<PAGE> 1
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 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
COMPUSERVE CORPORATION
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
COMPUSERVE CORPORATION
- -------------------------------------------------------------------------------
(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:
- ------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- ------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
- ------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- ------------------------------------------------------------------------------
(5) Total fee paid:
- ------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- -------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- -------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- -------------------------------------------------------------------------------
(3) Filing party:
- -------------------------------------------------------------------------------
(4) Date filed:
- -------------------------------------------------------------------------------
<PAGE> 2
COMPUSERVE CORPORATION
5000 ARLINGTON CENTRE BOULEVARD
COLUMBUS, OHIO 43220
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 21, 1997
The annual meeting of stockholders of CompuServe Corporation, a Delaware
corporation (the "Company"), will be held at the Company's corporate
headquarters, 5000 Arlington Centre Boulevard, Columbus, Ohio 43220, at 9:00
a.m., Columbus time, on Friday, March 21, 1997. The meeting will be held for the
purpose of considering and acting upon the following:
1. The election of two Class I directors to serve until the third
succeeding annual meeting of stockholders;
2. The ratification of the appointment of Deloitte & Touche LLP as the
Company's independent auditors for the year ending April 30, 1997; and
3. The transaction of such other business as may properly come before
the meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on February 11, 1997
as the record date for determining stockholders of the Company entitled to
notice of and to vote at the meeting.
By Order of the Board of Directors
STEPHEN M. HEATON
Secretary
Columbus, Ohio
February 27, 1997
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE RETURN ENVELOPE FURNISHED
FOR THAT PURPOSE, AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY REASON, YOU MAY DO SO
IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT. FOR FURTHER INFORMATION
CONCERNING THE INDIVIDUALS NOMINATED AS DIRECTORS, USE OF THE PROXY AND OTHER
RELATED MATTERS, YOU ARE URGED TO READ THE PROXY STATEMENT ON THE FOLLOWING
PAGES.
<PAGE> 3
COMPUSERVE CORPORATION
5000 ARLINGTON CENTRE BOULEVARD
COLUMBUS, OHIO 43220
PROXY STATEMENT
The accompanying proxy is solicited by the Board of Directors of CompuServe
Corporation ("CompuServe" or the "Company"), 5000 Arlington Centre Boulevard,
Columbus, Ohio 43220, for use at the annual meeting of stockholders (the
"Meeting") to be held at 9:00 a.m., Columbus time, on Friday, March 21, 1997,
and at any adjournments of that meeting, for the purposes set forth in the
foregoing notice.
A stockholder giving a proxy has the power to revoke it at any time before
it is exercised. A proxy may be revoked by filing with the Secretary of the
Company a revoking instrument or a duly executed proxy bearing a later date. The
powers of the proxy holders will be suspended if the person executing the proxy
is present at the meeting and elects to vote in person. Subject to such
revocation or suspension, shares represented by properly executed proxies
received by the Board of Directors will be counted at the Meeting and will be
voted in accordance with the stockholder's directions. If the form of proxy is
signed and returned and the stockholder has made no specifications with respect
to voting matters, the shares will be voted in accordance with the
recommendations of the Board of Directors.
VOTING PROCEDURES
All matters being voted on at the Meeting, including the election of
directors, will be decided by the holders of a majority of the shares present or
represented by proxy at the Meeting and entitled to vote on the matter.
Stockholders do not have cumulative voting rights with respect to the election
of directors. For purposes of determining the number of shares present in person
or represented by proxy at the Meeting, all votes cast "for," "against" or
"abstain" are included. "Broker non-votes," which occur when brokers or other
nominees are prohibited from exercising discretionary voting authority for
beneficial owners who have not provided voting instructions, are not counted for
the purpose of determining the number of shares present in person or represented
by proxy.
H&R Block, Inc. ("H&R Block") is the beneficial owner of approximately
80.1% of the outstanding shares of Common Stock of the Company. As a result, H&R
Block has the ability to approve all corporate actions requiring stockholder
approval, including the election of the two directors being voted upon at the
Meeting. H&R Block has indicated that it will vote its shares in accordance with
the recommendations of the Board of Directors.
OUTSTANDING VOTING SECURITIES AND DATE OF MAILING
At the close of business on February 11, 1997, there were 92,600,000
outstanding shares of common stock, par value $0.01 per share (the "Common
Stock").
This proxy statement and accompanying form of proxy, the Company's Annual
Report to Stockholders for the fiscal year ended April 30, 1996 and the
Company's Quarterly Report on Form 10-Q for the six months ended October 31,
1996 are first being sent to stockholders on or about February 28, 1997.
2
<PAGE> 4
ELECTION OF DIRECTORS
(ITEM 1 ON FORM OF PROXY)
The Company's Certificate of Incorporation and Bylaws provide that the
number of directors shall be not less than two nor more than 15, and empower the
Company's Board of Directors to fix the exact number of directors and to fill
any vacancies on the Board of Directors. The Company's Board of Directors has
set the number of directors at six. As a result of the resignation in February
1997 of Robert J. Massey as the Company's President and Chief Executive Officer
and a director of the Company, there is currently, and there will be following
the Meeting, a vacancy on the Company's Board of Directors. The Certificate of
Incorporation of the Company provides that the Board of Directors shall be
divided into three classes: Class I, Class II and Class III, with each class to
consist, as nearly as possible, of one-third of the members of the Board. The
term of the Class I directors will expire at the Meeting, the term of the Class
II directors will expire at the next annual meeting of stockholders and the term
of the Class III directors will expire at the second succeeding annual meeting
of stockholders. Directors elected at an annual meeting of stockholders to
succeed those whose terms expire shall be identified as being of the same class
as those directors they succeed and shall be elected for a term to expire at the
third annual meeting of stockholders after their election.
