan to attend the Meeting, please complete, date and sign the enclosed
Proxy, which is solicited by the Board of Directors of the Company, and mail it
promptly in the enclosed envelope to make sure that your shares are represented
at the Meeting. In the event you decide to attend the Meeting in person, you
may, if you desire, revoke your Proxy and vote your shares in person.
By Order of the Board of Directors
/s/ Stuart Diamond
STUART DIAMOND
Secretary
Dated: April 24, 1998
IMPORTANT
THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF FURTHER
REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. A SELF-ADDRESSED ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE
UNITED STATES.
<PAGE>
HEALTHWORLD CORPORATION
100 Avenue of the Americas
New York, New York 10013
PROXY STATEMENT
Annual Meeting of Stockholders
June 10, 1998
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Healthworld Corporation, a Delaware
corporation (the 'Company'), to be voted at the Annual Meeting of Stockholders
(the 'Meeting') of the Company which will be held at 100 Avenue of the Americas,
New York, New York 10013, on Wednesday, June 10, 1998 at 10:30 A.M., Local Time,
and any adjournment or adjournments thereof for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders and in this Proxy
Statement.
The principal executive offices of the Company are located at 100 Avenue of
the Americas, New York, New York 10013. The approximate date on which this Proxy
Statement and accompanying Proxy will first be sent or given to stockholders is
April 24, 1998.
A Proxy, in the accompanying form, which is properly executed, duly
returned to the Company and not revoked, will be voted in accordance with the
instructions contained therein and, in the absence of specific instructions,
will be voted (i) FOR the election as directors of persons who have been
nominated by the Board of Directors, (ii) FOR the approval and adoption of a
proposed amendment to the Company's 1997 Stock Option Plan to increase the
number of shares of the Company's Common Stock, $.01 par value (the 'Common
Stock'), available under the Plan by an aggregate of 700,000 shares, (iii) FOR
the ratification of the selection of Arthur Andersen LLP as independent auditors
to audit and report upon the consolidated financial statements of the Company
for the 1998 fiscal year, and (iv) in accordance with the judgment of the person
or persons voting the proxies on any other matter that may be properly brought
before the Meeting. Each such Proxy granted may be revoked at any time
thereafter by writing to the Secretary of the Company prior to the Meeting, or
by execution and delivery of a subsequent Proxy or by attendance and voting in
person at the Meeting, except as to any matter or matters upon which, prior to
such revocation, a vote shall have been cast pursuant to the authority conferred
by such Proxy.
On November 12, 1997, Healthworld Corporation acquired (the
'Consolidation'), in exchange for shares of its Common Stock, all of the issued
and outstanding common stock of each of (i) Girgenti, Hughes, Butler & McDowell,
Inc. and its affiliated entities ('GHB&M') and (ii) Milton Marketing Group
Limited and its subsidiaries ('Milton'). Unless otherwise indicated, all
references herein to the 'Company' include GHB&M and Milton and give effect to
the Consolidation and all references to 'Healthworld' refer to Healthworld
Corporation prior to the consummation of the Consolidation. Healthworld was
incorporated in Delaware on September 12, 1996 and conducted no operations prior
to the consummation of the Consolidation on November 12, 1997.
VOTING SECURITIES
Stockholders of record as of the close of business on April 16, 1998 (the
'Record Date') will be entitled to notice of, and to vote at, the Meeting or any
adjournments thereof. On the Record Date there were outstanding 7,415,000 shares
of the Company's Common Stock. There was no other class of voting securities
outstanding at the Record Date. Each holder of Common Stock is entitled to one
vote for each share held by such holder. The presence, in person or by proxy, of
the holders of a majority of the outstanding shares of Common Stock is necessary
to constitute a quorum at the Meeting.
<PAGE>
PROPOSAL 1--ELECTION OF DIRECTORS
At the Meeting, seven directors are to be elected to serve until the next
annual meeting of stockholders and until their successors shall be duly elected
and shall qualify. Unless otherwise specified, all proxies received will be
voted in favor of the election of the seven nominees of the Board of Directors
named below as directors of the Company. All of the seven nominees are presently
directors of the Company. The term of the current directors expires at the
Meeting. Should any of the nominees not remain a candidate for election at the
date of the Meeting (which contingency is not now contemplated or foreseen by
the Board of Directors), proxies solicited thereunder will be voted in favor of
those nominees who do remain candidates and may be voted for substitute nominees
selected by the Board of Directors.
Assuming a quorum is present, a vote of a majority of the votes cast at the
Meeting, in person or by proxy, is required to elect each of the nominees as a
director. Abstentions and broker non-votes are not counted as votes cast.
The following table sets forth the names of the nominees, their ages, and
their current positions with the Company:
NAME AGE TITLE
- ------------------------ --- -------------------------------------------------
Steven Girgenti......... 52 Chairman of the Board and Chief Executive Officer
William Leslie Milton... 54 Vice Chairman of the Board and President
Francis Hughes.......... 59 Chief Creative Officer of Girgenti, Hughes,
Butler & McDowell, Inc. and Director
Peter Knight............ 47 Director
Colin Lloyd............. 56 Director
Jonah Shacknai.......... 41 Director
Alex Spizz.............. 49 Director
Mr. Girgenti has served as Chairman of the Board and Chief Executive
Officer of the Company since August 1997. Mr. Girgenti co-founded Girgenti,
Hughes, Butler & McDowell, Inc. ('GH'), a wholly-owned subsidiary of the
Company, in April 1986 and has served as its President and Chief Executive
Officer since then. Beginning in 1969, Mr. Girgenti worked in the pharmaceutical
industry for advertising companies specializing in medical communications,
including William Douglas McAdams. Prior to that, Mr. Girgenti held a variety of
positions with pharmaceutical companies, including Director of Marketing
Research and Product Manager for DuPont Pharmaceuticals and Manager of
Commercial Development for Bristol-Myers Squibb Company.
Mr. Milton has served as Vice Chairman of the Board and President of the
Company since August 1997. Mr. Milton founded Milton Marketing Limited, a
wholly-owned subsidiary of the Company, in August 1978 and has served as its
Chairman of the Board and Chief Executive Officer since such time. Prior to such
time, Mr. Milton held a variety of positions with Warner Lambert Consumer
Healthcare, Beecham Laboratories (South Africa), Gillette Industries UK Limited,
and Parke Davis Pty (South Africa) where he developed an expertise in marketing
management with respect to medical and consumer health care products.
Mr. Hughes has been a director of the Company since August 1997. Mr. Hughes
co-founded GH in April 1986 and has served as its Secretary and Chief Creative
Officer since then. In 1980, Mr. Hughes co-founded William J. Bologna
International, Inc., a health care communications company. Prior to that time,
Mr. Hughes worked in the medical divisions of various advertising companies,
including J. Walter Thompson Co., Compton and William Douglas McAdams.
Mr. Knight has been a director of the Company since November 1997. Mr.
Knight has been a partner of the law firm of Wunder, Knight, Levine, Thelen &
Forsey since 1991. In 1996, Mr. Knight took a leave of absence from the firm to
serve as Campaign Manager for the 1996 Clinton/Gore campaign. Mr. Knight was
General Counsel and Secretary of Medicis Pharmaceutical Corp. from 1989 to 1991,
and is currently a director of Comsat Corp., an international telecommunications
and network service company, Medicis Pharmaceutical Corp., a
2
<PAGE>
publicly traded pharmaceutical company, and Whitman Education Group Inc., a
private for-profit education company.
Mr. Lloyd has been a director of the Company since November 1997. Mr. Lloyd
has been the Chief Executive Officer of Direct Marketing Association (U.K.)
Ltd., a direct marketing trade association, since September 1993. Mr. Lloyd
served as a consultant to and a director of various companies from 1992 to 1993,
and was President of Marketing Services Worldwide of Roux, Seguile, Cyzak &
Goudard, SA ('RSCG'), an international advertising group, from February 1990 to
August 1991. In 1969, Mr. Lloyd co-founded KLP Group plc ('KLP'), a sales
promotion and marketing services company in the United Kingdom quoted on the
London Stock Exchange in which he served as the Chief Executive Officer until
August 1991. KLP was acquired in 1990 by RSCG. Mr. Lloyd is currently a director
of Viewinn plc, a publicly traded hotel information services company.
Mr. Shacknai has been a director of the Company since November 1997. Mr.
Shacknai has been Chairman of the Board and Chief Executive Officer of Medicis
Pharmaceutical Corp. since 1988. From 1982 to 1988, Mr. Shacknai was a senior
partner in the law firm of Royer, Shacknai and Mehle, where he represented over
34 multinational pharmaceutical and medical device companies. From 1983 to 1986,
Mr. Shacknai was also an executive officer of Key Pharmaceuticals, Inc., prior
to its acquisition by Schering Plough Corp. From 1977 to 1982, Mr. Shacknai
served as Chief Aide to a United States House of Representatives committee with
responsibility for health policy. Mr. Shacknai serves as a member of the
National Arthritis and Musculoskeletal and Skin Diseases Advisory Council of the
National Institute of Health, and the U.S.-Israel Science and Technology
Commission. Mr. Shacknai is currently a director of Miravant Medical
Technologies, a publicly traded medical technologies company.
Mr. Spizz has been a director of the Company since November 1997. For more
than the past five years, Mr. Spizz has been a senior member of the law firm of
Todtman, Nachamie, Hendler & Spizz, P.C., counsel to the Company, certain of its
subsidiaries and Healthworld B.V. in connection with various matters.
In November 1997, the Company consummated an initial public offering (the
'IPO'), pursuant to which the Company issued and sold an aggregate of 2,415,000
shares of Common Stock.
