<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.)
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
IVI PUBLISHING, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
May 2, 1997
To Our Shareholders:
The Board of Directors of IVI Publishing, Inc. joins me in extending a
cordial invitation to attend our 1997 Annual Meeting of Shareholders. The
meeting will be held at The Marriott Southwest Hotel, Salon F-H, 5801 Opus
Parkway, Minnetonka, Minnesota 55343 on Thursday, May 22, 1997, at 3:30 p.m.,
local time.
In addition to voting on the matters described in the accompanying Proxy
Statement, we will review IVI's 1996 business and discuss our direction for the
coming years. After the formal business of the meeting, there will also be an
opportunity to discuss matters of interest to you as a shareholder.
It is important that your shares be represented at the meeting whether or
not you plan to attend in person. Therefore, please sign and return the
enclosed proxy in the envelope provided. If you do attend the meeting and
desire to vote in person, you may do so even though you have previously sent in
a proxy.
We hope that you will be able to attend the meeting, and we look forward to
seeing you.
Sincerely,
/s/ Joy A. Solomon
------------------------------
Joy A. Solomon
President and Chief Executive Officer
IVI PUBLISHING, INC.
Enclosures
<PAGE>
IVI PUBLISHING, INC.
7500 FLYING CLOUD DRIVE
EDEN PRAIRIE, MINNESOTA 55344
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 22, 1997
TO THE SHAREHOLDERS OF IVI PUBLISHING, INC.:
The Annual Meeting of Shareholders of IVI Publishing, Inc. will be held at
The Marriott Southwest Hotel, Salon F-H, 5801 Opus Parkway, Minnetonka,
Minnesota 55343 on Thursday, May 22, 1997, at 3:30 p.m., local time, for the
following purposes:
1. To set the number of directors to be elected at seven (7);
2. To elect members of the Board of Directors;
3. To ratify the appointment of Ernst & Young LLP as the independent
auditors for the Company for the year ending December 31, 1997;
4. To amend the Director Option Plan to: (i) increase the number of
shares for issuance under the Plan to an aggregate of 300,000
shares of Common Stock, (ii) increase the number of
shares granted to new Non-Employee Directors to 25,000 shares of
Common Stock (iii) increase the annual option grant to all
Non-Employee Directors to 5,000 shares of Common Stock and (iv)
to permit the Board, from time to time, to grant special options
to Non-Employee Directors outside of the formula provision of the
plan; and
5. To transact such other business as may properly come before the
Annual Meeting or any adjournments or postponements thereof.
Shareholders of record on March 27, 1997, will be entitled to vote at the
Annual Meeting or any adjournments thereof.
YOUR VOTE IS IMPORTANT. YOU ARE REQUESTED TO READ CAREFULLY THE ATTACHED
PROXY STATEMENT. YOU ARE URGED TO SIGN AND RETURN THE ENCLOSED CARD
AUTHORIZING CHARLES A. NICKOLOFF AND JOY A. SOLOMON, OFFICERS OF THE COMPANY, TO
VOTE FOR YOU AT THE MEETING.
By Order of the Board of Directors
IVI Publishing, Inc.
/s/ Joy A. Solomon
------------------------------
Joy A. Solomon
President and Chief Executive Officer
Eden Prairie, Minnesota
April 30, 1997
<PAGE>
PROXY STATEMENT
OF
IVI PUBLISHING, INC.
7500 FLYING CLOUD DRIVE
EDEN PRAIRIE, MINNESOTA 55344
------------------------------
ANNUAL MEETING OF SHAREHOLDERS
MAY 22, 1997
------------------------------
PROXIES AND VOTING
This Proxy Statement and the accompanying form of proxy are furnished in
connection with the solicitation of proxies by the Board of Directors of IVI
Publishing, Inc. (the "Company") to be used at the Annual Meeting of the
shareholders of the Company to be held at 3:30 p.m., local time, on May 22,
1997, at The Marriott Southwest Hotel, Salon F-H, 5801 Opus Parkway, Minnetonka,
Minnesota 55343. The meeting has been called for the purposes set forth in the
accompanying Notice of Annual Meeting.
Each shareholder who signs and returns a proxy in the form enclosed with
this Proxy Statement may revoke the same at any time prior to its use by giving
notice of such revocation to the Company in writing or at the meeting. Unless
so revoked, the shares represented by each proxy will be voted at the Annual
Meeting and at any adjournment thereof. Presence at the Annual Meeting of a
shareholder who has signed a proxy does not alone revoke that proxy. This Proxy
Statement and the accompanying proxy were first mailed to shareholders on or
about May 2, 1997.
Only shareholders of record as of the close of business on March 27, 1997,
will be entitled to vote at the Annual Meeting. As of the Record Date (the
"Record Date"), the Company had outstanding 7,662,850 shares of Common Stock,
$.01 par value ("Common Stock").
Holders of Common Stock of record on the Record Date, voting together as a
single class, will be entitled to one vote per share on (1) setting the number
of directors, (2) the election of directors, (3) the ratification of the
appointment of the independent auditors, (4) amending the Director Option Plan
and (5) all other business properly presented at the meeting.
Proxies which are signed by shareholders but which lack any specification
will be voted in favor of the proposals set forth in the Notice of Annual
Meeting and in favor of the slate of directors proposed by the Board of
Directors and listed herein. Abstentions are treated as being present and,
because the affirmative vote of a majority of the shares of Common Stock present
and entitled to vote on a particular proposal is necessary for adoption of such
proposal, the effect of an abstention is a vote against the proposal. If a
broker returns a "non-vote" proxy, indicating a lack of voting instructions by
the beneficial holder and a lack of discretionary authority on the part of the
broker to vote on a particular matter, then the shares covered by such non-vote
shall be deemed present at the Annual Meeting for purposes of determining a
quorum but shall not be deemed to be represented at the Annual Meeting for
purposes of calculating the vote with respect to such matters.
<PAGE>
PRINCIPAL SHAREHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of March 27, 1997, by (i)
each person known to the Company to own beneficially more than 5% of the
Company's Common Stock, (ii) each executive officer named in the Summary
Compensation Table, (iii) each director of the Company, and (iv) all directors
and executive officers as a group. As of March 27, 1997, there were 7,662,850
outstanding shares of Common Stock.
