<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/x/ Definitive Proxy Statement
/x/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Infonautics, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Inconautics, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
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.
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
INFONAUTICS, INC.
900 West Valley Road, Suite 1000
Wayne, PA 19087
--------------------------------
NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
MAY 29, 1997
--------------------------------
TO THE SHAREHOLDERS OF
INFONAUTICS, INC.:
Notice is hereby given that the 1997 annual meeting of shareholders (the
"Annual Meeting") of Infonautics, Inc. (the "Company") will be held at the
Valley Forge Marriott Suites, 888 Chesterbrook Boulevard, Wayne, Pennsylvania on
May 29, 1997, at 10:00 a.m., local time, for the following purposes:
1. To elect seven directors, each for a one-year term and until the
election and qualification of his successor;
2. To adopt and approve the Company's Amended and Restated 1996 Equity
Compensation Plan; and
3. To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
Only shareholders of record as of the close of business on April 14, 1997
will be entitled to notice of the Annual Meeting and to vote at the Annual
Meeting and any adjournments thereof. A list of shareholders of the Company
as of the close of business on April 14, 1997 will be available for
inspection during normal business hours for ten days prior to the Annual
Meeting at the Company's executive offices at 900 West Valley Road, Suite
1000, Wayne, PA 19087.
By order of the board of directors,
Joshua M. Kopelman
Secretary
Wayne, Pennsylvania
April 29, 1997
EACH SHAREHOLDER IS URGED TO COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY
CARD IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. IF A SHAREHOLDER DECIDES TO ATTEND THE MEETING, HE OR SHE
MAY, IF SO DESIRED, REVOKE THE PROXY AND VOTE THE SHARES IN PERSON.
<PAGE>
INFONAUTICS, INC.
900 West Valley Road, Suite 1000
Wayne, PA 19087
--------------------------------
PROXY STATEMENT
FOR
1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
MAY 29, 1997
--------------------------------
This proxy statement and the accompanying form of proxy are being mailed
on or about April 29, 1997 to the shareholders of Infonautics, Inc. (the
"Company"). These materials are being furnished in connection with the
solicitation by the board of directors of the Company of proxies to be voted
at the 1997 Annual Meeting of Shareholders (the "Annual Meeting") to be held
at the Valley Forge Marriott Suites, 888 Chesterbrook Boulevard, Wayne,
Pennsylvania on May 29, 1997, at 10:00 a.m., local time, and at any
adjournments thereof.
At the Annual Meeting, shareholders of the Company will be asked to vote
upon (i) the election of seven directors, each for a one-year term and until
the election and qualification of his successor and (ii) the approval and
adoption of the Company's Amended and Restated 1996 Equity Compensation Plan
(the "Plan").
The cost of solicitation of proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by telephone by
officers and directors and a small number of regular employees of the Company
who will not be specially compensated for such services. The Company also will
request banks and brokers to solicit proxies from their customers, where
appropriate, and will reimburse such persons for reasonable expenses incurred in
that regard.
The Company's annual report to shareholders for the year ended December 31,
1996, including financial statements, is being mailed to shareholders with this
proxy statement but does not constitute a part of this proxy statement.
VOTING AT THE MEETING
Holders of record of shares of Class A Common Stock, no par value ("Class
A Common Stock"), and Class B Common Stock, no par value ("Class B Common
Stock"), at the close of business on April 14, 1997 are entitled to vote at
the Annual Meeting. As of that date, there were 9,391,627 shares of Class A
Common Stock and 100,000 shares of Class B Common Stock outstanding. Each
holder of Class A Common Stock entitled to vote shall have the right to one
vote for each share of Class A Common Stock in such shareholder's name, and
each holder of Class B Common Stock entitled to vote shall have the right to
fifty votes for each share of Class B Common Stock in such shareholder's name.
The presence in person or by proxy of shareholders entitled to cast a
majority of all votes entitled to be cast at the Annual Meeting will
constitute a quorum.
Shares cannot be voted at the Annual Meeting unless the holder of record
is present in person or by proxy. The enclosed form of proxy is a means by
which a shareholder may authorize the voting of his or her shares at the
Annual Meeting.
1
<PAGE>
Directors are to be elected at the Annual Meeting by a plurality of the
votes cast by holders of Class A Common Stock and Class B Common Stock
present in person or represented by proxy at the Annual Meeting and entitled
to vote, voting together as a single class. Votes may be cast in favor or
withheld; votes that are withheld will be excluded entirely from the vote and
will have no effect other than for purposes of determining the presence of a
quorum. The approval and adoption of the Plan requires the affirmative vote
of a majority of the votes cast by all the holders of the Class A Common
Stock and Class B Common Stock entitled to vote thereon, voting together as a
single class. Abstentions and broker non-votes, because they are not treated
as votes cast, will have no effect on whether this proposal is approved by
the shareholders. The shares of Common Stock represented by each properly
executed proxy will be voted at the Annual Meeting in accordance with each
shareholder's directions. Shareholders are urged to specify their choices by
marking the appropriate boxes on the enclosed proxy card. If no choice has
been specified and the enclosed proxy card is properly executed and returned,
the shares will be voted as recommended by the board of directors. If any
other matters are properly presented to the Annual Meeting for action, the
proxy holders will vote the proxies (which confer discretionary authority to
vote on such matters) in accordance with their best judgment.
Execution of the accompanying proxy will not affect a shareholder's right
to attend the Annual Meeting and vote in person. Any shareholder giving a
proxy has the right to revoke it by giving written notice of revocation to
the Secretary of the Company, or by delivering a subsequently executed proxy,
at any time before the proxy is voted.
Brokers who hold shares in street name for customers have the authority
under the rules of various stock exchanges to vote on certain items when they
have not received instructions from beneficial owners. The Company believes
that brokers who do not receive instructions are entitled to vote those
shares with respect to the election of directors, but are not entitled to
vote on the proposal to approve and adopt the Plan. A failure by brokers to
vote those shares will have no effect in the outcome of the election of
directors or on the proposal to approve and adopt the Plan, as broker
non-votes will not be treated as votes cast.
YOUR PROXY VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE ASKED TO COMPLETE, SIGN
AND RETURN THE ACCOMPANYING PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING. IF YOU PLAN TO ATTEND THE ANNUAL MEETING TO VOTE IN PERSON AND
YOUR SHARES ARE REGISTERED WITH THE COMPANY'S TRANSFER AGENT IN THE NAME OF A
BROKER OR BANK, YOU MUST SECURE A PROXY FROM YOUR BROKER OR BANK ASSIGNING
VOTING RIGHTS TO YOU FOR YOUR SHARES OF CLASS A COMMON STOCK.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 1, 1997
(except as otherwise noted) regarding the ownership of Common Stock (i) by each
person known by the Company to be the beneficial owner of more than five percent
of the outstanding common stock, (ii) by each director of the Company, (iii) by
each executive officer named in the Summary Compensation Table and (iv) by all
current executive officers and directors of the Company as a group.
PERCENTAGE
NAME AND ADDRESS NUMBER OF OF
----------------------- SHARES BENEFICIALLY OUTSTANDING
5% SHAREHOLDERS OWNED (1) SHARES(2)
- --------------- ------------------- -----------
21st Century Communications
Partners, L.P.(3)
767 Fifth Avenue
New York, NY 10153.......... 844,444 9.0%
Officers and Directors
- ----------------------
Marvin I. Weinberger(4)
900 West Valley Road
Wayne, PA 19087............... 1,815,222 19.3
Barry Rubenstein(3)(5)........ 854,444 9.1
Lloyd N. Morrisett(6)......... 368,250 3.9
Joshua M. Kopelman(7)......... 219,504 2.3
Howard L. Morgan(8)........... 148,250 1.6
Van Morris(9)................. 98,300 1.0
Israel J. Melman(10).......... 62,252 *
Ronald A. Berg(11)............ 52,625 *
James T. Beattie(12).......... 39,000 *
Lester D. Wunderman(13)....... 10,000 *
Michael Zisman(14)............ 10,000 *
All current executive officers
and directors as a group
(13 persons)(15)............. 3,680,347 37.8%
- ------------------------
* Less than one percent.
(1) Nature of ownership consists of sole voting and investment power unless
otherwise indicated. The number of shares indicated includes shares issuable
upon the exercise of outstanding stock options held by each individual or
group to the extent such options are exercisable within sixty days of April
1, 1997.
(2) The percentage for each individual or group is based on the aggregate of the
shares outstanding as of April 1, 1997 (9,391,627 shares) and all shares
issuable upon the exercise of outstanding stock options held by such
individual or group to the extent such options are exercisable within sixty
days of April 1, 1997.
(3) Includes 572,600 shares of Class A Common Stock held by 21st Century
Communications Partners, L.P., 194,880 shares of Class A Common Stock held
by 21st Century Communications T-E Partners, L.P. and 76,964 shares of Class
A Common Stock held by 21st Century Communications Foreign Partners, L.P.
One of the general partners of the 21st Century funds is InfoMedia
Associates, Ltd., a New York corporation, of which Mr. Rubenstein is an
officer. Mr. Rubenstein shares voting and investment power with the other
officers of InfoMedia Associates, Ltd. and with the other general partner of
the 21st Century funds and disclaims beneficial ownership of shares in which
he has no pecuniary interest.
3
<PAGE>
(4) Represents 1,116,150 shares of Class A Common Stock, 100,000 shares of
Class B Common Stock and exercisable options to purchase 37,500 shares
of Class A Common Stock held by Mr. Weinberger; 160,000 shares of Class
A Common Stock held by Fran Solow Weinberger (Mr. Weinberger's wife) and
Howard L. Morgan, Trustees under The Marvin Weinberger 1996 Trust
Agreement dated January 31, 1996 (the "1996 Trust"); 17,400 shares of
Class A Common Stock held by Fran Solow Weinberger and Howard L. Morgan,
Trustees under The Marvin Weinberger GST Trust dated January 31, 1996
(the "GST Trust"); 114,172 shares of Class A Common Stock held by The
Danna Company, an Ohio corporation ("Danna"), of which Mr. Weinberger is
the president and a director; and 270,000 shares of Class A Common Stock
held by Lawrence Husick. Mrs. Weinberger and Dr. Morgan have shared
voting and investment power with respect to the shares held by the 1996
Trust and the GST Trust. Mr. Weinberger disclaims beneficial ownership
with respect to such shares. Mr. Weinberger has shared voting and
investment power with respect to the shares held by Danna and disclaims
beneficial ownership with respect to such shares. Mr. Weinberger has
voting power with respect to Mr. Husick's shares in certain limited
circumstances and disclaims beneficial ownership with respect to such
shares.
(5) Includes exercisable options to purchase 10,000 shares of Class A Common
Stock.
(6) Represents 2,000 shares of Class A Common Stock held jointly by Dr.
Morrisett and his wife, exercisable options to purchase 10,000 shares of
Class A Common Stock owned by Dr. Morrisett and 356,250 shares of Class A
Common Stock owned by The Markle Foundation. Dr. Morrisett is the President
of The Markle Foundation and has shared voting and investment power with
respect to the shares held by the Markle Foundation. Dr. Morrisett
disclaims beneficial ownership with respect to such shares.
(7) Represents 162,004 shares of Class A Common Stock and exercisable options
to purchase 57,500 shares of Class A Common Stock.
