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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:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
AMERICAN BUSINESS INFORMATION, INC.
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(Name of Registrant as Specified In Its Charter)
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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[_] 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:
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(4) Date Filed:
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AMERICAN BUSINESS INFORMATION, INC.
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
OCTOBER 3, 1997
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TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of American
Business Information, Inc., a Delaware corporation (the "Company"), will be
held on October 3, 1997, at 10:00 a.m. local time, at the Company's principal
executive offices located at 5711 South 86th Circle, Omaha, Nebraska 68127,
for the following purposes as more fully described in the Proxy Statement
accompanying this Notice:
1. To consider and act upon a proposal to amend Article IV of the Company's
Certificate of Incorporation, as amended, to (i) reclassify the existing
Common Stock of the Company as Class B Common Stock, which is identical
to the existing Common Stock except that each share will entitle its
holder to ten votes, (ii) authorize a new class of common stock,
designated as Class A Common Stock, with a preferential dividend right
over the Class B Common Stock and one vote per share, (iii) increase the
number of authorized shares of Common Stock from 75,000,000 to
295,000,000, consisting of 220,000,000 shares of Class A Common Stock
and 75,000,000 shares of Class B Common Stock, and (iv) establish the
rights, powers and limitations of the Class A Common Stock and the Class
B Common Stock.
2. To approve the adoption of the Company's 1997 Class A Common Stock
Option Plan, including the reservation thereunder of 2,000,000 shares of
the Company's Class A Common Stock, contingent upon stockholder approval
of Proposal No. 1.
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only stockholders of record at the close of business on August 4, 1997, are
entitled to receive notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed Proxy card as promptly as possible in the
postage-prepaid envelope for that purpose. Stockholders attending the meeting
may vote in person even if they have returned a Proxy.
Sincerely,
STEVEN PURCELL
Secretary
Omaha, Nebraska
September 5, 1997
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AMERICAN BUSINESS INFORMATION, INC.
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PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of American Business Information,
Inc., a Delaware corporation (the "Company"), for use at a Special Meeting of
Stockholders (the "Special Meeting") to be held on October 3, 1997, at 10:00
a.m., local time, or at any adjournments or postponements thereof, for the
purposes set forth in this Proxy Statement and in the accompanying Notice of
Special Meeting of Stockholders. The Special Meeting will be held at the
Company's principal executive offices located at 5711 South 86th Circle,
Omaha, Nebraska 68127. The Company's telephone number is (402) 593-4500.
These proxy solicitation materials were mailed on or about September 5,
1997, to all stockholders entitled to vote at the meeting.
RECORD DATE; OUTSTANDING SHARES
Stockholders of record at the close of business on August 4, 1997 (the
"Record Date"), are entitled to receive notice of and vote at the meeting. On
the Record Date, 24,384,013 shares of the Company's Common Stock, $.0025 par
value, were issued and outstanding. For information regarding holders of more
than five percent of the outstanding Common Stock, see "Other Information
Regarding the Company--Security Ownership."
REVOCABILITY OF PROXIES
Proxies given pursuant to this solicitation may be revoked at any time
before they have been used. Revocation will occur by delivering a written
notice of revocation to the Company or by duly executing a proxy bearing a
later date. Revocation will also occur if the individual attends the meeting
and votes in person.
VOTING AND SOLICITATION
Every stockholder of record on the Record Date is entitled, for each share
held, to one vote on each proposal or item that comes before the meeting. The
directors and executive officers of the Company and their affiliates, as a
group, owned 11,783,013 shares of the Company's Common Stock as of the Record
Date (including options exercisable for Common Stock within sixty days of the
Record Date), or approximately 47% of the Company's outstanding Common Stock.
The cost of this solicitation will be borne by the Company. The Company may
reimburse expenses incurred by brokerage firms and other persons representing
beneficial owners of shares in forwarding solicitation material to beneficial
owners. Proxies may be solicited by certain of the Company's directors,
officers and regular employees, without additional compensation, personally,
by telephone or by telegram. The Company has retained Georgeson & Company,
Inc., an independent proxy solicitation firm, to assist in soliciting proxies
at an estimated fee of $7,000 plus reimbursement of reasonable expenses.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Stockholder proposals which are intended to be presented at the Company's
1998 Annual Meeting must be received by the Company no later than December 24,
1997 in order that they may be included in the proxy statement and form of
proxy for that meeting.
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PROPOSAL NO. 1:
AMENDMENT OF CERTIFICATE OF INCORPORATION
THIS PROXY STATEMENT CONTAINS FORWARD LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. THE FORWARD LOOKING STATEMENTS REFLECT THE BEST JUDGMENT OF
THE COMPANY'S MANAGEMENT BASED ON FACTORS CURRENTLY KNOWN. ACTUAL RESULTS MAY
DIFFER SUBSTANTIALLY FROM THOSE DISCUSSED IN THESE FORWARD LOOKING STATEMENTS.
FOR A DISCUSSION OF SOME FACTORS THAT MAY AFFECT ACTUAL RESULTS, SEE "CERTAIN
POTENTIAL DISADVANTAGES OF THE RECLASSIFICATION," BELOW, AND THE DOCUMENTS THE
COMPANY FILES FROM TIME TO TIME WITH THE SECURITIES AND EXCHANGE COMMISSION.
DESCRIPTION OF THE AMENDMENT, THE DIVIDEND AND THE PUBLIC OFFERING
At the Special Meeting the Company's stockholders are being asked to
consider and act upon a proposal to approve an amendment in the form attached
hereto as Annex A (the "Amendment" or the "Reclassification") to the Company's
Certificate of Incorporation, as amended, which would (i) reclassify the
existing Common Stock of the Company (the "Existing Common Stock") as Class B
Common Stock, (ii) authorize a new class of common stock, designated as Class
A Common Stock, (iii) increase the number of authorized shares of Common Stock
from seventy-five million (75,000,000) to two hundred ninety-five million
(295,000,000), consisting of two hundred twenty million (220,000,000) shares
of Class A Common Stock and seventy-five million (75,000,000) shares of Class
B Common Stock, and (iv) establish the rights, powers and limitations of the
Class A Common Stock and the Class B Common Stock.
If the Amendment is adopted by the stockholders, the Board intends to file a
Certificate of Amendment to the Certificate of Incorporation of the Company in
accordance with the Amendment. The Amendment will be effective immediately
upon acceptance of filing by the Secretary of State of Delaware (the
"Effective Date"). The Board would then be free to issue Class A Common Stock
or Class B Common Stock without any further action on the part of the
stockholders. Although the Board presently intends to file the Certificate of
Amendment, if the Reclassification is approved by stockholders, the resolution
of stockholders will reserve to the Board the right to defer or abandon the
Reclassification and not file such Certificate of Amendment.
If the Board files the Certificate of Amendment, then promptly after the
Effective Date the Board presently intends to declare a stock dividend (the
"Dividend") of one share of Class A Common Stock for each share of Existing
Common Stock (which will then have been reclassified as Class B Common Stock)
outstanding on the record date for the Dividend (the "Dividend Record Date").
The Dividend will be essentially a two-for-one stock split. Stockholder
approval of the Dividend is not required by Delaware law and is not being
solicited by the Proxy Statement, and there is no assurance that the Dividend
will actually be effected.
Upon effectiveness of the Amendment, each outstanding share of Existing
Common Stock will automatically be converted into, and the certificate
therefor will be deemed to represent, one share of Class B Common Stock. The
Existing Common Stock certificates will no longer specify the correct
designation. On the Effective Date, options to purchase the Company's Common
Stock under the Company's 1992 Stock Option Plan will automatically become
options to purchase Class B Common Stock with no adjustments to numbers of
shares or purchase price. If the Company declares the Dividend, then
outstanding options will become options to purchase both, but not either, one
share of Class A Common Stock and one share of Class B Common Stock for each
share of Class B Common Stock subject to such option prior to the Dividend,
without adjustment to purchase price.
As soon as practicable after the effectiveness of the Amendment, Norwest
Bank Minnesota, N.A., the Company's transfer agent, will issue certificates
representing the Class A Common Stock and will mail a letter
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of transmittal (the "Transmittal Letter") to each record holder of Class B
Common Stock on the Dividend Record Date. New certificates representing the
Class B Common Stock will be issued to the record holders of Class B Common
Stock who deliver properly executed Transmittal Letters accompanied by their
certificates formerly representing shares of Existing Common Stock. Until
certificates formerly representing shares of Existing Common Stock are
delivered for exchange, such certificates will represent shares of Class B
Common Stock.
Under the provisions of the Amendment, the currently outstanding shares of
Existing Common Stock would be reclassified as Class B Common Stock and would
continue to have their present rights, powers and limitations except that each
share of Class B Common Stock will entitle the holder thereof to ten votes on
any matter submitted for stockholder vote. As more fully described below, each
share of the new Class A Common Stock will be substantially identical to
shares of Class B Common Stock, except that each share of Class A Common Stock
will entitle the holder thereof to one vote per share on any matter submitted
for a stockholder vote, and will be entitled to a dividend in preference to
the Class B Common. Nothing in the Amendment entitles the Class A Common to
any dividend, however, until and unless such dividend is declared by the
Board, and the Board is not required to declare any dividends. As a result of
the Dividend, there will be no change in the relative voting power or equity
of any stockholder of the Company, including members of the family of the
Company's Chairman of the Board and Chief Executive Officer, Vinod Gupta (the
"Gupta Family"), because the Dividend will be made to all stockholders in
proportion to the number of shares of Class B Common Stock owned on the
Dividend Record Date. No reference herein to securities held or controlled by
the "Gupta Family" shall be deemed an admission by any member of the Gupta
Family that such member beneficially owns any of such securities individually
or as part of a group for purposes of Sections 13 or 16 of the Securities
Exchange Act of 1934, as amended, or for any other purposes. See "Description
of Capital Stock."
Upon completion of the Reclassification and the Dividend, the Company
presently intends to conduct a public offering of its Class A Common Stock
(the "Public Offering"). The Company has selected a lead underwriter for the
Public Offering, and presently anticipates filing a registration statement
with the Securities and Exchange Commission in connection with the Public
Offering in advance of the Special Meeting. Whether the Company will actually
undertake the Public Offering is contingent on, among other things, approval
of the Board of Directors, market conditions, and determination as to the
appropriate timing of such offering, and the Company may elect not to conduct
the Public Offering at all. The proceeds from the Public Offering will be used
to pay off existing bank debt and for general corporate purposes. The offering
will be made only by means of a prospectus complying with the requirements of
the Securities Act of 1933, as amended, and this Proxy Statement does not
constitute an offer to sell, or a solicitation of an offer to buy, any shares
of Class A Common Stock. Stockholder approval of the Public Offering is not
required by Delaware Law, and is not being solicited by this Proxy Statement.