Nominations of persons for election to the Board of Directors may be made
at a meeting of stockholders only (i) by or at the direction of the Board of
Directors or (ii) by any stockholder of the Company entitled to vote for the
election of directors at the meeting who complies with the notice procedures set
forth in the Company's Bylaws.
At the Meeting, two Class I directors will be elected to hold office until
the third succeeding annual meeting of stockholders or until their successors
are elected and shall have qualified. Frank L. Salizzoni and Morton I. Sosland
have been nominated for election as Class I directors of the Company. Both
directors currently are serving as Class I directors of the Company. The shares
voted by the proxies will be voted for the election of Messrs. Salizzoni and
Sosland unless authority to do so is withheld as provided in the form of proxy.
The nominees have consented to serve if elected and the Board of Directors has
no reason to believe that the nominees will be unable to accept the office of
director, but if such contingency should arise, it is the intention of the
proxies to vote for such person or persons as the Board of Directors may
recommend.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THESE NOMINEES
AS DIRECTORS OF THE COMPANY.
Certain information with respect to the nominees for election as directors
proposed by the Company and the other directors whose terms of office as
directors will continue after the Meeting is set forth below.
CLASS I DIRECTORS
Frank L. Salizzoni, age 58, has been a director of the Company since June
1996 and has served as the Chairman of the Board of the Company since October
1996 and acting chief executive officer since February 1997. Mr. Salizzoni has
served as President and Chief Executive Officer of H&R Block since June 1996. He
served as President and Chief Operating Officer of USAir, Inc. from March 1994
until April 1996. From November 1990 to March 1994, he served as Executive Vice
President -- Finance of USAir, Inc. Mr. Salizzoni is a director of H&R Block,
Orbital Sciences Corporation and SKF USA Inc.
Morton I. Sosland, age 71, has been a director of the Company since
February 1996. Mr. Sosland has served as Chairman of Sosland Companies, Inc.
since January 1993. He served as President of such firm from
3
<PAGE> 5
July 1968 through December 1992. He has also served as Chairman of Sosland
Publishing Company since 1984. He was President of such company from July 1968
to December 1992. Mr. Sosland is a director of H&R Block and Kansas City
Southern Industries, Inc.
CLASS II DIRECTORS
Henry F. Frigon, age 62, has served as a director of the Company since
February 1996. Mr. Frigon served as interim Chairman of the Board of the Company
from June 1996 to October 1996. He served as Executive Vice
President -- Corporate Development & Strategy and Chief Financial Officer of
Hallmark Cards Incorporated (greeting cards) from January 1991 until his
retirement in December 1994. He had previously served as President and Chief
Executive Officer of BATUS Incorporated. Mr. Frigon is a director of Buckeye
Cellulose Corporation, Dimon Incorporated, Group Technologies Corporation and
H&R Block.
Roger W. Hale, age 53, has served as a director of the Company since
February 1996. Mr. Hale has served as Chairman, President and Chief Executive
Officer of LG&E Energy Corp. (diversified energy services) since August 1990. He
has also served as Chairman of the Board of Louisville Gas & Electric Company
since February 1990 and Chief Executive Officer of such company since June 1989.
Mr. Hale is a director of H&R Block and PNC Bank Corp. -- Kentucky.
CLASS III DIRECTORS
Edward E. Lucente, age 57, has served as a director of the Company since
October 1996. Mr. Lucente has served as President and CEO of Liant Software
Corporation since 1995; as a marketing consultant from May 1994 to 1995; head of
worldwide sales and marketing of Digital Equipment Corp. from March 1993 until
April 1994; Executive Vice-President of Northern Telecom Limited from January
1992 until March 1993; Member of the Executive Office of Northern Telecom
limited from February 1991 until March 1993; Senior Vice President of Marketing
for Northern Telecom Limited from February 1991 until January 1992; Corporate
Vice President of International Business Machines Corporations ("IBM") from 1981
until February 1991. Mr. Lucente is a director of Genicom Corporation and
Information Resources Inc.
DIRECTORS' MEETINGS, COMMITTEES AND COMPENSATION
The Company was incorporated in February 1996 to hold all of the
outstanding capital stock of CompuServe Incorporated (the "Operating Company"),
which was founded in 1969. The Company completed an initial public offering of
its Common Stock in April 1996. There was one meeting of the Company's Board of
Directors held during the fiscal year ended April 30, 1996 (including regularly
scheduled and special meetings). All incumbent directors attended all Board of
Directors meetings and meetings held by all committees of the Board of Directors
of which they were a member (or of such meetings during such directors' tenure
on the Board of Directors).
The standing committees of the Board of Directors include the Audit
Committee and the Compensation Committee.
The Audit Committee reviews the financial books and records of the Company
in consultation with the Company's accounting staff and its independent auditors
and reviews with the accounting staff and independent auditors any questions
raised with respect to accounting and auditing policy and procedure. The Audit
Committee is comprised of Messrs. Hale (Chairman), Frigon, Lucente and Sosland.
The Audit Committee held no meetings during the fiscal year ended April 30,
1996.
4
<PAGE> 6
The Compensation Committee makes recommendations to the Board of Directors
as to general levels of compensation for all employees of the Company, the
annual salary of each of the executive officers of the Company, and awards to
employees under the Company's employee benefit plans and reviews and approves
compensation and benefit plans of the Company. See the Compensation Committee
Report on Executive Compensation under "Compensation of Executive Officers,"
below. The Compensation Committee is comprised of Messrs. Frigon (Chairman),
Hale, Lucente and Sosland. The Compensation Committee held one meeting during
the fiscal year ended April 30, 1996.