<TABLE>
<CAPTION>
Name of 5% Shareholder (1), Number of shares Percentage of
Executive Officer or Director Beneficially owned (2) (3) Class
---------------------------- -------------------------- -------------
<S> <C> <C>
Perkins Capital Management, Inc. 819,439 (4) 10.28%
Medical Innovation Partners and Affiliates 764,908 (5) 9.79
Frazier Management, L.L.C. 637,957 (6) 8.00
Mayo Foundation for Medical Education and Research 490,000 6.39
Wayne William Mills 473,750 (7) 6.13
Ronald E. Eibensteiner 277,731 (8) 3.60
Alan D. Frazier 637,957 (6) 8.00
Timothy I. Maudlin 715,408 (9) 9.15
Joy A. Solomon 139,903 (10) 1.79
Ronald G. Buck 80,000 (11) 1.04
Charles A. Nickoloff 63,750 (12) *
Timothy J. Walsh 38,269 (13) *
Nicholas C. Bluhm 20,000 (14) *
Michael A. Brochu --- ---
All Directors and Executive Officers as a Group
(8 persons) 1,757,166 (15) 20.95
</TABLE>
* Less than one percent.
(1) The address of Perkins Capital Management, Inc. is 730 East Lake Street,
Wayzata, Minnesota 55391. The address of Medical Innovation Partners, its
affiliates identified in footnote (5) below and Mr. Maudlin is 421 Opus
Center, 9900 Bren Road East, Minneapolis, Minnesota 55343. The address of
Frazier Management, L.L.C., its affiliates identified in footnote (6) below
and Mr. Frazier is Two Union Square, 601 Union Street, Suite 2110, Seattle,
Washington 98101. The address of Mayo Foundation for Medical Education and
Research is 200 First Street S.W., Rochester, Minnesota 55905. The address
of Mr. Mills is 5500 Wayzata Blvd., Suite 290, Minneapolis, Minnesota
55416.
(2) Each shareholder possesses sole voting and investment power with respect to
the shares listed, except as otherwise indicated. The Company has relied on
information provided to it through Schedule 13 and other SEC filings and
other available information.
(3) Under the rules of the Securities and Exchange Commission, shares not
actually outstanding are nevertheless deemed to be beneficially owned by a
person if such person has the right to acquire the shares within 60 days.
Pursuant to such SEC rules, shares deemed beneficially owned by virtue of a
person's right to acquire them are also treated as outstanding when
calculating the percent of class owned by such person and when determining
the percentage owned by a group. As of March 27, 1997, AT&T Corporation had
outstanding warrants to purchase up to 20% of the outstanding common shares
of the Company at $14.00 per share, but because these warrants were not
exercised by AT&T and expired on March 31, 1997, they have been omitted
from this table.
(4) Includes 225,000 shares that may be acquired by Perkins Capital Management,
Inc. ("Perkins Capital") upon conversion of a 9% Convertible Subordinated
Debenture and 80,000 shares that may be acquired by Pyramid Partners, L.P.
of which Perkins Capital is the general partner upon conversion of a 9%
Convertible Subordinated Debenture. Perkins Capital has sole voting power
over 192,450 shares and sole dispositive power over 819,439 shares.
(5) Includes 387,376 shares owned by Medical Innovation Fund ("MIF"), 83,784
shares subject to currently exercisable warrants held by MIF, 135,853
shares owned by Medical Innovation Fund II ("MIF II"), 909 shares owned
by Medical Innovation Capital L.P. ("MICI L.P."), 29,500 shares owned by
Mark B. Knudson, Ph.D. and members of his immediate family, 14,548 shares
owned by Timothy I. Maudlin, 6,250 shares pursuant to an exercisable
option, subject to shareholder approval of Proposal 4; 16,550 shares
owned by his wife, 8,600 shares owned by their children, 20,000 shares
owned by Anne H. Nickoloff, wife of Robert S. Nickoloff and 61,538 shares
that may be acquired by Medical Innovation Partners ("MIP") upon
conversion of a 9% Convertible Subordinated Debenture. Pursuant to a
management agreement between MIF and Medical Innovation Capital, Inc.
("MICI"), MICI manages the assets of MIF. MICI's principal shareholders
are Timothy I. Maudlin, Robert S. Nickoloff, and Mark B. Knudson, Ph.D.
Investment and voting with respect to the securities holdings of MIF are
made on the basis of recommendations by the general partners of MIP, the
General Partner of MIF. Mr. Maudlin is Managing General Partner of MIP,
Mr. Robert S. Nickoloff is the other General Partner of MIP and Mr.
Knudson is a Limited Partner of MIP.
MIF II is managed pursuant to an agreement with KMN, Inc., which is owned
by Messrs. Knudson, Maudlin and Robert S. Nickoloff. Investment and voting
decisions with respect to the securities holdings of MIF II are made on the
basis of recommendation by the general partners of Medical Innovation
Partners II ("MIP II"). Mr. Maudlin is the Managing General Partner, Mr.
Knudson is the Managing Venture General Partner and Mr. Nickoloff is
General Partner of MIP II.
Mr. Robert S. Nickoloff is the father of Charles A. Nickoloff, an executive
officer of the Company. Frank Solomon, a limited partner of MIF II, is the
husband of Joy A. Solomon, the Chief Executive Officer of the Company.
(6) Consists of 304,348 shares held by Frazier Healthcare Investments, L.P.,
224,349 shares subject to currently exercisable warrants, 76,923 shares
that may be acquired upon conversion of a 9% Convertible Subordinated
Debenture held by Frazier & Company, L.P. and 26,087 shares held by
Frazier & Company, L.P., and 6,250 shares pursuant to an exercisable
option, subject to shareholder approval of Proposal 4, by Mr. Frazier.
Mr. Frazier is the sole stockholder of Frazier & Company, Inc. which is
(i) the managing member of Frazier Management, L.L.C., (ii) the managing
member of Frazier & Company, L.P., (iii) the general partner of Frazier
Healthcare Management, L.P. and (iv) the general partner of Frazier
Healthcare Investments, L.P. As such, Mr. Frazier may be deemed to share
voting and investment power with respect to such shares. Mr. Frazier
disclaims beneficial ownership of such shares except to the extent of his
pecuniary interest in such shares arising from his interest in the
entities referred to herein.