(8) Represents 100,000 shares of Class A Common Stock, exercisable options to
purchase 42,250 shares of Class A Common Stock, 2,000 shares of Class A
Common Stock held by Eleanor Morgan (Dr. Morgan's wife) and Beverly Budin,
Trustees under the Howard L. Morgan 1989 Indenture of Trust F/B/O Kimberly
D. Morgan, 2,000 shares of Class A Common Stock held by Eleanor Morgan and
Beverly Budin, Trustees under the Howard L. Morgan 1989 Indenture of Trust
F/B/O Elizabeth S. Morgan, and 2,000 shares of Class A Common Stock held by
Eleanor Morgan and Beverly Budin, Trustees under the Howard L. Morgan 1989
Indenture of Trust F/B/O Danielle A. Morgan (such trusts being collectively
referred to as the "Howard L. Morgan Trusts"). Mrs. Morgan and Beverly
Budin have shared voting and investment power with respect to the shares
held by the Howard L. Morgan Trusts. Dr. Morgan disclaims beneficial
ownership with respect to such shares. Excludes 160,000 shares of Class A
Common Stock held by Fran Solow Weinberger and Howard L. Morgan, Trustees
under the 1996 Trust, and 17,400 shares of Class A Common Stock held by
Fran Solow Weinberger and Howard L. Morgan, Trustees under the GST Trust.
Mrs. Weinberger and Dr. Morgan have shared voting and investment power
with respect to the shares held by the 1996 Trust and the GST Trust.
Dr. Morgan disclaims beneficial ownership with respect to such shares.
(9) Represents 32,500 shares of Class A Common Stock and exercisable options
to purchase 65,800 shares of Class A Common Stock.
(10) Includes 45,000 shares of Class A Common Stock and exercisable options to
purchase 10,000 shares of Class A Common Stock held by Mr. Melman. Also
includes 7,252 shares of Class A Common Stock held by the Melman Trust,
with respect to which Mr. Melman has shared voting and investment power.
(11) Represents 9,500 shares of Class A Common Stock and exercisable options to
purchase 43,125 shares of Class A Common Stock.
(12) Represents 2,000 shares of Class A Common Stock and exercisable options to
purchase 37,000 shares of Class A Common Stock.
(13) Includes exercisable options to purchase 10,000 shares of Class A Common
Stock.
(14) Includes exercisable options to purchase 10,000 shares of Class A Common
Stock.
(15) Includes exercisable options to purchase 335,675 shares of Class A Common
Stock.
4
<PAGE>
ELECTION OF DIRECTORS
The board of directors of the Company currently consists of seven directors.
At the Annual Meeting, seven directors are to be elected. The term of office for
each director will expire at the 1998 annual meeting of shareholders, and each
director will hold office until the election and qualification of the director's
successor or until the director's earlier death, removal or resignation.
The board of directors, upon the recommendation of the nominating committee,
has nominated for election as directors of the Company Messrs. Weinberger,
Melman, Rubenstein, Wunderman and Zisman and Drs. Morgan and Morrisett. All
nominees are presently directors of the Company whose terms expire at the Annual
Meeting.
All nominees have consented to be named and to serve if elected. Unless
otherwise instructed by the shareholders, the persons named in the proxies will
vote the shares represented thereby for the election of such nominees. The board
of directors believes all nominees will be able to serve as directors; if this
should not be the case, however, the proxies may be voted for one or more
substitute nominees to be designated by the board of directors or the board may
decide to reduce the number of directors. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE FOR EACH OF THE NOMINEES.
--------------------------------
NOMINEES FOR ELECTION
--------------------------------
<TABLE>
<CAPTION>
YEAR FIRST BECAME DIRECTOR, PRINCIPAL OCCUPATIONS
DURING
NAME OF DIRECTOR AGE PAST FIVE YEARS AND CERTAIN DIRECTORSHIPS
- ----------------------------- --- -----------------------------------------------------
<S> <C> <C>
Marvin I. Weinberger 42 Mr. Weinberger, a co-founder of the Company, has
served as the Company's Chief Executive Officer and
Chairman of the board of directors since the
Company's inception in November 1992. From 1985 until
he co-founded the Company in 1992, he was Executive
Vice President and co-founder of Telebase Systems,
Inc. ("Telebase"), a developer of customized
information and entertainment services that is now
part of N2K Inc., where his duties included marketing
and sales functions. Mr. Weinberger was Project
Leader for Homework Helper, now one of the Company's
services, while at Telebase.
Israel J. Melman 77 Mr. Melman, a co-founder of the Company, has served
as a director of the Company since April 1993. He is
presently and for the last 26 years has been the
president of Lexan Associates, a management
consulting firm working with companies in the areas
of video graphics, microelectronics, communication
optics and robotics. From 1985 through 1993, Mr.
Melman was Chairman of Telebase.
Howard L. Morgan 51 Dr. Morgan has served as a director of the Company
since March 1993. Since 1989, he has been the sole
shareholder and President of the Arca Group, Inc., a
consulting and investment management firm
specializing in the areas of computer and
communications technologies. Dr. Morgan was Professor
of Decision Sciences at the Wharton School of the
University of Pennsylvania from 1972 through 1986.
Dr. Morgan serves as director for a number of
technology companies, including Cylink Corporation,
Franklin Electronic Publishers, Inc., HDS Network
Systems, Inc., Kentek Information Systems, Inc.,
MetaTools, Inc., Quarterdeck Corporation, Segue
Software, Inc. and Unitronix Corporation.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST BECAME DIRECTOR, PRINCIPAL OCCUPATIONS
DURING
NAME OF DIRECTOR AGE PAST FIVE YEARS AND CERTAIN DIRECTORSHIPS
- ----------------------------- --- -----------------------------------------------------
<S> <C> <C>
Lloyd N. Morrisett 67 Dr. Morrisett has served as a director of the Company
since February 1994. He is the co-founder of the
Children's Television Workshop and has served since
1969 as President of The John & Mary R. Markle
Foundation ("The Markle Foundation"), a charitable
organization which is a shareholder of the Company.
Dr. Morrisett is a director of WEBS Index Fund
Inc.
Barry Rubenstein 53 Mr. Rubenstein has served as a director of the
Company since September 1994. Since February 1995,
Mr. Rubenstein has served as an officer of InfoMedia
Associates, Ltd., a New York corporation which is a
general partner of 21st Century Communications
Partners, L.P., 21st Century Communications T-E
Partners, L.P. and 21st Century Communications
Foreign Partners, L.P. In addition, since June 1992,
1985, 1976 and 1975, respectively, Mr. Rubenstein has
served as a general partner of Applewood Associates,
L.P., Woodland Partners, Seneca Ventures and Woodland
Venture Fund, respectively, all of which are
investment partnerships. Mr. Rubenstein is a director
of The Millbrook Press, Inc.
Lester D. Wunderman 76 Mr. Wunderman has served as a director of the Company
since December 1996. He is Chairman of Wunderman Cato
Johnson, a world-wide direct marketing agency, which
he founded in 1958. Mr. Wunderman is also Adjunct
Professor of Marketing at the School for Continuing
Education at New York University ("NYU"), Chairman of
the Executive Committee of the Center for Direct
Marketing at NYU and a Trustee of the Children's
Television Workshop.
Michael Zisman 48 Mr. Zisman has served as a director of the Company
since November 1996. Mr. Zisman has served as
executive vice president for strategy at Lotus
Development Corporation ("Lotus"), a subsidiary of
IBM, since October 1996. He served Lotus as Chief
Executive Officer from October 1995 to October 1996
and was V.P.--Communications Products from July 1994
to October 1995. Prior to July 1994, he was Chief
Executive Officer of Soft-Switch, Inc., which he
founded in 1979. Mr. Zisman has also served as a
professor of the Sloan School for Management at the
Massachusetts Institute of Technology.
</TABLE>
6
<PAGE>
GENERAL INFORMATION CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES
Mr. Rubenstein was originally elected to the board of directors pursuant to
a voting agreement between 21st Century Investments and Mr. Weinberger. This
agreement terminated upon the closing of the Company's initial public offering
in May 1996.
The board of directors of the Company met on six occasions during 1996
(including once by telephone conference call). The Pennsylvania Business
Corporation Law of 1988, as amended (the "PBCL"), provides that the board of
directors, by resolution, may designate one or more committees, each of which
shall consist of one or more directors. The board of directors annually elects
from its members an Audit Committee and a Compensation Committee. Each director
attended at least 75% of the aggregate of the meetings of the board of directors
held during the period for which he was a director, and the meetings of the
committee or committees on which he served during such period.
AUDIT COMMITTEE. The Audit Committee reviews the scope of the Company's
audit, the engagement of its independent auditors and their audit reports. The
Audit Committee meets with the financial staff to review accounting procedures
and reports. The Audit Committee met once during 1996. The Audit Committee is
currently composed of three directors, Drs. Morgan and Morrisett and Mr. Zisman.
COMPENSATION COMMITTEE. The Compensation Committee evaluates the Company's
compensation policies and administers the Company's stock option and equity
compensation plans. The current members of the Compensation Committee are
Messrs. Melman and Rubenstein and Dr. Morrisett. The Compensation Committee met
five times during 1996.
COMPENSATION OF DIRECTORS
The non-employee directors of the Company each receive $5,000 per year for
their service on the board of directors and are reimbursed for their
out-of-pocket expenses. Other directors do not receive compensation for their
service on the board of directors or any committee thereof, although they are
reimbursed for their out-of-pocket expenses for serving on the board of
directors. Under the Plan, each non-employee director who was a member of the
board of directors as of the effective date of the Plan received a formula grant
of a non-qualified stock option ("NQSO"), to purchase 10,000 shares of Class A
Common Stock at a price equal to the initial public offering price in the
Company's initial public offering. Dr. Morgan waived his rights to the initial
grant of options to purchase 10,000 shares of Class A Common Stock. In addition,
each non-employee director who became or becomes a member of the board of
directors after the effective date of the Plan received or will receive a
formula grant of an NQSO to purchase 10,000 shares of Class A Common Stock on
the date he became or becomes a member of the board of directors, at an exercise
price equal to the closing price per share on The Nasdaq National Market on the
date of grant. On each date on which the Company holds its annual meeting of
shareholders, each non-employee director in office immediately before and after
the annual election of directors will receive a grant of an NQSO to purchase
2,500 shares of Class A Common Stock at an exercise price equal to the closing
price per share on The Nasdaq National Market on the date of grant. The term of
each such option is or will be five years, and each such option is or will be
fully and immediately exercisable on the date of grant.
Each of the directors is a party to an indemnification agreement with the
Company. Pursuant to these agreements, the directors are indemnified against
liabilities and expenses incurred as a result of litigation which may be brought
alleging that they violated their fiduciary duties to the Company, if they have
not met the applicable standard of care. Such agreements generally parallel the
indemnification provisions permitted under the PBCL and set forth in the
Company's Bylaws.
Dr. Morgan is a party to a consulting agreement with the Company pursuant to
which Dr. Morgan provides consulting services to the Company for up to three
days per month for a monthly consulting fee of $3,000. The agreement lasts until
terminated with 10 days' notice by either Dr. Morgan or the Company. In general,
Dr.
7
<PAGE>
Morgan's services to date have focused on technical assessment and planning
for the Company's services and products.