See "Certain Potential Benefits of the Reclassification--Increased Flexibility
in Raising Working Capital and Financing Acquisitions," "Certain Potential
Disadvantages of the Reclassification--Uncertain Effect on Stock Price," "--
Risks of Discounted Value of Class A Common Stock in Future Acquisitions or
Financings," and "--Potential Reduced Liquidity of Class B Common Stock."
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Reclassification has been unanimously approved by the Company's Board of
Directors, including by each of the directors who is neither a member of the
Gupta Family nor an officer or employee of the Company. The Board believes
that the Reclassification is in the best interests of the Company and its
stockholders and recommends that you vote "FOR" the adoption of the
Reclassification. See "The Board's Reasons for the Reclassification."
THE BOARD'S REASONS FOR THE RECLASSIFICATION
Vinod Gupta founded the Company in 1972, and has served as Chairman of the
Board since that time. Members of the Gupta Family together control
approximately 38.5% of the voting power of the Company and hold options
covering an additional 3.6% of the outstanding voting securities of the
Company. The Board
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believes that the Company has enjoyed substantial success in building
stockholder value in the past, in particular through strategic acquisitions of
companies, assets and product lines, and that management and operating policies
adopted in recent years have set the foundation for continuing to build
stockholder value over the long-term. Over the past twelve months, the Company
has completed five acquisitions, pursuant to which the Company has issued more
than 3,600,000 shares of Common Stock (including options and warrants), and the
Company has incurred approximately $64 million of bank debt to fund the
approximately $80 million cash portion of such acquisitions. An additional
acquisition is currently pending.
After carefully considering the factors summarized below, the Board of
Directors has come to the conclusion that continued voting strength of the
Company's present stockholders, including the Gupta Family, will promote the
long-term best interests of the Company and all of its stockholders. At the
same time, the Board of Directors also believes that the continued success of
the Company and its growth strategy requires the flexibility to issue stock to
raise capital, acquire other companies, and provide effective incentive-based
compensation to management and key employees without significantly diluting the
voting strength of Company's existing stockholders, including the Gupta Family.
The Board of Directors believes that the Reclassification would promote both
objectives, without causing any disenfranchisement of existing stockholders.
Further the Board of Directors believes the Reclassification is consistent with
dual class capital structures which have been adopted by a number of publicly
held companies.
CERTAIN POTENTIAL BENEFITS OF THE RECLASSIFICATION
After careful consideration, the Board has identified the following potential
benefits of the Reclassification for the Company and its stockholders:
NO DISENFRANCHISEMENT OF EXISTING STOCKHOLDERS. The Board believes that the
Reclassification is preferable to other dual class structures because it will
not reduce the voting power of existing stockholders. In particular, because
each holder of a share of Existing Common Stock will, immediately following the
Amendment and the Dividend, hold one share of Class A Common Stock and one
share of Class B Common Stock, the Reclassification will have no immediate
effect on the relative voting strength of existing stockholders.
INCREASED FLEXIBILITY IN RAISING WORKING CAPITAL AND FINANCING
ACQUISITIONS. The Board believes that the Reclassification will provide the
Company with increased flexibility to raise equity capital to finance
acquisitions, repay debt or increase investment in the Company's growth without
significantly diluting the voting strength of current stockholders, including
the Gupta Family. Although the Class B Common Stock is likely to trade at a
premium with respect to the Class A Common Stock, as discussed below, the
Amendment expressly permits the Board to issue and sell shares of Class A
Common Stock even if the consideration which could be obtained by issuing or
selling Class B Common Stock would be greater. Whether the Company actually
undertakes the Public Offering or any other such offerings will depend upon,
among other things, approval of the Board of Directors, market conditions, and
determination as to the appropriate timing of any such offering, and the Board
may decide not to conduct any such offerings. If the Public Offering or any
other such public offerings occur, existing stockholders will, in each case,
experience some dilution of their percentage interests in the Company. See
"Description of the Amendment, the Dividend and the Public Offering."
INCREASED FLEXIBILITY IN RESPONDING TO FUTURE ACQUISITION OPPORTUNITIES. The
Board believes that the business and consumer database industry has undergone,
and will continue to undergo, significant and rapid consolidation. The
consummation of strategic acquisitions may require the issuance of substantial
amounts of capital stock and/or cash payments. The availability of a pool of
authorized but unissued Class A Common Stock that can be issued without
significant dilution of current stockholders' voting rights, will provide the
Company with greater flexibility in responding to rapidly developing
acquisition opportunities that the Board of Directors determines are in the
Company's long-term best interest. For example, rather than paying for future
acquisitions out of existing cash or incurring new long-term debt to finance
such acquisitions, shares of Class A Common could be issued to target companies
or their shareholders or in financings to generate additional cash to finance
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acquisitions or to repay debt incurred in connection with prior acquisitions.
While the Company has no current commitments to issue Common Stock in an
acquisition, management and the Board of Directors regularly evaluate
acquisition opportunities.
ABILITY TO PROVIDE INCENTIVE COMPENSATION WHILE MINIMIZING UNINTENDED
DILUTION OF VOTING STRENGTH. The Board is committed to providing the Company's
employees with equity-based incentive compensation, which aligns each
employee's interest in the success of the Company with the interests of the
stockholders. Over the long term, equity-based incentive programs have the
unintended side effect of diluting stockholder voting power. For instance, the
Company currently has approximately 24,384,000 shares of Common Stock
outstanding, and, excluding the shares to be issued under the proposed 1997
Class A Common Stock Option Plan, an additional approximately 4.5 million
shares either subject to existing options or available for future option
grants, representing over 15% of the Company's stock on a fully diluted basis.
Proposal No. 2 for the Company's stockholders at the Special Meeting is to
approve the Company's 1997 Class A Common Stock Option Plan. If both the
Amendment and Proposal No. 2 are adopted, the Company will be able to continue
to provide equity-based incentive compensation while minimizing the unintended
dilution of voting strength. See "Proposal No. 2: 1997 Class A Common Stock
Plan."
STOCKHOLDER FLEXIBILITY. To the extent that the Company issues Class A Common
Stock in connection with financings, acquisitions, and employee compensation
plans, present stockholders, including the Gupta Family, will have relatively
small dilution of voting power. In addition, present stockholders will have
increased flexibility to dispose of a portion of their equity interest in the
Company without substantially diminishing their relative voting power by
selling or otherwise disposing of Class A Common Stock while retaining Class B
Common Stock. The Company is not aware of any present intention by members of
the Gupta Family to dispose of any portion of their interests in the Company.
However, if in time some members of the Gupta Family elect to dispose of some
of their shares for diversification, liquidity and estate planning reasons, the
Company believes that, if the Reclassification is approved, they would be more
likely to dispose of shares of Class A Common Stock rather than shares of Class
B Common Stock.
PROMOTING MANAGEMENT CONTINUITY AND EMPLOYEE PRODUCTIVITY. Because
implementation of the Reclassification would allow existing stockholders,
including the Gupta Family, to largely preserve their voting strength in the
Company even after substantial issuances of stock by the Company to meet
strategic objectives or a diversification by existing stockholders, including
the Gupta Family, for financial planning reasons, the adoption of the
Reclassification will reduce the risk of a disruption of the Company's long-
term plans and objectives. Implementation of the Reclassification will thus
allow management to focus its attention and the Company's resources on
maximizing long-term corporate growth and profitability without concern for the
possibility of an unexpected change in control of the Company. Similarly, by
contributing to stability of management the Reclassification will in turn allow
all employees to continue to concentrate on their responsibilities without
undue concern over potential loss of or change in employment in the event of a
change of control.
BUSINESS RELATIONSHIPS. Implementation of the Reclassification may enhance
the existing and potential business relationships of the Company with
suppliers, customers and other parties who may become concerned about changes
in control of the Company in the event the Gupta Family holdings are diluted as
a result of future issuances by the Company or diversification by the Gupta
Family.
CERTAIN POTENTIAL DISADVANTAGES OF THE RECLASSIFICATION
In addition to the potential benefits of the Reclassification, discussed
above, the Board also considered potential disadvantages of the
Reclassification, including:
UNCERTAIN EFFECT ON STOCK PRICE. Because the Company expects to declare a
dividend of one share of Class A Common Stock for every share of Class B Common
Stock outstanding on the Dividend Record Date, the Company expects that the
Dividend will have an effect similar to a 2 for 1 stock split (i.e., both Class
A
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Common Stock and Class B Common Stock will trade at roughly half the price that
Class B Common Stock traded at immediately prior to payment of the dividend).
However, as before the Dividend, many factors, including general market
conditions, future performance of the Company, and the performance of other
companies in the business and consumer database industry, could cause
fluctuations in the prices for both the Class A and Class B Common Stock, and
could cause the Class A Common Stock and Class B Common Stock to trade at
different prices. If the Company conducts the Public Offering, the increased
number of shares of Class A Common Stock in the market may also affect the
price of the Class A Common Stock and/or the Class B Common Stock. After the
Dividend, in the event of a tender offer or other unsolicited attempt to
acquire the Company, shares of Class B Common Stock would likely trade at a
substantial premium to shares of Class A Common Stock as a result of the
disparity of voting rights. While the Company presently intends to issue
primarily Class A Common Stock in the future if the Reclassification is adopted
and implemented, it may from time to time issue Class B Common Stock if
necessary to achieve strategic objectives of the Company. Future issuances of
both Class A Common Stock and Class B Common Stock could affect the price for
either or both classes of Common Stock. For the foregoing reasons, the Company
cannot predict the relative or absolute effect of the Reclassification and the
Dividend on the market price for the Class A Common Stock and Class B Common
Stock. See "--Risk of Discounted Value of Class A Common Stock in Acquisitions
or Financings," "Description of the Amendment, the Dividend and the Public
Offering," and "Description of Capital Stock--Certain Anti-takeover Effects."
CHANGE IN CONTROL IMPACT. The Gupta Family currently owns a significant
portion of the Existing Common Stock and Company believes that the Gupta Family
has effective voting control over the Company. Regardless of whether the
Reclassification is implemented, the Gupta Family will maintain the ability to
keep or dispose of such voting control. However, implementation of the Proposal
will allow members of the Gupta Family to continue to exercise voting control
even if some or all of them choose to significantly reduce their total equity
position through sales of Class A Common Stock. Implementation of the
Reclassification is likely to limit the future circumstances in which a sale or
transfer of equity by the Gupta Family could lead to a merger proposal or
tender offer that is not acceptable to the Gupta Family or a proxy contest for
the removal of incumbent directors. Consequently, the Amendment and the
Dividend might reduce the possibility that stockholders of the Company may sell
their shares at a premium over prevailing market prices and make it more
difficult to replace the current Board of Directors and management of the
Company.