(7) Includes 350,000 shares in the name of Wayne William Mills, 70,000 shares
that may be acquired upon conversion of a 9% Convertible Subordinated
Debenture, 1,750 shares issuable upon the exercise of a warrant and 52,000
shares in the name of Tamara Kottom-Mills, his spouse. Mr. Mills shares
voting and dispositive power with respect to 422,000 shares and has sole
voting and dispositive power with respect to 51,750 shares.
(8) Includes 11,217 shares issuable upon the exercise of a warrant, 13,750
shares subject to exercisable options and 30,769 shares that may be
acquired upon conversion of a 9% Convertible Subordinated Debenture.
Mr. Eibensteiner is a limited partner of MIP II, which is a general
partner of MIF II, which owns 135,853 shares. Although such shares are
included in Mr. Eibensteiner's holdings, Mr. Eibensteiner disclaims
beneficial ownership of such shares. Included as part of the 13,750 shares
subject to exercisable options are 12,500 shares subject to shareholder
approval of Proposal 4. Upon such approval, these shares vest immediately.
(9) Consists of all shares and warrants beneficially owned by Medical
Innovation Partners and affiliates, excluding the holdings of Mark B.
Knudson, his family and the holdings of Anne H. Nickoloff, 14,548 shares
owned beneficially by Mr. Maudlin, 6,250 shares pursuant to an exercisable
option, subject to shareholder approval of Proposal 4, and 25,150 shares
owned by Mr. Maudlin's immediate family. Mr. Maudlin is the Managing
General Partner of MIF and MIF II. As such, Mr. Maudlin may be deemed to
share voting and investment power with respect to such shares. Mr. Maudlin
disclaims beneficial ownership of such shares and warrants beneficially
owned by MIP, MIF and MIF II except to the extent of his pecuniary
interest in such shares arising from his interest in the entities referred
to herein.
(10) Includes exercisable options to acquire 128,749 shares, 5,000 shares owned
by Ms. Solomon in an IRA and 6,154 shares that may be acquired upon
conversion of a 9% Convertible Subordinated Debenture.
(11) Represents direct ownership of 80,000 shares, based on available
information to the Company through January 1997. Mr. Buck resigned as
Chairman and Chief Executive Officer in August 1996 but continued as a
non-officer employee until December 31, 1996. All his options immediately
vested upon his resignation. As of March 31, 1997, Mr. Buck had
outstanding unexercised options to purchase shares of the Company's
Common Stock, but because all his unexercised options terminated on
March 31, 1997, these options are omitted from the table.
(12) Includes exercisable options to acquire 16,250 shares.
(13) Includes exercisable options to acquire 7,500 shares and 30,769 shares that
may be acquired upon conversion of a 9% Convertible Subordinated Debenture.
(14) Includes 20,000 shares that may be acquired upon conversion of a 9%
Convertible Subordinated Debenture.
(15) Includes 485,599 shares subject to stock options and warrants currently
exercisable or exercisable within 60 days after March 27, 1997, and 226,154
shares that may be acquired upon conversion of 9% Convertible Subordinated
Debentures.
<PAGE>
DETERMINATION OF NUMBER AND ELECTION OF DIRECTORS
PROPOSALS NO. 1 AND NO. 2
The Bylaws of the Company provide that the number of directors to be
elected shall be determined by the shareholders. The Board of Directors
recommends that the number of directors to be elected at the 1997 Annual
Meeting be set at seven (7). Subject to approval by the shareholders of that
recommendation, seven (7) directors will be elected at the Annual Meeting,
each to serve until the next Annual Meeting of Shareholders and/or until a
successor has been duly elected and qualified.
NOMINEES FOR ELECTION
Except where authority has been withheld by a shareholder, the enclosed
proxy will be voted for the election of the seven nominees named below to the
Company's Board of Directors for a term of one year and/or until their
successors are duly elected and qualified. All nominees listed below are
currently serving as directors. The terms of all current directors will
expire at this Annual Meeting. In the event any one or more of the following
named nominees shall unexpectedly become unable to serve on the Board, votes
will be cast pursuant to authority granted by the enclosed proxy for such
person or persons as may be designated by the Board of Directors.
The following seven persons have been nominated by the Company's Board
of Directors for election as directors at this Annual Meeting:
Nicholas C. Bluhm Alan D. Frazier Joy A. Solomon
Michael A. Brochu Timothy I. Maudlin
Ronald E. Eibensteiner Charles A. Nickoloff
Mr. Ronald G. Buck, a duly-elected Director in May 1996, resigned from the
Board in August 1996 at the same time he stepped down as Chairman and CEO. The
Board of Directors regretfully accepted his resignation from the Board. Mr.
Maudlin was then elected Chairman and Ms. Solomon was appointed to the Board
upon Mr. Buck's departure. Mr. Bluhm and Mr. Brochu were appointed to the Board
in February 1997 and April 1997, respectively.
The Board of Directors unanimously recommends a vote FOR each nominee.
Under applicable Minnesota law, approval of the proposals to set the number
of directors at seven (7) and to elect the nominees to the Board of Directors
requires the affirmative vote of the holders of the greater of (1) a majority of
the voting power of the shares represented in person or by proxy at the Annual
Meeting with authority to vote on such matters, or (2) a majority of the voting
power of the minimum number of shares that would constitute a quorum for the
transaction of business at the Annual Meeting.
BUSINESS EXPERIENCE OF DIRECTORS
The following sets forth information concerning the nominees for
director, including their ages, principal occupations for at least the past
five years and directorships with other public corporations.
Nicholas C. Bluhm (45) was appointed to the Board in February 1997. He
has been President and CEO of OneLink Communications, Inc. since May 1996.
He has been President of Minneopa, Inc. since October 1990. Mr. Bluhm is
also a director of MCI International Gateways and MCI Overseas Gateways,
joint ventures between MCI Telecommunications and Minneopa, Inc.
Michael A. Brochu (43) was appointed to the Board in April 1997. He has
been President and COO of Sierra On-Line, Inc. since October 1995 and was CFO
and Executive Vice President from July 1994. Prior to joining Sierra
On-Line, Mr. Brochu served in the positions of Senior Vice President, CFO and
COO at Burlington Environmental from 1987 until July 1994.