The Company also has a consulting agreement with Mr. Melman for
consulting services. The monthly consulting fee is $3,000, and the agreement
expires in July 1998. Mr. Melman is required to provide at least two days per
month of consulting services, and in general his services to date have
focused on advising the Company as to organizational management matters.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Melman, a member of the Compensation Committee, is a party to a
consulting agreement with the Company. See "--Compensation of Directors" and
"Certain Relationships and Related Transactions."
APPROVAL OF
AMENDED AND RESTATED
1996 EQUITY COMPENSATION PLAN
PROPOSAL
At the Annual Meeting, there will be presented to shareholders a proposal
to approve and adopt the Plan. At its April 1, 1997 meeting, the board of
directors unanimously voted to amend the existing 1996 Equity Compensation
Plan to: (i) subject to stockholder approval, increase the number of shares
of Class A Common Stock reserved for issuance under the Plan from 500,000 to
1,000,000; (ii) reflect recent changes to Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); and (iii) clarify
certain other provisions of the Plan. The Plan is also being submitted to the
shareholders for approval to comply with the requirements of Section 162(m)
of the Internal Revenue Code of 1986, a amended (the "Code"). See
"Description of the Amended and Restated 1996 Equity Compensation
Plan--Section 162(m)."
The board of directors believes that the amendment to increase the number
of shares reserved for issuance under the Plan is in the best interest of the
Company. The board of directors believes the Plan helps the Company to
attract, retain and motivate participants and to encourage participants to
devote their best efforts to the business and financial success of the
Company. The board believes that by providing key employees, non-employee
directors and consultants with the opportunity to acquire an equity interest
in the Company over time, stock options serve to align their interests
closely with other stockholders. The Plan, which became effective upon the
consummation of the Company's initial public offering in May 1996, initially
authorized the issuance of up to 500,000 shares of Class A Common Stock. As
of April 1, 1997, the Company had granted 297,580 shares to directors,
officers and employees under the Plan. The board of directors believes it is
in the best interest of the Company to increase the number of shares
authorized for issuance under the Plan because the increase will allow the
board to continue to grant stock-based compensation at levels it deems
appropriate.
The principal terms of the Plan are discussed below.
VOTE REQUIRED FOR APPROVAL
Approval of the proposal to approve and adopt the Plan requires the
affirmative vote of the holders of a majority of the votes cast by all the
holders of Class A Common Stock and Class B Common Stock entitled to vote
thereon, voting together as a single class. Abstentions and broker non-votes,
because they are not treated as votes cast, will have no effect on whether this
proposal is approved by the shareholders.
8
<PAGE>
THE PLAN IS SET FORTH IN EXHIBIT A TO THIS PROXY STATEMENT. THE DESCRIPTION
OF THE PLAN CONTAINED HEREIN DESCRIBES THE PLAN INCLUDING THE AMENDMENTS
APPROVED BY THE BOARD OF DIRECTORS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO EXHIBIT A.
DESCRIPTION OF THE AMENDED AND RESTATED 1996 EQUITY COMPENSATION PLAN
The Plan was originally adopted by the board of directors on February 29,
1996, to be effective upon consummation of the Company's initial public
offering. The Plan provides for grants of stock options to selected officers
(including officers who are also directors) of the Company or its
subsidiaries, other employees of the Company or its subsidiaries and
independent contractors and consultants who perform valuable services to the
Company or its subsidiaries. Non-employee directors of the Company are
entitled to receive formula stock option grants under the Plan. In addition,
the Plan provides for grants of restricted stock, stock appreciation rights
("SARs") and performance units (herein, together with grants of stock
options, collectively, "Grants") to participants other than non-employee
directors of the Company.
The original 500,000 shares of Class A Common Stock issued or to be
issued under the Plan are covered by a registration statement on Form S-8,
which was filed with the SEC on September 18, 1996. The Company intends to
file an additional registration statement on Form S-8 to register the
additional 500,000 shares of Class A Common Stock if the Plan is approved by
the shareholders.
GENERAL. Subject to adjustment in certain circumstances as discussed
below and to shareholder approval of the Plan, the Plan authorizes up to
1,000,000 shares of Class A Common Stock for issuance pursuant to the terms
of the Plan. If and to the extent Grants under the Plan expire or are
terminated for any reason without being exercised, or the shares subject to a
Grant are forfeited, the shares of Class A Common Stock subject to such Grant
again will be available for grant under the Plan.
ADMINISTRATION OF THE PLAN. The Plan is administered and interpreted by
a committee (the "Committee") of the board of directors consisting of not
less than two persons appointed by the board of directors from among its
members, each of whom must be a "non-employee" director as defined in Rule
16b-3 under the Exchange Act and an "outside director" as defined by Section
162(m) of the Code. The Committee has the sole authority to determine (i)
persons to whom Grants may be made under the Plan, (ii) the type, size and
other terms and conditions of each Grant, (iii) the time when the Grants will
be made and the duration of any applicable exercise or restriction period,
including the criteria for vesting and the acceleration of vesting, and (iv)
any other matters arising under the Plan. The Committee has full power and
authority to administer and interpret the Plan, to make factual
determinations and to adopt or amend such rules, regulations, agreements and
instruments for implementing the Plan and for conduct of its business as it
deems necessary or advisable, in its sole discretion. The members of the
Compensation Committee currently serve as this Committee. See "Election of
Directors--General Information Concerning the Board of Directors and its
Committees."
GRANTS. Grants under the Plan may consist of (i) options intended to
qualify as incentive stock options ("ISOs") within the meaning of section 422 of
the Code or (ii) so-called "nonqualified stock options" that are not intended to
so qualify ("NQSOs"). In addition, Grants under the Plan may also consist of
grants of (i) restricted stock, (ii) SARs or (iii) performance units.
ELIGIBILITY FOR PARTICIPATION. Grants may be made to any employees
(including officers and directors) of, or independent contractors and
consultants to, the Company or its subsidiaries. Non-employee directors of the
Company are entitled only to formula grants of NQSOs. As of April 1, 1997, 134
employees and 7 directors (including 6 non-employee directors) were eligible for
Grants under the Plan. During any calendar year, no participant may receive
Grants under the Plan for more than 250,000 shares of Class A Common Stock. As
of April 1, 1997, 277,730 options were outstanding and held by all participants
as a group under the Plan, at an average exercise price of $5.87 per
9
<PAGE>
share. The last reported sales price of the Company's Class A Common Stock as
reported on the Nasdaq National Market on that date was $1.75.
OPTIONS. The exercise price of any ISO granted under the Plans will not
be less than the fair market value of the underlying shares of Class A Common
Stock on the date of grant, except that the exercise price of an ISO granted
to an employee who owns more than 10% of the total combined voting power of
all classes of the stock of the Company or its subsidiaries may not be less
than 110% of the fair market value of the underlying shares of Class A Common
Stock on the date of grant. The exercise price of an NQSO may be greater
than, equal to or less than the fair market value of the underlying shares of
Class A Common Stock on the date of grant. The Committee will determine the
term of each Option; provided, however, that the exercise period may not
exceed ten years from the date of grant, and the exercise period of an ISO
granted to an employee who owns more than 10% of the total voting power of
all outstanding stock of the Company or its subsidiaries may not exceed five
years from the date of grant. A participant may pay the exercise price (i) in
cash, (ii) with the approval of the Committee, by delivering shares of Class
A Common Stock owned by the participant and having a fair market value on the
date of exercise equal to the exercise price or (iii) by a combination of the
foregoing. The participant may instruct the Company to deliver the shares of
Class A Common Stock due upon the exercise to a designated broker instead of
to the participant.
FORMULA OPTION GRANTS TO NON-EMPLOYEE DIRECTORS. Non-employee directors
are entitled to receive NQSOs pursuant to the formula grants under the Plan.
According to the formula grants, each non-employee director who was a member
of the board of directors as of the effective date of the Plan received a
grant of an NQSO to purchase 10,000 shares of Class A Common Stock at an
exercise price equal to the initial public offering price in the Company's
initial public offering. In addition, each non-employee director who first
became or becomes a member of the board of directors after the effective date
of the Plan received or will receive a grant of an NQSO to purchase 10,000
shares of Class A Common Stock on the date he or she became or becomes a
member of the board of directors, at an exercise price equal to the closing
price on The Nasdaq National Market on the date of grant. On each date on
which the Company holds its annual meeting of shareholders, each non-employee
director in office immediately before and after the annual election of
directors will receive a grant of an NQSO to purchase 2,500 shares of Class A
Common Stock at an exercise price equal to the closing price per share on The
Nasdaq National Market on the date of the grant. The term of each such option
shall be five years and each such option shall be fully and immediately
exercisable upon the date of grant.
RESTRICTED STOCK. The Committee may issue shares of Class A Common Stock to
participants pursuant to the Plan. Shares may be issued for cash consideration
or for no cash consideration, as the Committee determines. The number of shares
of Class A Common Stock granted to each participant shall be determined by the
Committee, subject to the maximum limit described above. Grants of restricted
stock will be made subject to such performance requirements, vesting provisions,
transfer restrictions or other restrictions and conditions as the Committee may
determine in its sole discretion.
STOCK APPRECIATION RIGHTS. The Committee may grant SARs alone or in tandem
with any stock option pursuant to the Plan. The base price of an SAR will be the
greater of (i) the exercise price of the related stock option or (ii) the fair
market value of a share of Class A Common Stock on the date of grant of the SAR.
When the participant exercises an SAR, the participant will receive the amount
by which the fair market value of the Class A Common Stock on the date of
exercise exceeds the base price of the SAR. The participant may elect to have
such appreciation paid in cash or in shares of Class A Common Stock, subject to
Committee approval. To the extent a participant exercises a tandem SAR, the
related option shall terminate. Similarly, upon exercise of a stock option, the
related SAR, if any, shall terminate.
PERFORMANCE UNITS. The Committee may grant performance unit awards payable
in cash or shares of Class A Common Stock at the end of a specified performance
period pursuant to the Plan. Payment will be contingent upon achieving
performance goals by the end of the performance period. The measure of a
performance unit may, in the Committee's discretion, be equal to the fair market
value of a share of Class A Common Stock. The performance goals will be
comprised of specified annual levels of one or more performance criteria as the
Committee may deem
10
<PAGE>
appropriate, such as earnings per share, balance sheet measurements, cash
return on assets, shareholder return, or return on capital. The Committee
will determine the length of the performance period, the maximum payment
value of an award, and the minimum performance goals required before payment
will be made.
AMENDMENT AND TERMINATION OF THE PLAN. The board of directors may amend
or terminate the Plan at any time; provided, however, that the board of
directors may not amend the Plan, without shareholder approval, to (i)
increase (except for increases due to the adjustments discussed below) the
aggregate number (or individual limit for any individual) of shares of Class
A Common Stock for which Grants may be made thereunder, (ii) modify the
requirements for eligibility for participation in the Plan or (iii) make any
amendment that requires shareholder approval pursuant to Section 162(m) of
the Code. The Plan will terminate on the date immediately preceding the tenth
anniversary of its effective date, unless terminated earlier by the board of
directors or extended by the board of directors with approval of the
shareholders.