Because the market price of the Class B Common Stock is expected to be
approximately one-half of the price of the Existing Common Stock, it will be
possible to acquire more voting Common Stock for a given amount of
consideration after the Dividend as compared with prior to the Dividend.
Therefore, the Reclassification could permit stockholders, including the Gupta
Family, to increase their relative voting control at a lower cost. The Gupta
Family has advised the Company that it has no present plans to acquire any
additional shares of Class B Common Stock after the Dividend.
The Company is not aware of any current intention of members of the Gupta
Family to dispose of any significant amount of Common Stock of the Company or
of any existing or planned effort on the part of any party to accumulate
material amounts of the Company's Common Stock, or to acquire control of the
Company by means of a merger, tender offer, solicitation in opposition to
management or otherwise, or to change the Company's management.
RISK OF DISCOUNTED VALUE OF CLASS A COMMON STOCK IN FUTURE ACQUISITIONS OR
FINANCINGS. The Company presently plans to issue primarily Class A Common Stock
in future acquisitions or financings, including the presently anticipated
Public Offering. If the Class A Common Stock trades at a discount to the Class
B Common Stock, then acquisitions or financings involving the issuance of Class
A Common Stock will be economically more dilutive to existing stockholders than
such transactions would be if the Company issued Class B Common Stock or, if
the Reclassification were not approved, Existing Common Stock. This dilution,
if it occurs, will result in decreased earnings per share and lower stock
prices for both the Class A Common Stock and the Class B Common Stock. See
"Description of the Amendment, the Dividend, and the Public Offering."
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POTENTIALLY REDUCED LIQUIDITY OF CLASS B COMMON STOCK. Upon effectiveness of
the Amendment and Dividend, there will be equal numbers of shares of Class A
Common Stock and Class B Common Stock outstanding. To minimize dilution of
voting power to existing stockholders, the Board of Directors presently
intends to issue Class A Common Stock, rather than Class B Common Stock, in
the future to the extent the Board believes necessary to raise equity,
including the presently anticipated Public Offering, finance acquisitions or
fund employee benefit plans. Furthermore, members of the Gupta Family and
other stockholders who wish to retain voting power within the Company are more
likely to dispose of Class A Common Stock over time than Class B Common Stock.
Any such issuance of additional Class A Common Stock by the Company or
dispositions of Class A Common Stock by members of the Gupta Family or other
existing stockholders may serve to further increase market activity in Class A
Common Stock while resulting in a relative reduction in liquidity in the
market for Class B Common Stock. See "Description of the Amendment, the
Dividend and the Public Offering."
POTENTIAL CONFLICT OF INTEREST. The Gupta Family holds approximately 38.5%
of the outstanding voting stock of the Company and options covering an
additional approximately 3.6% of the outstanding voting stock of the Company.
Approval of the Amendment would allow the Gupta Family to dispose of some or
all of the shares of Class A Common Stock received by them in the Dividend
without a substantial reduction in voting power, assuming no other events
occur that would affect voting power. The Company is not aware of any present
intentions of the members of the Gupta Family to dispose of Common Stock. As
such, in approving the Reclassification, the Gupta Family is subject to a
conflict of interest.
POTENTIAL NEGATIVE RESPONSE OF INSTITUTIONAL INVESTORS. Implementation of
the Amendment may affect the decision of certain institutional investors that
would otherwise consider investing in the Existing Common Stock but who object
to the Reclassification. To the extent that institutional investors avoid
purchasing the Company's stock, the stock price may be negatively affected by
the decreased demand.
COMPLICATIONS FOR FUTURE BUSINESS COMBINATIONS. The Board believes that the
creation of Class A Common Stock will allow the Company greater flexibility in
carrying out future acquisitions. However, the existence of two classes of
Common Stock will cause difficulties in accounting for such acquisitions using
the "pooling of interests" method for financial reporting purposes, and may
limit the Company's ability to effect certain combinations as tax-free
reorganizations. Either or both of these factors could counteract the increase
in flexibility in responding to acquisition opportunities that is an
anticipated result of the Reclassification.
POTENTIAL CHANGES IN LAW OR REGULATIONS. In recent years, bills have been
introduced in Congress that, if enacted, would have prohibited the
registration of common stock on a national securities exchange or the trading
of such common stock on Nasdaq if such common stock was part of a class of
securities which has no voting rights or carried disproportionate voting
rights. While these bills have not been acted upon by Congress, there can be
no assurance that such a bill (or a modified version thereof) will not be
introduced in Congress in the future. Legislation or other regulatory
developments could make the Company's Class A Common Stock and Class B Common
Stock ineligible for trading on national securities exchanges and for trading
on Nasdaq as a result of the Dividend. Similarly, rule changes adopted by the
National Association of Securities Dealers could also make the Company's Class
A Common Stock or Class B Common Stock ineligible for trading on Nasdaq. The
Company is unable to predict whether any such regulatory proposals or rule
changes will be adopted or whether they will have such effect. If such
legislation or rule changes are adopted, however, it could include
"grandfather" provisions, in which event the Company might not be affected as
to any action already taken.
BROKERAGE COSTS; SECURITY FOR CREDIT. As typical in connection with any
stock split, brokerage charges and stock transfer taxes, if any, may be
somewhat higher with respect to purchases and sales of Common Stock after the
Dividend, assuming transactions of the same dollar amount, because of the
increased number of shares involved. The Company does not expect that the
adoption of the Reclassification and the Dividend will affect the ability of
holders of the common stock to use the Class A Common Stock or Class B Common
Stock as security for the extension of credit by financial institutions,
securities brokers or dealers, but the Company makes no representation or
warranty to such effect.
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CERTAIN ACCOUNTING EFFECTS
EFFECT ON BOOK VALUE, EARNINGS PER SHARE, AND RETAINED EARNINGS AND CAPITAL
STOCK ACCOUNTS. Although the interest of each stockholder in the total equity
of the Company will remain unchanged as a result of the Dividend, the issuance
of the Class A Common Stock pursuant to the Dividend will cause the book value
and earnings per share of the Company to be adjusted to reflect the increased
number of shares outstanding. In addition, though effected in the form of a
dividend, for accounting purposes the Dividend will have the same effect as a
two-for-one stock split. Consequently, the Stockholders' Equity Account of the
Company will be adjusted to increase the Common Stock account by approximately
$61,000, the total par value of the Class A Common Stock to be issued in the
Dividend, and to decrease retained earnings by an equal amount. If the Dividend
had occurred as at June 30, 1997, the Dividend would have resulted in a total
Common Stock account of $122,000 as compared to $61,000 without the Dividend,
and the retained earnings of the Company would have been $8,595,000 as compared
to $8,656,000 without the Dividend.
CERTAIN FEDERAL INCOME TAX EFFECTS
The following description of certain federal income tax consequences
concerning the Reclassification is based upon current provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), applicable Treasury
Regulations, and judicial and administrative interpretations thereof. This
description does not, however, address any aspects of state, local or foreign
taxation relating to the Reclassification.
The Company believes that, in general, for federal income tax purposes (i)
neither the Reclassification of Existing Common Stock into Class B Common Stock
nor the Dividend of Class A Common Stock will be taxable to a stockholder of
the Company, (ii) neither the Class B Common Stock nor the Class A Common Stock
will constitute "Section 306 stock" within the meaning of Section 306(c) of the
Internal Revenue Code of 1986, as amended, (iii) the cost basis of each share
of Existing Common Stock will be apportioned between the share of Class B
Common Stock into which it is reclassified and the Class A Common Stock issued
with regard to it in proportion to the fair market value of the shares of each
class on the date of the Dividend, and (iv) the holding period for each share
of Class B Common Stock and Class A Common Stock will include the stockholder's
holding period for the Existing Common Stock with respect to which they were
distributed. Gain or loss will be recognized, however, on the subsequent sale
of a share of Class B Common Stock or a share of Class A Common Stock.
Stockholders are urged to seek the advice of their own tax counsel on this
matter and on state or foreign income tax matters.
EFFECTS ON RELATIVE OWNERSHIP INTEREST AND VOTING POWER
Because the Amendment provides that each whole share of Existing Common Stock
will be reclassified and changed into one share of Class B Common Stock, and
because the Dividend is to be made to all stockholders in proportion to the
number of shares of Class B Common Stock owned on the Dividend Record Date by
each stockholder, the relative ownership interest and voting power of each
holder of a whole share of Existing Common Stock will be the same immediately
after effectiveness of the Amendment and Dividend as it was immediately prior
thereto.
Stockholders who sell their shares of Class B Common Stock after the Dividend
will lose a greater amount of voting control in proportion to equity than they
would have prior to the Dividend. At the same time, stockholders desiring to
maintain a long-term investment in the Company will be free to continue to hold
the Class B Common Stock and retain the benefits of the voting power attached
to such Common Stock.
As of the Record Date, members of the Gupta Family had sole or shared voting
or dispositive power over an aggregate of 9,155,654 shares or approximately
37.5% of the outstanding Existing Common stock of the Company. If the Gupta
Family, following the Dividend, were to sell all of the shares of Class A
Common Stock received in the Dividend, the Gupta Family would still have
approximately 34.1% of the voting power assuming no other change. The foregoing
is for illustrative purposes only and is in no way intended to suggest that the
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Gupta Family has any intention of selling any or all of its shares of Class A
Common Stock or Class B Common Stock following the Dividend. The Company has
been advised that it is the present intention of members of the Gupta Family
to hold the shares of Class B Common Stock and that if, they did determine to
dispose of any shares, they would intend to dispose of shares of Class A
Common Stock.
SECURITIES LAWS & REGULATIONS
FEDERAL SECURITIES LAWS. Because the Existing Common Stock will be
reclassified as Class B Common Stock with essentially the same rights, powers
and limitations, the Reclassification is not an "offer," "offer to sell,"
"offer for sale" or "sale" of a security within the meaning of Section 2(3) of
the Securities Act of 1933, as amended (the "Securities Act"), and will not
involve the substitution of one security for another under Rule 145
thereunder. In addition, the Dividend of the Class A Common Stock as a stock
dividend will not involve a "sale" of a security under the Securities Act or
Rule 145. Consequently, the Company is not required to register and has not
registered the Class A Common Stock or the Class B Common Stock under the
Securities Act.
Because the Amendment and Dividend do not constitute a "sale" of either
Class A Common Stock or Class B Common Stock under the Securities Act,
stockholders will not be deemed to have purchased such shares separately from
the Existing Common Stock under the Securities Act and Rule 144 thereunder.