Ronald E. Eibensteiner (46) has been a Director of the Company since
February 1991. He is an independent financial consultant and is President of
Wyncrest Capital, Inc., a corporation formed in January 1994 of which he is
the sole shareholder. Mr. Eibensteiner is also a director of OneLink
Communications, Inc., Reality Interactive, Inc. and Intranet Solutions, Inc.
Alan D. Frazier (45) has been a Director of the Company since January
1994 and has been a principal of Frazier and Company, L.P. since August 1991.
Mr. Frazier is a director of NeoPath, Inc., InControl, Inc. and Integrated
Medical Resources, Inc.
Timothy I. Maudlin (46) has been a Director of the Company since August
1991 and Chairman of the Board since August 1996. Mr. Maudlin has been
Managing Partner of Medical Innovation Partners, a medical venture capital
firm, since December 1988, and since 1982 he has been an officer of the
affiliated management company of Medical Innovation Partners. Mr. Maudlin is
a director of Curative Health Services, Inc.
Charles A. Nickoloff (36) is a founder of the Company and has been a Vice
President and Director since operations began in February 1991. The Board
appointed Mr. Nickoloff acting Chief Financial Officer in April 1996.
Joy A. Solomon (39) has been President and Chief Executive Officer since
August 1996, and prior to such time, held the positions of Chief Operating
Officer, Executive Vice President and Vice President, since joining the Company
in July 1992. Ms. Solomon was previously Vice President of Sales and Marketing
for Jostens, Inc.
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held a total of nine meetings and
acted by written unanimous actions five times during 1996. All directors
attended at least 75% of the meetings of the Board of Directors and any
committee on which such directors served during the period.
The Board of Directors has designated two standing committees. The Audit
Committee, consisting of Messrs. Eibensteiner and Maudlin, reviews the scope
of the work and fees of the Company's independent auditors and meets with the
Company's financial officers and independent auditors to review matters
concerning the Company's financial statements and internal controls. The
Audit Committee met two times during 1996. The Compensation and Stock Option
Committee, consisting of Messrs. Eibensteiner, Frazier and Maudlin, reviews
and determines the compensation, including base salary and bonus incentives
for the executive officers, awards nonqualified stock options and administers
and awards stock option grants under the Company's 1991 Stock Option Plan.
None of the Compensation and Stock Option Committee members is eligible for
grants under the plan. The Compensation and Stock Option Committee met four
times during 1996. The Company does not have a Nominating Committee.
COMPENSATION OF DIRECTORS
With one exception, the Company's directors receive no fees for
attendance at meetings of the Board of Directors, but they are reimbursed for
out-of-pocket expenses relating to their attendance. Mr. Brochu will be paid
an annual fee of $10,000 for his services as a director and will be
reimbursed for out-of-pocket expenses. The Company may provide cash
compensation to other outside directors in the future. The Company also has a
Director Option Plan and, upon shareholder approval of Proposal 4, the plan
will be amended ("the Amended Plan"). Under the current plan, each
Non-Employee Director, upon becoming a director, is granted options for
10,000 shares of Common Stock and thereafter receives options for an
additional 1,000 shares on March 1 of each year. As unanimously approved at
the September 1996 meeting of the Board and under the Amended Plan, each new
Non-Employee Director will be granted options for 25,000 shares of Common
Stock. In addition each Non-Employee Director will receive annual options
for 5,000 shares on March 1 of each year, effective March 1, 1997. The
exercise price for the options so granted is the fair market value of the
Company's Common Stock on the date of the grant. The options expire on the
tenth anniversary of the date of grant (or, on the fifth anniversary of such
grant, for any director who is a party to a partnership or other agreement
requiring a reduction in his compensation pursuant to such agreement based on
the value of the options granted under the Director Option Plan). The
exercise price for the grant of options to Non-Employee Directors on March 1,
1997, was $3.22. Messrs. Frazier and Maudlin each received a grant of options
for 25,000 shares with an exercise price of $2.88 per share in recognition of
their continued contributions to the development of the Company since its
inception, subject to shareholder approval of Proposal 4. Messrs. Frazier
and Maudlin have previously declined to accept their options, but have
accepted the 25,000 share grant and the annual grant under the formula
beginning in 1997. Mr. Eibensteiner received grants of options to purchase
10,000, 1,000 and 1,000 shares of Common Stock in March 1994, March 1995 and
March 1996, respectively. In recognition of his efforts to assist the
Company in its financing efforts, the Board awarded Mr. Eibensteiner a new
grant of 25,000 shares with an exercise price of $2.88 per share of Common
Stock, subject to shareholder approval of Proposal 4. In return, Mr.
Eibensteiner relinquished his original option grant of 10,000 shares of
Common Stock at $26 per share. Mr. Bluhm and Mr. Brochu both received the
stock option grant for new Non-Employee Directors at the time of their
election and Mr. Bluhm received the annual grant on March 1, 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Alan D. Frazier, a director of the Company, is a principal of Frazier &
Company, L.P. In 1996, the Company paid Frazier and Company, L.P. a total of
$25,000 for financial consulting services.
In June 1995, upon recommendation of the Compensation Committee of the
Board of Directors, the Company entered into an employment agreement with Mr.
Buck. As part of Mr. Buck's agreement, the Company loaned Mr. Buck $200,000
at an interest rate of prime plus 1%. The loan plus accrued interest was to
be repaid in June 1996, but a substantial amount remained outstanding on such
date. In August 1996, Mr. Buck tendered his resignation as President, CEO,
and as Chairman of the Board. As part of his separation agreement, Mr. Buck
and the Company agreed to freeze the interest on his loan as of August 1,
1996, and no further interest shall accrue. Imputed interest, if any, is Mr.
Buck's responsibility. The principal and interest balance Mr. Buck owes the
Company will be paid by Mr. Buck over the period from April 1997 to June 1998
through a set-off against compensation payments to be made to Mr. Buck as
part of the separation agreement. These compensation payments will continue
through June 13, 1998. (See "Employment Agreements.")