ADJUSTMENT PROVISIONS. Subject to the change of control provisions
below, in the event of certain transactions identified in the Plan, the board
of directors may appropriately adjust: (i) the number of shares of Class A
Common Stock (and the exercise price per share) subject to the unexercised
portion of any outstanding options or SARs, (ii) the number of shares of
Class A Common Stock to be acquired pursuant to a Grant which has not vested
and (iii) the number of shares of Class A Common Stock for which Grants may
be made under the Plan, and such adjustments shall be effective and binding
for all purposes of the Plan.
CHANGE OF CONTROL OF THE COMPANY. In the event of a change of control,
all options, restricted stock and SARs will become fully vested. Each
participant will be provided with advance written notice by the Company prior
to the change of control (to the extent possible) and will have the right,
within 90 days after such notice, to exercise the options and SARs in full.
Any options or SARs not timely exercised will terminate unless exchanged or
substituted with options or SARs of the successor corporation. In addition,
if a participant terminates employment with the Company (or its successor)
within 12 months following a change of control, a percentage of the
performance unit payments, if any, for the full performance period in which
the participant so terminates equal to the percentage of the performance
period during which the participant was in the employ or service of the
Company (or its successor) and all amounts for the prior performance period
if not then distributed will be distributed to such participant in a lump sum.
A change of control is defined as (i) a tender offer, merger or other
transaction as a result of which any person or group (other than the Company,
any subsidiary, any employee benefit plan or trust of the Company or any
subsidiary, or Marvin I. Weinberger, any affiliate of Marvin I. Weinberger or
any holders of the Class B Common Stock) becomes the owner of more than 40%
of the common stock or the combined voting power of the Company's then
outstanding securities, (ii) a liquidation or a sale of substantially all the
Company's assets, (iii) the individuals constituting the board of directors
or individuals nominated or elected by them cease to constitute a majority of
the board of directors, or (iv) the Company merges or consolidates with any
other corporation (other than a wholly owned subsidiary) and is not the
surviving corporation (or survives only as a subsidiary of another
corporation).
SECTION 162(m). Under Section 162(m) of the Code, the Company may be
precluded from claiming a federal income tax deduction for total remuneration
in excess of $1,000,000 paid to the chief executive officer or to any of the
other four most highly compensated officers in any one year. Total
remuneration would include amounts received upon the exercise of stock
options granted under the Plan and the value of shares received when the
shares of restricted stock became transferable (or such other time when
income is recognized). An exception does exist, however, for
"performance-based compensation," including amounts received upon the
exercise of stock options pursuant to a plan approved by shareholders that
meets certain requirements. The Plan is intended to allow grants of options
thereunder to meet the requirements of "performance-based compensation."
Grants of restricted stock and performance units generally will not qualify
as "performance-based compensation."
11
<PAGE>
Option grants to purchase the following number of shares of Class A
Common Stock have been made under the Plan from inception of the Plan through
April 1, 1997: all executive officers named in the Summary Compensation
Table, none; current executive officers as a group, 35,000 shares;
non-employee directors as a group, 50,000 shares; and all other employees as
a group, 201,780 shares. Because options are granted from time to time by the
Committee to those persons whom the Committee determines in its discretion
should receive options, the benefits and amounts that may be received in the
future by persons eligible to participate in the Plan is not determinable,
except as to those future grants to be awarded to non-employee directors.
FEDERAL INCOME TAX CONSEQUENCES: The current federal income tax treatment
of Grants under the Plan is generally described below. Local and state tax
authorities may also tax incentive compensation awarded under the Plan, and
tax laws are subject to change. Participants are urged to consult with their
personal tax advisors concerning the application of the general principles
discussed below to their own situations and the application of state and
local tax laws.
There are no federal income tax consequences to a participant or to the
Company upon the grant of an NQSO under the Plan. Upon the exercise of an
NQSO, a participant will recognize ordinary compensation income in an amount
equal to the excess of the fair market value of the shares at the time of
exercise over the exercise price of the NQSO, and the Company generally will
be entitled to a corresponding federal income tax deduction. Upon the sale of
shares acquired by the exercise of an NQSO, a participant will have a capital
gain or loss (long-term or short-term depending upon the length of time the
shares were held) in an amount equal to the difference between the amount
realized upon the sale and the participant's adjusted tax basis in the shares
(the exercise price plus the amount of ordinary income recognized by the
participant at the time of exercise of the NQSO).
A participant who is granted an ISO will not recognize taxable income for
purposes of the regular income tax, upon either the grant or exercise of the
ISO. However, for purposes of the alternative minimum tax imposed under the
Code, in the year in which an ISO is exercised, the amount by which the fair
market value of the shares acquired upon exercise exceeds the exercise price
will be treated as an item of adjustment and included in the computation of
the recipient's alternative minimum taxable income in the year of exercise. A
participant who disposes of the shares acquired upon exercise of an ISO after
two years from the date the ISO was granted and after one year from the date
such shares were transferred to him or her upon exercise of the ISO will
recognize long-term capital gain or loss in the amount of the difference
between the amount realized on the sale and the exercise price (or the
participant's other tax basis in the shares), and the Company will not be
entitled to any tax deduction by reason of the grant or exercise of the ISO.
As a general rule, if a participant disposes of the shares acquired upon
exercise of an ISO before satisfying both holding period requirements (a
"disqualifying disposition"), his or her gain recognized on such a
disposition will be taxed as ordinary income to the extent of the difference
between the fair market value of such shares on the date of exercise and the
exercise price, and the Company will be entitled to a deduction in that
amount. The gain, if any, in excess of the amount recognized as ordinary
income on such a disqualifying disposition will be long-term or short-term
capital gain, depending upon the length of time the participant held his or
her shares prior to the disposition.
A participant normally will not recognize taxable income upon receiving a
restricted stock Grant, and the Company will not be entitled to a deduction,
until such stock is transferable by the participant or no longer subject to a
substantial risk of forfeiture for federal tax purposes, whichever occurs
earlier. When the stock is either transferable or is no longer subject to a
substantial risk of forfeiture, the participant will recognize ordinary
compensation income in an amount equal to the fair market value of the shares
(less any amounts paid for such shares) at that time, and the Company will be
entitled to a deduction in the same amount. A participant may, however, elect
to recognize ordinary compensation income in the year the restricted stock
Grant is awarded in an amount equal to the fair market value of the shares
subject to the restricted stock Grant (less any amounts paid for such shares)
at that time, determined without regard to the restrictions. In such event,
the Company generally will be entitled to a corresponding deduction in the
same year. Any gain or loss recognized by the participant upon subsequent
disposition of the shares will be capital gain or loss. If, after making the
election, any shares subject to a restricted stock Grant are forfeited, or if
the market value declines during the restriction period, the participant will
not be entitled to any tax deduction or tax refund.
12
<PAGE>
There are no federal income tax consequences to a participant or to the
Company upon the grant of an SAR under the Plan. Upon the exercise of an SAR,
if the participant receives the appreciation inherent in the SAR in cash, the
participant will recognize ordinary compensation income in an amount equal to
the cash received. If the participant receives the appreciation in shares,
the participant will recognize ordinary compensation income in an amount
equal to the fair market value of the shares received. The Company generally
will be entitled to a corresponding federal income tax deduction at the time
of the exercise of the SAR. Upon the sale of any shares acquired by the
exercise of an SAR, a participant will have a capital gain or loss (long-term
or short-term depending upon the length of time the shares were held) in an
amount equal to the difference between the amount realized upon the sale and
the participant's adjusted tax basis in the shares (the amount of ordinary
income recognized by the participant at the time of exercise of the SAR).
There are no federal income tax consequences to a participant or to the
Company upon the grant of performance units under the Plan. If the
participant receives payment of the performance units in cash, the
participant will recognize ordinary compensation income in an amount equal to
the cash received. If the participant receives payment of the performance
units in shares, the participant will recognize ordinary compensation income
in an amount equal to the fair market value of the shares received. The
Company generally will be entitled to a corresponding federal income tax
deduction at the time of the payment of the performance units. Upon the sale
of any shares acquired upon payment of the performance units, a participant
will have a capital gain or loss (long-term or short-term depending upon the
length of time the shares were held) in an amount equal to the difference
between the amount realized upon the sale and the participant's adjusted tax
basis in the shares (the amount of ordinary income recognized by the
participant at the time of the payment of the performance units).
TAX WITHHOLDING. The Company has the right to deduct from all Grants
paid in cash or from other wages paid to an employee of the Company, any
federal, state or local taxes required by law to be withheld with respect to
Grants, and the participant or other person receiving shares under the Plan
will be required to pay to the Company the amount of any such taxes which the
Company is required to withhold with respect to such shares. A participant
may elect to satisfy the Company's income tax withholding obligation by
withholding shares received from the exercise of a stock option or a
restricted stock Grant. The shares withheld may not exceed the participant's
maximum marginal tax rate for federal, state and local tax liabilities.
NEW PLAN BENEFITS.
Because grants are made from time to time by the Committee to those persons
whom the Committee determines in its discretion should receive grants, the
benefits and amounts that may be received in the future by persons eligible to
participate in the Plan are not presently determinable, except as to those
future formula grants to be awarded to non-employee directors. See "--Formula
Option Grants to Non-Employee Directors."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Compensation of Executive Officers--Employment Agreements" for
description of employment agreements with Messrs. Weinberger, Morris, Kopelman,
Beattie and Berg and "Election of Directors--Compensation of Directors" for
description of consulting arrangements with Dr. Morgan and Mr. Melman.
CERTAIN TRANSACTIONS WITH FOUNDERS
On October 13, 1995, The Danna Company, of which Mr. Weinberger is
President, purchased 66,666 shares of Class A Common Stock at $3.75 per share.
Upon the closing of the purchase, the Company received a note for $250,000 from
The Danna Company, due in February 1996, with interest at 6% per annum. This
note has been paid in full.
13
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth for the years ended December 31, 1996 and
1995 certain compensation paid by the Company to its Chief Executive Officer and
the three other most highly paid executive officers of the Company whose cash
compensation exceeded $100,000 for the year ended December 31, 1996 (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION
COMPENSATION --------------
----------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS
- ---------------------------------------------------- --------- ---------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Marvin I. Weinberger..................... 1996 $132,900 -- $15,260(2) 150,000
Chairman of the Board and 1995 $133,750(1) -- $ 4,000(3) --
Chief Executive Officer
Van Morris............................... 1996 $138,750 -- $65,000(5) 111,200
President and Chief Operating Officer 1995 $ 39,375(4) -- -- 152,000
James T. Beattie......................... 1996 $126,667 $10,000 -- 50,000
Vice President and General 1995 $111,667 $15,000 -- 22,000
Manager--New Media Services
Ronald A. Berg........................... 1996 $ 94,166 $16,255 -- 50,000
Vice President--Finance and
Administration and Chief
Financial Officer
</TABLE>
- ------------------------
(1) Includes $7,500 which Mr. Weinberger was paid in shares of Class A Common
Stock valued at $3.75 per share.
(2) Represents $4,800 in automobile allowance and $10,460 paid by the Company
to a financial advisor for Mr. Weinberger's estate planning.
(3) Represents automobile allowance.
(4) Mr. Morris joined the Company as President and Chief Operating Officer in
September 1995, with an annual salary of $135,000. However, pursuant to the
terms of Mr. Morris' employment agreement with the Company, Mr. Morris was
paid his salary from commencement of employment through December 31, 1995 in
shares of Class A Common Stock, valued at $3.75 per share, the fair market
value on the date of his employment agreement.
(5) These amounts represent payments relating to relocation expenses.