Shares of Class B Common Stock held immediately upon effectiveness of the
Amendment and shares of Class A Common Stock received in the Dividend may be
offered for sale and sold in the same manner as the Existing Common Stock. Any
affiliate of the Company under Rule 144 will be subject to the same
restrictions in disposing of Class A Common Stock and Class B Common Stock as
the affiliate presently is with respect to the Existing Common Stock. The
Class A Common Stock and Class B Common Stock will be registered under Section
12(g) of the Securities Exchange Act. Reports on acquisitions of the Company's
Common Stock pursuant to Section 13 of the Securities Exchange, and reports of
acquisitions and dispositions of Common Stock under Section 16(a) of the
Securities Exchange Act will be required separately for Class A Common Stock
and Class B Common Stock. The Company will not receive any cash or other
consideration from the holders of Existing Common Stock in connection with the
Reclassification or the Dividend.
NASDAQ NATIONAL MARKET REQUIREMENTS. The Existing Common Stock currently is
traded on the Nasdaq National Market ("Nasdaq"), and application is being made
to trade the Class A Common Stock and the Class B Common Stock on Nasdaq as
well. The Reclassification is intended to comply with the requirements of Rule
4460(j) of the Nasdaq Marketplace Rules, which prohibits the listing on Nasdaq
of equity securities of an issuer which issues a class of security or takes
other corporate action with the effect of nullifying, restricting or
disparately reducing the per share voting rights of holders of an outstanding
class of common stock. The Company has reviewed the terms of the Amendment and
Dividend with Nasdaq and has been advised by Nasdaq that (1) the issuance of
the Class A Common Stock would not violate Nasdaq's voting rights policy and
(2) on issuance, the Class A Common Stock as well as the Class B Common Stock,
will be eligible for listing on Nasdaq. Future issuances of Common Stock may
require Nasdaq approval. Any future creation and issuance of a new class of
common stock having proportionately greater voting power than Class A Common
Stock or Class B Common Stock may be subject to the limitations of Rule
4460(j), and Nasdaq approval may be required in connection with any such
future issuance. The Company has no plans to issue any such new class of
common stock.
GENERAL EXPENSES
The costs of proceeding with the Reclassification and Dividend (such as
transfer agent's fees, printing, engraving and mailing costs, legal fees,
investment banking fees, solicitation fees, and NASD fees) will be charged
against the Company's pre-tax earnings. The approximate cost of proceeding
with the Reclassification and Dividend is estimated to not exceed $300,000,
inclusive of fees of financial and legal advisors.
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DESCRIPTION OF CAPITAL STOCK
As indicated above, the Amendment will reclassify the Existing Common Stock
into Class B Common Stock and create a new Class A Common Stock. The rights,
powers and limitations of the Class A Common Stock and the Class B Common Stock
are set forth in full in the proposed Article IV of the Company's Certificate
of Incorporation. The full text of Article IV as proposed to be amended is set
forth as Annex A to this Proxy Statement and incorporated herein by reference.
The following summary should be read in conjunction with, and is qualified in
its entirety by reference to, such Annex A.
Except as set forth below, the Class A Common Stock and Class B Common Stock
will be substantially identical. The holders of Class A Common Stock and Class
B Common Stock may take action by written consent in accordance with Delaware
law, but do not have the right to cumulate votes in connection with the
election of Directors. The Board is divided into three classes, each of which
is elected for a three year term. The term of one class of Directors terminates
at each annual meeting of stockholders. In the event of a liquidation,
dissolution or winding up of the Company, the holders of Class A Common Stock
and Class B Common Stock shall first receive any declared but unpaid dividends
with respect to the respective class, and then shall be entitled to share
ratably in all assets remaining after payment of the Company's liabilities. For
purposes of the Certificate of Incorporation, a sale of all or substantially
all of the Company's assets or a merger in which the stockholders of the
Company, immediately prior to the merger own less than a majority of the voting
power of the surviving entity following the entity, will be treated as a
liquidation, dissolution or winding up of the Company. The Class A Common Stock
and Class B Common Stock have no preemptive, conversion or other subscription
rights and there are no redemption or sinking fund provisions applicable to the
Class A Common Stock or Class B Common Stock. All outstanding shares of
Existing Common Stock are fully paid and non-assessable, and the shares of
Class A Common Stock and Class B Common Stock to be outstanding upon completion
of the Reclassification and the Dividend will be fully paid and non-assessable.
There will be no restrictions on the transferability of the Class A Common
Stock or the Class B Common Stock, except for such restrictions as may be
entered into by the holders thereof contractually, or may be imposed on the
holders thereof by applicable laws. See "Securities Laws and Regulations."
VOTING RIGHTS. Holders of the Class A Common Stock will be entitled to one
vote per share on all matters submitted to a vote of the stockholders. Holders
of the Class B Common Stock will be entitled to ten votes per share on all
matters submitted to a vote of the stockholders. The votes of holders of Class
A Common Stock and Class B Common Stock will be counted together for all
purposes, including any increase or decrease in the number of authorized shares
of Class A Common Stock or Class B Common Stock, unless the matter to be voted
on would increase or decrease the par value of such Class or alter or change
the powers, preferences or special rights of the shares of such Class so as to
affect it adversely. As a result of this difference in voting rights, the Class
B Common Stock will effectively maintain voting control of the Company, except
in limited circumstances.
DIVIDEND RIGHTS. Neither the Class A Common Stock nor the Class B Common
Stock shall have any right to receive dividends unless and until such dividends
are declared by the Board of Directors out of funds legally available therefor.
Subject to any dividend rights of the Preferred Stock, when and if the Board of
Directors declares a dividend on Common Stock payable other than in shares of
capital stock of the Company or in rights to acquire such capital stock,
holders of Class B Common Stock will not be entitled to any such dividend until
the holders of the Class A Common Stock have received a dividend in such year
equal to $.02 per share. Thereafter, all such dividends declared on Common
Stock shall be paid at an equal per-share rate. The Company has not paid any
cash dividends since its inception, and does not anticipate paying cash
dividends in the foreseeable future. The Company currently intends to retain
available future earnings to finance the operations of the business. Dividends
or other distributions payable on the Common Stock in shares of capital stock
shall be made to all holders of Common Stock and may be made (a) in shares of
Class A Common Stock to the holders of Class B Common Stock and to the holders
of Class A Common Stock, (b) in shares of Class B Common Stock to the holders
of Class B Common Stock and in shares of Class A Common Stock to the holders of
Class A Common Stock, or (c) in any other authorized class or series of capital
stock to the holders of both classes of Common Stock. In no event will either
Class A Common Stock or Class B Common Stock be split, subdivided or combined
unless the other is proportionately split, subdivided or combined.
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CERTAIN ANTI-TAKEOVER EFFECTS
THE RECLASSIFICATION. The Reclassification is not being proposed as a
response to any currently known or anticipated efforts to take control of the
Company. Nonetheless, the Reclassification could result in certain anti-
takeover effects. In the view of the Board of Directors, it is unlikely that a
person could succeed in a takeover of the Company without making an offer
acceptable to the Gupta Family, because of its substantial ownership of voting
stock. Implementation of the Reclassification will not change the voting power
of the Gupta Family, but it will give the Company more flexibility to issue
Common Stock without substantial diminution of the voting power of the existing
shareholders, including the Gupta Family, and it will give the Gupta Family the
ability to reduce its equity holdings in the Company (by sale of Class A Common
Stock) without materially reducing its voting power. If shareholders were to
reject the Reclassification and if the Company were to sell a substantial
amount of Existing Common Stock or the Gupta Family were to sell a substantial
amount of Existing Common Stock, the chances of success might improve for a
tender offer or other takeover proposal or a proxy contest which would remove
incumbent directors notwithstanding the opposition of the Gupta Family.
On the foregoing assumptions, the Reclassification might be said to reduce
the possibility of the stockholders receiving and accepting hostile takeover
bids, which are often made at premiums over then-current market prices of the
target company's stock. The Reclassification may also render more difficult or
discourage mergers, proxy contests, removal of current management or other
changes in control of the Company which may be desired by substantial holders
of the Company's equity securities, particularly if their holdings are
primarily Class A Common Stock.
STOCKHOLDER RIGHTS PLAN. The Board recently adopted a stockholder rights plan
(the "Rights Plan") with respect to its Existing Common Stock, pursuant to
which it declared a dividend distribution of preferred shares purchase rights
(the "Rights"). The Rights currently trade with shares of the Company's
Existing Common Stock and have no impact on the way the Company's shares are
traded. The Rights are not exercisable until ten days after a person or group
(other than present holders of more than 15% of the Company's Existing Common
Stock, including any or all members of the Gupta Family) announces acquisition
of 15% or more of the Company's outstanding Existing Common Stock or the
commencement of a tender offer which would result in ownership of the person or
group of 15% or more of the outstanding Existing Common Stock. Once a person or
group (the "Acquiring Person") acquires 15% or more of the Company's Existing
Common Stock (a "Trigger Event"), each Right not owned by the Acquiring Person
will entitle its holder to purchase, at the Right's then current exercise
price, that number of shares of Existing Common Stock of the Company (or, in
certain circumstances as determined by the Board, cash, other property or other
securities) having a market value at that time of twice the Right's exercise
price. If, after the tenth day following acquisition by such Acquiring Person
of 15% or more of the Company's Existing Common Stock, ABI sells more than 50%
of its assets or earning power or is acquired in a merger or other business
combination transaction, the Acquiring Person must assume the obligations under
the Rights and the Rights will become exercisable to acquire common stock of
the Acquiring Person at the discounted price.
The Rights are designed to protect and maximize the value of stockholders'
interests in the Company in the event of an unsolicited takeover attempt
through such methods as a gradual accumulation of shares in excess of 15% of
the outstanding stock followed by a two-tier tender offer or other tactics that
do not treat all shareholders equally. The Rights Plan is not intended to
prevent a takeover, but instead to protect stockholders from the abusive and
coercive tactics that often occur in takeover attempts. These tactics may
unfairly pressure stockholders, deprive them of the full value of their shares,
or squeeze them out of their investment without giving them any real choice.
Pursuant to the Rights Plan, the Rights currently attached to the Existing
Common Stock will continue to be attached to the Class B Common Stock after the
Reclassification has been adopted and implemented and, in the event of a
Trigger Event, the holders of such rights not owned by the Acquiring Person
would be entitled to purchase Class B Common Stock worth twice the exercise
price. The Rights will not, however, attach to the shares of Class A Common
Stock issued in the Dividend or thereafter. If the Reclassification is adopted
and
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implemented, the Board presently intends to adopt a second stockholder rights
plan for the Class A Common Stock, which would operate in substantially the
same manner as the Rights Plan, but would, in the case of a Trigger Event,
provide rights to acquire shares of Class A Common Stock worth twice the
exercise price.