Since the time on November 21, 1997 that the Company's Registration
Statement relating to the IPO was declared effective by the Securities and
Exchange Commission (the 'Effective Time'), through December 31, 1997, there
were no meetings of the Board of Directors of the Company. Prior to the
Effective Time, there was one meeting of the Board of Directors of the Company
(which was attended by all of the members of the Board of Directors) and action
was taken by the directors by unanimous written consent in lieu of a meeting on
five occasions during the last fiscal year. The Board of Directors designated,
as of the Effective Time, from among its members an Audit Committee, which
consists of Messrs. Lloyd, Shacknai and Spizz. The Audit Committee, which is
responsible for recommending annually to the Board of Directors the independent
auditors to be retained by the Company and which meets with management and the
Company's independent auditors to determine the adequacy of the Company's
financial and accounting practices and controls, held no meetings during the
1997 fiscal year. The Company has had, since the Effective Time, a Compensation
Committee of the Board of Directors, which reviews and recommends to the Board
of Directors the compensation and benefits of all officers of the Company,
reviews general policy matters relating to the compensation and benefits of
employees of the Company and administers the Company's 1997 Stock Option Plan
and the issuance of stock options to the Company's officers, employees,
directors and consultants. The Compensation Committee consists of Messrs.
Knight, Lloyd and Shacknai. The Compensation Committee held no meetings during
the 1997 fiscal year. The Company does not have a standing nominating committee.
There are no family relationships between any of the directors or executive
officers of the Company.
3
<PAGE>
EXECUTIVE OFFICERS
Set forth below is certain information regarding the executive officers of
the Company:
NAME AGE CURRENT POSITION
- ------------------------ --- -------------------------------------------------
Steven Girgenti......... 52 Chairman of the Board and Chief Executive Officer
William Leslie Milton... 54 Vice Chairman of the Board and President
Stuart Diamond.......... 37 Executive Vice President, Chief Financial
Officer, Secretary and Treasurer
William Butler.......... 52 Executive Vice President--Global Communications
Services of GH
Herbert Ehrenthal....... 61 Executive Vice President--U.S. Communications
Services of GH
Francis Hughes.......... 59 Chief Creative Officer of GH and Director
Michael Garnham......... 42 Managing Director--U.K. Contract Sales Services
Officers serve at the discretion of the Board of Directors. See 'Executive
Compensation--Employment Agreements' for a description of certain employment
agreements of executive officers.
Information regarding Mr. Girgenti is included herein in the section
entitled 'PROPOSAL 1--ELECTION OF DIRECTORS.'
Information regarding Mr. Milton is included herein in the section entitled
'PROPOSAL 1--ELECTION OF DIRECTORS.'
Mr. Diamond has served as Executive Vice President, Chief Financial
Officer, Secretary and Treasurer of the Company since August 1997. Mr. Diamond
was the Vice President-Controller of the Licensing Division of Calvin Klein
Inc., an apparel company, from April 1996 to August 1997. He was the Vice
President and Chief Financial Officer of Fenway Partners Inc., a leveraged
buyout firm, from April 1995 to April 1996. Mr. Diamond was the Senior Vice
President and Chief Financial Officer of Medicis Pharmaceutical Corp. from 1990
to April 1995.
Mr. Butler became Executive Vice President of GH's Global Communications
Services in November 1997. Mr. Butler co-founded GH in April 1986 and has served
as its Executive Vice President since such time. Mr. Butler has worked for
various medical communications firms, including Sudler & Hennessey and William
Douglas McAdams. Prior to that time, Mr. Butler worked in a number of marketing
positions at Pfizer Inc. and Continental Group.
Mr. Ehrenthal became Executive Vice President of GH's U.S. Communications
Services in November 1997. Mr. Ehrenthal has been President and Chief Operating
Officer of Rubin Ehrenthal & Associates, a division of GH, since 1991 when
Rubin, Reid, Noto & Ehrenthal, Inc. ('Rubin Ehrenthal') (of which he was a
founding member) merged with GH. Prior to his employment with Rubin Ehrenthal,
Mr. Ehrenthal held a variety of senior management positions with various
advertising agencies, including BBDO Worldwide Inc. and Ted Bates.
Information regarding Mr. Hughes is included herein in the section entitled
'PROPOSAL 1--ELECTION OF DIRECTORS.'
Mr. Garnham has been the Managing Director of U.K. Contract Sales Services
since December 1994. Mr. Garnham served as a consultant to Milton Marketing
Limited from August 1993 to December 1994 in connection with its field marketing
activities. Mr. Garnham was the Associate Director of FMCG Field Marketing Ltd.,
a field marketing company, from February 1992 to August 1993.
4
<PAGE>
SECURITY OWNERSHIP
The following table sets forth certain information as of April 16, 1998
regarding the ownership of Common Stock of the Company by (i) each person who is
known to the management of the Company to have been the beneficial owner of more
than 5% of the outstanding shares of the Company's Common Stock, (ii) each
director and nominee for director, (iii) each executive officer named in the
Summary Compensation Table contained herein and (iv) all directors and executive
officers of the Company as a group. Each stockholder listed below has sole
voting and investment power with respect to the shares set forth opposite such
stockholder's name. All persons listed below have an address c/o the Company's
principal executive offices in New York.
NAME AND ADDRESS OF AMOUNT AND NATURE OF % OF
BENEFICIAL OWNER POSITION WITH THE COMPANY BENEFICIAL OWNERSHIP CLASS
- ------------------------ ------------------------- -------------------- -----
Steven Girgenti......... Chairman of the Board and 2,195,925 29.6%
Chief Executive Officer
William Leslie Milton... Vice Chairman of the 1,290,984 17.4%
Board and President
William Butler.......... Executive Vice President 485,070 6.5%
--Global Communications
Services of GH
Herbert Ehrenthal....... Executive Vice President 596,505 8.0%
--U.S. Communications
Services of GH
Francis Hughes.......... Chief Creative Officer of 172,500 2.3%
GH and Director
Peter Knight............ Director 0 *
Colin Lloyd............. Director 5,000 *
Jonah Shacknai.......... Director 0 *
Alex Spizz.............. Director 10,000 *
All directors and
executive officers as a
group (11 persons)..... 4,954,215 66.8%
- ------------------
* Less than one percent (1%).
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers, directors and persons who beneficially own
greater than 10% of a registered class of the Company's equity securities to
file certain reports ('Section 16 Reports') with the Securities and Exchange
Commission with respect to ownership and changes in ownership of the Common
Stock and other equity securities of the Company. Based solely on the Company's
review of the Section 16 Reports furnished to the Company and written
representations from certain reporting persons, all Section 16(a) requirements
applicable to its officers, directors and greater than 10% beneficial owners
were complied with.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes compensation paid by the Company during
fiscal 1996 and 1997 to the Company's Chairman of the Board and Chief Executive
Officer and its four other most highly compensated executive officers whose cash
compensation exceeded $100,000 for such respective fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
ANNUAL COMPENSATION ------------
-------------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING
FISCAL COMPENSATION OPTIONS/SARS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) $ (#)(1) COMPENSATION ($)
- --------------------------- ------ ---------- --------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Steven Girgenti............ 1997 $ 47,811(2) -- $417,130(3) 25,000 $2,628,109(4)(5)
Chairman of the Board & 1996 -- -- 337,000(3) -- 981,500(4)
Chief Executive Officer
William Leslie Milton...... 1997 $103,307(6)(9) -- $ 33,855(6)(7) 25,000 $ 131,186(8)
Vice Chairman of the 1996 98,280(6)(9) -- 32,340(6)(7) -- --
Board & President
William Butler............. 1997 $ 37,853(2) -- $273,541(3) 25,000 $ 576,366(4)(5)
Executive Vice President- 1996 -- -- 275,000(3) -- 222,622(4)
Global Communications
Services of GH
Herbert Ehrenthal.......... 1997 $ 37,753(2) -- $280,573(3) 25,000 $ 764,897(4)(5)
Executive Vice President- 1996 -- -- 275,000(3) -- 231,211(4)
U.S. Communications
Services of GH
Francis Hughes............. 1997 $ 28,125(2) -- $205,383(3) 25,000 $ 232,552(4)(5)
Chief Creative Officer of 1996 -- -- 225,000(3) -- 52,372(4)
GH and Director
</TABLE>
- ------------------
(1) Reflects options to purchase shares of Common Stock granted to such persons
under the Company's 1997 Stock Option Plan in 1997 at an exercise price of
$9.90 per share for Mr. Girgenti, and at an exercise price of $9.00 per
share for each of Messrs. Milton, Butler, Ehrenthal and Hughes. Such options
vest at a rate of 1/3 per year on November 21 of 1998, 1999 and 2000.
(2) Compensation paid by certain of the companies comprising GHB&M.
(3) Represents consulting fees paid prior to the Effective Time by certain of
the companies comprising GHB&M to certain companies wholly-owned by each
respective officer.
(4) Includes distributions made to such individuals by certain of the companies
comprising GHB&M. A portion of such distributions were made to cover each
individual's 1995, 1996 and estimated 1997 tax liabilities associated with
the election of the companies comprising GHB&M to be treated as 'S'
Corporations (other then Syberactive, Inc., which was treated as a 'C'
Corporation) during such periods. Pursuant to such election, income or loss
of each of such companies was allocated to its stockholders by inclusion in
their respective individual income tax returns. As a result of the
consummation of the Consolidation, the status of each of the companies
comprising GHB&M as S Corporations terminated and each of the companies
comprising GHB&M became subject to Federal and state income taxes at
applicable corporate rates. Immediately prior to the consummation of the
Consolidation, GHB&M made distributions to its stockholders (Messrs.
Girgenti, Butler, Ehrenthal and Hughes) of $3.7 million in the aggregate
from existing cash balances for the payment by such stockholders of taxes
due on GHB&M's estimated 1997 S corporation earnings through the date of the
Consolidation. See 'Related Transactions'.
(Footnotes continued on next page)
6
<PAGE>
(Footnotes continued from previous page)
(5) Includes the Company's contributions to the Healthworld and the U.S.
Subsidiaries Profit Sharing/401K Retirement Plan. For fiscal 1997, such
contributions were as follows: Mr. Girgenti--$1,220; Mr. Butler-- $1,067;
Mr. Ehrenthal--$1,067; and Mr. Hughes--$1,067.