14
<PAGE>
The following table summarizes stock options granted during 1996 to the
Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (1)
--------------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED 1996 PRICE DATE
- ----------------------------------------------------------- ----------- ----------------------- ----------- -----------
<S> <C> <C> <C> <C>
Marvin I. Weinberger....................................... 150,000 22.7% $14.00 4/29/05
Van Morris................................................. 91,200 13.8% $11.50 2/8/05
20,000 3.0% $14.00 4/29/05
James T. Beattie........................................... 50,000 7.6% $14.00 4/29/05
Ronald A. Berg............................................. 50,000 7.6% $14.00 4/29/05
</TABLE>
- ------------------------
(1) The options, some of which were granted under the Company's 1994 Omnibus
Stock Option Plan and some of which were granted under the Company's 1996
Equity Compensation Plan, have a term of nine years, subject to earlier
termination in certain events related to the termination of employment. The
options vest in four equal annual installments commencing on the first
anniversary of the date of grant. If a "change of control" (as defined in
each of the plans) were to occur, these options would become immediately
exercisable in full.
The following table summarizes option exercises during 1996 and the value of
vested and unvested options for the Named Executive Officers at December 31,
1996. Year-end values are based upon a price of $3.75 per share, which was the
closing market price of a share of the Company's Class A Common Stock on
December 31, 1996.
AGGREGATED OPTION EXERCISES IN LAST YEAR AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING UNEXERCISED
OPTIONS AT DECEMBER 31, VALUE OF UNEXERCISED
1996 IN-THE-MONEY OPTIONS AT
-------------------------- DECEMBER 31, 1996
SHARES ACQUIRED --------------------------
NAME ON EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Marvin I. Weinberger.............. -- -- 37,500 112,500 -- --
Van Morris........................ -- -- 38,000 225,200 -- --
James T. Beattie.................. -- -- 19,500 81,500 21,450 21,450
Ronald A. Berg.................... -- -- 22,625 77,375 31,632 31,632
</TABLE>
The Company does not currently grant any long-term incentives, other than
stock options, to its executives or other employees. Similarly, the Company does
not sponsor any defined benefit or actuarial plans at this time.
EMPLOYMENT AGREEMENTS
As of January 1, 1993, Marvin I. Weinberger and Joshua M. Kopelman each
entered into employment agreements with the Company that provided for base
salaries of $90,000 and $35,000, respectively, which salaries may be increased
as determined by the board of directors and are currently $140,000 and $97,000,
respectively. Each employment agreement is for a five-year term, but is
automatically renewed at the end of each year so that the term of each agreement
never has less than four years remaining. The Company is also required to create
annual bonus plans for each of these employees, and the bonus plan for Mr.
Weinberger must be reasonably acceptable to him. These bonus plans have not yet
been established by the Company.
15
<PAGE>
The board of directors may terminate either employment agreement at any
time, whether or not for cause; however, if either employee is terminated
without cause or terminates his employment for "good reason" (as defined in
the agreement) after a "change of control" of the Company (also as defined in
the agreement), such employee will be paid his average aggregate annual
compensation calculated over the five year period preceding the date of
termination multiplied by 2.99. If either employee is terminated by the
Company other than for cause or terminates his employment for "good reason"
without regard to a "change of control," the Company will pay such employee
an amount equal to the product of such employee's current annual base salary
in effect as of the date of termination multiplied by the number of years
remaining in the term of employment and will continue without cost to the
employee all medical, dental, life insurance and other benefits until the
employee reaches age 70. There are no non-compete or similar provisions
applicable to periods after termination of employment.
As of September 5, 1995, Van Morris entered into an employment agreement
with the Company that provides for a current base salary of $150,000, which
salary will be subject to review at least annually. In connection with his
employment agreement, the Company agreed to grant Mr. Morris an aggregate of
152,000 options to purchase Class A Common Stock. Mr. Morris' employment
agreement is at-will, with limited non-compete provisions applicable for up
to one year after certain terminations, as long as the Company continues
certain salary payments during the period. However, if the Company terminates
Mr. Morris without cause, the Company is required to pay Mr. Morris as
severance a lump sum equal to his annual salary within 30 days of
termination. Such payment is conditioned on the Company's receiving a general
release from Mr. Morris. The Company's obligations to pay Mr. Morris will
terminate upon Mr. Morris' obtaining other employment or other full-time
consulting work.
On January 21, 1994 and April 14, 1994, respectively, the Company entered
into employment agreements with Ronald A. Berg and James T. Beattie that
provided for base salaries of $75,000 and $105,000, respectively, which
salaries are subject to review at least annually and are currently $95,000
and $130,000, respectively. The agreements were each amended on November 4,
1996. Each agreement is at-will, with limited non-compete provisions
applicable for up to one year after certain terminations, with the
non-compete provisions in some cases being contingent upon the Company's
continuing to make certain salary payments during the period. However, if the
Company terminates Messrs. Berg or Beattie without cause, the Company is
required to pay as severance a lump sum equal to such employee's annual
salary within 30 days of termination. All such payments are contingent on the
Company's receiving a general release from the employee.
INFORMATION CONCERNING INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P. has served as the Company's independent
accountants since the Company's inception in November 1992 and has been
selected to continue in that capacity in the coming year. The Company has
requested that a representative of Coopers & Lybrand L.L.P. attend the Annual
Meeting. Such representative will have an opportunity to make a statement, if
he or she desires, and will be available to respond to appropriate questions
of shareholders.
OTHER MATTERS
The board of directors is not aware of any matters not set forth herein
that may come before the meeting. If, however, further business properly
comes before the meeting, the persons named in the proxies will vote the
shares represented thereby in accordance with their judgment.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the
16
<PAGE>
Securities and Exchange Commission (the "SEC") initial reports of ownership
and reports of changes in ownership of common stock and other equity
securities of the Company. Officers, directors and ten-percent shareholders
are required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file. Based solely on its review of the copies of
such reports received by the Company and written representations from certain
reporting persons that no Forms 5 were required for those persons, the
Company believes that during the year ended December 31, 1996, all filing
requirements applicable to its officers, directors and ten-percent
shareholders were satisfied.
SHAREHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
Shareholders may submit proposals on matters appropriate for shareholder
action at annual meetings in accordance with regulations adopted by the SEC. To
be considered for inclusion in the proxy statement and form of proxy relating to
the 1998 annual meeting, such proposals must be received by the Company no later
than December 30, 1997. Proposals should be directed to the attention of the
Secretary of the Company.
By order of the board of directors,
Joshua M. Kopelman
Secretary
April 29, 1997
17
<PAGE>
EXHIBIT A
INFONAUTICS, INC.
AMENDED AND RESTATED
1996 EQUITY COMPENSATION PLAN
Amended and Restated as of April 1, 1997
The purpose of the Infonautics, Inc. Amended and Restated 1996 Equity
Compensation Plan (the "Plan") is to provide (i) designated officers
(including officers who are also directors) and other employees of
Infonautics, Inc. (the "Company") and its subsidiaries, (ii) non-employee
members of the board of directors of the Company (the "Board"), and (iii)
independent contractors and consultants who perform valuable services for the
Company or its subsidiaries, with the opportunity to receive grants of
incentive stock options, nonqualified stock options, stock appreciation
rights, restricted stock and performance units. The Company believes that the
Plan will cause the participants to contribute materially to the growth of
the Company, thereby benefitting the Company's shareholders, and will align
the economic interests of the participants with those of the shareholders.
1. ADMINISTRATION
The Plan shall be administered and interpreted by a committee (the
"Committee"), which shall consist of two or more persons appointed by the
Board, all of whom shall be "non-employee directors" as defined under Rule
16b-3 under the Securities Exchange Act of 1934 (the "Exchange Act") and
"outside directors" as defined under section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code") and related Treasury regulations.
The Committee shall have the sole authority to (i) determine the
individuals to whom grants shall be made under the Plan, (ii) determine the
type, size and terms of the grants to be made to each such individual, (iii)
determine the time when the grants will be made and the duration of any
applicable exercise or restriction period, including the criteria for vesting
and the acceleration of vesting and (iv) deal with any other matters arising
under the Plan.
The Committee shall have full power and authority to administer and
interpret the Plan, to make factual determinations and to adopt or amend such
rules, regulations, agreements and instruments for implementing the Plan and
for the conduct of its business as it deems necessary or advisable, in its
sole discretion. The Committee's interpretations of the Plan and all
determinations made by the Committee pursuant to the powers vested in it
hereunder shall be conclusive and binding on all persons having any interests
in the Plan or in any awards granted hereunder. All powers of the Committee
shall be executed in its sole discretion, in the best interest of the Company
and in keeping with the objectives of the Plan and need not be uniform as to
similarly situated individuals.
2. GRANTS
Incentives under the Plan shall consist of grants of incentive stock
options, nonqualified stock options, stock appreciation rights, restricted
stock and performance units (hereinafter collectively referred to as
"Grants"). All Grants shall be subject to the terms and conditions set forth
herein and to those other terms and conditions consistent with this Plan as
the Committee deems appropriate and as are specified in writing by the
Committee to the individual (the "Grant Instrument"). The Committee shall
approve the form and provisions of each Grant Instrument. Grants under a
particular section of the Plan need not be uniform as among the grantees.
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3. SHARES SUBJECT TO THE PLAN
(a) Subject to the adjustment specified below, the aggregate number of
shares of Class A Common Stock of the Company (the "Company Stock") that may be
issued or transferred under the Plan is 1,000,000 shares. Notwithstanding
anything in the Plan to the contrary, the maximum aggregate number of shares of
Company Stock that shall be subject to Grants made under the Plan to any one
individual during any calendar year shall be 250,000 shares. The shares may be
authorized but unissued shares of Company Stock or reacquired shares of Company
Stock, including shares purchased by the Company on the open market for purposes
of the Plan. If and to the extent options granted under the Plan terminate,
expire, or are cancelled, forfeited, exchanged or surrendered without having
been exercised or if any shares of restricted stock are forfeited, the shares
subject to such Grants shall again be available for purposes of the Plan.
(b) If there is any change in the number or kind of shares of Company Stock
outstanding by reason of a stock dividend, a recapitalization, stock split, or
combination or exchange of shares, or merger, reorganization or consolidation in
which the Company is the surviving corporation, reclassification or change in
par value or by reason of any other extraordinary or unusual events affecting
the outstanding Company Stock as a class without the Company's receipt of
consideration, or if the value of outstanding shares of Company Stock is
substantially reduced due to the Company's payment of an extraordinary dividend
or distribution, the maximum number of shares of Company Stock available for
Grants, the maximum number of shares of Company Stock that may be subject to
Grants to any one individual under the Plan in any calendar year, the number of
shares covered by outstanding Grants, and the price per share or the applicable
market value of such Grants shall be proportionately adjusted by the Committee
to reflect any increase or decrease in the number or kind of issued shares of
Company Stock to preclude the enlargement or dilution of rights and benefits
under such Grants; provided, however, that any fractional shares resulting from
such adjustment shall be eliminated. For purposes of this Section 3(b), "shares
of Company Stock" and "shares" include referenced shares with respect to SARs
or, to the extent applicable, performance units. The adjustments determined by
the Committee shall be final, binding and conclusive. Notwithstanding the
foregoing, no adjustment shall be authorized or made pursuant to this Section to
the extent that such authority or adjustment would cause any incentive stock
option to fail to comply with section 422 of the Code.