CERTAIN OTHER EFFECTS. The Company's Certificate of Incorporation currently
provides for three classes of directors, each with three-year terms, so that
shareholders desiring to replace the incumbent directors and gain control of
the Board would be required to win at least two successive annual contests
before their nominees constituted a majority of directors. The Certificate of
Incorporation also contains a requirement that charter amendments be approved
by holders of 60% of the Company's voting stock.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW. Finally, because the
Company has not by a provision in its Certificate of Incorporation elected
otherwise, it is subject to Section 203 of the Delaware General Corporation Law
("Section 203"), which imposes certain restrictions, described below, on
"business combinations" with an "interested stockholder" that could produce
anti-takeover effects in certain circumstances. Section 203 defines a business
combination to include: (i) any merger or consolidation involving the
corporation and the interested stockholder; (ii) any sale, transfer, pledge or
other disposition involving the interested stockholder of 10% or more of the
assets of the corporation; (iii) subject to certain exceptions, any transaction
which results in the issuance or transfer by the corporation of any stock of
the corporation to the interested stockholder; (iv) any transaction involving
the corporation which has the effect of increasing the proportionate share of
the stock of any class or series of the corporation beneficially owned by the
interested stockholder; or (v) the receipt by the interested stockholder of the
benefit of any loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation. In general, Section 203 defines an
"interested stockholder" as any entity or person beneficially owning 15% or
more of the outstanding voting stock of the corporation and any entity or
person affiliated with or controlling or controlled by such entity or person.
Subject to certain exceptions, Section 203 prohibits a Delaware corporation
from engaging in any business combination with any interested stockholder for a
period of three years following the time that such stockholder became an
interested stockholder, unless (i) prior to such time, the board of directors
of the corporation approved either the business combination or the transaction
which resulted in the stockholder becoming an interested stockholder, (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (not counting those shares owned by directors who are also officers
and by employee stock plans in which employee participants do not have the
right to determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer), or (iii) at or subsequent to such
time, the business combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock which is not owned by the interested stockholder.
REQUIRED VOTE
Approval of the Reclassification requires the affirmative vote of holders of
at least sixty percent (60%) of the outstanding Common Stock of the Company as
of the Record Date. Abstentions and broker non-votes will be counted for the
purpose of establishing a quorum, and will have the same effect as a vote
against the Reclassification. AFTER CAREFUL CONSIDERATION, THE BOARD OF
DIRECTORS RECOMMENDS YOU VOTE "FOR" THE RECLASSIFICATION.
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PROPOSAL NO. 2:
APPROVAL OF THE 1997 CLASS A COMMON STOCK OPTION PLAN
In July 1997, the Board of Directors adopted the 1997 Class A Common Stock
Option Plan (the "Plan") and reserved two million (2,000,000) shares of the
Company's Class A Common Stock for issuance thereunder, subject to stockholder
approval of this Proposal and Proposal No. 1. As of the mailing hereof no
options to purchase stock had been granted pursuant to the Plan by the Board
or its committees, and actual or prospective recipients of benefits under the
Plan have yet to be determined. At the Special Meeting, the stockholders are
being asked to approve the Plan and the reservation of shares thereunder.
The Company's 1992 Stock Option Plan (the "1992 Plan") will continue in
effect. If the Reclassification and Dividend, as discussed in Proposal No. 1
are adopted and implemented, then currently outstanding options under the 1992
Plan will become options to purchase both, but not either, one share of Class
A Common Stock and one Class B Common Stock for each share of Existing Common
Stock subject to such option before the Reclassification and the Dividend,
without adjustment to the exercise price therefor. The pool of shares of
Common Stock available for future grants will become one share of Class A
Common Stock and one share of Class B Common Stock for every share of Existing
Common Stock available prior to the Reclassification and the Dividend. As of
the Record Date, the Company has reserved under the 1992 Plan 5,000,000 shares
of Existing Common Stock, of which 556,850 have been issued pursuant to option
exercises, 3,211,150 underlie outstanding options, and 1,232,000 remain
available for future grants.
SUMMARY OF THE 1997 CLASS A COMMON STOCK OPTION PLAN
GENERAL. The purpose of the Plan is to attract and retain the best available
personnel for positions of substantial responsibility with the Company, to
provide additional incentive to the employees and consultants of the Company
and to promote the success of the Company's business. Options granted under
the Plan may be either "incentive stock options," as defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), or nonstatutory
stock options.
ADMINISTRATION. The Plan may be administered by the Board of Directors or a
committee of the Board (the "Administrator"), which Administrator shall, in
the case of options intended to qualify as "performance-based compensation"
within the meaning of Section 162(m) of the Code, consist of two or more
"outside directors" within the meaning of Section 162(m) of the Code. The
Administrator has the power to determine the terms of the options granted,
including the exercise price, the number of shares subject to each option, the
exercisability thereof, and the form of consideration payable upon such
exercise. In addition, the Administrator has the authority to amend, suspend
or terminate the Plan, provided that no such action may affect any share of
the Company's Class A Common Stock previously issued and sold or any option
previously granted under the Plan.
ELIGIBILITY; LIMITATIONS. Nonstatutory stock options may be granted under
the Plan to directors, employees and consultants of the Company and any parent
or subsidiary of the Company. Incentive stock options may be granted only to
employees. The Administrator, in its discretion, selects the directors,
employees and consultants to whom options may be granted, the time or times at
which such options shall be granted, and the number of shares subject to each
such grant.
Section 162(m) of the Code places limits on the deductibility for federal
income tax purposes of compensation paid to certain executive officers of the
Company. In order to preserve the Company's ability to deduct the compensation
income associated with options granted to such persons, the Plan provides that
no employee may be granted, in any fiscal year of the Company, options and
stock purchase rights to purchase more than 900,000 shares of Class A Common
Stock (as appropriately adjusted for changes in the capitalization of the
Company).
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TERMS AND CONDITIONS OF OPTIONS. Each option is evidenced by a stock option
agreement between the Company and the optionee, and is subject to the
following additional terms and conditions:
(a) EXERCISE PRICE. The Administrator determines the exercise price of
options at the time the options are granted. The exercise price of an
incentive stock option may not be less than 100% of the fair market value
of the Class A Common Stock on the date such option is granted; provided,
however, the exercise price of an incentive stock option granted to a 10%
stockholder may not be less than 110% of the fair market value of the Class
A Common Stock on the date such option is granted. The fair market value of
the Class A Common Stock is generally determined with reference to the
closing sale price for the Class A Common Stock (or the closing bid if no
sales were reported) on the last market trading day prior to the date the
option is granted.
(b) EXERCISE OF OPTION; FORM OF CONSIDERATION. The Administrator
determines when options become exercisable, and may in its discretion,
accelerate the vesting of any outstanding option. Stock options granted
under the Plan generally vest over four (4) years and become exercisable
over five (5) years. The means of payment for shares issued upon exercise
of an option is specified in each option agreement. The Plan permits
payment to be made by cash, check, promissory note, other shares of Class A
Common Stock of the Company (with some restrictions), cashless exercises, a
reduction in the amount of any Company liability to the optionee, any other
form of consideration permitted by applicable law, or any combination
thereof.
(c) TERM OF OPTION. The term of an incentive stock option may be no more
than ten (10) years from the date of grant; provided that in the case of an
incentive stock option granted to a 10% stockholder, the term of the option
may be no more than five (5) years from the date of grant. No option may be
exercised after the expiration of its term.
(d) TERMINATION OF EMPLOYMENT. If an optionee's employment or consulting
relationship terminates for any reason (other than death or disability),
then all options held by the optionee under the Plan expire on the earlier
of (i) the date set forth in his or her notice of grant or, in the absence
thereof, three (3) months after the date of termination or (ii) the
expiration date of such option. To the extent the option is exercisable at
the time of such termination, the optionee may exercise all or part of his
or her option at any time before termination.
(e) DEATH OR DISABILITY. If an optionee's employment or consulting
relationship terminates as a result of death or disability, then all
options held by such optionee under the Plan expire on the earlier of (i)
the date set forth in his or her notice of grant or, in the absence
thereof, 12 months from the date of such termination or (ii) the expiration
date of such option. The optionee (or the optionee's estate or the person
who acquires the right to exercise the option by bequest or inheritance),
may exercise all or part of the option at any time before such expiration
to the extent that the option was exercisable at the time of such
termination.
(f) NONTRANSFERABILITY OF OPTIONS. Unless determined by the
Administrator, options granted under the Plan are not transferable other
than by will or the laws of descent and distribution, and may be exercised
during the optionee's lifetime only by the optionee.
(g) OTHER PROVISIONS. The stock option agreement may contain other terms,
provisions and conditions not inconsistent with the Plan as may be
determined by the Administrator.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event that the Class A
Common Stock of the Company changes by reason of any stock split, reverse
stock split, stock dividend, combination, reclassification or other similar
change in the capital structure of the Company effected without the receipt of
consideration, appropriate adjustments shall be made in the number and class
of shares of stock subject to the Plan, the number and class of shares of
stock subject to any option outstanding under the Plan, and the exercise price
of any such outstanding option.
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In the event of a liquidation or dissolution, any unexercised options will
terminate. The Administrator may, in its discretion provide that each optionee
shall have the right to exercise all of the optionee's options, including
those not otherwise exercisable, until the date ten (10) days prior to the
consummation of the liquidation or dissolution, or that any rights of
repurchase in the Company with respect to shares purchased upon exercise of an
option shall lapse provided the proposed dissolution or liquidation takes
place at the time and in the manner anticipated.
In connection with any merger, consolidation, acquisition of assets or like
occurrence involving the Company, each outstanding option shall be assumed or
an equivalent option substituted by the successor corporation. If the
successor corporation refuses to assume the options or to substitute
substantially equivalent options, the optionee shall have the vested right to
exercise the option as to all the optioned stock, including shares not
otherwise vested or exercisable. In such event, the Administrator shall notify
the optionee that the option is fully exercisable for fifteen (15) days from
the date of such notice and that the option terminates upon expiration of such
period.
AMENDMENT AND TERMINATION OF THE PLAN. The Board may amend, alter, suspend
or terminate the Plan, or any part thereof, at any time and for any reason.
However, the Company shall obtain stockholder approval for any amendment to
the Plan to the extent necessary to comply with Rule 16b-3, Section 162(m) and
Section 422 of the Code, or any similar rule or statute. No such action by the
Board or stockholders may alter or impair any option previously granted under
the Plan without the written consent of the optionee. Unless terminated
earlier, the Plan shall terminate ten years from the date of its approval by
the stockholders or the Board, whichever is earlier.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise may subject the optionee to the
alternative minimum tax. Upon a disposition of the shares more than two years
after grant of the option and one year after exercise of the option, any gain
or loss is treated as long-term capital gain or loss. If these holding periods
are not satisfied, the optionee recognizes ordinary income at the time of
disposition equal to the difference between the exercise price and the lower
of (i) the fair market value of the shares at the date of the option exercise
or (ii) the sale price of the shares. Any gain or loss recognized on such a
premature disposition of the shares in excess of the amount treated as
ordinary income is treated as long-term or short-term capital gain or loss,
depending on the holding period. A different rule for measuring ordinary
income upon such a premature disposition may apply if the optionee is also an
officer, director, or 10% stockholder of the Company. The Company is entitled
to a deduction in the same amount as the ordinary income recognized by the
optionee.