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to
compensation paid or accrued by the Company for the fiscal years ended
December 31, 1994, 1995 and 1996 to each person who served as the Company's
Chief Executive Officer during 1996 and the only other person who served as
an executive officer whose salary and bonus exceeded $100,000 in 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
------------
Annual Compensation Securities
Other Annual Underlying All Other
Name and ---------------------- Compensation Options Compensation
Principal Position Year Salary ($) Bonus ($) ($) (#) ($)
- ----------------------------------- ---- ---------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Joy A. Solomon (1) 1996 171,000 21,000 --- 180,000 ---
President and 1995 171,000 45,000 --- 60,000 1,000
Chief Executive Officer 1994 171,000 --- --- --- ---
Ronald G. Buck (2) 1996 194,000 --- --- 30,000 2,000(3)
Former Chairman 1995 194,000 --- --- 90,000 5,000
and Chief Executive Officer 1994 194,000 --- --- --- 2,000
Charles A. Nickoloff 1996 93,000 11,000 --- 25,000 ---
Vice President, Secretary and 1995 90,000 --- --- --- 350
Acting Chief Financial Officer 1994 90,000 --- --- --- 350
</TABLE>
(1) Joy A. Solomon was appointed Chief Executive Officer in August 1996. She was
previously President and COO.
(2) Ronald G. Buck was Chairman and Chief Executive Officer from 1991 until his
resignation in August 1996.
(3) Constitutes insurance premium paid by the Company with respect to life
insurance for the benefit of Mr. Buck.
STOCK OPTION GRANTS
The following table contains information concerning the grant of stock
options during the fiscal year ended December 31, 1996, to the executive
officers of the Company who are named on the Summary Compensation Table. The
Company has not granted any stock appreciation rights.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
% of Total Annual Rates of
Number of Options Granted Stock Price
Shares to Appreciation
Underlying Employees in for Option Term
Options Fiscal Exercise Expiration --------------------
Name Granted Year Price Date 5% 10%
- ----------------------------------- ----------- --------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Joy A. Solomon (1) 180,000 33% $ 2.75 8/7/06 $311,303 $788,903
Ronald G. Buck (2) 30,000 5% 13.13 1/22/06 247,722 627,775
Charles A. Nickoloff (3) 25,000 5% 3.06 8/1/06 48,110 121,921
</TABLE>
- ------------------------
(1) Certain of these options replace options granted in 1993, 1995 and 1996 (see
'Stock Option Repricing Table'). 25,000 shares vested immediately and an
additional 2,083.33 shares vest monthly beginning on September 7, 1996,
through the third anniversary date of the grant. An additional 25,000 shares
vest five years from the date of grant or on such date as the closing price
of the Company's Common Stock is at or above $5.00 per share for twenty
consecutive trading days, if earlier. An additional 55,000 shares vest five
years from the date of grant or on such date as the closing price of the
Company's Common Stock is at or above $7.00 per share for twenty consecutive
trading days, if earlier.
(2) Mr. Buck resigned from his position as Chairman and Chief Executive Officer
in August 1996. These options vested upon his resignation and any
unexercised options terminated on March 31, 1997.
(3) These options vest with respect to one-fourth of the underlying shares on
each of the date of grant and on the first, second, and third anniversary
dates of the grant.
STOCK OPTION HOLDINGS
The following table contains information concerning the number and value
of stock options held as of December 31, 1996, by the executive officers of
the Company named in the Summary Compensation Table. The value of
unexercised options is determined by the difference between the market value
of the Company's Common Stock at December 31, 1996, and the exercise price.
No options were exercised by the executive officers named in the Summary
Compensation Table during fiscal 1996. The Company has no outstanding stock
appreciation rights.
<PAGE>
FISCAL YEAR-END OPTION VALUES
Number of Shares
Underlying Unexercised Value of Unexercised
Options In-the-Money Options
at Fiscal Year End (#) at Fiscal Year End (1)
-------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---------------------- ----------- ------------- ----------- -------------
Joy A. Solomon 118,333 146,667 $14,583 $64,166
Ronald G. Buck (2) 336,000 --- 87,500 ---
Charles A. Nickoloff 16,250 18,750 781 2,344
(1) Based on $3.1875 per share, which was the last sale price of the Company's
Common Stock as reported on the Nasdaq National Market on December 31, 1996.
(2) Mr. Buck resigned as Chairman and Chief Executive Officer in August 1996.
His options immediately vested on resignation and any unexercised options
terminated on March 31, 1997.
COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation and Stock Option Committee are
Non-Employee Directors Messrs. Eibensteiner, Frazier and Maudlin. Mr.
Frazier is the managing partner of Frazier & Company L.P., an entity the
Company paid $25,000 in 1996 for financial consulting services.
STOCK OPTION REPRICING TABLE
<TABLE>
<CAPTION>
LENGTH OF
MARKET EXERCISE ORIGINAL
SECURITIES PRICE OF PRICE OF OPTION TERM
UNDERLYING NUMBER STOCK AT STOCK AT NEW REMAINING AT
OF OPTIONS REPRICED TIME OF TIME OF EXERCISE DATE OF
NAME AND POSITION DATE OR AMENDED REPRICING REPRICING PRICE REPRICING
- ----------------- --------- ------------------- ----------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Joy A. Solomon 8/7/96 20,000 $2.75 $14.50 $2.75 7.00 years
(Chief Executive Officer 8/7/96 40,000 2.75 17.75 2.75 7.25 years
and President) 8/7/96 40,000 2.75 13.13 2.75 9.30 years
8/7/96 30,000 2.75 7.00 2.75 8.75 years
</TABLE>
REPORT ON REPRICING OF OPTIONS
In connection with the promotion of Joy A. Solomon to the position of
Chief Executive Officer and election to the Board of Directors, the Company
entered into an Employment Agreement with Ms. Solomon on August 7, 1996.
Pursuant to the Agreement, the Company and Ms. Solomon agreed to (i) cancel
options to purchase an aggregate of 130,000 shares of the Company's Common
Stock ("Original Options"), which options were previously granted to Ms.
Solomon between July 1993 and January 1996 and had exercise prices ranging
between $7.00 and $17.75 per share, (ii) and grant options to purchase an
aggregate of 180,000 shares of the Company's Common Stock ("Replacement
Options") at $2.75 per share, the closing price reported on the Nasdaq
National Market on such date. The terms of the Replacement Options are set
forth in the table under "Option Grants During 1996 Fiscal Year."