The Company's Board of Directors has not established a nominating committee
to nominate directors. The Board of Directors will consider a stockholder's
suggestion for candidates if mailed to: Secretary, CompuServe Corporation, 5000
Arlington Centre Boulevard, Columbus, Ohio 43220. Any such suggestion with
respect to directors to be elected at the next annual meeting of stockholders
must be received not later than July 1, 1997 and must comply with the Company's
Bylaws.
Directors of the Company receive quarterly cash fees of $6,000 for
attendance at board meetings.
On March 12, 1996, the Company adopted the CompuServe Corporation 1996
Outside Directors Plan (the "Directors Plan") which was approved by the
Company's sole stockholder, H&R Block Group, Inc., in March 1996. Under the
Directors Plan, on the date of each annual meeting of stockholders, each non-
employee Director of the Company (an "Outside Director") is automatically
granted an option to purchase 7,500 shares of Common Stock. Individuals who
first become Outside Directors on other than an annual meeting date are eligible
for an option award, subject to a pro rata reduction to reflect the period
during which they were not an Outside Director. On the date of the Meeting, four
directors will be eligible for awards under the Directors Plan.
The exercise price of the shares subject to the option is the greater of
the fair market value of a share of Common Stock on the date that the option is
granted or par value. Options become exercisable on the day immediately
preceding the next annual stockholders meeting and remain exercisable until the
earlier of the ten-year anniversary of the grant date, or the first anniversary
of the Outside Director's termination of service on the Board. If the Outside
Director terminates service on the Board for reasons other than death or
disability prior to the vesting date, such option is forfeited. All options
become immediately exercisable in the event of the Outside Director's death or
disability. Options are not transferable except as designated by the holder by
will or the laws of descent and distribution. The option purchase price shall be
payable in cash or in shares of Common Stock.
The number of shares which may be awarded under the Directors Plan shall
not exceed 90,000 shares. Shares issued under the Plan may be authorized and
unissued shares or treasury shares. In the event of certain transactions
affecting the type or number of outstanding shares, the number of shares subject
to the Directors Plan, the number or type of shares subject to outstanding
options, and the exercise price thereof, shall be adjusted to reflect the
transaction. The closing price with respect to the Company's Common Stock on
February 27, 1997 was $10 1/4 per share.
An Outside Director who is granted a stock option will not be subject to
federal income tax at the time of grant, and the Company will not be entitled to
a tax deduction by reason of such grant. Upon exercise of the option, the
difference between the option price and the fair market value of the Common
Stock on the date of exercise will be considered ordinary income to the Outside
Director, and generally the Company will be entitled to a corresponding tax
deduction.
5
<PAGE> 7
The following table sets forth the number of options to purchase shares of
Common Stock which have been awarded under the Director's Plan.
<TABLE>
<CAPTION>
SHARES UNDERLYING
OPTIONS GRANTED(1)
------------------
<S> <C>
Non-Executive Director Group (4 persons).................... 30,000
</TABLE>
- -------------------------
(1) The options reported in this column consist of nonqualified options to
acquire Common Stock which were awarded to the Company's four Outside
Directors at the time of the Company's initial public offering with an
exercise price per share of $30.00. The options will become exercisable on
the day preceding the Meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers to file with the Securities and Exchange Commission (the
"SEC") reports of holdings and transactions in the Company's Common Stock. Based
on Company records and other information, the Company believes that all SEC
filing requirements applicable to its directors and officers with respect to the
Company's fiscal year ending April 30, 1996 were complied with on a timely
basis.
INFORMATION REGARDING STOCKHOLDERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the name, address and share ownership of the
persons or organizations known to the Company to be the beneficial owners of
more than 5% of the outstanding Common Stock of the Company. Unless otherwise
indicated, information concerning share ownership is as of January 7, 1997. The
percentage of ownership is based upon the number of shares of the Company's
Common Stock issued and outstanding as of January 7, 1997.
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PERCENT OF COMMON
OF BENEFICIAL OWNER BENEFICIALLY OWNED STOCK OUTSTANDING
- ------------------- ------------------ -----------------
<S> <C> <C>
H&R Block, Inc.............................................. 74,200,000 80.1%
4400 Main Street
Kansas City, MO 64111
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT AND DIRECTORS
OWNERSHIP OF COMPUSERVE COMMON STOCK
The following tables set forth information, as of January 7, 1997, with
respect to the beneficial ownership of shares of the Company's Common Stock by
each of the persons listed in the Summary Compensation Table below under
"COMPENSATION OF EXECUTIVE OFFICERS," each of the Company's directors and by all
directors and executive officers of the Company as a group. Unless otherwise
indicated, the named individual has sole voting and investment power over the
shares of Common Stock listed under the column "Shares Beneficially Owned." The
shares of Common Stock owned by each of the individuals named below
6
<PAGE> 8
and by all directors and executive officers as a group constitute less than one
percent of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
NAME OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED(1)
---------------- ---------------------
<S> <C>
Dennis D. Matteucci......................................... --
Lawrence A. Gyenes.......................................... 1,000
Herbert J. Kahn............................................. 500
Robert J. Massey(2)......................................... 3,100(3)
Steven P. Stanbrook(2)...................................... 1,000
Alexander B. Trevor(2)...................................... --
Henry F. Frigon(4).......................................... 9,000(5)
Roger W. Hale............................................... 500(5)
Edward E. Lucente........................................... --(5)
Frank L. Salizzoni.......................................... 7,500(5)
Morton I. Sosland........................................... 15,000(5)
All directors and executive officers as a group (9
persons)(6)............................................... 33,500(7)
</TABLE>
- -------------------------
(1) As of January 7, 1997. For purposes of this disclosure, the SEC has defined
"beneficial ownership" to include securities over which the individual has
sole or shared investment or voting power regardless of the economic
incidents of ownership. The shares reported in the table include shares held
by certain family members of the directors or in trusts or custodianships
for such members (directly or through nominees) and shares which the
specified person has the right to purchase within 60 days pursuant to
options granted in connection with the Company's stock option plans.