(6) Calculated using the 1996 and 1997 average exchange rates of $1.56 =
pounds 1.00 and $1.64 = pounds 1.00, respectively.
(7) For 1996 and 1997, includes (i) a contribution by Milton Marketing Limited
to Mr. Milton's pension plan of $15,600 and $16,398, respectively, and (ii)
an aggregate of $10,952 and $14,776, respectively, for automobile expenses.
(8) Represents dividend distributions made by Milton Marketing Limited to Mr.
Milton in connection with dividends declared prior to the consummation of
the Consolidation.
(9) Compensation paid by Milton Marketing Limited.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information for each of the persons named in
the Summary Compensation Table with respect to the stock options granted to such
executive officers during the fiscal year ended December 31, 1997 pursuant to
the Company's 1997 Stock Option Plan.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------ POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
TOTAL ANNUAL RATES OF STOCK
OPTIONS PRICE APPRECIATION
GRANTED TO FOR OPTION TERM (1)
OPTIONS EMPLOYEES EXERCISE ---------------------
GRANTED IN FISCAL PRICE EXPIRATION 5% 10%
NAME # YEAR (%) $/SH DATE $ $
- ------------------------ ------- ----------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Steven Girgenti......... 25,000 4.6% $ 9.90 11/21/02 $ 39,663 $114,865
William Leslie Milton... 25,000 4.6 9.00 11/21/04 91,598 213,461
William Butler.......... 25,000 4.6 9.00 11/21/07 141,501 358,592
Herbert Ehrenthal....... 25,000 4.6 9.00 11/21/07 141,501 358,592
Francis Hughes.......... 25,000 4.6 9.00 11/21/07 141,501 358,592
</TABLE>
- ------------------
(1) These figures were calculated assuming that the market price per share of
the Common Stock increased from $9.00 per share at a compound rate of 5% and
10% per year for ten years. The purpose of including this information is to
indicate the potential realizable value at the assumed annual rates of stock
price appreciation for the option term for all of the Company's
stockholders.
7
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table sets forth information for each of the persons named in
the Summary Compensation Table with respect to the aggregate stock options
exercised during the fiscal year ended December 31, 1997, and stock options held
as of December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE- MONEY
OPTIONS AT OPTIONS AT
SHARES FY-END(#) FY-END($)(1)
ACQUIRED ------------- -------------
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ------------------------ ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Steven Girgenti......... 0 0 0/25,000 0/$54,000
William Leslie Milton... 0 0 0/25,000 0/ 76,500
William Butler.......... 0 0 0/25,000 0/ 76,500
Herbert Ehrenthal....... 0 0 0/25,000 0/ 76,500
Francis Hughes.......... 0 0 0/25,000 0/ 76,500
</TABLE>
- ------------------
(1) Based upon the closing price of the Common Stock of $12.06 on December 31,
1997, less the exercise price.
EMPLOYMENT AGREEMENTS
In November 1997, the Company entered into a three-year employment
agreement with each of Messrs. Girgenti, Milton, Butler and Garnham, and an
eighteen month employment agreement with Mr. Ehrenthal (collectively, the
'Executive Employment Agreements'), which became effective as of the Effective
Time and provide that Messrs. Girgenti, Milton, Butler, Garnham and Ehrenthal
(the 'Executives') will serve as Chairman of the Board and Chief Executive
Officer of the Company, Vice Chairman of the Board and President of the Company,
Executive Vice President Global--Communications Services of GH, Managing
Director--U.K. Contract Sales Services and Executive Vice President--U.S.
Communications Services of GH, respectively, at an annual salary of $360,000,
$325,000, $300,000, $175,000, and $300,000, respectively, subject to review and
increase at the discretion of the Board of Directors of the Company. Messrs.
Girgenti's and Milton's Executive Employment Agreements provide that each of
Messrs. Girgenti and Milton will serve as members of the Board of Directors of
the Company. Each Executive Employment Agreement is automatically renewable
after the initial term for successive one year periods unless either the Company
or the Executive notifies the other at least 90 days prior to the expiration of
any term of its or his desire to terminate the agreement. Each Executive
Employment Agreement also contains a confidentiality provision as well as a
noncompetition provision which prohibits the Executive from competing with the
Company during the term of the applicable agreement and for a two year period
(or, in the case of Mr. Ehrenthal, for a one year period) after the expiration
of such term. Under Messrs. Girgenti's or Milton's Executive Employment
Agreement, in the event that the Company terminates Mr. Girgenti or Milton
without cause (as defined in the agreement) prior to the expiration of the
agreement, the Company is obligated to pay Messrs. Girgenti or Milton, as the
case may be, severance in an amount equal to twice his then current base salary.
Furthermore, each Executive Employment Agreement provides that Messrs.
Girgenti, Milton, Butler, Ehrenthal and Garnham are entitled to a bonus based on
achieving or exceeding certain profits and revenue performance goals set by the
Company during the term of their respective employment agreement, and may be
entitled to an additional bonus to be determined at the sole discretion of the
Compensation Committee of the Company. Mr. Ehrenthal's agreement also provides
that he will be entitled to (i) a two year consulting arrangement, at the end of
his employment term (or if he is terminated without cause), for $300,000 per
annum for the first year and $120,000 per annum for the second year of such
consulting arrangement and (ii) an expense allowance during his employment term
of $30,000 per year.
In August 1997, the Company entered into a three-year employment agreement
with Stuart Diamond (the 'Diamond Employment Agreement'), which provides that
Mr. Diamond will serve as the Company's Executive Vice President and Chief
Financial Officer at an annual base salary of $175,000, subject to annual review
and
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increase at the discretion of the Board of Directors of the Company. The Diamond
Employment Agreement also provided that Mr. Diamond would receive a minimum
bonus of $30,000 for the year ending December 31, 1997 and may be entitled to
additional annual bonuses and awards under any plans established by the Company
as determined by the Board of Directors or Compensation Committee in their sole
discretion. The Diamond Employment Agreement is automatically renewable after
the initial three-year term for successive one year periods unless either the
Company or Mr. Diamond notifies the other at least 30 days prior to the
expiration of any term of its or his desire to terminate the agreement. The
Diamond Employment Agreement contains a confidentiality provision as well as a
non-competition provision which prohibits Mr. Diamond from competing with the
Company during the term of the agreement. Under the Diamond Employment
Agreement, the Company will be obligated to pay Mr. Diamond severance in an
amount equal to (i) six months base salary, in the event that the Company
terminates Mr. Diamond without cause (as defined in the agreement) prior to or
subsequent to the expiration of the agreement and (ii) a minimum of three months
base salary (subject to increase at the discretion of the Board of Directors) in
the event that the Company is sold or a change of control in the Company occurs
(in addition to the amount payable in (i) above).
In September 1995, GH entered into a three-year employment agreement (the
'Hughes Employment Agreement') with Francis Hughes, a member of Healthworld's
Board of Directors, which provides that Mr. Hughes will serve as the Chief
Creative Officer and Secretary of GH for an annual base salary of $225,000.
Under the Hughes Employment Agreement, Mr. Hughes is obligated to work a total
of six out of 12 months per calendar year in accordance with a pre-approved
schedule. The Hughes Employment Agreement may be extended by Mr. Hughes at his
sole discretion for up to two additional one-year periods upon at least 30 days
prior written notice to the Company. The Hughes Employment Agreement contains a
confidentiality provision as well as a non-competition provision which prohibits
Mr. Hughes from competing with the Company during the term of the agreement and
for five years thereafter.
COMPENSATION OF DIRECTORS
Prior to the consummation of the IPO, the members of Healthworld's Board of
Directors did not receive any compensation for serving as directors. Each
non-employee member of the Board of Directors will receive, beginning in the
1998 fiscal year, an annual fee of $2,000 plus reimbursement of expenses
incurred in attending meetings. Pursuant to the Company's 1997 Stock Option Plan
(the 'Stock Option Plan') each non-employee director automatically received an
option grant for 10,000 shares of Common Stock at the Effective Time at an
exercise price per share of $9.00. In addition, under the Stock Option Plan each
non-employee director will automatically receive, subject to availability under
the Stock Option Plan, an option grant for 10,000 shares of Common Stock on the
date of the first meeting of the Board of Directors following each annual
meeting of stockholders. In addition, a non-employee director who becomes a
director on a date other than the date of any annual meeting of stockholders
will receive, subject to availability under the Stock Option Plan, an option
grant under the Stock Option Plan for 10,000 shares of Common Stock on the date
he or she becomes a director. Each grant will be at an exercise price per share
equal to the market price of the Common Stock on the grant date, will become
fully exercisable on the first anniversary of the date of the grant, and will
have a term of ten years measured from the grant date, subject to earlier
termination if an optionee's service as a Board member is terminated. At the
Effective Time, options to purchase 10,000 shares of Common Stock at an exercise
price of $9.00 per share were granted to each of Messrs. Knight, Lloyd, Shacknai
and Spizz.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the Consolidation, compensation policies and decisions, including
those relating to salary, bonuses and benefits of executive officers, had been
set or made by Mr. Girgenti, with respect to GHB&M, and Mr. Milton, with respect
to Milton, since the formation of such companies. Since the Effective Time and
for the remainder of the fiscal year ended December 31, 1997, the members of the
Compensation Committee of the Board of Directors were Peter Knight, Colin Lloyd
and Jonah Shacknai. During the 1997 fiscal year, no executive officer of the
Company served as a director of or member of a compensation committee of any
entity for which any of the persons serving on the Board of Directors of the
Company or on the Compensation Committee of the Board of Directors is an
executive officer.