4. ELIGIBILITY FOR PARTICIPATION
All employees of the Company and its subsidiaries ("Employees"),
including Employees who are officers or members of the Board, shall be
eligible to participate in the Plan. All members of the Board who are not
employees of the Company or any of its subsidiaries ("Non-Employee
Directors") shall be eligible only to receive nonqualified stock options
pursuant to Section 6. Any independent contractors or consultants who perform
valuable services to the Company or any of its subsidiaries ("Consultants")
shall be eligible to participate in the Plan, but shall not be eligible to
receive incentive stock options. The Committee shall select the Employees and
Consultants to receive Grants and determine the number of shares of Company
Stock subject to a particular Grant in such manner as the Committee
determines. (Employees and Consultants who receive Grants under this Plan
shall hereinafter be referred to as "Grantees".)
Nothing contained in this Plan shall be construed to (i) limit the right
of the Committee to make Grants under this Plan in connection with the
acquisition, by purchase, lease, merger, consolidation or otherwise, of the
business or assets of any corporation, firm or association, including options
granted to employees thereof who become Employees, or for other proper
corporate purpose, or (ii) limit the right of the Company to grant stock
options or make other awards outside of this Plan.
5. GRANTING OF OPTIONS
(a) NUMBER OF SHARES. The Committee, in its sole discretion, shall
determine the number of shares of Company Stock that will be subject to each
Grant of stock options.
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(b) TYPE OF OPTION AND PRICE. The Committee may grant options intended to
qualify as "incentive stock options" within the meaning of section 422 of the
Code ("Incentive Stock Options") or options which are not intended to so
qualify ("Nonqualified Stock Options") or any combination of Incentive Stock
Options and Nonqualified Stock Options (hereinafter collectively the "Stock
Options"), all in accordance with the terms and conditions set forth herein;
provided, however, that Consultants shall not be eligible to receive
Incentive Stock Options.
The purchase price of Company Stock subject to a Stock Option shall be
determined by the Committee and may be equal to, greater than, or less than
the Fair Market Value (as defined below) of a share of such Company Stock on
the date such Stock Option is granted; provided, however, that the purchase
price of Company Stock subject to an Incentive Stock Option shall be equal
to, or greater than, the Fair Market Value of a share of such Stock on the
date such Stock Option is granted.
If the Company Stock is traded in a public market, then the "Fair Market
Value" per share shall be, if the principal trading market for the Company
Stock is a national securities exchange or the National Market segment of The
NASDAQ Stock Market, the last reported sale price thereof on the relevant
date or (if there were no trades on that date) the latest preceding date upon
which a sale was reported, or, if the Company Stock is not principally traded
on such exchange or market, the mean between the last reported "bid" and
"asked" prices thereof on the relevant date, as reported on NASDAQ or, if not
so reported, as reported by the National Daily Quotation Bureau, Inc. or as
reported in a customary financial reporting service, as applicable and as the
Committee determines. If the Company Stock is not traded in a public market
or subject to reported transactions or "bid" or "ask" quotations as set forth
above, the "Fair Market Value" per share shall be as determined by the
Committee.
(c) OPTION TERM. The Committee shall determine the term of each Stock
Option. The term of any Stock Option shall not exceed ten years from the date of
grant.
(d) EXERCISABILITY OF OPTIONS. Stock Options shall become exercisable in
accordance with the terms and conditions determined by the Committee, in its
sole discretion, and specified in the Grant Instrument. The Committee, in its
sole discretion, may accelerate the exercisability of any or all outstanding
Stock Options at any time for any reason. In addition, all outstanding Stock
Options automatically shall become fully and immediately exercisable upon a
Change of Control (as defined herein) in accordance with the provisions of
Section 11.
(e) MANNER OF EXERCISE. A Grantee may exercise a Stock Option which has
become exercisable, in whole or in part, by delivering a notice of exercise to
the Committee with accompanying payment of the option price in accordance with
Subsection (g) below. Such notice may instruct the Company to deliver shares of
Company Stock due upon the exercise of the Stock Option to any registered broker
or dealer designated by the Committee ("Designated Broker") in lieu of delivery
to the Grantee. Such instructions must designate the account into which the
shares are to be deposited. The Grantee may tender a notice of exercise, which
has been properly executed by the Grantee and the aforementioned delivery
instructions to any Designated Broker.
(f) TERMINATION OF EMPLOYMENT, DISABILITY OR DEATH.
(i) In the event that a Grantee ceases to be an Employee or a Consultant, as
the case may be, of the Company for any reason other than a "disability", death,
or "termination for cause", any Stock Option which is otherwise exercisable by
the Grantee shall terminate unless exercised within 90 days of the date on which
the Grantee ceases to be an Employee or Consultant of the Company (or within
such other period of time as may be specified in the Grant Instrument), but in
any event no later than the date of expiration of the option term. Any of the
Grantee's Stock Options which are not otherwise exercisable as of the date on
which the Grantee ceases to be an Employee or Consultant of the Company shall
terminate as of such date.
(ii) In the event the Grantee ceases to be an Employee or Consultant of the
Company on account of a "termination for cause" by the Company, any Stock Option
held by the Grantee shall terminate as of the date the Grantee ceases to be an
Employee or Consultant of the Company.
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(iii) In the event the Grantee ceases to be an Employee or Consultant of the
Company because the Grantee is "disabled", any Stock Option which is otherwise
exercisable by the Grantee shall terminate unless exercised within one year of
the date on which the Grantee ceases to be an Employee or Consultant of the
Company (or within such other period of time as may be specified in the Grant
Instrument), but in any event no later than the date of expiration of the option
term. Any of the Grantee's Stock Options which are not otherwise exercisable as
of the date on which the Grantee ceases to be an Employee or Consultant shall
terminate as of such date.
(iv) In the event of the death of the Grantee while the Grantee is an
Employee or Consultant of the Company or within not more than 90 days of the
date on which the Grantee ceases to be an Employee or Consultant of the Company
on account of a termination of employment specified in Section 5(f)(i) of the
Plan (or within such other period of time as may be specified in the Grant
Instrument), any Stock Option which is otherwise exercisable by the Grantee
shall terminate unless exercised within one year of the date on which the
Grantee ceases to be an employee of the Company (or within such other period of
time as may be specified in the Grant Instrument), but in any event no later
than the date of expiration of the option term. Any of the Grantee's Stock
Options which are not otherwise exercisable as of the date on which the Grantee
ceases to be an Employee or Consultant shall terminate as of such date.
(v) For purposes of this Section 5(f), the term "Company" shall include the
Company's subsidiaries and the following terms shall be defined as follows: (A)
"disability" shall mean a Grantee's becoming disabled within the meaning of
section 22(e)(3) of the Code and (B) "termination for cause" shall mean, except
to the extent otherwise provided in a Grantee's Grant Instrument, a finding by
the Committee, after full consideration of the facts presented on behalf of both
the Company and the Grantee, that the Grantee has breached his or her employment
or service contract with the Company, or has been engaged in disloyalty to the
Company, including, without limitation, fraud, embezzlement, theft, commission
of a felony or proven dishonesty in the course of his or her employment or
service, or has disclosed trade secrets or confidential information of the
Company. In such event, in addition to the immediate termination of the Stock
Option, the Grantee shall automatically forfeit all option shares for any
exercised portion of a Stock Option for which the Company has not yet delivered
the share certificates upon refund by the Company of the option price.
(g) SATISFACTION OF OPTION PRICE. The Grantee shall pay the option price
specified in the Grant Instrument in (i) cash, (ii) with the approval of the
Committee, by delivering shares of Company Stock owned by the Grantee (including
Company Stock acquired in connection with the exercise of a Stock Option,
subject to such restrictions as the Committee deems appropriate) and having a
Fair Market Value on the date of exercise equal to the option price or (iii)
through any combination of (i) and (ii). The Grantee shall pay the option price
and the amount of withholding tax due, if any, at the time of exercise. Shares
of Company Stock shall not be issued or transferred upon exercise of a Stock
Option until the option price is fully paid and any required withholding is
made.
(h) ELECTION TO WITHHOLD SHARES. Grantees may make an election to satisfy
the Company income tax withholding obligation with respect to a Stock Option by
having shares withheld up to an amount that does not exceed the Grantee's
maximum marginal tax rate for federal (including FICA), state and local tax
liabilities. Such election must be in the form and manner prescribed by the
Committee.
(i) LIMITS ON INCENTIVE STOCK OPTIONS. Each Incentive Stock Option shall
provide that, to the extent that the aggregate Fair Market Value of the Company
Stock on the date of the grant with respect to which Incentive Stock Options are
exercisable for the first time by a Grantee during any calendar year under the
Plan or any other stock option plan of the Company exceeds $100,000, then such
option as to the excess shall be treated as a Nonqualified Stock Option. An
Incentive Stock Option shall not be granted to any participant who is not an
Employee of the Company or any "subsidiary" within the meaning of section 424(f)
of the Code. An Incentive Stock Option shall not be granted to any Employee who,
at the time of grant, owns stock possessing more than 10 percent of the total
combined voting power of all classes of stock of the Company or any "parent" or
"subsidiary" of the Company within the meaning of section 424(e) and (f) of the
Code, unless the option price per share is not less than 110% of
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the Fair Market Value of Company Stock on the date of grant and the option
exercise period is not more than five years from the date of grant.
6. FORMULA OPTION GRANTS TO NON-EMPLOYEE DIRECTORS
A Non-Employee Director shall be entitled to receive Nonqualified Stock
Options in accordance with this Section 6.
(a) INITIAL GRANT. Each Non-Employee Director who is a member of the Board
on the effective date of this Plan (as specified in Section 20) will receive a
grant of a Nonqualified Stock Option to purchase 10,000 shares of Company Stock
as of such date. Each Non-Employee Director who first becomes a member of the
Board after the effective date of this Plan (as specified in Section 20), will
receive a grant of a Nonqualified Stock Option to purchase 10,000 shares
immediately upon the date he or she becomes a member of the Board.
(b) ANNUAL GRANTS. On each date that the Company holds its annual meeting of
shareholders, commencing with the 1996 calendar year, each Non-Employee Director
in office both immediately before and after the annual election of directors
will receive a grant of a Nonqualified Stock Option to purchase 2,500 shares of
Company Stock. The date of grant of such annual Grants shall be the date of such
annual meeting of shareholders.
(c) OPTION PRICE. The purchase price per share of Company Stock subject to a
Stock Option granted under this Section 6 shall be equal to the Fair Market
Value of a share of Company Stock on the date of grant; provided that the
purchase price for the initial grant provided in Section 6(a) hereof to Non-
Employee Directors who are members of the Board on the effective date of the
Plan (as specified in Section 20) shall be equal to the initial public offering
price of Company Stock.
(d) OPTION TERM. The term of each Stock Option granted pursuant to this
Section 6 shall be five years.
(e) EXERCISABILITY. Options granted under this Section 6 shall be fully and
immediately exercisable upon the date of grant.
(f) ADMINISTRATION. The provisions of this Section 6 are intended to operate
automatically and not require administration. However, to the extent that
administrative determinations are required, the provisions of this Section 6
shall be made by the members of the Board who are not eligible to receive grants
under this Section 6, but in no event shall such determinations affect the
eligibility of Grantees, the determination of the exercise price, the timing of
the grants or the number of shares subject to Stock Options granted hereunder.