(2) Mr. Massey resigned as the Company's President and Chief Executive Officer
and a director of the Company in February 1996, Mr. Stanbrook resigned as
President, CompuServe Europe in October 1996 and Mr. Trevor resigned as
Executive Vice President and Chief Technical Officer in June 1996.
(3) Includes 600 shares held jointly with Mr. Massey's daughter.
(4) Includes 3,000 shares held with sole voting and investment power and 6,000
shares held with shared voting and investment power.
(5) Does not include 7,500 shares which the reporting person will have the right
to acquire beginning on the date prior to the Meeting.
(6) Includes 30,000 shares held with sole voting and investment power and 6,000
shares held with shared voting and investment power.
(7) Does not include 37,500 shares which the directors of the Company will have
the right to acquire beginning on the date prior to the Meeting.
7
<PAGE> 9
OWNERSHIP OF H&R BLOCK COMMON STOCK
The following table sets forth the beneficial ownership of H&R Block's
common stock of those executive officers of the Company listed in the Summary
Compensation Table, below, under "COMPENSATION OF EXECUTIVE OFFICERS," who are
not directors of the Company, all directors and all directors and executive
officers of the Company as a group as of January 7, 1997.
<TABLE>
<CAPTION>
SOLE VOTING SHARED VOTING
NAME OF SHARES AND AND/OR
BENEFICIAL OWNER BENEFICIALLY OWNED(1) INVESTMENT POWER INVESTMENT POWER(1)
---------------- --------------------- ---------------- -------------------
<S> <C> <C> <C>
Dennis D. Matteucci..................... 260 -- 260
Lawrence A. Gyenes...................... 1,000 1,000 --
Herbert J. Kahn......................... 10,466(2) 10,466(2) --
Robert J. Massey........................ 35,666(2) 35,666(2) --
Steven P. Stanbrook..................... -- -- --
Alexander B. Trevor..................... 20,791(2) 20,791(2) --
Henry F. Frigon......................... 11,999(2) 3,999(2) 8,000
Roger W. Hale........................... 11,161(2) 11,161(2) --
Edward E. Lucente....................... -- -- --
Frank L. Salizzoni...................... 23,999(2) 23,999(1) --
Morton I. Sosland....................... 280,397(2) 95,809(2) 184,588
All directors and executive officers as
a group (9 persons)................... 345,649 152,801 192,848
</TABLE>
- -------------------------
(1) As of January 7, 1997. For purposes of this disclosure, the SEC has defined
"beneficial ownership" to include securities over which the individual has
sole or shared investment or voting power regardless of the economic
incidents of ownership. The shares reported in the table include shares held
by certain family members of the directors or in trusts or custodianships
for such members (directly or through nominees). The reported shares also
include 8,000 shares held by a charitable foundation of which Mr. Frigon is
a director, 2,000 shares held by a charitable foundation of which Mr.
Salizzoni is an officer, 9,000 shares held by a charitable foundation of
which Mr. Sosland is an officer and a director and 104,592 shares held by a
corporation of which Mr. Sosland is an officer and a director. The
respective directors have disclaimed any beneficial ownership of those
shares held by or for their family members, Mr. Frigon has disclaimed any
beneficial ownership of those shares held in the name of the charitable
foundation of which he is a director, Mr. Salizzoni has disclaimed any
beneficial ownership of those shares held in the name of the charitable
foundation of which he is an officer and Mr. Sosland has disclaimed any
beneficial ownership of those shares held by said corporation or in the name
of the charitable foundation of which he is an officer and director.
(2) Includes shares which the specified person has the right to purchase within
60 days pursuant to options granted in connection with H&R Block's stock
option plans, as follows: Mr. Massey -- 35,666; Mr. Kahn -- 10,166; Mr.
Trevor -- 15,999; Mr. Frigon -- 3,999; Mr. Hale -- 9,999; Mr. Salizzoni --
17,999; and Mr. Sosland -- 17,999.
8
<PAGE> 10
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth for the year ended April 30, 1996, and the
previous fiscal year, the annual, long-term and other compensation paid to the
Company's Chief Executive Officer serving as such at the end of such year, to
each of the five highest paid executive officers of the Company (other than the
Chief Executive Officer) who was serving as an executive officer of the Company
at the end of such year, and to the former Chief Executive Officer of the
Company who resigned during such year (collectively, the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
FISCAL ------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#) COMPENSATION(1)
--------------------------- ------ ------ ----- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Dennis D. Matteucci(2)................. 1996 $ 11,539 $ 37,383 100,000 $ --
President, Online Services
Lawrence A. Gyenes(3).................. 1996 9,615 50,000 100,000 --
Executive Vice President and Chief
Financial Officer
Herbert J, Kahn........................ 1996 187,598 40,420 185,000 53,598
Executive Vice President, 40,000(4)
Administration 1995 165,673 94,160 65,000(4) 51,221
Robert J. Massey(5).................... 1996 263,402 42,340 399,000 $ 783
Former President and Chief Executive 90,000(4)
Officer 1995 197,358 188,474 135,000(4) --
Steven P. Stanbrook(6)................. 1996 28,346 -- 100,000 --
Former President, CompuServe Europe
Alexander B. Trevor(7)................. 1996 210,000 33,670 206,000 807
Former Executive Vice President and 10,000(4)
Chief Technology Officer 1995 203,462 182,974 35,000(4) 4,724
Maurice A. Cox......................... 1996 46,154 -- -- --
Former President and Chief 1995 282,692 338,297 215,000(4) 66,834
Executive Officer of the Operating
Company
</TABLE>
- -------------------------
(1) Includes the economic value of death benefits provided under H&R Block's
Executive Survivor Plan, the dollar value of "above market" amounts earned
on deferred compensation under H&R Block's Deferred Compensation Plan,
and/or Company matching contributions under such Plan.