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Prior to the Consolidation, compensation policies and decisions, including
those relating to salary, bonuses and benefits of executive officers, had been
set or made by Mr. Girgenti, with respect to GHB&M, and Mr. Milton, with respect
to Milton, since the formation of such companies. All compensation paid to the
Company's executive officers prior to the Effective Time was determined by
either Mr. Girgenti or Mr. Milton, other than certain compensation paid to
Messrs. Diamond and Hughes pursuant to their employment agreements, which were
in effect prior to the Effective Time. As discussed under 'Executive
Compensation-Employment Agreements,' the Company has also entered into
employment agreements, effective as of the Effective Time, with each of Messrs.
Girgenti, Milton, Butler, Garnham and Ehrenthal. The compensation paid to
Messrs. Girgenti, Milton, Butler, Garnham and Ehrenthal since the Effective Time
has been based solely on the terms of such employment agreements, with the
exception of stock option grants under the Stock Option Plan to executive
officers at the Effective Time, which were approved by the Board of Directors of
the Company prior to the Effective Time. Consequently, although the Compensation
Committee is responsible, since the Effective Time, for determining compensation
policies and guidelines for the Company's executive officers and for
administering the Stock Option Plan and the grant of stock options thereunder,
the Compensation Committee has not, as of December 31, 1997, formulated specific
policies concerning compensation of the Company's Chief Executive Officer and
the Company's other executive officers.
The Compensation Committee of the Board of Directors
Peter Knight
Colin Lloyd
Jonah Shacknai
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PERFORMANCE COMPARISON
The following graph compares, from November 21, 1997 (the Effective Time
and the date on which the Common Stock was registered under Section 12 of the
Securities Exchange Act of 1934, as amended (the 'Exchange Act')) the cumulative
total stockholder return on the Common Stock with the cumulative total returns
of the Nasdaq Stock Market (U.S.) Index and a peer group. The graph assumes that
the value of the investment in the Common Stock and each index was $100 on
November 21, 1997 and that all dividends were reinvested.
The peer group is comprised of the following domestic and foreign
advertising, marketing and communications companies: Boron Lepore & Associates
Inc., Cks Group Inc., Think New Ideas Inc., Cordiant Communications Group,
Omnicom Group, True North Communications, Grey Advertising Inc., Wpp Group Plc
and Quintiles Transnational Corp. The return of each company in the peer group
has been weighted according to its respective stock market capitalization. Data
for the graph were provided by Research Data Group, Inc.
COMPARISON OF ONE MONTH CUMULATIVE TOTAL RETURN*
AMONG HEALTHWORLD CORPORATION, THE NASDAQ STOCK MARKET (U.S.) INDEX
AND A PEER GROUP
[PERFORMANCE GRAPH]
Healthworld Peer Nasdaq Stock
Corp. Group Market (U.S.)
----------- ----- -------------
11/21/97 $100 $100 $100
12/31/97 121 107 98
*$100 INVESTED ON 11/21/97 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
RELATED TRANSACTIONS
Healthworld entered into separate Agreements and Plans of Organization (the
'Consolidation Agreements') in October 1997 with the shareholders of GHB&M and
Milton and, pursuant thereto, acquired GHB&M and Milton on November 12, 1997.
Prior to November 12, 1997, each of the companies comprising GHB&M were owned by
Steven Girgenti, the Chairman of the Board and Chief Executive Officer of the
Company, William Butler, the Executive Vice President of Global Communications
Services of GH, Herbert Ehrenthal, the Executive Vice President of U.S.
Communications Services of GH, and Francis Hughes, a director
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of the Company and Chief Creative Officer of GH. Prior to November 12, 1997,
Milton Marketing Group Limited ('MMGL') was owned by William Leslie Milton, the
Vice Chairman of the Board and President of the Company, and minority interests
of Milton Marketing Limited, Effective Sales Personnel (f/k/a Milton Headcount
Limited), PDM Communications Limited ('PDM') and Milton Cater Limited, each a
subsidiary of MMGL, were owned by Michael Bourne, Michael Garnham (the Managing
Director of U.K. Contract Sales Services), Leonard Moreton and Claire Cater,
respectively.
Pursuant to the terms of the Consolidation Agreements, in exchange for all
of the shares of common stock of the companies comprising GHB&M and all of the
shares of common stock of the companies comprising Milton, including Milton's
minority interests, Healthworld issued an aggregate of 5,000,000 shares of its
Common Stock, of which 3,450,000 shares were issued to the shareholders of GHB&M
and 1,550,000 shares were issued to the shareholders of Milton, other than
Claire Cater, who did not receive any of such shares since her minority interest
was redeemed by Milton for no consideration pursuant to a prior agreement
between Milton and Ms. Cater. See 'Security Ownership.' The allocation of the
shares of Common Stock issued in the Consolidation to the GHB&M shareholders was
made in the same proportion as each such stockholder's current ownership
interest in the GHB&M companies. Of the shares of Common Stock issued to
Milton's shareholders, Mr. Milton received 1,290,984 shares and the minority
shareholders (other than Ms. Cater) received an aggregate of 259,016 shares. In
addition, pursuant to a pre-existing agreement between PDM and Leonard Moreton,
certain of the terms of which were incorporated in the Consolidation Agreements,
the Company will pay to Mr. Moreton no later than July 31, 1999 an amount in
cash up to approximately $320,000 based on the profits earned by PDM. As a
result of the Consolidation, all of the shares of GHB&M and Milton (including
the minority interests in the subsidiaries of Milton) were acquired by
Healthworld as described above, and GHB&M and Milton became wholly owned
subsidiaries of Healthworld.
Pursuant to the Consolidation Agreements, Messrs. Milton and Garnham and
each of the shareholders of GHB&M have agreed not to compete with the Company
for a two year period, and Messrs. Bourne and Moreton have agreed not to compete
with the Company for a six month period, commencing on November 21, 1997. In
addition, under the Consolidation Agreements, the Company granted to the
stockholders of GHB&M and Milton who received shares of Common Stock in the
Consolidation (including Messrs. Girgenti, Milton, Butler, Ehrenthal, Hughes and
Garnham) unlimited piggy-back registration rights with respect to such shares,
commencing one year from the Effective Time.
Prior to the consummation of the Consolidation, the companies comprising
GHB&M (other than Syberactive, Inc. ('Syberactive'), which is treated as a C
Corporation) elected to be treated as S Corporations under the Internal Revenue
Code of 1986, as amended, pursuant to which income or loss of each of such
companies was allocated to its shareholders by inclusion in their respective
individual income tax returns. As a result of the consummation of the
Consolidation, the status of each of the companies comprising GHB&M as S
Corporations terminated and each of the companies comprising GHB&M became
subject to Federal and state income taxes at applicable corporate rates.
In connection with the termination of the status of each of the companies
comprising GHB&M as S Corporations, GHB&M entered into an agreement under which,
prior to the consummation of the Consolidation, GHB&M sold approximately $2.6
million of its accounts receivable to an unaffiliated financial institution at a
discount rate equal to 2% of the gross face amount of the accounts receivable
sold (the 'Accounts Receivable Sale'). Immediately prior to the consummation of
the Consolidation, GHB&M made distributions (the 'S Corporation Distributions')
to its shareholders of $3.7 million in the aggregate from existing cash balances
for the payment by such shareholders of taxes due on GHB&M's estimated 1997 S
Corporation earnings through the date of the Consolidation (including taxable
earnings arising from the Accounts Receivable Sale).
The law firm of Todtman, Nachamie, Hendler & Spizz, P.C. ('Todtman'), New
York, New York, of which Alex Spizz, a director of the Company, is a member, has
acted as counsel to the Company, GHB&M and Healthworld B.V. in connection with
various matters since April 1986. The Company paid an aggregate of $770,000 for
legal fees for services rendered by Todtman to the Company during the fiscal
year ended December 31, 1997.
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PROPOSAL 2--APPROVAL OF AMENDMENT
TO THE 1997 STOCK OPTION PLAN
AMENDMENT
In February, 1998, the Board of Directors of the Company adopted, subject
to the approval of the stockholders, an amendment to the Company's Stock Option
Plan increasing the number of shares of Common Stock available under the Stock
Option Plan by an aggregate of 700,000 shares of Common Stock.
The Stock Option Plan provides for the grant of stock options and currently
covers up to an aggregate of 710,000 shares of Common Stock. As of April 16,
1998, options to purchase 691,050 shares of Common Stock were outstanding under
the Stock Option Plan. Under the Stock Option Plan as currently in effect, there
are 18,950 shares of Common Stock available for future grants of stock options.
The principal purpose of the proposed amendment to the Stock Option Plan is
to enable the Company to continue to attract and retain the services of
directors, officers, employees and consultants for the benefit of the Company,
thereby providing increased incentive for such directors, officers, key
employees and consultants to render services to the Company in the future and to
exert maximum effort for the success of the Company. In addition, under the
Stock Option Plan as currently in effect, there are only a limited number of
shares of Common Stock available for future grants of stock options.
The stockholders are required to vote on and approve the proposed amendment
to the Stock Option Plan. The Board of Directors believes that it is in the best
interest of the Company and its stockholders to approve the proposed amendment
to the Stock Option Plan. Assuming a quorum is present, a vote of a majority of
the votes cast at the Meeting, in person or by proxy, is required to approve the
proposed amendment to the Stock Option Plan. With respect to the proposed
amendment, abstentions and broker non-votes are not counted as votes cast. If
the proposed amendment to the Stock Option Plan is not approved, the Stock
Option Plan will continue to remain in effect in its present form.
DESCRIPTION OF THE STOCK OPTION PLAN
The Board of Directors has adopted, and the stockholders have approved, the
Company's Stock Option Plan. The Stock Option Plan provides for the grant of (i)
options that are intended to qualify as incentive stock options ('Incentive
Stock Options') within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the 'Code') to certain employees (including officers and
directors who are employees) and (ii) options not intended to so qualify
('Non-Qualified Stock Options') to the Company's employees, officers, directors
and consultants. The total number of shares of Common Stock for which options
may be granted under the Stock Option Plan currently is 710,000. The purpose of
the Stock Option Plan is to induce certain employees, directors and consultants
to remain in the employ or service of the Company and its subsidiaries, to
attract new individuals to enter such employment or service and to encourage
such individuals to secure or increase on reasonable terms their stock ownership
in the Company. Furthermore, the Board of Directors of the Company believes that
the granting of stock options under the Stock Option Plan will promote
continuity of management and increased incentive and personal interest in the
welfare of the Company by those who are or may become primarily responsible for
shaping and carrying out the long range plans of the Company and securing its
continued growth and financial success.