NONSTATUTORY STOCK OPTIONS. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price.
Any taxable income recognized in connection with an option exercise by an
employee of the Company is subject to tax withholding by the Company. The
Company is entitled to a deduction in the same amount as the ordinary income
recognized by the optionee. Upon a disposition of such shares by the optionee,
any difference between the sale price and the optionee's exercise price, to
the extent not recognized as taxable income as provided above, is treated as
long-term or short-term capital gain or loss, depending on the holding period.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON OPTIONEES, AND THE COMPANY WITH RESPECT TO THE GRANT AND EXERCISE OF
OPTIONS UNDER THE PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT
DISCUSS THE TAX CONSEQUENCES OF THE EMPLOYEE'S OR CONSULTANT'S DEATH OR THE
PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN
COUNTRY IN WHICH THE EMPLOYEE OR CONSULTANT MAY RESIDE.
15
<PAGE>
REQUIRED VOTE
At the Special Meeting, the stockholders are being asked to approve the
adoption of the Plan. The affirmative vote of the holders of a majority of the
votes cast at the Special Meeting will be required to approve the adoption of
the Plan. Abstentions and broker non-votes will be counted for the purpose of
establishing a quorum. Abstentions will have the same effect as a vote against
the proposal, and broker non-votes will have no effect on the outcome of the
proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL
OF THE PLAN. In considering the recommendation of the Board of Directors, it
should be noted that directors are eligible for stock option grants under the
Plan, and therefor have a potential conflict of interest in their
recommendation because they could benefit personally from its adoption.
16
<PAGE>
OTHER INFORMATION REGARDING THE COMPANY
SECURITY OWNERSHIP
The following table sets forth the beneficial ownership of the Company's
Common Stock as of the Record Date (i) by each of the Company's Named
Executive Officers (as that term is defined below), (ii) by each director,
(iii) by all current directors and executive officers as a group and (iv) by
all persons known to the Company to be the beneficial owners of more than 5%
of the Company's Common Stock:
<TABLE>
<CAPTION>
NUMBER APPROXIMATE PERCENTAGE
NAME OF PERSON OR ENTITY OF SHARES OF TOTAL VOTING POWER
------------------------ ---------- ----------------------
<S> <C> <C>
Vinod Gupta(1)............................... 9,155,654 37.3%
5711 South 86th Circle
Omaha, Nebraska 68127
FRM Corp..................................... 2,448,050 10%
82 Devonshire Street
Boston, MA 02109-3614
Paul A. Goldner(2)........................... 1,426,316 5.8%
Jon D. Hoffmaster(3)......................... 471,000 1.9%
Jon H. Wellman(4)............................ 57,500 *
Gautam Gupta(5).............................. 63,535 *
Elliot S. Kaplan(6).......................... 91,840 *
Harold W. Andersen........................... 17,300 *
George Kubat(7).............................. 28,300 *
George Haddix(8)............................. 22,500 *
Ed Mallin(9)................................. 28,750 *
Bill Kerry(10)............................... 19,759 *
Monica Messer(11)............................ 160,934 *
All directors and executive officers as a
group (20 persons) (12) .................... 11,783,013 47%
</TABLE>
- --------
* Represents less than 1% of the outstanding shares of Common Stock
(1) Excludes 360,430 shares held in irrevocable trusts for the benefit of Mr.
Gupta's children for which Mr. Gupta is not trustee and in which he has
no beneficial interest. Includes 120,000 shares subject to options
exercisable on or before October 3, 1997.
(2) Excludes 545,717 shares held in irrevocable trusts for the benefit of Mr.
Goldner's children for which Mr. Goldner is not a trustee and in which he
has no beneficial interest.
(3) Includes 81,000 shares subject to options exercisable on or before
October 3, 1997.
(4) Includes 57,500 shares subject to options exercisable on or before
October 3, 1997.
(5) Includes 6,000 shares subject to options exercisable on or before October
3, 1997.
(6) Includes 6,000 shares subject to options exercisable on or before October
3, 1997.
(7) Includes 21,000 shares subject to options exercisable on or before
October 3, 1997.
(8) Includes 21,000 shares subject to options exercisable on or before
October 3, 1997.
(9) Includes 25,750 shares subject to options exercisable on or before
October 3, 1997.
(10) Includes 9,000 shares subject to options exercisable on or before October
3, 1997.
(11) Includes 11,250 shares subject to options exercisable on or before
October 3, 1997.
(12) Includes 487,400 shares subject to options exercisable on or before
October 3, 1997.
17
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth the compensation
paid by the Company for each of the three previous years for the period ending
December 31 to the Chief Executive Officer and each of the other four most
highly compensated executive officers of the Company (the "Named Executive
Officers"):
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS OPTIONS(#)
--------------------------- ---- --------- -------- ------------
<S> <C> <C> <C> <C>
Vinod Gupta.............................. 1996 $ 48,000(1) $ -- 900,000
Chairman and Chief Executive Officer 1995 $100,000(1) $ -- --
1994 $120,000(1) $ -- --
Jack Betts............................... 1996 $200,000 $ -- --
Senior Vice President 1995 $174,915 $ -- --
1994 $118,972 $ -- --
Bill Kerrey.............................. 1996 $157,500 $ 79,048 --
Senior Vice President 1995 $118,500 $172,888 18,000
1994 $107,000 $ 20,000 7,500
Edward Mallin............................ 1996 $208,000 $ 11,325 --
Senior Vice President 1995 $194,625 $ 31,270 9,000
1994 $185,000 $ 37,600 15,000
Monica Messer............................ 1996 $208,000 $ -- --
Senor Vice President 1995 $182,875 $ -- --
1994 $173,221 $ 25,000 15,000
</TABLE>
- --------
(1) Excludes $280,000, $ 148,000 and $48,000 paid by the Company in 1994, 1995
and 1996, respectively, to Annapurna Corporation for consulting services
and related expenses reimbursed in connection with the Company's
acquisition related activities. Annapurna Corporation is 100% owned by
Vinod Gupta. Vinod Gupta has agreed not to be eligible for cash bonuses.
18
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR. The following table sets forth each grant
of stock options made during the year ended December 31, 1996 to each of the
Named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(1)
------------------------------------------- ---------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
GRANTED FISCAL YEAR ($/SH) DATE 5% 10%
---------- ------------ -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Vinod Gupta(2).......... 600,000 31.0% $17.05 3/15/01 $1,639,419 $4,747,743
Vinod Gupta(3).......... 300,000 15.5% $17.05 3/15/02 $1,116,445 $3,122,759
Jack Betts.............. -- -- -- -- -- --
Bill Kerry.............. -- -- -- -- -- --
Edward Mallin........... -- -- -- -- -- --
Monica Messer........... -- -- -- -- -- --
</TABLE>
- --------
(1) Potential realizable value is based on an assumption that the stock price
appreciates at the annual rate shown (compounded annually) from the date
of grant until the end of the option term. These numbers are calculated
based on the requirements promulgated by the Securities and Exchange
Commission and do not reflect the Company's estimate of future stock price
growth.
(2) Option indicated vests and becomes exercisable in five equal annual
installments on the first five anniversaries of the date of grant subject
to the optionee continuing to be employed by the Company. The per-share
exercise price of this option is equal to 110% of the closing price of the
Company's Common Stock on the March 8, 1996 date of grant.
(3) Subject to the optionee continuing to be employed by the Company, the
option indicated becomes fully vested and exercisable on the date six
years after the date of grant, provided that such option shall become
earlier vested and exercisable as to 20% of the underlying Common Stock on
each of the first five anniversaries of the date of grant if the Company
meets certain performance objectives. The per-share exercise price of this
option is equal to 110% of the closing price of the Company's Common Stock
on the March 8, 1996 date of grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE(1) OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED VALUE YEAR-END(#): YEAR-END($):
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Vinod Gupta............. -- -- 0/900,000 $0/$4,680,000
Jack Betts.............. -- -- 0/0 $0/$0
Bill Kerry.............. -- -- 18,750/18,750 $222,690/$136,680
Edward Mallin........... 4,800 $51,600 22,200/18,000 $291,863/$187,988
Monica Messer........... -- -- 7,500/7,500 $101,850/$101,850
</TABLE>
- --------
(1) Market value of underlying securities at year-end minus the exercise
19
<PAGE>
INTERESTS OF CERTAIN PERSONS
Vinod Gupta, Chairman of the Board and Chief Executive Officer of the
Company, and members of his family held approximately 38.5% of the outstanding
Common Stock of the Company, and options to purchase an additional 3.6% of the
Company's Common Stock as of the Record Date. Approval and implementation of
the proposals presented at the Special Meeting will allow Mr. Gupta to dispose
of significant amounts of the Company's capital stock while maintaining
essentially the same voting strength as prior to the adoption and
implementation of these proposals.
ACCOUNTANTS REPRESENTATIVE
A representative of Coopers & Lybrand is expected to be available at the
Special Meeting to make a statement if such representative desires to do so
and to respond to appropriate questions.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Board of Directors may recommend.
BY ORDER OF THE BOARD OF DIRECTORS
Omaha, Nebraska
September 5, 1997
20
<PAGE>
ANNEX A
CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INCORPORATION
OF AMERICAN BUSINESS INFORMATION, INC.
American Business Information, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Company"), hereby certifies as
follows:
FIRST: The Board of Directors of the Company, at a meeting duly called and
held in accordance with the Bylaws of the Company and Section 141 of the
Delaware General Corporation Law, as amended, duly adopted resolutions
proposing and declaring advisable the amendment to the Certificate of
Incorporation of the Company as set forth below.
SECOND: That Article IV of the Company's Certificate of Incorporation, as
amended to date, is hereby amended in its entirety to read as follows:
"Article IV. AUTHORIZED STOCK.
A. The total number of shares of all classes of capital stock which the
corporation shall have authority to issue is three hundred million
(300,000,000) shares which shall be divided into three classes as follows:
(i) Two Hundred Twenty Million (220,000,000) shares of Class A Common
Stock of the par value of one fourth of one cent ($0.0025) per share;
(ii) Seventy-Five million (75,000,000) shares of Class B Common Stock of
the par value of one fourth of one cent ($0.0025) per share; and
(iii) Five Million (5,000,000) shares of Preferred Stock with a par value
of one fourth of one cent ($0.0025) per share.