(g) APPLICABILITY OF PLAN PROVISIONS. Except as otherwise provided in, and
not inconsistent with, this Section 6, the Nonqualified Stock Options granted to
Non-Employee Directors shall be subject to the provisions of this Plan
applicable to Nonqualified Stock Options granted to other persons.
7. RESTRICTED STOCK GRANTS
The Committee may issue or transfer shares of Company Stock to an Employee
under a Grant (a "Restricted Stock Grant"), upon such terms as the Committee
deems appropriate. The following provisions are applicable to Restricted Stock
Grants:
(a) GENERAL REQUIREMENTS. Shares of Company Stock issued pursuant to
Restricted Stock Grants may be issued for cash consideration or for no cash
consideration, at the sole discretion of the Committee. The Committee shall
establish conditions under which restrictions on the transfer of shares of
Company Stock shall lapse over a period of time or according to such other
criteria as the Committee deems appropriate. The period of years during which
the Restricted Stock Grant will remain subject to restrictions will be
designated in the Grant Instrument as the "Restriction Period."
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(b) NUMBER OF SHARES. The Committee shall grant to each Grantee a number
of shares of Company Stock pursuant to a Restricted Stock Grant in such
manner as the Committee determines.
(c) TERMINATION OF EMPLOYMENT OR SERVICES. If the Grantee's employment or
service with the Company terminates during a period designated in the Grant
Instrument as the Restriction Period, or if other specified conditions are
not met, the Restricted Stock Grant shall terminate as to all shares covered
by the Grant as to which restrictions on transfer have not lapsed, and those
shares of Company Stock must be immediately returned to the Company. The
Committee may, however, provide for complete or partial exceptions to this
requirement as it deems equitable.
(d) RESTRICTIONS ON TRANSFER AND LEGEND ON STOCK CERTIFICATE. During the
Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the shares of Company Stock to which such Restriction
Period applies except to a Successor Grantee under Section 10. Each
certificate for a share issued or transferred under a Restricted Stock Grant
shall contain a legend giving appropriate notice of the restrictions in the
Grant. The Grantee shall be entitled to have the legend removed from the
stock certificate or certificates covering any of the shares subject to
restrictions when all restrictions on such shares have lapsed.
(e) RIGHT TO VOTE AND TO RECEIVE DIVIDENDS. During the Restriction
Period, unless the Committee determines otherwise, the Grantee shall have
the right to vote shares subject to the Restricted Stock Grant and to
receive any dividends paid on such shares, subject to such restrictions as
the Committee deems appropriate.
(f) LAPSE OF RESTRICTIONS. All restrictions imposed under the Restricted
Stock Grant shall lapse upon the expiration of the applicable Restriction
Period and the satisfaction of any conditions imposed by the Committee. The
Committee may determine, as to any or all Restricted Stock Grants, that all
the restrictions shall lapse without regard to any Restriction Period. All
restrictions under all outstanding Restricted Stock Grants shall
automatically and immediately lapse upon a Change of Control, unless the
Committee determines otherwise.
(g) ELECTION TO WITHHOLD SHARES. Grantees may make an election to satisfy
the Company's income tax withholding obligation with respect to a Restricted
Stock Grant by having shares withheld up to an amount that does not exceed
the participant's maximum marginal tax rate for federal (including FICA),
state and local tax liabilities. Such election must be in the form and manner
prescribed by the Committee.
8. STOCK APPRECIATION RIGHTS
(a) GENERAL REQUIREMENTS. The Committee may grant stock appreciation
rights ("SARs") to any Grantee in tandem with any Stock Option, for all or a
portion of the applicable Stock Option, either at the time the Stock Option
is granted or at any time thereafter while the Stock Option remains
outstanding; provided, however, that in the case of an Incentive Stock
Option, such rights may be granted only at the time of the Grant of such
Stock Option. Unless the Committee determines otherwise, the base price of
each SAR shall be equal to the greater of (i) the exercise price of the
related Stock Option or (ii) the Fair Market Value of a share of Company
Stock as of the date of Grant of such SAR. An SAR is exercisable only during
the period when the Stock Option to which it is related is also exercisable.
(b) NUMBER OF SARs. The number of SARs granted to a Grantee which shall
be exercisable during any given period of time shall not exceed the number of
shares of Company Stock which the Grantee may purchase upon the exercise of
the related Stock Option during such period of time. Upon the exercise of a
Stock Option, the SARs relating to the Company Stock covered by such Stock
Option shall terminate. Upon the exercise of SARs, the related Stock Option
shall terminate to the extent of an equal number of shares of Company Stock.
(c) VALUE OF SARs. Upon a Grantee's exercise of some or all of the
Grantee's SARs, the Grantee shall receive in settlement of such SARs an
amount equal to the value of the stock appreciation for the number of SARs
exercised, payable in cash, Company Stock or a combination thereof. The stock
appreciation for an SAR is the
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difference between the base price of the SAR as described in subsection (a)
and the Fair Market Value of the underlying Company Stock on the date of
exercise of such SAR.
(d) FORM OF PAYMENT. At the time of such exercise, the Grantee shall have
the right to elect the portion of the amount to be received that shall
consist of cash and the portion that shall consist of Common Stock, which for
purposes of calculating the number of shares of Company Stock to be received,
shall be valued at their Fair Market Value on the date of exercise of such
SARs. The Committee shall have the right to disapprove a Grantee's election
to receive cash in full or partial settlement of the SARs exercised and to
require that shares of Company Stock be delivered in lieu of cash. If shares
of Company Stock are to be received upon exercise of an SAR, cash shall be
delivered in lieu of any fractional share.
9. PERFORMANCE UNITS
(a) GENERAL REQUIREMENTS. The Committee may grant performance units
("Performance Units") to any Grantee. Each Performance Unit shall represent
the right of a Grantee to receive an amount equal to the value of the
Performance Unit, determined in the manner established by the Committee at
the time of grant.
(b) PERFORMANCE PERIOD. At the time of grant of each Performance Unit,
the Committee shall establish a performance period during which performance
shall be measured ("Performance Period"). There may be more than one grant in
existence at any one time, and Performance Periods may differ.
(c) PERFORMANCE GOALS. Prior to the beginning of a Performance Period,
the Committee shall establish in writing performance goals for the Company
and its various operating units ("Performance Goals"). The Performance Goals
will be comprised of specified annual levels of one or more performance
criteria as the Committee may deem appropriate such as: earnings per share,
net earnings, operating earnings, unit volume, net sales, market share,
balance sheet measurements, cash return on assets, shareholder return, or
return on capital. The Committee may disregard or offset the effect of any
special charges or gains or cumulative effect of a change in accounting in
determining the attainment of Performance Goals. Awards of Performance Units
may also be payable when Company performance, as measured by one or more of
the above criteria, as compared to peer companies, meets or exceeds an
objective target established by the Committee.
(d) PERFORMANCE MEASURES. Performance Units shall be granted to a Grantee
contingent upon the attainment of Performance Goals in accordance with Section
9(c).
(e) PERFORMANCE UNIT VALUE. Each Performance Unit shall have a maximum
dollar value established by the Committee at the time of the of the grant.
Performance Units earned will be determined by the Committee in respect of a
Performance Period in relation to the degree of attainment of Performance Goals.
The measure of a Performance Unit may, in the Committee's discretion, be equal
to the Fair Market Value of a share of Company Stock.
(f) GRANT CRITERIA. In determining the number of Performance Units to be
granted to any Grantee, the Committee shall take into account the Grantee's
responsibility level, performance, potential, cash compensation level, other
incentive awards, and such other considerations as it deems appropriate.
(g) ANNOUNCEMENT OF GRANTS. The Committee shall certify and announce the
results for each Performance Period to all Grantees immediately following the
announcement of the Company's financial results for the Performance Period and
the filing of its Form 10-K, normally within 90 days following the end of such
Performance Period.
(h) PAYMENT. Following the end of a Performance Period, a Grantee holding
Performance Units will be entitled to receive payment of an amount, not
exceeding the maximum value of the Performance Units, based on the achievement
of the Performance Goals for such Performance Period, as determined by the
Committee. Payment
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of Performance Units shall be made in cash, except that, in the discretion of
the Committee, Performance Units which are measured using Company Stock may
be paid in shares of Company Stock. Payment shall be made in a lump sum or in
installments and shall be subject to such other terms and conditions as shall
be determined by the Committee.
(i) TERMINATION OF EMPLOYMENT OR SERVICES AND CHANGE IN CONTROL.
(i) A Performance Unit Grant shall terminate for all purposes if
the Grantee does not remain continuously in the employ or service of the
Company at all times during the applicable Performance Period, except as may
otherwise be determined by the Committee, provided that in the event the
Grantee terminates employment with the Company within 12 months following a
Change of Control, a percentage of the Performance Unit payments, if any, for
the full Performance Period in which the Grantee so terminates equal to the
percentage of the Performance Period during which the Grantee was in the
employ or service of the Company and all amounts for the prior Performance
Period, if not then distributed, shall be distributed to such Grantee in a
lump sum.
(ii) In the event that a Grantee holding a Performance Unit
terminates employment with or ceases to provide services to the Company
following the end of the applicable Performance Period, but prior to full
payment according to the terms of the Performance Unit award, payment shall
be made in accordance with the terms established by the Committee for the
payment of such Performance Unit.
10. TRANSFERABILITY OF GRANTS
Only the Grantee or his or her authorized representative may exercise
rights under a Grant. Such persons may not transfer those rights except by
will or by the laws of descent and distribution or, with respect to Grants
other than Incentive Stock Options, if permitted in any specific case by the
Committee in its sole discretion, pursuant to a qualified domestic relations
order as defined under the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended or the regulations thereunder . When a
Grantee dies, the representative or other person entitled to succeed to the
rights of the Grantee ("Successor Grantee") may exercise such rights. A
Successor Grantee must furnish proof satisfactory to the Company of his or
her right to receive the Grant under the Grantee's will or under the
applicable laws of descent and distribution. Notwithstanding the foregoing,
the Committee may provide, in a Grant Instrument, that a Grantee may transfer
Nonqualified Stock Options to his or her children, grandchildren or spouse or
to one or more trusts for the benefit of such family members or to
partnerships in which such family members are the only partners (a "Family
Transfer"), provided that the Grantee receives no consideration for a Family
Transfer and the Grant Instruments relating to Nonqualified Stock Options
transferred in a Family Transfer continue to be subject to the same terms and
conditions that were applicable to such Nonqualified Stock Options
immediately prior to the Family Transfer.
11. CHANGE OF CONTROL OF THE COMPANY
As used herein, a "Change of Control" shall be deemed to have occurred if:
(a) A liquidation or dissolution of the Company (excluding transfers to
subsidiaries) or the sale of all or substantially all of the Company's
assets occurs;
(b) As a result of a tender offer, stock purchase, other stock
acquisition, merger, consolidation, recapitalization, reverse split or sale
or transfer of assets, any person or group (as such terms are used in and
under Section 13(d)(3) or 14(d)(2) of the Exchange Act) becomes the
beneficial owner (as defined in Rule 13-d under the Exchange Act), directly
or indirectly, of securities of the Company representing more than 40% of
the common stock of the Company or the combined voting power of the
Company's then outstanding securities; provided, however, that for purposes
of this subsection 11(b), a person or group shall not include the Company or
any subsidiary or any employee benefit plan (or related trust) sponsored or
maintained by the Company or any subsidiary, or Marvin I. Weinberger, any
affiliate of Marvin I. Weinberger or any holders of the Class B Common Stock
of the Company;
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(c) If at least a majority of the Board at any time does not consist of
individuals who were elected, or nominated for election, by directors in
office at the time of such election or nomination; or
(d) The Company merges or consolidates with any other corporation (other
than a wholly owned subsidiary) and is not the surviving corporation (or
survives only as a subsidiary of another corporation).