The Stock Option Plan is administered by the Compensation Committee of the
Board of Directors, which, under such plan, must be comprised of two or more
non-employee directors who will determine the terms of options to be granted
under such plan, including the exercise price, the number of shares subject to
the option and the terms and conditions of exercise. The Compensation Committee
may appoint a separate committee comprised of the Chief Executive Officer and
the Chief Financial Officer of the Company (the 'Administrative Committee') to
act on its behalf and administer the Stock Option Plan with respect to certain
employees of the Company who are not officers of the Company, provided that (i)
the Administrative Committee may not grant options to purchase more than an
aggregate of 50,000 shares of Common Stock in any one calendar year and (ii)
unless otherwise determined by the Compensation Committee, no single employee
may be granted options to purchase more than 2,500 shares of Common Stock. No
option granted under the Stock Option Plan is transferable by the optionee other
than by will or the laws of descent and distribution and each option is
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exercisable during the lifetime of the optionee only by such optionee. The Stock
Option Plan provides that no person shall be granted options to purchase more
than an aggregate of 200,000 shares of Common Stock during any fiscal year.
The exercise price of all stock options granted under the Stock Option Plan
must be at least equal to the fair market value of such shares on the date of
grant. With respect to any participant who owns stock possessing more than 10%
of the voting rights of the Company's outstanding capital stock, the exercise
price of any Incentive Stock Option must be not less than 110% of the fair
market value on the date of grant. The term of each option granted pursuant to
the Stock Option Plan will be established by the Compensation Committee in its
sole discretion; provided, however, that the maximum term of each Incentive
Stock Option granted pursuant to the Stock Option Plan is ten years. With
respect to any Incentive Stock Option granted to a participant who owns stock
possessing more than 10% of the total combined voting power of all classes of
the Company's outstanding capital stock, the maximum term is five years. Options
are subject to earlier termination upon termination of employment. Except as
otherwise provided by the Compensation Committee at the time of grant, options
shall become exercisable ratably over three years commencing on the first
anniversary of the date of grant.
The Stock Option Plan also provides for an automatic annual option grant
for the non-employee directors. Each non-employee director automatically
received an option grant for 10,000 shares of Common Stock at the Effective
Time, and will automatically receive, subject to availability under the Stock
Option Plan, an option grant for 10,000 shares of Common Stock on the date of
the first meeting of the Board of Directors following each annual meeting of
stockholders thereafter. In addition, a non-employee director who becomes a
director other than on the date of any annual meeting of stockholders will
receive, subject to availability under the Stock Option Plan, an option grant of
10,000 shares of Common Stock on the date he or she becomes a director. Each
grant will be at an exercise price per share equal to the market price of the
Common Stock on the grant date, will become fully exercisable on the first
anniversary of the date of grant, and will have a term of ten years measured
from the grant date, subject to earlier termination of an optionee's service as
a Board member is terminated.
In the event of a 'change of control' (as defined in the Stock Option Plan)
of the Company, each option granted under the Stock Option Plan which has not
previously expired or been cancelled, shall become immediately exercisable in
full.
As defined in the Stock Option Plan, a 'change of control' is deemed to
occur if any of the following events occurs: (a) any person (as such term is
used in Section 13(d) and 14(d) of the Exchange Act) other than the Company or
certain related parties becomes the beneficial owner, directly or indirectly, of
securities of the Company representing more than 50% of the combined voting
power of the Company's then outstanding securities; (b) individuals who, as of
the Effective Time, constitute the Board cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
subsequent to the Effective Time whose election, or nomination for election by
the Company's stockholders, was approved by a vote of at least a majority of the
directors then comprising the incumbent board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
directors of the Company) shall be, for purposes of this Agreement, considered
as though such person were a member of the incumbent board; or (c) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than (i) a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than 60% of the
combined voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation or (ii) a
merger or consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no person acquires more than 50% of the
combined voting power of the Company's then outstanding securities.
On April 16, 1998, the closing price of a share of Common Stock on the
Nasdaq National Market was $18.00.
As of April 16, 1998, 135 persons participated in the Stock Option Plan
(including the five executive officers named in the Summary Compensation Table
and four non-employee directors of the Company). Options to purchase 25,000
shares of Common Stock at an average exercise price of $9.18 per share were
granted under the Stock Option Plan during the 1997 fiscal year to each of
Messrs. Girgenti, Milton, Butler, Ehrenthal and
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Hughes, the executive officers named in the Summary Compensation Table. In
February 1998, options to purchase shares of the Common Stock under the Stock
Option Plan at an average exercise price of $15.19 per share were granted as
follows: options to purchase 25,000 shares of Common Stock were granted to each
of Messrs. Girgenti and Milton and options to purchase 10,000 shares of Common
Stock were granted to each of Messrs. Butler, Ehrenthal and Hughes. As of April
16, 1998 (i) an aggregate of 275,000 shares of Common Stock at an average
exercise price of $11.43 per share were granted under the Stock Option Plan to
all executive officers of the Company as a group, (ii) options to purchase
10,000 shares of Common Stock at an exercise price of $9.00 per share were
automatically granted under the Stock Option Plan to each of Messrs. Knight,
Lloyd, Shacknai and Spizz, and (iii) options to purchase an aggregate of 376,050
shares of Common Stock at an average exercise price of $9.72 per share were
granted under the Stock Option Plan to all employees as a group (other than
executive officers).
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the United States Federal income tax
consequences of the granting and exercise of options under the Stock Option
Plan, and the sale of the Common Stock acquired as a result thereof, is based on
an analysis of the Code, as currently in effect, existing laws, judicial
decisions and administrative rulings and regulations, all of which are subject
to change. The following discussion applies only to a participant who is a
United States person (hereinafter referred to as a 'United States Participant').
For purposes of this discussion, a 'United States person' means a citizen or
resident alien of the United States. NON-UNITED STATES PERSONS WHO ARE
PARTICIPANTS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE TAX
CONSEQUENCES (INCLUDING IN THEIR COUNTRY OF RESIDENCE) OF THE GRANTING AND
EXERCISE OF OPTIONS UNDER THE PLAN, AND THE SALE OF THE COMMON STOCK ACQUIRED AS
A RESULT OF SUCH EXERCISE. In addition to being subject to the United States
Federal income tax consequences described below, a United States Participant may
also be subject to state, local and/or foreign income tax consequences in the
jurisdiction in which he works and/or resides.
There are no federal income tax consequences to a United States Participant
by reason of the grant of Incentive Stock Options or Non-Qualified Stock Options
under the Stock Option Plan. The exercise of Incentive Stock Options is not a
taxable event for regular federal income tax purposes. However, such exercise
may give rise to an alternative minimum tax liability. Except in the case of a
disqualifying disposition (see below), the subsequent sale of shares following
the exercise of an Incentive Stock Option will generally result in capital gain
or loss. Upon the exercise of a Non-Qualified Stock Option, a United States
Participant will generally recognize ordinary income in an amount equal to the
excess of the fair market value of the shares of Common Stock at the time of
exercise over the amount paid as the exercise price. The ordinary income in
connection with the exercise by a United States Participant who is an employee
of a Non-Qualified Stock Option will be subject to both wage and employment tax
withholding.
A United States Participant's tax basis in the shares acquired pursuant to
the exercise of the Non-Qualified Stock Option will be the amount paid upon
exercise plus the amount of ordinary income recognized by the United States
Participant as a result of the exercise of the Non-Qualified Stock Option. Any
gain or loss on a subsequent sale of the Common Stock will generally be either
capital gain or loss. Depending on whether the shares are held less than 12
months, 12 to 18 months or longer than 18 months, capital gain or loss will be
either short-term, mid-term or long-term.
A disqualifying disposition occurs if the United States Participant
disposes of shares of Common Stock acquired upon exercise of an Incentive Stock
Option (other than in certain tax-free transactions) within two years from the
date on which the option is granted or within one year after the transfer of the
shares to the United States Participant upon his exercise. At the time of
disposition the United States Participant will generally recognize ordinary
income equal to the excess of such shares' fair market value either on the date
of exercise or the date of disposition, whichever is lower, over the United
States Participant's adjusted basis in such shares, with additional gain, if
any, taxed as capital gain.
There are no federal income tax consequences to the Company by reason of
the grant of Incentive Stock Options or Non-Qualified Stock Options or the
exercise of Incentive Stock Options.
Subject to the usual rules as to reasonableness of compensation, at the
time the United States Participant recognizes ordinary income from the exercise
of a Non-Qualified Stock Option, the Company will be entitled to a
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federal income tax deduction in the amount of the ordinary income so recognized.
To the extent the United States Participant recognizes ordinary income by reason
of a disqualifying disposition of the Common Stock acquired upon exercise of
Incentive Stock Options, the Company will be entitled to a corresponding
deduction in the year in which the disposition occurs.
The Company will be required to report to the Internal Revenue Service any
ordinary income recognized by a United States Participant by reason of the
exercise of a Non-Qualified Stock Option or a disqualifying disposition of
Common Stock acquired upon exercise of an Incentive Stock Option, if such
information is available to the Company. The Company, in the case of
Non-Qualified Stock Options granted to employees who are United States persons,
will be required to withhold income and employment taxes (and pay the employer's
shares of employment taxes) with respect to such ordinary income. On the
ordinary income realized on a disqualifying disposition of Common Stock acquired
upon exercise of an Incentive Stock Option, withholding of income and payroll
taxes by the Company will not be required.