Upon this Certificate of Amendment of Certificate of Incorporation becoming
effective pursuant to the General Corporation Law of the State of Delaware
(the "Effective Time"), and without any further action on the part of the
Corporation or its stockholders, each share of the Corporation's Common Stock,
one fourth of one cent ($0.0025) par value, then issued (including shares held
in the treasury of the Corporation), shall be automatically reclassified,
changed and converted into one (1) fully paid and non-assessable share of
Class B Common Stock, one fourth of one cent ($0.0025) par value. Any stock
certificate which, immediately prior to the Effective Time, represents shares
of Common Stock, one fourth of one cent ($0.0025) par value, will, from and
after the Effective Time, automatically and without the necessity of
presenting the same for exchange, represent that number of shares of Class B
Common Stock equal to the number of shares of Common Stock represented by such
certificate prior to the Effective Time. As soon as practicable after the
Effective Time, the corporation's transfer agent shall mail a transmittal
letter to each record holder who then holds shares of Class B Common Stock,
informing such persons of this reclassification with appropriate instructions
on exchanging certificates representing such shares and other relevant
matters. The Class A Common Stock and Class B Common Stock are hereinafter
collectively referred to as the "Common Stock."
The rights, preferences, privileges, restrictions and limitations pertaining
to the Common Stock, subject to applicable law, are set forth in Section B of
this Article IV. The rights, preferences, privileges, restrictions and
limitations pertaining to the Preferred Stock, subject to applicable law, are
set forth in Article V.
A-1
<PAGE>
B. COMMON STOCK: Except as set forth expressly in this Section B and to the
fullest extent not otherwise required by applicable law, the Class A Common
Stock and Class B Common Stock shall be identical in every respect.
(i) DIVIDENDS: Subject to all of the rights of any Preferred Stock as to
dividends, holders of shares of Class A Common Stock shall be entitled to
receive, when and as declared by the Board of Directors, out of funds
legally available therefor, dividends at the rate per share of $0.02, per
annum, as adjusted for stock splits, stock dividends, recapitalizations,
and similar events, payable in preference and priority to any payment of
any dividend on the Class B Common Stock of the Corporation (such
preferential dividends, the "Class A Preferential Dividends"). The Class A
Preferential Dividends shall not be cumulative, and no right to such
dividends shall accrue to holders of Class A Common Stock unless declared
by the Board of Directors. No dividends or other distributions shall be
made with respect to the Class B Common Stock in any fiscal year, other
than dividends payable solely in capital stock, until (a) the Class A
Preferential Dividends have been paid to or declared and set apart upon all
shares of Class A Common Stock during that fiscal year, and (b) such
dividend is declared by the Board of Directors. All dividends other than
the Class A Preferential Dividends shall be paid, when, as and if declared
by the Board of Directors, at an equal per-share rate on all then-
outstanding shares of Class A Common Stock and Class B Common Stock.
(ii) VOTING: To the fullest extent not otherwise required by law, the
holder of each share of Class A Common Stock issued and outstanding shall
have one vote with respect to such share and the holder of each share of
Class B Common Stock shall have ten (10) votes with respect to such share,
such votes to be counted together with all other shares of stock of the
Corporation having general voting power and not separately as a class.
Holders of Common Stock shall be entitled to notice of any shareholders'
meeting in accordance with the Bylaws of the Corporation. Pursuant to
Section 242(c) of the General Corporation Law of Delaware, the number of
authorized shares of Class A Common Stock or Class B Common Stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the
stock of the corporation entitled to vote, voting together as a single
class.
(iii) ALLOCATIONS OF PROCEEDS UPON LIQUIDATION: In the event of any
liquidation, dissolution or winding up of the Corporation (a "Liquidation
Event") the assets or funds of the Corporation legally available for
distribution to its stockholders by reason of their ownership of the stock
of the Corporation shall, subject to all of the rights of any Preferred
Stock to receive assets of the Corporation upon a Liquidation Event, be
distributed as follows: first, the holders of Common Stock shall be
entitled to receive for each outstanding share of Common Stock then held by
them an amount equal to all declared but unpaid dividends on such share;
second, all remaining assets and funds of the Corporation legally available
for distribution to stockholders by reason of their ownership of stock of
the Corporation shall be distributed ratably among the holders of Common
Stock in proportion to the number of shares of Common Stock held by them.
For purposes of this paragraph, a merger or consolidation of the
Corporation with or into any other corporation or corporations, or a sale
of all or substantially all of the assets of the Corporation, shall be
treated as a liquidation, dissolution or winding up, unless the
stockholders of the Corporation immediately prior to such transaction hold
at least 50% of the outstanding voting equity securities of the surviving
corporation in such merger, consolidation or sale of assets reorganization.
C. ISSUANCES AND REPURCHASES OF COMMON STOCK: The Board of Directors shall
have the power to issue and sell all or any part of any class of stock herein
or hereafter authorized to such persons, firms, associations or corporations,
and for such consideration as the Board of Directors shall from time to time,
in its discretion, determine, whether or not greater consideration could be
received upon the issue or sale of the same number of shares of another class,
and as otherwise permitted by law. In addition, the Board of Directors shall
have the power to purchase any class of stock herein or hereafter authorized
from such persons, firms, associations or corporations, and for such
consideration as the Board of Directors shall from time to time, in its
discretion, determine, whether or not less consideration could be paid upon
the purchase of the same number of shares of another class, and as otherwise
permitted by law."
A-2
<PAGE>
THIRD: The undersigned, Vinod Gupta and Steven Purcell further verify that:
A. This Amendment to Certificate of Incorporation has been duly adopted
in accordance with Section 242 of the Delaware General Corporation Law, as
amended.
B. Pursuant to a duly adopted resolution of the Board of Directors of the
Company, a special meeting of the stockholders of the Company was duly
called and held, upon notice in accordance with Section 222 of the Delaware
General Corporation Law, as amended, at which meeting holders of at least
sixty percent of the outstanding shares of Common Stock of the Company,
constituting the only outstanding securities of the Company entitled to
vote in respect of the amendment to the Certificate of Incorporation of the
Company as set forth above, duly approved said amendment.
THE UNDERSIGNED, being the Chief Executive Officer and Secretary,
respectively, of American Business Information, Inc., do make this Amendment
to Certificate of Incorporation, hereby declaring and certifying that this is
an act and deed of the Company and that the facts herein stated are true, and
accordingly have hereunto set their hands this day of , 1997.
-------------------------------------
Vinod Gupta,
Chief Executive Officer
-------------------------------------
Steven Purcell,
Secretary
A-3
<PAGE>
ANNEX B
AMERICAN BUSINESS INFORMATION, INC.
1997 CLASS A COMMON STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this Stock Option Plan are:
. to attract and retain the best available personnel for positions of
substantial responsibility,
. to provide additional incentive to Employees, Directors and Consultants,
and
. to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees as shall be
administering the Plan, in accordance with Section 4 of the Plan.
(b) "APPLICABLE LAWS" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or
quotation system on which the Common Stock is listed or quoted and the
applicable laws of any foreign country or jurisdiction where Options are,
or will be, granted under the Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means a committee of Directors appointed by the Board in
accordance with Section 4 of the Plan.
(f) "COMMON STOCK" means the Class A common stock of the Company.
(g) "COMPANY" means American Business Information, Inc., a Delaware
corporation.
(h) "CONSULTANT" means any person, including an advisor, engaged by the
Company or a Parent or Subsidiary to render services to such entity.
(i) "DIRECTOR" means a member of the Board.
(j) "DISABILITY" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(k) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any
leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company, its Parent, any
Subsidiary, or any successor. For purposes of Incentive Stock Options, no
such leave may exceed ninety days, unless reemployment upon expiration of
such leave is guaranteed by statute or contract. If reemployment upon
expiration of a leave of absence approved by the Company is not so
guaranteed, on the 181st day of such leave any Incentive Stock Option held
by the Optionee shall cease to be treated as an Incentive Stock Option and
shall be treated for tax purposes as a Nonstatutory Stock Option. Neither
service as a Director nor payment of a director's fee by the Company shall
be sufficient to constitute "employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
B-1
<PAGE>
(m) "FAIR MARKET VALUE" means, as of any date, the value of Common Stock
determined as follows:
(i) 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 of The Nasdaq Stock
Market, its Fair Market Value shall be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market
Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading
day prior to the day of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
(o) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(p) "NOTICE OF GRANT" means a written or electronic notice evidencing
certain terms and conditions of an individual Option grant. The Notice of
Grant is part of the Option Agreement.
(q) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "OPTION" means a stock option granted pursuant to the Plan.
(s) "OPTION AGREEMENT" means an agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant.
The Option Agreement is subject to the terms and conditions of the Plan.
(t) "OPTION EXCHANGE PROGRAM" means a program whereby outstanding Options
are surrendered in exchange for Options with a lower exercise price.
(u) "OPTIONED STOCK" means the Common Stock subject to an Option.
(v) "OPTIONEE" means the holder of an outstanding Option granted under
the Plan.
(w) "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(x) "PLAN" means this 1997 Class A Common Stock Option Plan.
(y) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to
the Plan.
(z) "SECTION 16(b)" means Section 16(b) of the Exchange Act.
(aa) "SERVICE PROVIDER" means an Employee, Director or Consultant.
(bb) "SHARE" means a share of the Common Stock, as adjusted in accordance
with Section 12 of the Plan.
(cc) "SUBSIDIARY" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
B-2
<PAGE>
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 12 of the
Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is two million (2,000,000) Shares. The Shares may be authorized,
but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been exercised
in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); provided,
however, that Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE.
(i) MULTIPLE ADMINISTRATIVE BODIES. The Plan may be administered by
different Committees with respect to different groups of Service
Providers.
(ii) SECTION 162(m). To the extent that the Administrator determines
it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m)
of the Code, the Plan shall be administered by a Committee of two or
more "outside directors" within the meaning of Section 162(m) of the
Code.
(iii) RULE 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption
under Rule 16b-3.
(iv) OTHER ADMINISTRATION. Other than as provided above, the Plan
shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the Plan,
and in the case of a Committee, subject to the specific duties delegated by
the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options may be granted
hereunder;
(iii) to determine the number of shares of Common Stock to be covered
by each Option granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any Option granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the
time or times when Options may be exercised (which may be based on
performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or
the shares of Common Stock relating thereto, based in each case on such
factors as the Administrator, in its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option to the then current
Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was
granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations relating
to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
B-3
<PAGE>
(x) to modify or amend each Option (subject to Section 14(c) of the
Plan), including the discretionary authority to extend the post-
termination exercisability period of Options longer than is otherwise
provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon
exercise of an Option that number of Shares having a Fair Market Value
equal to the amount required to be withheld. The Fair Market Value of
the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined. All elections by an
Optionee to have Shares withheld for this purpose shall be made in such
form and under such conditions as the Administrator may deem necessary
or advisable;
(xii) to authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Option previously granted
by the Administrator;
(xiii) to make all other determinations deemed necessary or advisable
for administering the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION. The Administrator's decisions,
determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.