(2) Mr. Matteucci was hired by the Company in April 1996. Mr. Matteucci's annual
base salary is $300,000.
(3) Mr. Gyenes was hired by the Company in April 1996. Mr. Gyenes's annual base
salary is $250,000.
(4) Represents options to acquire H&R Block common stock granted pursuant to H&R
Block's 1993 Long-Term Executive Compensation Plan.
(5) Mr. Massey was promoted to President and Chief Executive Officer of the
Company in June 1995 and resigned in February 1997.
(6) Mr. Stanbrook was hired by the Company in March 1996 and resigned in
November 1996. Mr. Stanbrook's annual base salary was $275,000.
(7) Mr. Trevor resigned from the Company in June 1996.
9
<PAGE> 11
STOCK OPTION GRANT TABLE
The following table summarizes options to purchase the Company's Common
Stock granted during the fiscal year ended April 30, 1996 to the Named Executive
Officers. The amounts shown as potential realizable values on the options
identified in the table are based on assumed annualized rates of appreciation in
the price of the Common Stock underlying the options of five percent and ten
percent over the term of the options, as set forth in the rules of the SEC.
Actual gains, if any, on stock option exercises are dependent upon the future
performance of the Common Stock underlying the options. There can be no
assurance that the potential realizable values reflected in this table will be
achieved. No stock appreciation rights of the Company were granted during the
Company's 1996 fiscal year.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
SHARES OF STOCK APPRECIATION
UNDERLYING % EXERCISE FOR OPTION TERM
OPTIONS TOTAL OR BASE EXPIRATION ---------------------------
GRANTED GRANTED PRICE DATE 5% 10%
---------- ------- -------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Dennis D. Matteucci......... 100,000 9.48% $30.00 4/24/2006 $ 1,887,000 $ 4,781,000
Lawrence A. Gyenes.......... 100,000 9.48% $30.00 4/24/2006 $ 1,887,000 $ 4,781,000
Herbert J. Kahn............. 80,000(1) 7.58% $30.00 4/24/2006 $ 1,509,600 $ 3,824,800
108,500(2) 10.04% $30.00 4/24/2006 $ 2,047,395 $ 5,187,385
40,000(3) 1.13% $41.00 6/30/2005 $ 1,031,200 $ 2,613,600
Robert J. Massey............ 150,000(1) 14.37% $30.00 4/24/2006 $ 2,830,500 $ 7,171,500
249,000(2) 23.86% $30.00 6/30/2005 $ 4,698,630 $11,904,690
90,000(3) 2.54% $41.00 6/30/2005 $ 2,320,200 $ 5,880,000
Steven P. Stanbrook......... 100,000 7.03% $30.00 4/24/2006 $ 1,887,000 $ 4,781,000
Alexander B. Trevor......... 55,000(1) 5.21% $30.00 4/24/2006 $ 1,037,850 $ 2,629,550
151,000(2) 14.47% $30.00 4/24/2006 $ 2,849,370 $ 7,219,310
10,000(3) (4) $41.00 6/30/2005 $ 257,800 $ 653,400
All current executive
officers as a group(4).... 150,000(1) 14.37% $30.00 4/24/2006 $ 2,830,500 $ 7,171,500
173,834(2) 16.66% $30.00 6/30/2005 $ 3,280,248 $ 8,311,004
All employees, including all
current officers who are
not executive officers, as
a group(5)................ 554,900 52.60% $30.00 4/24/2006 $10,470,963 $26,529,769
620,648 59.48% $30.00 6/30/2005 $11,711,628 $29,673,181
</TABLE>
- -------------------------
(1) Represents options to purchase shares of CompuServe Common Stock awarded by
the CompuServe Compensation Committee as of the completion of the initial
public offering. Such options vest ratably over a three-year period
commencing on the second anniversary of the grant date and shall
automatically be cancelled if H&R Block does not distribute its ownership
interest in the Company to its stockholders within 12 months (extended on
January 15, 1997 by the Company's Board of Directors to 18 months) of the
completion of the initial public offering.
10
<PAGE> 12
(2) Represents nonqualified options to purchase shares of CompuServe Common
Stock awarded by the CompuServe Compensation Committee in respect of options
to purchase shares of H&R Block common stock ("Block Options"). Each
employee of the Company and its subsidiaries who held outstanding Block
Options prior to the initial public offering of the Company's Common Stock
was awarded an option under the Incentive Plan to purchase a number of
shares of the Company's Common Stock equal to the number of shares subject
to the outstanding Block Options. Such options vest ratably over a
three-year period commencing on the second anniversary of the grant date and
shall automatically be cancelled if H&R Block does not distribute its
ownership interest in the Company to its stockholders within 12 months
(extended on January 15, 1997 by the Company's Board of Directors to 18
months) of the completion of the initial public offering.