The Compensation and Stock Option Committee granted the Replacement
Options to replace the Original Options in order to preserve an economic
incentive for continued commitment to the Company's success.
Ronald E. Eibensteiner
Alan D. Frazier
Timothy I. Maudlin
Compensation and Stock Option Committee
COMPLIANCE WITH BENEFICIAL OWNERSHIP REPORTING RULES
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors and persons who own more than 10% of a
registered class of the Company's equity securities to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission ("SEC"). Such officers, directors and shareholders are required
by SEC regulations to furnish the Company with copies of all such reports.
To the Company's knowledge, based solely on a review of copies of reports
filed with the SEC during 1996, all applicable Section 16(a) filing
requirements were complied with except that Mr. Bluhm's Form 3 was filed late.
<PAGE>
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
ON EXECUTIVE COMPENSATION
The Company's Compensation and Stock Option Committee (the "Compensation
Committee") is composed of the following three directors who are not
executive officers of the Company: Ronald E. Eibensteiner, Alan D. Frazier
and Timothy I. Maudlin. The Compensation Committee is authorized to review
compensation arrangements for the executive officers of the Company and to
administer the Company's 1991 Stock Option Plan (the "Option Plan"),
including the award of options granted under the Option Plan. None of the
members of the Compensation Committee has been or is eligible to receive
options under the Option Plan. A separate Director Option Plan ("Director
Plan") exists for Non-Employee Directors (See "Compensation of Directors" in
this Proxy Statement.)
The Committee has implemented a compensation program which it believes is
fair to the shareholders, uses a basic philosophy of keeping the compensation
mix weighted toward performance and is competitive in the Company's industry.
The goals of the Company's executive compensation program are to provide
compensation that will attract and retain the management talent required to
achieve Company goals and objectives, to reward performance which results in
achievement of Company goals and objectives and to encourage consistent,
long-term growth in shareholder value.
In determining compensation for executive officers of the Company during
1996, the Compensation Committee considered the following factors: (i) increased
visibility of the Company as an electronic publisher of health and medical
information for the consumer and professional medical markets, (ii) consummation
of agreements with online providers and CD-ROM retail and OEM distributors
consistent with the strategic goals of the Company, (iii) surveys of regional
and national compensation levels of executives in companies of comparable size
and development, (iv) necessity of maintaining salary differentials for
successful recruitment, (v) compensation packages available in the marketplace
to executive officers of comparable credentials in the electronic multimedia and
telecommunications industry, and (vi) the individual performance of each
executive officer in meeting corporate goals of sales, results of operations and
strategic objectives within his or her area of assigned responsibility.
The Company's executive officer compensation program includes three key
components: base salary, annual cash incentive compensation based on corporate
goals and objectives, and long-term incentive compensation in the form of
options to acquire Common Stock. In addition, executive officers are entitled
to participate in the Company's benefit plans such as the 401(k) Retirement, the
Employee Stock Purchase Plan and health, dental, life and disability insurance
plans generally available to other employees of the Company.
BASE SALARY
The salaries of the Company's executive officers were determined by the
Compensation Committee after considering the factors described above, together
with recommendations from the President and Chief Executive Officer (for the
executive officers other than herself) and other factors as deemed appropriate
by the Compensation Committee.
For 1996, the annual salaries for certain executive officers are set
forth in the Summary Compensation Table. The Compensation Committee believes
that the levels of compensation it has set for all executive officers are
consistent with the responsibilities currently assumed by its executive
officers. Salaries and incentive compensation are set to achieve targeted
financial results and make available to the Company strategic alliances to
ensure the Company's planned future development. The Committee periodically
monitors and reviews executive compensation levels in comparable companies.
<PAGE>
INCENTIVE COMPENSATION FOR 1996
The Company's 1996 Management Bonus Plan (the "Bonus Plan") was based on
reaching benchmarks in three areas: number of agreements with online service
providers with links to the Company's MAYO HEALTH O@SIS-SM- Web site, annual
net revenues and net profit (loss) for the year. The Bonus Plan was intended
to provide a direct cash incentive to executives and managers for the
achievement of corporate performance goals. No incentive is paid for the
achievement of individual performance goals unless certain levels of
corporate performance are achieved. Potential payouts were based on the
Company's financial objectives, approved by the Chief Executive Officer.
STOCK INCENTIVE
In 1996, the Compensation Committee awarded options for 180,000 shares to
Ms. Solomon, 30,000 shares to Mr. Buck and 25,000 shares to Mr. Nickoloff.
In considering the grants to Ms. Solomon, Mr. Buck and Mr. Nickoloff, the
Compensation Committee considered the importance of these executive officers
to the long-term success of the Company. Excluding the option grants to Ms.
Solomon and Messrs. Buck and Nickoloff, the Compensation Committee also made
option grants in August 1996 and October 1996 to 19 key employees and two
executive officers.
EMPLOYMENT AGREEMENTS
In August 1996, the Compensation Committee negotiated an employment
agreement with Ms. Solomon and a termination agreement with Mr. Buck.
Ms. Solomon's employment agreement has a term of two years during which
Ms. Solomon will serve as President and Chief Executive Officer of the
Company, with automatic renewals unless one party gives notice to terminate.
Under the Agreement, Ms. Solomon will receive an annual base salary of
$171,000, subject to annual review of such amount. In addition, Ms. Solomon
is entitled to participate in any incentive compensation plan established by
the Board of Directors. Ms. Solomon also received options to purchase up to
180,000 shares of the Company's Common Stock, 130,000 of which replaced
previously granted options. The Agreement contains a non-compete clause
which covers the term of Ms. Solomon's employment and extends for 12 months
from the date of termination. In the event Ms. Solomon is terminated without
cause, she is entitled to receive her base salary for 12 months or through
August 7, 1998, if longer. These payments made after termination will be
reduced by any compensation received by Ms. Solomon as an employee or
consultant for another party.