5. ELIGIBILITY. Nonstatutory Stock Options may be granted to Service
Providers. Incentive Stock Options may be granted only to Employees.
6. LIMITATIONS.
(a) Each Option shall be designated in the Option Agreement as either an
Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair
Market Value of the Shares with respect to which Incentive Stock Options
are exercisable for the first time by the Optionee during any calendar year
(under all plans of the Company and any Parent or Subsidiary) exceeds
$100,000, such Options shall be treated as Nonstatutory Stock Options. For
purposes of this Section 6(a), Incentive Stock Options shall be taken into
account in the order in which they were granted. The Fair Market Value of
the Shares shall be determined as of the time the Option with respect to
such Shares is granted.
(b) Neither the Plan nor any Option shall confer upon an Optionee any
right with respect to continuing the Optionee's relationship as a Service
Provider with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such relationship at
any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year of the
Company, Options to purchase more than nine hundred thousand (900,000)
Shares.
(ii) The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company's capitalization as described
in Section 12.
(iii) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a
transaction described in Section 12), the cancelled Option will be
counted against the limits set forth in subsections (i) and (ii) above.
For this purpose, if the exercise price of an Option is reduced, the
transaction will be treated as a cancellation of the Option and the
grant of a new Option.
7. TERM OF PLAN. Subject to Section 18 of the Plan, the Plan shall become
effective upon its adoption by the Board. It shall continue in effect for a
term of ten (10) years unless terminated earlier under Section 14 of the Plan.
8. TERM OF OPTION. The term of each Option shall be stated in the Option
Agreement. In the case of an Incentive Stock Option, the term shall be ten
(10) years from the date of grant or such shorter term as may be
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provided in the Option Agreement. Moreover, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option shall be five (5) years
from the date of grant or such shorter term as may be provided in the Option
Agreement.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive Stock
Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per Share exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of
grant.
(B) granted to any Employee other than an Employee described in
paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of
a Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per
Share exercise price shall be no less than 100% of the Fair Market
Value per Share on the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with a
per Share exercise price of less than 100% of the Fair Market Value per
Share on the date of grant pursuant to a merger or other corporate
transaction.
(b) WAITING PERIOD AND EXERCISE DATES. At the time an Option is granted,
the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before
the Option may be exercised.
(c) FORM OF CONSIDERATION. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the
method of payment. In the case of an Incentive Stock Option, the
Administrator shall determine the acceptable form of consideration at the
time of grant. Such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than
six months on the date of surrender, and (B) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised;
(v) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vii) any combination of the foregoing methods of payment; or
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(viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option granted
hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and
set forth in the Option Agreement. Unless the Administrator provides
otherwise, vesting of Options granted hereunder shall be tolled during any
unpaid leave of absence. An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed exercised when the Company receives: (i) written
or electronic notice of exercise (in accordance with the Option Agreement)
from the person entitled to exercise the Option, and (ii) full payment for the
Shares with respect to which the Option is exercised. Full payment may consist
of any consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the Shares
are issued (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company), no right to vote or
receive dividends or any other rights as a stockholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except
as provided in Section 12 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
(b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER. If an Optionee
ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option within such period
of time as is specified in the Option Agreement to the extent that the
Option is vested on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for three (3) months following the
Optionee's termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified by
the Administrator, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(c) DISABILITY OF OPTIONEE. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may
exercise his or her Option within such period of time as is specified in
the Option Agreement to the extent the Option is vested on the date of
termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement). In the absence of a specified
time in the Option Agreement, the Option shall remain exercisable for
twelve (12) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the
Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified herein, the Option shall terminate, and
the Shares covered by such Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. If an Optionee dies while a Service Provider, the
Option may be exercised within such period of time as is specified in the
Option Agreement (but in no event later than the expiration of the term of
such Option as set forth in the Notice of Grant), by the Optionee's estate
or by a person who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Option is vested on the date
of death. In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the
Optionee's termination. If, at the time of death, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the
B-6
<PAGE>
Option shall immediately revert to the Plan. The Option may be exercised by
the executor or administrator of the Optionee's estate or, if none, by the
person(s) entitled to exercise the Option under the Optionee's will or the
laws of descent or distribution. If the Option is not so exercised within
the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(e) BUYOUT PROVISIONS. The Administrator may at any time offer to buy out
for a payment in cash or Shares an Option previously granted based on such
terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
11. NON-TRANSFERABILITY OF OPTIONS. Unless determined otherwise by the
Administrator, an Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions
as the Administrator deems appropriate.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR ASSET
SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered
by each outstanding Option, and the number of shares of Common Stock which
have been authorized for issuance under the Plan but as to which no Options
have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of the Common Stock,
or any other increase or decrease in the number of issued shares of Common
Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall
not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board, whose determination in that
respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution
or liquidation of the Company, the Administrator shall notify each Optionee
as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an
Optionee to have the right to exercise his or her Option until ten (10)
days prior to such transaction as to all of the Optioned Stock covered
thereby, including Shares as to which the Option would not otherwise be
exercisable. In addition, the Administrator may provide that any Company
repurchase option applicable to any Shares purchased upon exercise of an
Option shall lapse as to all such Shares, provided the proposed dissolution
or liquidation takes place at the time and in the manner contemplated. To
the extent it has not been previously exercised, an Option will terminate
immediately prior to the consummation of such proposed action.
(c) MERGER OR ASSET SALE. In the event of a merger of the Company with or
into another corporation, or the sale of substantially all of the assets of
the Company, each outstanding Option shall be assumed or an equivalent
option substituted by the successor corporation or a Parent or Subsidiary
of the successor corporation. In the event that the successor corporation
refuses to assume or substitute for the Option, the Optionee shall fully
vest in and have the right to exercise the Option as to all of the Optioned
Stock, including Shares as to which it would not otherwise be vested or
exercisable. If an Option becomes fully vested and exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that
the Option shall be fully vested and exercisable for a period of fifteen
(15) days from the date of such notice, and the Option shall terminate upon
the expiration of such period. For the purposes of this paragraph, the
Option shall be considered assumed if, following the merger or sale of
assets, the option or right confers the right to purchase or receive, for
each Share of Optioned Stock subject to the Option immediately prior to the
merger or sale of
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<PAGE>
assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common
Stock for each Share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor
corporation, provide for the consideration to be received upon the exercise
of the Option, for each Share of Optioned Stock subject to the Option, to
be solely common stock of the successor corporation or its Parent equal in
fair market value to the per share consideration received by holders of
Common Stock in the merger or sale of assets.
13. DATE OF GRANT. The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option or, on such other later date as is determined by the
Administrator. Notice of the determination shall be provided to each Optionee
within a reasonable time after the date of such grant.
14. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend, alter,
suspend or terminate the Plan.
(b) STOCKHOLDER APPROVAL. The Company shall obtain stockholder approval
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.
(c) EFFECT OF AMENDMENT OR TERMINATION. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the
Optionee and the Company. Termination of the Plan shall not affect the
Administrator's ability to exercise the powers granted to it hereunder with
respect to Options granted under the Plan prior to the date of such
termination.
15. CONDITIONS UPON ISSUANCE OF SHARES.
(a) LEGAL COMPLIANCE. Shares shall not be issued pursuant to the exercise
of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be
further subject to the approval of counsel for the Company with respect to
such compliance.
(b) INVESTMENT REPRESENTATIONS. As a condition to the exercise of an
Option, the Company may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are
being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the
Company, such a representation is required.
16. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
17. RESERVATION OF SHARES. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. STOCKHOLDER APPROVAL. The Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan
is adopted. Such stockholder approval shall be obtained in the manner and to
the degree required under Applicable Laws.
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<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF
AMERICAN BUSINESS INFORMATION, INC.
SPECIAL MEETING OF STOCKHOLDERS -- SEPTEMBER ___, 1997
The undersigned stockholder of American Business Information, Inc., a
Delaware corporation (the "Company"), hereby appoints JON WELLMAN with full
power of substitution, as the proxy of the undersigned to vote and otherwise
represent all of the shares registered in the name of the undersigned at the
Special Meeting of Stockholders of the Company to be held on September __, 1997
at 10:00 a.m. local time at the Company's principal executive offices located at
5711 South 86th Circle, Omaha, Nebraska 98127 and at any adjournments thereof,
on the following matters and in the following manner:
1. PROPOSAL TO AMEND ARTICLE IV OF THE COMPANY'S CERTIFICATE OF
INCORPORATION, AS AMENDED, TO (I) RECLASSIFY THE EXISTING COMMON STOCK OF
THE COMPANY AS CLASS B COMMON STOCK, WHICH IS IDENTICAL TO THE EXISTING
COMMON STOCK EXCEPT THAT EACH SHARE WILL ENTITLE ITS HOLDER TO TEN VOTES,
(II) AUTHORIZE A NEW CLASS OF COMMON STOCK, DESIGNATED AS CLASS A COMMON
STOCK, WITH A PREFERENTIAL DIVIDEND RIGHT OVER THE CLASS B COMMON STOCK
AND ONE VOTE PER SHARE, (III) INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK FROM 75,000,000 TO 295,000,000, CONSISTING OF 220,000,000
SHARES OF CLASS A COMMON STOCK AND 75,000,000 SHARES OF CLASS B COMMON
STOCK, AND (IV) ESTABLISH THE RIGHTS, POWERS AND LIMITATIONS OF THE CLASS
A COMMON STOCK AND THE CLASS B COMMON STOCK.
[_] FOR [_] AGAINST [_] ABSTAIN
2. PROPOSAL TO APPROVE THE ADOPTION OF THE COMPANY'S 1997 CLASS A COMMON
STOCK PLAN, INCLUDING THE RESERVATION THEREUNDER OF 2,000,000 SHARES OF
THE COMPANY'S CLASS A COMMON STOCK, CONTINGENT UPON STOCKHOLDER APPROVAL
OF PROPOSAL NO. 1.
[_] FOR [_] AGAINST [_] ABSTAIN
and, in the discretion of the proxy holder, to vote or otherwise represent the
shares on any other business which may properly come before the meeting or any
adjournments thereof.
(Continued, and to be signed on reverse side)
<PAGE>
(Continued from other side)
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATION MADE. IF NO SPECIFICATION IS MADE, THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED FOR EACH OF THE ABOVE PROPOSALS, AND FOR SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING AS THE PROXY HOLDER DEEMS ADVISABLE.
_________________________________________
Signature Date
_________________________________________
Signature Date
Sign exactly as your name(s) appears on
your stock certificate. A corporation is
requested to sign its name by its
President or other authorized officer,
with the office held designated.
Executors, administrators, trustees,
etc., are requested to so indicate when
signing. If stock is registered in two
names, both should sign.
----
TO ASSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, PLEASE MARK, SIGN AND DATE
THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