(3) Represents options to acquire H&R Block common stock granted pursuant to H&R
Block's 1993 Long-Term Executive Compensation Plan. "% Total Granted" is
based upon the total number of options to acquire H&R Block common stock
granted by H&R Block.
(4) Represents less than one percent of the total number of options to acquire
H&R Block common stock granted by H&R Block.
OPTION EXERCISES AND FISCAL YEAR END VALUES
The following table presents the number and value of unexercised options to
acquire shares of the Company's Common Stock as of April 30, 1996 for the Named
Executive Officers. No options to acquire the Company's Common Stock were
exercised by the Named Executive Officers during the year ended April 30, 1996.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END(3) FY-END(3)
EXERCISABLE(E) EXERCISABLE(E)
UNEXERCISABLE(U) UNEXERCISABLE(U)
---------------- ----------------
<S> <C> <C>
Dennis D. Matteucci......................................... 0E --E
100,000U 0U
Lawrence A. Gyenes.......................................... 0E --E
100,000U 0U
Herbert J. Kahn............................................. 0E --E
188,500U 0U
Robert J. Massey............................................ 0E $--E
399,000U 0U
Steven P. Stanbrook......................................... 0E --E
100,000U 0U
Alexander B. Trevor......................................... 0E --E
206,000U 0U
</TABLE>
11
<PAGE> 13
CHANGE IN CONTROL ARRANGEMENTS
In connection with Robert J. Massey's resignation in February 1997 as the
Company's President and Chief Executive Officer and a director of the Company,
the Company and Mr. Massey entered into an agreement pursuant to which Mr.
Massey is to be paid over a one-year period severance pay in the amount of
$550,000 (equal to twice Mr. Massey's then current annual base pay). Mr. Massey
is also entitled to continuation of certain medical benefits through August 31,
1997. In the event of the occurrence of a "change in control" of the Company
prior to August 17, 1997 or the execution prior to such date of a definitive
agreement, binding letter of intent or binding letter in principle regarding a
"change of control" of the Company, subject to certain exceptions, Mr. Massey
will become entitled to a bonus equal to $600,000 and, under certain
circumstances, an additional $137,500. Mr. Massey has three months after
February 17, 1997 to exercise any outstanding options to acquire H&R Block
common stock then exercisable. All options to acquire shares of Common Stock of
the Company will expire unexercised. Pursuant to the agreement, Mr. Massey has
agreed not to engage in any activity in the United States or Europe for a period
of 12 months following the date of the agreement that would compete with the
Company's online interactive information services, Internet access services or
network services.
In connection with Alexander B. Trevor's resignation in June 1996 as the
Company's Executive Vice President and Chief Technology Officer, the Company and
Mr. Trevor entered into an agreement pursuant to which, among other things, Mr.
Trevor became entitled to 24 weeks of severance pay and certain earned incentive
compensation. In addition, Mr. Trevor became entitled to 20 weeks of additional
base pay.
The Company has adopted a plan which could apply as a result of a "change
of control" of the Company. The following are the material terms of such plan.
In the event of the termination of an employee in connection with a "change of
control" of the Company, such employee would be entitled to either (i) two times
annual base salary and target bonus for executive vice presidents and above,
(ii) one times annual base salary and target bonus for vice presidents and
director level employees and (iii) two weeks base salary for each year of
service (with a minimum of three months and a maximum of six months base salary)
for all other employees. Such severance will be paid to an employee terminated
(i) without "cause" within two years of a "change of control" or who resigns
with "good reason" or (ii) without "cause" during a "potential change of
control" and a "change of control" in fact occurs within three months after such
person's termination date. In addition, options awarded under the Company's 1996
Long-Term Incentive Plan would immediately vest upon a "change of control." The
Company's Board of Directors may revoke or materially modify these severance
benefits on 180 days' notice. A "change of control" includes, but is not limited
to, (i) the acquisition by any person of more than 25% of the voting power of
the Company's Common Stock, (ii) stockholder approval of a merger involving the
Company unless more than 50% of the successor is owned by the prior owners of
the Company, (iii) a majority of the Company's board of directors are not
nominated by the incumbent board or (iv) if the Company ceases to own its all or
substantially all of its online division or network division.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Compensation information with respect to the Named Executive Officers for
1996 reflects compensation earned in part while the Company was a wholly owned
subsidiary of H&R Block. Until April 1996, the Company had no compensation
committee. Executive compensation levels during 1996 were established by the
Company's Chief Executive Officer, except that the compensation level of the
Chief Executive Officer was established by the Compensation Committee and the
Chief Executive Officer of H&R Block.
12
<PAGE> 14
PERFORMANCE GRAPH
The graph below provides an indicator of cumulative total shareowner
returns ("Total Return") for the Company as compared with the cumulative returns
of the CRSP Total Return Index for the Nasdaq National Market (U.S. Companies),
the CRSP Total Return Index for Nasdaq Computer and Data Processing Services
Stocks and a peer group consisting of America Online, Inc. and Netcom On Line
Communication Services, Inc. (the "Peer Group").
This graph covers the period of time beginning April 19, 1996 when the
Company's Common Stock was first traded through December 31, 1996. The Company's
fiscal year end is April 30. The stock price performance on the graph below is
not necessarily indicative of future price performance.