Mr. Buck's termination agreement was effective as of August 1, 1996 when
he resigned as Chief Executive Officer of the Company and Chairman of the
Board. Mr. Buck continued as a non-officer employee until December 31, 1996,
and thereafter he has been a consultant to the Company and will continue in
such role through June 14, 1998. The termination agreement contains a
non-compete clause which extends to December 31, 1997.
In consideration of such covenant not to compete, the Company agreed to
make monthly payments (equal to his monthly base salary as of August 1, 1996,
of $16,100) through December 1997, or until Mr. Buck obtains certain
employment which does not violate the covenant not to compete. Such
compensation is reduced both by any compensation received by Mr. Buck from
other employers and, for the period of April 1997 through June 1998, by
principal and interest amounts owed to the Company pursuant to an outstanding
promissory note (with an outstanding principal and interest amount of
$230,000 owed by Mr. Buck to the Company).
<PAGE>
EXECUTIVE OFFICER COMPENSATION
Joy A. Solomon has been President since May 1996 and Chief Executive
Officer of the Company since August 1996 and has been an executive officer of
the Company since July 1992. For fiscal 1996, the Compensation Committee set
Ms. Solomon's salary at $171,000 which represented no increase from 1995.
Ms. Solomon earned in fiscal 1996 a bonus of $21,000 under the 1996
Management Bonus Plan due to the Company meeting certain of its corporate
performance goals. Stock options granted to Ms. Solomon during fiscal 1996
are consistent with the design of the overall program and are shown in the
Summary Compensation Table.
The Compensation Committee believes that the two year employment
agreement given to Ms. Solomon in 1996 which includes options for 180,000
shares of the Company's Common Stock, fairly compensates Ms. Solomon and
reflects (i) her experience and leadership with respect to the Company's
future and (ii) her role in a growing company.
Mr. Buck was paid a salary of $194,000 for 1996 and earned no bonus. Mr.
Buck left the Company in August 1996.
Section 162(m) of the Internal Revenue Code imposes an annual deduction
limitation of $1.0 million on the compensation of certain executive officers
of publicly-held companies. The Compensation Committee does not believe that
the Section 162(m) limitation will materially affect the Company in the near
future based on the level of compensation of the executive officers.
Ronald E. Eibensteiner
Alan D. Frazier
Timothy I. Maudlin
Compensation and Stock Option Committee
COMMON STOCK PRICE PERFORMANCE CHART
The following graph shows a quarterly comparison of the cumulative total
return for the Company, the Nasdaq U.S. Companies Index and the Nasdaq
Computer and Data Processing Services Stock Index for the period from October
14, 1993, (the date on which the Company's Common Stock became a designated
stock on the Nasdaq National Market) to December 31, 1996. The Nasdaq
Computer and Data Processing Services Stock Index is prepared by Nasdaq and
includes all companies in the Standard Industry Code 737 (computer
programming, data processing, and other computer-related services) which are
included in the Nasdaq U.S. Companies Index. A list of the companies
included in the Nasdaq Computer and Data Processing Services Stock Index is
available from the Company upon request. The graph assumes that $100 was
invested on October 14, 1993.
[GRAPH]
NASDAQ Stock NASDAQ Computer and
IVI PUBLISHING, INC. Market (U.S.) Data Processing Stocks
----------------------------------------------------------------
10/14/93 100 100 100
12/31/93 201.7241379 98.93936876 97.51181510
3/31/94 165.5172414 94.77794393 98.85961189
6/30/94 113.7931034 90.34750409 96.74284440
9/30/94 101.7241379 97.82770380 107.7062518
12/31/94 79.31034483 96.71168712 118.3783278
3/31/95 56.89655172 105.4309383 133.2580428
6/30/95 48.06068966 120.5946814 157.9463902
9/30/95 67.24137931 135.1199095 172.5354933
12/31/95 90.51724138 136.7684176 180.2844256
3/31/96 94.82758621 143.1571285 188.7510161
6/30/96 50.86206897 154.8422702 209.8033574
9/30/96 19.82758621 160.3562866 213.9803046
12/31/96 21.98275862 168.2364484 222.6439932
<PAGE>
APPOINTMENT OF INDEPENDENT AUDITORS
PROPOSAL NO. 3
Ernst & Young LLP has been the Company's independent auditors since its
inception and has been recommended by the Board of Directors to be the
Company's independent auditors for the year ending December 31, 1997. A
representative of Ernst & Young LLP will be present at the Annual Meeting,
afforded the opportunity to make a statement and available to respond to
questions.
The Board of Directors unanimously recommends a vote FOR the proposal to
ratify the appointment of Ernst & Young LLP as the independent auditors for the
Company for the year ending December 31, 1997.
APPROVAL OF AN AMENDMENT TO THE DIRECTOR OPTION PLAN
PROPOSAL NO. 4
AMENDMENT
On March 7, 1994, the Board adopted the Director Option Plan (the "Plan")
to provide for the granting of options to directors who are not employees of
the Company ("Non-Employee Directors"). The shareholders approved the Plan
at the 1994 Annual Meeting. On September 16, 1996, the Board amended the
Plan to (i) increase the number of shares for issuance under the Plan from
100,000 to 300,000; (ii) increase the options from 10,000 to 25,000 shares
for options granted to Non-Employee Directors upon initial election to the
Board; (iii) increase the annual options granted to Non-Employee Directors
from 1,000 to 5,000 shares; and (iv) permit grants of options under the Plan
other than pursuant to the formula (the "Amendment").
As of April 10, 1997, the Company had outstanding nonqualified options
for the purchase of an aggregate of 147,000 shares of the Company's Common
Stock with an average exercise price of $3.02 per share granted under the
Plan. No options granted under the Plan have been exercised as of April 10,
1997.
The Board believes that granting fairly-priced stock options to the
Non-Employee Directors increases their proprietary interest in the Company's
success and enables the Company to attract and retain qualified individuals.
The Board therefore recommends that all shareholders vote FOR the Amendment.
SUMMARY OF DIRECTOR OPTION PLAN
A general description of the basic features of the Plan is presented
below, but such description is qualified in its entirety by reference to the
full text of the Plan, a copy of which may be obtained without charge upon
written request to Charles A. Nickoloff, the Company's Vice President,
Secretary and Acting Chief Financial Officer.