The foregoing does not discuss all tax consequences that may be applicable
to a United States Participant under the Stock Option Plan or to the Company
(including, for example, the effects under state, local and/or foreign income
tax laws). Accordingly, United States Participants are urged to consult their
own tax advisors concerning the tax consequences to them of their participation
in the Stock Option Plan.
PROPOSAL 3--RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of its Audit Committee, has
selected Arthur Andersen LLP as independent auditors to audit and report upon
the consolidated financial statements of the Company for the 1998 fiscal year
and is submitting this matter to the stockholders for their ratification. Arthur
Andersen LLP served as the Company's independent auditors in fiscal 1997.
Assuming a quorum is present, a vote of a majority of the votes cast at the
Meeting, in person or by proxy, is required for the ratification of the
selection of Arthur Andersen LLP. Abstentions and broker non-votes are not
counted as votes cast. If stockholders do not ratify the selection of Arthur
Andersen LLP, the Board of Directors will consider other independent auditors.
Representatives of the firm of Arthur Andersen LLP will be present at the
Meeting to make a statement if they desire to do so and to be available to
respond to appropriate questions that may be asked by stockholders.
ANNUAL REPORT
All stockholders of record as of April 16, 1998 are concurrently being sent
a copy of the Company's Annual Report for the fiscal year ended December 31,
1997 which contains audited financial statements of the Company for the fiscal
years ended December 31, 1995, December 31, 1996, and December 31, 1997.
STOCKHOLDER PROPOSALS
Stockholder proposals must be received by February 10, 1999 in order to be
considered for inclusion in proxy materials distributed in connected with the
next annual meeting of stockholders.
MISCELLANEOUS
As of the date of this Proxy Statement, the Board of Directors of the
Company does not know of any other matter to be brought before the Meeting.
However, if any other matters not mentioned in the Proxy Statement are brought
before the Meeting or any adjournments thereof, the persons named in the
enclosed Proxy or their substitutes will have discretionary authority to vote
proxies given in said form or otherwise act, in respect of such matters, in
accordance with their best judgment.
All of the costs and expenses in connection with the solicitation of
proxies with respect to the matters described herein will be borne by the
Company. In addition to solicitation of proxies by use of the mails, directors,
officers and employees (who will receive no compensation therefor in addition to
their regular remuneration) of the Company may solicit the return of proxies by
telephone, telegram or personal interview.
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The Company will request banks, brokerage houses and other custodians, nominees
and fiduciaries to forward copies of the proxy materials to their principals and
to request instructions for voting the proxies. The Company may reimburse such
banks, brokerage houses and other custodians, nominees and fiduciaries for their
expenses in connection therewith.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH BENEFICIAL OWNER OF COMMON
STOCK ON THE RECORD DATE, ON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
1997 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. ANY SUCH REQUEST
SHOULD BE MADE IN WRITING TO STUART DIAMOND, SECRETARY, HEALTHWORLD CORPORATION,
100 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10013.
It is important that proxies be returned promptly. Stockholders are,
therefore, urged to fill in, date, sign and return the Proxy immediately. No
postage need be affixed if mailed in the enclosed envelope in the United States.
By Order of the Board of Directors
/s/ Stuart Diamond
STUART DIAMOND
Secretary
April 24, 1998
17
<PAGE>
PROXY
HEALTHWORLD CORPORATION
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 10, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Steven Girgenti and Stuart
Diamond, or either of them acting singly in the absence of the other, with the
power of substitution in either of them, the proxies of the undersigned to vote
with the same force and effect as the undersigned all shares of Common Stock of
Healthworld Corporation (the "Company") held of record by the undersigned on
April 16, 1998, at the Annual Meeting of Stockholders to be held at the offices
of the Company, 100 Avenue of the Americas, New York, New York 10013, on June
10, 1998, at 10:30 A.M., Local Time, and at any adjournment or adjournments
thereof, hereby revoking any proxy or proxies heretofore given and ratifying and
confirming all that said proxies may do or cause to be done by virtue thereof
with respect to the following matters:
1. The election of seven directors nominated by the Board of Directors:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as indicated below) to vote for the nominees listed below
Steven Girgenti, William Leslie Milton, Francis Hughes, Peter Knight, Colin
Lloyd, Jonah Shacknai and Alex Spizz
(INSTRUCTION: To withhold authority to vote for any individual nominee or
nominees write such nominee's or nominees' names in the space provided
below.)
___________________________________________________________________________
2. The approval of a proposed amendment to the Company's 1997 Stock Option Plan
to increase the number of shares of the Company's Common Stock available
under the Company's 1997 Stock Option Plan by an aggregate of 700,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. The ratification of the selection of Arthur Andersen LLP as independent
auditors of the Company for the 1998 fiscal year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued, and to be signed on other side)
<PAGE>
(Continued from other side)
4. Upon such other business as may properly come before the Meeting or any
adjournment thereof.
This proxy, when properly executed, will be voted as directed. IF NO
DIRECTION IS INDICATED, THE PROXY WILL BE VOTED (I) FOR THE ELECTION OF THE
SEVEN NAMED INDIVIDUALS AS DIRECTORS, (II) FOR THE APPROVAL OF THE PROPOSED
AMENDMENT TO THE COMPANY'S 1997 STOCK OPTION PLAN TO INCREASE THE NUMBER OF
SHARES OF THE COMPANY'S COMMON STOCK AVAILABLE UNDER THE COMPANY'S 1997 STOCK
OPTION PLAN BY AN AGGREGATE OF 700,000 SHARES AND (III) FOR THE RATIFICATION OF
THE SELECTION OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS OF THE COMPANY FOR
THE 1998 FISCAL YEAR. If any other business properly comes before the Annual
Meeting of Stockholders, this proxy confers discretionary authority on the proxy
nominees named herein to vote in their discretion on such other business.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders to be held on June 10, 1998 and the Proxy Statement, dated April
24, 1998, prior to the signing of this proxy.
PLEASE SIGN, DATE, AND MAIL THIS PROXY IMMEDIATELY IN THE ENCLOSED ENVELOPE.
Date: _______________, 1998
___________________________
(L.S.)
___________________________
(L.S.)
___________________________
(L.S.)
Please sign your name exactly as it appears hereon. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title as it
appears hereon. When signing as joint tenants, all parties in the joint tenancy
must sign. When a proxy is given by a corporation, it should be signed by an
authorized officer and the corporate seal affixed. No postage is required if
returned in the enclosed envelope and mailed in the United States.
<PAGE>
HEALTHWORLD CORPORATION
1997 STOCK OPTION PLAN
<PAGE>
TABLE OF CONTENTS
Page
----
1. Purpose..................................................... 1
2. Effective Date of the Plan.................................. 2
3. Stock Subject to Plan....................................... 2
4. Committee................................................... 2
5. Administration.............................................. 3
6. Eligibility................................................. 5
7. Option Prices............................................... 7
8. Option Term................................................. 9
9. Limitations on Amount of Options Granted.................... 9
10. Exercise of Options......................................... 10
11. Transferability............................................. 13
12. Termination of Employment................................... 13
13. Adjustment of Number of Shares.............................. 16
14. Purchase for Investment, Withholding and Waivers............ 18
15. No Stockholder Status....................................... 19
16. No Restrictions on Corporate Acts........................... 19
17. Options Granted in Connection With Acquisitions............. 19
18. No Employment or Service Right.............................. 20
19. Termination and Amendment of the Plan....................... 20
20. Expiration and Termination of the Plan...................... 21
<PAGE>
HEALTHWORLD CORPORATION
1997 STOCK OPTION PLAN
1. Purpose.
The purposes of the 1997 Stock Option Plan (the "Plan") are to induce
certain employees, directors and consultants to remain in the employ or service
of Healthworld Corporation (the "Company") and its present and future subsidiary
corporations (each a "Subsidiary"), as defined in Section 424(f) of the Internal
Revenue Code of 1986, as amended (the "Code"), to attract new individuals to
enter into such employment or service and to encourage such individuals to
secure or increase on reasonable terms their stock ownership in the Company. The
Board of Directors of the Company (the "Board") believes that the granting of
stock options (the "Options") under the Plan will promote continuity of
management and increased incentive and personal interest in the welfare of the
Company by those who are or may become primarily responsible for shaping and
carrying out the long range plans of the Company and securing its continued
growth and financial success. Options granted hereunder are intended to be
either (a) "incentive stock options" (which term, when used herein, shall have
the meaning ascribed thereto by the provisions of Section 422(b) of the Code) or
(b) options which
<PAGE>
are not incentive stock options ("non-qualified stock options") or (c) a
combination thereof, as determined by the Committee (the "Committee") referred
to in Section 4 hereof at the time of the grant thereof.
2. Effective Date of the Plan.
The Plan became effective on October 13, 1997 by action of the Board
ratified by the holders of all of the issued and outstanding shares of the
common stock of the Company.
3. Stock Subject to Plan.
710,000 of the authorized but unissued shares of the Common Stock, $.01
par value, of the Company (the "Common Stock") are hereby reserved for issue
upon the exercise of Options granted under the Plan; provided, however, that the
number of shares so reserved may from time to time be reduced to the extent that
a corresponding number of issued and outstanding shares of the Common Stock are
purchased by the Company and set aside for issue upon the exercise of Options.
If any Options expire or terminate for any reason without having been exercised
in full, the unpurchased shares subject thereto shall again be available for the
purposes of the Plan.
4. Committee.
The Committee shall consist of two or more members of the Board both or
all of whom shall be "non-employee directors" within the meaning of Rule
16b-3(b)(3) promulgated under the
2
<PAGE>
Securities Exchange Act of 1934, as amended (the "Exchange Act"). In addition,
from and after the date of the first meeting of the stockholders of the Company
occurring after December 31, 2000 at which directors are to be elected, all
members of the Committee shall be "outside directors" within the contemplation
of Section 162(m)(4)(C)(i) of the Code. The Chief Executive Officer of the
Company shall also be a member of the Committee, ex-officio, whether or not he
or she is otherwise eligible to be a member of the Committee. The Committee
shall be appointed annually by the Board, which may at any time and from time to
time remove any members of the Committee, with or without cause, appoint
additional members to the Committee and fill vacancies, however caused, in the
Committee. A majority of the members of the Committee shall constitute a quorum.