TOTAL RETURN TO STOCKHOLDERS
<TABLE>
<S> <C> <C> <C> <C>
COMPUSERVE NASDAQ MARKET
MEASUREMENT PERIOD CORPORATION INDEX C&DP INDEX PEER GROUP
4/19/96 100.00 100.00 100.00 100.00
4/30/96 86.36 104.66 105.89 108.18
5/31/96 75.00 109.47 109.39 96.00
6/28/96 64.02 104.53 105.39 74.45
7/31/96 36.36 95.22 94.38 51.89
8/31/96 36.74 100.56 96.91 51.65
9/30/96 40.91 108.25 107.49 59.44
10/31/96 28.22 107.07 105.61 45.86
11/29/96 31.82 113.70 113.23 59.09
12/31/96 29.92 113.57 113.84 55.09
</TABLE>
[GRAPH]
- - CompuServe Corporation
- - NASDAQ Market Index
- - C & DP Index
- - Peer Group
- -------------------------
(1) Assumes $100 invested on April 19, 1996 in (i) CompuServe Common Stock, (ii)
the Nasdaq National Market, (iii) the Nasdaq Computer and Data Processing
Index and (iv) the Peer Group.
(2) Total return assumes reinvestment of dividends.
13
<PAGE> 15
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY
The Company's compensation philosophy is incentive oriented, particularly
for executive officers. The incentive portion of the executive compensation
program is designed to be closely linked to Company performance and returns to
shareholders. Accordingly, the Company has developed an overall compensation
strategy and specific compensation plans that tie a significant portion of
executive compensation to the Company's success in meeting specified performance
goals and to appreciation in the Company's stock price. The overall objectives
of this strategy are to motivate the CEO and the executive officers to achieve
the goals inherent in the Company's business strategy, to link executive and
shareholder interests through equity-based plans, and finally, to provide a
compensation package that recognizes individual contributions, as well as
overall business results.
The Compensation Committee receives the recommendations of the CEO for the
compensation to be paid the executive officers, including the Named Executive
Officers, and after due deliberation determines the compensation of such
executive officers and the CEO. This process is designed to ensure consistency
throughout the executive compensation program.
The Committee believes that CompuServe's most direct competitors for
executive talent are not necessarily all of the companies that would be included
in a peer group established to compare shareholder returns. Thus, for
compensation comparison purposes, the comparable companies and industry data
used are not the same as the peer group index set forth and used in the
performance graph included elsewhere in this Proxy Statement.
BASE SALARIES
Base salaries are determined by reference to an individual's salary grade
and corresponding salary range. Several factors are considered in determining
the appropriate salary grade for a particular officer, including level of
responsibility, prior experience and accomplishments and the relative importance
of the job in terms of achieving corporate objectives. Among the factors
considered in determining the appropriate salary within a particular salary
range are the experience and performance of the executive.
The individual salaries of executive officers are reviewed annually by the
Committee which strives to maintain base salaries at or below general industry
medians. The CEO's base salary of $275,000 was established on the basis of the
above mentioned factors.
ANNUAL INCENTIVE PLAN
Employees of the Company are eligible for an annual cash bonus under the
1996 Short-Term Incentive Plan (the "Short-Term Plan"). The Short-Term Plan
consists of two parts, the Key Executive Incentive Plan ("KEIP") Program and the
Management by Objective ("MBO") Program.
Under the KEIP Program, employees selected by the Compensation Committee
will have the opportunity to receive a cash incentive award based on the
attainment of KEIP Program Goals established by the Compensation Committee for
the Performance Period (the fiscal year of the Company). The KEIP Program also
permits participants to be selected, and KEIP Program Goals to be established
for those participants, by the Executive Vice President - Administration and the
CEO. The KEIP Program Goals are based on one or more of the following elements,
as determined by the Compensation Committee: (i) Company income and (ii)
achievement of various strategic and operating goals. The KEIP Program Goals are
to be established, and
14
<PAGE> 16
may be revised, by the Compensation Committee, provided that such establishment
or revision may occur not later than 90 days after the beginning of the
Performance Period (but in no event after 25% of the Performance Period has
elapsed, and while the outcome as to the goals is substantially uncertain).
Participants may earn a maximum of 150% of the target amount with a maximum
payout of $500,000. If actual results fall short of the KEIP program for any
Performance Period, awards will be less than the target amount. Total cash
compensation (salary plus target bonus) for executive officers and the CEO is
set at approximately general industry medians.
Employees selected by the Compensation Committee, or selected by the CEO
(or by such officer's designees) from among groups designated by the
Compensation Committee, will participate in the MBO Program. Each MBO Program
participant will have the opportunity to receive a cash incentive award based on
the attainment of MBO Program Goals established by the participant's direct
supervisor in consultation with the participant. The MBO Program Goals for any
participant may be revised by the participant's supervisor to take into account
changes that render the achievement moot, inconsistent with applicable
objectives, unreasonable or undesirable, or take account of circumstances not
within the control of or area of responsibility of the participant. The amount
of the incentive award which may be paid to a participant under the MBO Program
will be established by the Compensation Committee, or by the CEO (or by such
officer's designees) from within a range established by the Compensation
Committee. Under the MBO Program, a participant shall be entitled to up to 100%
of the designated bonus amount, based on the extent to which the MBO Program
Goals are met.
The CEO is eligible for the Short-Term Plan. His target amount for fiscal
1996 was $200,000. Based on the Company's performance, a bonus of $42,340 was
earned.
STOCK OPTIONS
The Compensation Committee is responsible for administering the Company's
stock option program, including individual stock option grants to officers and
aggregate grants to all plan participants. Under the 1996 Long-Term Incentive
Plan (the "Incentive Plan"), option exercise prices are not less than 100% of
the stock fair market value on the date of grant. Thus, the value of the
stockholders' investment in the Company must appreciate before an optionee
receives any financial benefit from the option. Options are generally granted
for a term of ten years. The options typically vest in one-third increments at
the end of the second, third, and fourth years.