12. CONSEQUENCES OF A CHANGE OF CONTROL
(a) NOTICE.
(i) If a Change of Control described in Section 11(a), (b) or (d)
will occur, then, not later than 10 days after the approval by the
shareholders of the Company (or approval by the Board, if shareholder action
is not required) of such Change of Control, the Company shall give each
Grantee with any outstanding Stock Options or SARs written notice of such
proposed Change of Control.
(ii) If a Change of Control described in Section 11(b) may occur
without approval by the shareholders (or approval by the Board) and does so
occur, or if a Change of Control described in Section 11(c) occurs, then, not
later than 10 days after such Change of Control, the Company shall give each
Optionee with any outstanding Stock Options or SARs written notice of the
Change of Control.
(b) ELECTION PERIOD. In connection with the Change of Control and
effective only upon such Change of Control, each Grantee shall thereupon have
the right, within 90 days after such written notice is sent by the Company
(the "Election Period"), to make an election as described in Subsection (c)
with respect to all of his or her outstanding Stock Options or SARs (whether
the right to exercise such Stock Options or SARs has then accrued or the
right to exercise such Stock Options or SARs will accrue or has accrued upon
the Change of Control).
(c) ELECTION RIGHT. During the Election Period, each Grantee shall have the
right to elect to exercise in full any installments of such Stock Options or
SARs not previously exercised.
(d) TERMINATION OF STOCK OPTIONS. If a Grantee does not make a timely
election in accordance with Subsection (c) in connection with a Change of
Control where the Company is not the surviving corporation (or survives only as
a subsidiary of another corporation), the Grantee's Stock Options or SARs shall
terminate as of the Change of Control. Notwithstanding the foregoing, a Stock
Option or SAR will not terminate if assumed by the surviving or acquiring
corporation, or its parent, upon a merger or consolidation and, with respect to
an Incentive Stock Option, the assumption of the Stock Option occurs under
circumstances which are not deemed a modification of the Stock Option within the
meaning of sections 424(a) and 424(h)(3)(A) of the Code.
(e) ACCOUNTING AND TAX LIMITATIONS. Notwithstanding the foregoing,
(i) if the right described in Subsection (c) in connection with SARs
would make the applicable Change of Control ineligible for pooling of
interests accounting treatment or make such Change of Control ineligible for
desired tax treatment with respect to such Change of Control and, but for
those provisions, the Change of Control would otherwise qualify for such
treatment, the Grantee shall receive shares of Company Stock with a Fair
Market Value equal to the cash that would otherwise be payable pursuant to
Subsection (c) in substitution for the cash, and
(ii) if the termination of the Stock Options described in Subsection
(d) would make the applicable Change of Control ineligible for pooling of
interests accounting treatment and, but for such provision, the Change of
Control would otherwise qualify for such treatment, each affected Grantee
shall receive a replacement or substitute stock option issued by the
surviving or acquiring corporation.
A-9
<PAGE>
13. AMENDMENT AND TERMINATION OF THE PLAN
(a) AMENDMENT. The Board may amend or terminate the Plan at any time;
provided, however, that any amendment that increases the aggregate number (or
individual limit for any single Grantee) of shares of Company Stock that may be
issued or transferred under the Plan (other than by operation of Section 3(b)),
or modifies the requirements as to eligibility for participation in the Plan,
shall be subject to approval by the shareholders of the Company and provided,
further, that the Board shall not amend the Plan without shareholder approval if
such approval is required by Section 162(m) of the Code.
(b) TERMINATION OF PLAN. The Plan shall terminate on the day immediately
preceding the tenth anniversary of its effective date unless terminated earlier
by the Board or unless extended by the Board with the approval of the
shareholders.
(c) TERMINATION AND AMENDMENT OF OUTSTANDING GRANTS. A termination or
amendment of the Plan that occurs after a Grant is made shall not materially
impair the rights of a Grantee unless the Grantee consents or unless the
Committee acts under Section 21(b) hereof. The termination of the Plan shall not
impair the power and authority of the Committee with respect to an outstanding
Grant. Whether or not the Plan has terminated, an outstanding Grant may be
terminated or amended under Section 21(b) hereof or may be amended by agreement
of the Company and the Grantee consistent with the Plan.
(d) GOVERNING DOCUMENT. The Plan shall be the controlling document. No
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
14. FUNDING OF THE PLAN
This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Grants under this Plan. In no event shall
interest be paid or accrued on any Grant, including unpaid installments of
Grants.
15. RIGHTS OF PARTICIPANTS
Except as provided in Section 6, nothing in this Plan shall entitle any
Employee, Consultant or other person to any claim or right to be granted a
Grant under this Plan. Neither this Plan nor any action taken hereunder shall
be construed as giving any individual any rights to be retained by or in the
employ of the Company or any other employment rights.
16. NO FRACTIONAL SHARES
No fractional shares of Company Stock shall be issued or delivered
pursuant to the Plan or any Grant. The Committee shall determine whether
cash, other awards or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.
17. WITHHOLDING OF TAXES
The Company shall have the right to deduct from all Grants paid in cash,
or from other wages paid to an employee of the Company, any federal, state or
local taxes required by law to be withheld with respect to such cash awards
and, in the case of Grants paid in Company Stock, the Grantee or other person
receiving such shares shall be required to pay to the Company the amount of
any such taxes which the Company is required to withhold with respect to such
Grants, or the Company shall have the right to deduct from other wages paid
to the employee by the Company the amount of any withholding due with respect
to such Grants.
A-10
<PAGE>
18. REQUIREMENTS FOR ISSUANCE OF SHARES
No Company Stock shall be issued or transferred in connection with any
Grant hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to
condition any Grant made to any Grantee hereunder on such Grantee's
undertaking in writing to comply with such restrictions on his or her
subsequent disposition of such shares of Company Stock as the Committee shall
deem necessary or advisable as a result of any applicable law, regulation or
official interpretation thereof, and certificates representing such shares
may be legended to reflect any such restrictions. Certificates representing
shares of Company Stock issued under the Plan will be subject to such
stop-transfer orders and other restrictions as may be applicable under such
laws, regulations and other obligations of the Company, including any
requirement that a legend or legends be placed thereon.
19. HEADINGS
Section headings are for reference only. In the event of a conflict between
a title and the content of a Section, the content of the Section shall control.
20. EFFECTIVE DATE OF THE PLAN.
This Plan became effective upon consummation of the initial public offering
of the Company Stock. The amendment and restatement of the Plan shall be
effective as of April 1, 1997, subject to shareholder approval.
21. MISCELLANEOUS
(a) SUBSTITUTE GRANTS. The Committee may make a Grant to an employee of
another corporation who becomes an Employee by reason of a corporate merger,
consolidation, acquisition of stock or property, reorganization or liquidation
involving the Company or any of its subsidiaries in substitution for a stock
option or restricted stock grant made by such corporation ("Substituted Stock
Incentives"). The terms and conditions of the substitute grant may vary from the
terms and conditions required by the Plan and from those of the Substituted
Stock Incentives. The Committee shall prescribe the provisions of the substitute
grants.
(b) COMPLIANCE WITH LAW. The Plan, the exercise of Stock Options and the
obligations of the Company to issue or transfer shares of Company Stock under
Grants shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. With respect to persons
subject to Section 16 of the Exchange Act, it is the intent of the Company that
the Plan and all transactions under the Plan comply with all applicable
provisions of Rule 16b-3 or its successors under the Exchange Act. The Committee
may revoke any Grant if it is contrary to law or modify a Grant to bring it into
compliance with any valid and mandatory government regulation. The Committee may
also adopt rules regarding the withholding of taxes on payments to Grantees. The
Committee may, in its sole discretion, agree to limit its authority under this
Section.
(c) OWNERSHIP OF STOCK. A Grantee or Successor Grantee shall have no rights
as a shareholder with respect to any shares of Company Stock covered by a Grant
until the shares are issued or transferred to the Grantee or Successor Grantee
on the stock transfer records of the Company.
(d) GOVERNING LAW. The validity, construction, interpretation and effect of
the Plan and Grant Instruments issued under the Plan shall exclusively be
governed by and determined in accordance with the law of the Commonwealth of
Pennsylvania.
A-11
<PAGE>
To Fellow Infonautics, Inc. Shareholders:
Here is your 1997 Infonautics, Inc. proxy card. Please read both sides of the
card and mark, sign, and date it. Then detach and return it promptly using the
enclosed envelope. We urge you to vote your shares.
You are invited to attend the Annual Meeting of Shareholders on Thursday, May
29, 1997, at 10:00a.m. at the Valley Forge Marriott Suites in Wayne,
Pennsylvania.
Your continuing interest in Infonautics, Inc. is appreciated.
Thank you in advance for voting.
Joshua M. Kopelman
Secretary
<PAGE>
PROXY
INFONAUTICS, INC.
900 West Valley Road, Suite 1000
Wayne, Pennsylvania 19087
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints JOSHUA M. KOPELMAN and VAN MORRIS, or either
of them acting singly in the absence of the other, each with the power to
appoint his substitute, the Proxy Agents of the undersigned to attend the
Annual Meeting of Shareholders of Infonautics, Inc. (the "Company") to be
held May 29, 1997, and any adjournments thereof, and with all powers the
undersigned would possess if personally present, to vote upon the following
matters as indicated on the reverse side.
(Continued and to be signed on reverse side.)
<PAGE>
Please Detach and Mail in the Envelope Provided
A / x / Please mark your
votes as in this
example
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of / / / / Nominees: Marvin I. Weinberger 2. Approval and Adoption of the / / / / / /
Directors Israel J. Melman Company's Amended and Restated
Howard L. Morgan 1996 Equity Compenstation Plan.
For, except vote witheld from the Lloyd N. Morrisett
following nominee(s) Barry Rubenstein 3. In their discretion, the Proxy Agents are authorized
Lester D. Wunderman to vote upon such other business as may properly
Michael Zisman come before the meeting.
- --------------------------------
This proxy when properly executed will be voted in the
manner directed herein by the undersigned shareholder.
If no direction is made, this proxy will be voted FOR
all nominees for election as the directors and FOR
proposal number 2. The undersigned hereby acknowledges
receipt of the Notice of the Annual Meeting of
Shareholders and the related Proxy Statement.
PLEASE MARK, SIGN AND DATE THIS PROXY CARD AND PROMPTLY
RETURN IT USING THE ENCLOSED ENVELOPE.
SIGNATURE(S)----------------------------------------------------- DATE-------------------- 1997
NOTE: Please sign exactly as your name appears hereon. When shares are held by joint tenants, both should sign. When signing as
an attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in
full corporate name by the President or other authorized officer. If a partnership, please sign in the partnership name
by an authorized person.
</TABLE>