All determinations of the Committee shall be made by a majority of its members
present at a meeting duly called and held. Any decision or determination of the
Committee reduced to writing and signed by all of the members of the Committee
shall be fully as effective as if it had been made at a meeting duly called and
held.
5. Administration.
A. Subject to the express provisions of the Plan, the Committee shall
have complete authority, in its discretion, to interpret the Plan, to prescribe,
amend and rescind rules and regulations relating to it, to determine the terms
and provisions of the respective option agreements or certificates (which need
not be identical), to determine the individuals (each a "Partici-
3
<PAGE>
pant") to whom and the times and the prices at which Options shall be granted,
the periods during which each Option shall be exercisable, the number of shares
of the Common Stock to be subject to each Option and whether such Option shall
be an incentive stock option or a non-qualified stock option and to make all
other determinations necessary or advisable for the administration of the Plan;
provided, however, that directors of the Company who are not employed by the
Company or any of the Subsidiaries (each a "Non-Employee Director") shall only
be granted Options in accordance with the provisions of Section 6B. In making
such determinations, the Committee may take into account the nature of the
services rendered by the respective employees and consultants, their present and
potential contributions to the success of the Company and the Subsidiaries and
such other factors as the Committee in its discretion shall deem relevant. The
Committee's determination on the matters referred to in this Section 5 shall be
conclusive. Any dispute or disagreement which may arise under or as a result of
or with respect to any Option shall be determined by the Committee, in its sole
discretion, and any interpretations by the Committee of the terms of any Option
shall be final, binding and conclusive.
B. The Committee may appoint a separate committee comprised of the
Chief Executive Officer and Chief Financial Officer of the Company (the
"Administrative Committee") to administer the Plan with respect to employees of
the Company or a Subsidiary (I) who are not officers of the Company who are
4
<PAGE>
subject to the provisions of Section 16 of the Exchange Act and (ii) whose
compensation is not subject to the provisions of Section 162(m) of the Code,
subject to such conditions, restrictions and limitations as may be imposed by
the Committee, including but limited to: (a) Options to purchase not more than
50,000 shares of the Common Stock may be granted in any one calendar year by the
Administrative Committee to all employees of the Company in the aggregate and
(b) the Committee shall establish a maximum number of shares that may be subject
to Options granted under the Plan in any one calendar year to any single
employee by the Administrative Committee. Unless and until the Committee shall
take further action, the maximum number of shares that may be subject to Options
granted under the Plan in any one calendar year by the Administrative Committee
to any single employee shall be 2,500. Any actions duly taken by the
Administrative Committee with respect to the grant of Options to employees shall
be deemed to have been taken by the Committee for purposes of the Plan.
6. Eligibility.
A. An Option may be granted only to (i) an employee or consultant of
the Company or a Subsidiary, (ii) to the extent provided in Section 6B, a
Non-Employee Director and (iii) employees of a corporation or other business
enterprise which has been acquired by the Company or a Subsidiary, whether by
exchange or purchase of stock, purchase of assets, merger or reverse
5
<PAGE>
merger or otherwise, who hold options with respect to the stock of such
corporation which the Company has agreed to assume.
B. (i) Upon the effective date (the "Effective Date") of the Company's
Registration Statement on Form S-1 (Registration No. 333-34751) (the
"Registration Statement"), filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, on August 29, 1997, each person
who is a Non-Employee Director or who will be a Non-Employee Director on the
closing date of the Company's initial public offering pursuant to the
Registration Statement, shall be granted an Option (a "Non-Employee Director's
Formula Option") to purchase 10,000 shares of the Common Stock at the initial
per share option price equal to the initial public offering price in the
offering made under such registration statement.
(ii) At the first meeting of the Board immediately following the
annual meeting of the stockholders of the Company held in 1998, and at the first
meeting of the Board immediately following each subsequent annual meeting of the
stockholders of the Company, each Non-Employee Director shall be granted a Non-
Employee Director's Formula Option to purchase 10,000 shares of the Common Stock
at the initial per share option price equal to the fair market value of a share
of the Common Stock on the date of grant.
(iii) Each Non-Employee Director who becomes a director subsequent
to the Effective Date, and prior to the date of any
6
<PAGE>
annual meeting of the stockholders of the Company, shall be granted, on the date
he or she becomes a director, a Non-Employee Director's Formula Option to
purchase 10,000 shares of the Common Stock at the initial per share option price
equal to the fair market value of a share of the Common Stock on the date of
grant.
(iv) A Non-Employee Director may not exercise a Non-Employee
Director's Formula Option during the period commencing on the date of the
granting of such Option to him or her and ending on the day next preceding the
first anniversary of such date. A Non-Employee Director may during the period
commencing on the first anniversary of the date of the granting of a Non-
Employee Director's Formula Option to him or her exercise such Option with
respect to all of the shares granted thereby.
7. Option Prices.
A. Except as otherwise provided in Section 17, the initial per share
option price of any Option shall be the price determined by the Committee but
not less than the fair market value of a share of the Common Stock on the date
of grant; provided, however, that, in the case of a Participant who owns (within
the meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of the Common Stock at the time an Option which is an incentive
stock option is granted to him or her, the initial per share option price shall
not be less than 110% of the fair market value of a share of the Common Stock on
the date of grant.
7
<PAGE>
B. For all purposes of the Plan, the fair market value of a share of
the Common Stock on any date shall be determined by the Committee as follows:
(i) If the Common Stock is listed on the OTC Electronic Bulletin Board,
its fair market value shall be the closing selling price on such date for the
Common Stock as reported on the OTC Electronic Bulletin Board. If there are no
sales of the Common Stock on that date, then the reported closing selling price
for the Common Stock on the next preceding date for which such closing selling
price is quoted shall be determinative of fair market value; or,
(ii) If the Common Stock is listed on any established stock exchange or
a national market system, including without limitation, The Nasdaq National
Market or The Nasdaq SmallCap Market, its fair market value shall be the
reported closing selling price for the Common Stock on the principal securities
exchange or national market system on which the Common Stock is at such date
listed for trading. If there are no sales of Common Stock on that date, then the
reported closing selling price for the Common Stock on the next preceding day
for which such closing selling price is quoted shall be determinative of fair
market value; or,
(iii) If the Common Stock is not traded on the OTC Electronic Bulletin
Board, an exchange, or a national market system, its fair market value shall be
determined in good faith
8
<PAGE>
by the Committee, and such determination shall be conclusive and binding on all
persons.
8. Option Term.
Participants shall be granted Options for such term as the Committee
shall determine, not in excess of ten years from the date of the granting
thereof; provided, however, that, except as otherwise provided in Section 17, in
the case of a Participant who owns (within the meaning of Section 424(d) of the
Code) more than 10% of the total combined voting power of the Common Stock of
the Company at the time an Option which is an incentive stock option is granted
to him or her, the term with respect to such Option shall not be in excess of
five years from the date of the granting thereof; provided, further, however,
that the term of each Non-Employee Director's Formula Option shall be ten years
from the date of the granting thereof.
9. Limitations on Amount of Options Granted.
A. Except as otherwise provided in Section 17, the aggregate fair
market value of the shares of the Common Stock for which any Participant may be
granted incentive stock options which are exercisable for the first time in any
calendar year (whether under the terms of the Plan or any other stock option
plan of the Company) shall not exceed $100,000.
B. Except as otherwise provided in Section 17, no Participant shall,
during any fiscal year of the Company, be
9
<PAGE>
granted Options to purchase more than 200,000 shares of the Common Stock.
10. Exercise of Options.
A. Except as otherwise provided in Section 17 and except as otherwise
determined by the Committee at the time of the grant of an Option other than a
Non-Employee Director's Formula Option, a Participant may not exercise an Option
during the period commencing on the date of the granting of such Option to him
or her and ending on the day next preceding the first anniversary of such date.
Except as otherwise set forth in Sections 9A and 17 and in the preceding
sentence, a Participant may (i) during the period commencing on the first
anniversary of the date of the granting of an Option to him or her and ending on
the day next preceding the second anniversary of such date, exercise such Option
with respect to one-third of the shares granted thereby, (ii) during the period
commencing on such second anniversary and ending on the day next preceding the
third anniversary of the date of the granting of such Option, exercise such
Option with respect to two-thirds of the shares granted thereby, and (iii)
during the period commencing on such third anniversary, exercise such Option
with respect to all of the shares granted thereby.
B. Except as hereinbefore otherwise set forth, an Option may be
exercised either in whole at any time or in part from time to time.
10
<PAGE>
C. An Option may be exercised only by a written notice of intent to
exercise such Option with respect to a specific number of shares of the Common
Stock and payment to the Company of the amount of the option price for the
number of shares of the Common Stock so specified.
D. Except in the case of a Non-Employee Director's Formula Option, the
Board may, in its discretion, permit any Option to be exercised, in whole or in
part, prior to the time when it would otherwise be exercisable.
E. (i) Notwithstanding the provisions of paragraph A of this Section
10, in the event that a Change of Control of the Company shall occur, then, each
Option theretofore granted to any Participant which shall not have theretofore
expired or otherwise been cancelled or become unexercisable shall become
immediately exercisable in full. For purposes hereof a "Change in Control" of
the Company shall occur or be deemed to have occurred only if any of the
following events occurs: (a) any "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act (other than the Company, any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, or any corporation owned directly or indirectly by the stockholders of
the Company in substantially the same proportion as the ownership of stock of
the Company) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing more than 50% of the combined voting power of the Company's then
11
<PAGE>
outstanding securities; (b) individuals who, as of the Effective Date,
constitute the Board (as of the Effective Date, the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board, provided that any
person becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board (other
than an election or nomination of an individual whose initial assumption of
office is in connection with an actual or threatened election contest relating
to the election of the directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A under the Exchange Act) shall be, for purposes of this
Agreement, considered as though such person were a member of the Incumbent
Board; or (c) the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than (I) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 60% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation or (II) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no
"person" (as hereinabove defined) acquires more than 50% of the combined voting
power of the Company's then outstanding securities; or (d)
12
<PAGE>
the stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.