In April of 1996 in conjunction with the Company's initial public offering,
the Compensation Committee recommended and the Board of Directors granted
nonqualified stock options under the Incentive Plan to all executive officers,
as well as certain other employees. The grants made to each executive and
employee were based on comparisons to an Internet industry peer group, and
attempted to provide comparable total compensation to CompuServe employees, as
well as lock in the current management team.
At the same time, CompuServe (replacement) options were granted to
employees with outstanding H&R Block options. The number of CompuServe options
issued were equivalent in number to the employee's outstanding H&R Block
options.
POLICY OF DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the U.S. Internal Revenue Code limits the tax
deductibility by a company of compensation in excess of $1 million paid to any
of its five most highly compensated executive officers. However, compensation
which qualifies as "performance-based" is excluded from the $1 million limit if,
15
<PAGE> 17
among other requirements, the compensation is payable only upon attainment of
pre-established, objective performance goals under a plan approved by
shareholders.
The Compensation Committee does not presently expect total cash
compensation payable for base salaries and The Short-Term Plan to exceed the $1
million limit for any individual executive. The Compensation Committee will
continue to monitor the compensation levels potentially payable under the
Company's cash compensation programs, but intends to retain the flexibility
necessary to provide total cash compensation in line with the Peer Group, the
Company's compensation philosophy, and the Company's best interests. Gain from
option exercises under The Incentive Plan would be considered performance-based
and hence not subject to the deduction limit.
Henry F. Frigon, Chairman
Edward E. Lucente
Roger W. Hale
Morton I. Sosland
APPOINTMENT OF AUDITORS
(ITEM 2 ON FORM OF PROXY)
Deloitte & Touche LLP has audited the accounts of the Company and its
predecessor since 1980. It has offices or affiliates convenient to most of the
Company's operations in the United States and other countries and is considered
to be well qualified. The Board of Directors has appointed such firm as the
Company's independent auditors for the year ending April 30, 1997 and recommends
that the stockholders ratify such appointment. Representatives of Deloitte &
Touche LLP expect to attend the annual meeting, will be afforded an opportunity
to make a statement if they desire to do so, and will be available to respond to
appropriate questions by the stockholders.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR RATIFICATION
OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP IN THE ABSENCE OF INSTRUCTIONS TO
THE CONTRARY.
STOCKHOLDER PROPOSALS
Recommendations for nominees to be elected to the Board of Directors and
proposals of stockholders intended to be presented at the next annual meeting
scheduled to be held not earlier than September 1, 1997 must be submitted in
writing to the Secretary of the Company, CompuServe Corporation, 5000 Arlington
Centre Boulevard, Columbus, Ohio 43220. Stockholder proposals must be received
by the Secretary no later than May 4, 1997 in order to be included in next
year's proxy statement and form of proxy.
SOLICITATION OF PROXIES
The cost of solicitation of proxies will be borne by the Company.
Solicitation will be made by mail, and may be made by directors, officers and
employees of the Company, personally or by telephone or telegram. Proxy cards
and materials also will be distributed to beneficial owners of shares of Common
Stock through brokers, custodians, nominees and other parties, and the Company
expects to reimburse such parties for their charges and expenses. Corporate
Investor Communications, Inc. has been retained to assist the Company in the
solicitation of proxies at a fee estimated not to exceed $6,000, plus
out-of-pocket expenses.
16
<PAGE> 18
OTHER MATTERS
The Board of Directors knows of no other matters which will be presented at
the meeting, but if other matters do properly come before the meeting, it is
intended that the persons named in the proxy will vote according to their best
judgment.
By Order of the Board of Directors
STEPHEN M. HEATON
Secretary
February 27, 1997
17
<PAGE> 19
PROXY PROXY
COMPUSERVE CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS--MARCH 21, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF COMPUSERVE CORPORATION
The undersigned hereby appoints Lawrence A. Gyenes, Herbert J. Kahn and
Stephen P. Heaton, and each of them, proxies for the undersigned with full
power of substitution, to vote all shares of common stock, par value $0.01 per
share, of CompuServe Corporation which the undersigned may be entitled to vote
at the Annual Meeting of Stockholders of CompuServe Corporation, on March 21,
1997 at 9:00 A.M., and at any adjournments thereof, upon the matters set forth
on the reverse side and described in the accompanying Proxy Statement and upon
such other business as may properly come before the meeting or any adjournment
thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
(Continued and to be signed on reverse side.)
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 AND 2.
1. ELECTION OF DIRECTORS:
Nominees: Frank L. Sallzzoni and Morton I. Sosland.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
mark the "For All Except" box and write that nominee's name in the space
provided below.)
For Withhold For All
All All Except
[ ] [ ] [ ]
______________________________________
2. Ratification of the appointment of Deloitte & Touche LLP as the company's
independent auditors for the year ending April 30, 1997.
For Against Abstain
[ ] [ ] [ ]
I PLAN TO ATTEND MEETING [ ]
COMMENTS / ADDRESS CHANGE
To change your address, please mark this box and correct below. [ ]
______________________________________
______________________________________
If no direction is made, this proxy will be voted for Items 1 and 2.
Dated: _____________________, 1997
Signature ____________________________________________________________________
______________________________________________________________________________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee, or guardian, please give
full title as such.
-- FOLD AND DETACH HERE --
YOUR VOTE IS IMPORTANT.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