(ii) In the event that a Change in Control shall occur, then, from and
after the time of such event, neither the provisions of this paragraph E nor any
of the rights of any Participant thereunder shall be modified or amended in any
way.
11. Transferability.
No Option shall be assignable or transferable except by will and/or by
the laws of descent and distribution and, during the life of any Participant,
each Option granted to him or her may be exercised only by him or her.
12. Termination of Employment.
A. In the event a Participant leaves the employ of the Company and the
Subsidiaries or ceases to serve as a consultant to the Company and/or as a
Non-Employee Director of the Company, whether voluntarily or otherwise but other
than by reason of his or her retirement, permanent disability or death, each
Option theretofore granted to him or her which shall not have theretofore
expired or otherwise been cancelled shall, to the extent exercisable on the date
of such termination of employment or service and not theretofore exercised,
terminate upon the earlier to occur of the expiration of three months after the
date
13
<PAGE>
of such Participant's termination of employment or service and the date of
termination specified in such Option. Notwithstanding the foregoing, if a
Participant's employment by the Company and the Subsidiaries or service as a
consultant and/or as a Non-Employee Director of the Company is terminated for
"cause", each Option theretofore granted to him or her which shall not have
theretofore expired or otherwise been cancelled shall, to the extent not
theretofore exercised, terminate forthwith. For purposes of the foregoing, the
term "cause" shall mean: (i) the commission by a Participant of any act or
omission that would constitute a crime under federal, state or equivalent
foreign law, (ii) the commission by a Participant of any act of moral turpitude,
(iii) fraud, dishonesty or other acts or omissions that result in a breach of
any fiduciary or other material duty to the Company and/or the Subsidiaries or
(iv) continued alcohol or other substance abuse that renders a Participant
incapable of performing his or her material duties to the satisfaction of the
Company and/or the Subsidiaries.
B. In the event a Participant leaves the employ of the Company and the
Subsidiaries or ceases to serve as a consultant to the Company and/or as a
Non-Employee Director of the Company by reason of his or her retirement (other
than by reason of his or her death) on or after his or her 65th birthday, each
Option theretofore granted to him or her which shall not have theretofore
expired or otherwise been cancelled shall, to the extent exercisable on the date
of such retirement and not
14
<PAGE>
theretofore exercised, terminate upon the earlier to occur of the expiration of
two years after the date of such retirement and the date of termination
specified in such Option.
C. In the event a Participant's employment with the Company and the
Subsidiaries or service as a consultant and/or as a Non-Employee Director of
the Company terminates by reason of his or her permanent disability, each Option
theretofore granted to him or her which shall not have theretofore expired or
otherwise been cancelled shall, to the extent exercisable on the date of such
termination of employment or service and not theretofore exercised, terminate
upon the earlier to occur of one year after the date of such termination of
employment or service and the date of termination specified in such option.
D. In the event a Participant's employment with the Company and the
Subsidiaries or service as a consultant and/or as a Non-Employee Director of
the Company terminates by reason of his or her death, each Option theretofore
granted to him or her which shall not have theretofore expired or otherwise been
cancelled shall, to the extent exercisable on the date of his or her death and
not theretofore exercised, terminate upon the earlier to occur of the expiration
of one year after the date of the qualification of a representative of his or
her estate and the date of termination specified in such Option.
15
<PAGE>
13. Adjustment of Number of Shares.
A. In the event that a dividend shall be declared upon the Common Stock
payable in shares of the Common Stock, the number of shares of the Common Stock
then subject to any Option and the number of shares of the Common Stock reserved
for issuance in accordance with the provisions of the Plan but not yet covered
by an Option and the number of shares set forth in Sections 6B and 9B shall be
adjusted by adding to each share the number of shares which would be
distributable thereon if such shares had been outstanding on the date fixed for
determining the stockholders entitled to receive such stock dividend. In the
event that the outstanding shares of the Common Stock shall be changed into or
exchanged for a different number or kind of shares of stock or other securities
of the Company or of another corporation, whether through reorganization,
recapitalization, stock split-up, combination of shares, sale of assets, merger
or consolidation in which the Company is the surviving corporation, then, there
shall be substituted for each share of the Common Stock then subject to any
Option and for each share of the Common Stock reserved for issuance in
accordance with the provisions of the Plan but not yet covered by an Option and
for each share of the Common Stock referred to in Sections 6B and 9B, the number
and kind of shares of stock or other securities into which each outstanding
share of the Common Stock shall be so changed or for which each such share shall
be exchanged.
16
<PAGE>
B. In the event that there shall be any change, other than as specified
in Section 13, in the number or kind of outstanding shares of the Common Stock,
or of any stock or other securities into which the Common Stock shall have been
changed, or for which it shall have been exchanged, then, if the Committee
shall, in its sole discretion, determine that such change equitably requires an
adjustment in the number or kind of shares then subject to any Option and the
number or kind of shares reserved for issuance in accordance with the provisions
of the Plan but not yet covered by an Option and the number or kind of shares
referred to in Sections 6B and 9B, such adjustment shall be made by the
Committee and shall be effective and binding for all purposes of the Plan and of
each stock option agreement or certificate entered into in accordance with the
provisions of the Plan.
C. In the case of any substitution or adjustment in accordance with the
provisions of this Section 13, the option price in each stock option agreement
or certificate for each share covered thereby prior to such substitution or
adjustment shall be the option price for all shares of stock or other securities
which shall have been substituted for such share or to which such share shall
have been adjusted in accordance with the provisions of this Section 13.
D. No adjustment or substitution provided for in this Section 13 shall
require the Company to sell a fractional share under any stock option agreement
or certificate. Any fractional
17
<PAGE>
share resulting from an adjustment or substitution provided for in this Section
13 shall be rounded up to the nearest whole share.
E. In the event of the dissolution or liquidation of the Company, or a
merger, reorganization or consolidation in which the Company is not the
surviving corporation, then, except as otherwise provided in the second sentence
of Section 13A, each Option, to the extent not theretofore exercised, shall
terminate forthwith.
14. Purchase for Investment, Withholding and Waivers.
A. Unless the shares to be issued upon the exercise of an Option by a
Participant shall be registered prior to the issuance thereof under the
Securities Act of 1933, as amended, such Participant will, as a condition of the
Company's obligation to issue such shares, be required to give a representation
in writing that he or she is acquiring such shares for his or her own account as
an investment and not with a view to, or for sale in connection with, the
distribution of any thereof.
B. In the event of the death of a Participant, a condition of
exercising any Option shall be the delivery to the Company of such tax waivers
and other documents as the Committee shall determine.
C. In the case of each non-qualified stock option, a condition of
exercising the same shall be the entry by the person
18
<PAGE>
exercising the same into such arrangements with the Company with respect to
withholding as the Committee may determine.
15. No Stockholder Status.
Neither any Participant nor his or her legal representatives, legatees
or distributees shall be or be deemed to be the holder of any share of the
Common Stock covered by an Option unless and until a certificate for such share
has been issued. Upon payment of the purchase price thereof, a share issued upon
exercise of an Option shall be fully paid and non-assessable.
16. No Restrictions on Corporate Acts.
Neither the existence of the Plan nor any Option shall in any way
affect the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred or
prior preference stock ahead of or affecting the Common Stock or the rights
thereof, or dissolution or liquidation of the Company, or any sale or transfer
of all or any part of its assets or business, or any other corporate act or
proceeding whether of a similar character or otherwise.
17. Options Granted in Connection With Acquisitions.
In the event that the Committee determines that, in
connection with the acquisition by the Company or a Subsidiary of
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another corporation which will become a Subsidiary or division of the Company or
a Subsidiary (such corporation being hereafter referred to as an "Acquired
Subsidiary"), Options may be granted hereunder to employees and other personnel
of an Acquired Subsidiary in exchange for then outstanding options to purchase
securities of the Acquired Subsidiary. Such Options may be granted at such
option prices, may be exercisable immediately or at any time or times either in
whole or in part, and may contain such other provisions not inconsistent with
the Plan, or the requirements set forth in Section 19 that certain amendments to
the Plan be approved by the stockholders of the Company, as the Committee, in
its discretion, shall deem appropriate at the time of the granting of such
Options.
18. No Employment or Service Right.
Neither the existence of the Plan nor the grant of any Option shall
require the Company or any Subsidiary to continue any Participant in the employ
of the Company or such Subsidiary or require the Company to continue any
Participant as a director of the Company.
19. Termination and Amendment of the Plan.
The Board may at any time terminate the Plan or make such modifications
of the Plan as it shall deem advisable; provided, however, that the Board may
not without further approval of the holders of a majority of the shares of the
Common Stock present in person or by proxy at any special or annual meeting of
the
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stockholders, increase the number of shares as to which Options may be granted
under the Plan (as adjusted in accordance with the provisions of Section 13), or
change the manner of determining the option prices, or extend the period during
which an Option may be granted or exercised; provided, however, the provisions
of the Plan governing the grant of Non-Employee Director's Formula Options may
not be amended except by the vote of a majority of the members of the Board and
by the vote of a majority of the members of the Board who are employees of the
Company or a Subsidiary. Except as otherwise provided in Section 13, no
termination or amendment of the Plan may, without the consent of the Participant
to whom any Option shall theretofore have been granted, adversely affect the
rights of such Participant under such Option.
20. Expiration and Termination of the Plan.
The Plan shall terminate on October 12, 2007 or at such earlier time as
the Board may determine. Options may be granted under the Plan at any time and
from time to time prior to its termination. Any Option outstanding under the
Plan at the time of the termination of the Plan shall remain in effect until
such Option shall have been exercised or shall have expired in accordance with
its terms.
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