PURPOSE. The purpose of the Plan is to promote the success of the
Company by facilitating the retention of competent directors and by
furnishing incentive to Non-Employee Directors of the Company, upon whose
efforts the success of the Company depends to a large degree.
TERM. No options shall be granted under the Plan after March 6, 1999.
ADMINISTRATION. The Plan is administered by the Board of Directors;
however, the options which are granted pursuant to the formula are granted
without any further action by the Board of Directors.
ELIGIBILITY. Only Non-Employee Directors are eligible to receive
nonqualified stock options. As of April 10, 1997, the Company had five
Non-Employee Directors.
<PAGE>
OPTIONS. If the Amendment is approved, the Plan will provide that each
Non-Employee Director shall be automatically granted an option to purchase
(i) 25,000 shares on the date such Non-Employee Director first becomes a
member of the Board of Directors and (ii) 5,000 shares on March 1 of each
year thereafter.
As amended, in addition to the automatic option grants, the Non-Employee
Directors are eligible to receive additional nonqualified stock options
pursuant to the Plan in the sole discretion of the Board. When an option is
granted under the Plan outside of the formula, the Board, at its discretion,
specifies the terms.
The options granted under the Plan pursuant to the formula vest to the
extent of one-fourth of the option shares immediately and on each of the
first, second and third anniversaries of the date of grant; provided,
however, that the options may be exercised as to the vested shares during the
term of the option beginning six months and one day after the date of grant.
All options granted pursuant to these provisions are granted at a per share
exercise price equal to 100% of the fair market value of the Common Stock on
the date of grant, which is the closing sales price on the Nasdaq National
Market, and shall expire on the earlier of (i) ten (10) years after the date
of grant (provided, however that options granted a Non-Employee Director who
is a party to a partnership or other agreement requiring a reduction in
compensation pursuant to such agreement based on the value of options granted
under the Plan, shall have a five-year term), and (ii) one (1) year after
the Non-Employee Director ceases to be a director for any reason.
The optionees may pay for shares upon exercise of options with cash,
certified check or Common Stock of the Company valued at the stock's then
"fair market value" as defined in the Plan. The Plan does not provide for
the transfer during the lifetime of the optionee of any option granted under
the Plan.
AMENDMENT. The Board of Directors may from time to time suspend or
discontinue the Plan or revise or amend it in any respect; provided, however,
that, without shareholder approval, the Plan may not be amended to (i)
increase the number of shares subject to the Plan except as provided in the
case of stock splits, consolidations, stock dividends or similar events; (ii)
decrease the exercise price for shares subject to options granted under the
Plan; (iii) extend the period during which options may be granted; or (iv)
change the requirements as to the class of persons eligible to receive
options. The Plan may not be amended to change the number of shares under
the formula grants more frequently than once every six months other than to
comply with changes in the Internal Revenue Code or the rules and regulations
thereunder.
The Board of Directors will equitably adjust the maximum number of shares
of Common Stock reserved for issuance under the Plan, the number of shares
covered by each outstanding option and the option price per share in the
event of stock splits or consolidations, stock dividends or other
transactions in which the Company receives no consideration. Generally, the
Board of Directors may also provide for the protection of optionees in the
event of a merger, liquidation or reorganization of the Company.
FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN. Under present law, an
optionee will not realize any taxable income on the date a nonqualified stock
option is granted to the optionee pursuant to the Plan. Upon exercise of the
nonqualified stock option, however, the optionee will realize, in the year of
exercise, ordinary income to the extent of the difference between the option
price and the fair market value of the Company's Common Stock on the date of
exercise. Upon the sale of the shares, any resulting gain or loss will be
treated as capital gain or loss. The Company will be entitled to a tax
deduction in its fiscal year in which nonqualified stock options are
exercised, equal to the amount of compensation required to be included as
ordinary income by those optionees exercising such options.
PLAN BENEFITS. Except for the automatic grants to Non-Employee Directors
which are subject to shareholder approval at the Annual Meeting as set forth
below, future options are not determinable at this time. Also, future
benefits and dollar value under the Plan cannot be determined at this time.
The table below shows the total number of shares underlying stock options
that have been granted under the Plan as of April 10, 1997, including those
subject to shareholder approval of the Amendment, to the directors who are
not executive officers. The named executive officers and the current
executive officers and current employees who are not executive officers are
not eligible to receive options under the Plan and have been omitted from the
table below.
<PAGE>
Shares of Common Stock
Name and Position/Group Underlying Options Received
------------------------ ---------------------------
Current Directors who are not 147,000 (1)
Executive Officers as a Group (5 persons)
(1) Includes automatic options granted pursuant to the amended
formula to each of Ronald Eibensteiner, Nicholas Bluhm, Timothy
Maudlin and Alan Frazier for 5,000 shares and Nicholas Bluhm and
Michael Brochu for 25,000 shares, which options will be deemed to be
for 1,000 and 10,000 shares, respectively, if the shareholders do not
approve the Amendment. Also includes 25,000 shares pursuant to grants
outside of the formula under the Plan and which are subject to
shareholder approval of Proposal 4, to each of Ronald Eibensteiner as
recognition of his efforts to assist the Company in its financing
efforts and to Timothy Maudlin and Alan Frazier for their continued
efforts in the development of the Company since its inception. Also
includes two, 1,000 share grants accepted by Mr. Eibensteiner on March
1 of 1995 and 1996, pursuant to the formula provisions of the Plan,
which grants were previously declined by Mr. Maudlin and Mr. Frazier.
VOTE REQUIRED. The Board of Directors recommends that the shareholders
approve the Amendment to the Plan. Under applicable Minnesota law, approval
of the Amendment to the Plan requires the affirmative vote of the holders of
the greater of (i) a majority of the voting power of the shares represented
in person or by proxy at the Annual Meeting with authority to vote on such
matter, or (ii) a majority of the voting power of the minimum number of
shares that would constitute a quorum for the transaction of business at the
Annual Meeting.
The Board of Directors unanimously recommends a vote FOR the proposal to
approve the Amendment to the Director Option Plan as stated above.
OTHER MATTERS
The Board of Directors does not intend to present at the Annual Meeting
any other matters not referred to above and does not presently know of any
matters that may be presented at the Annual Meeting. If, however, any
matters are properly presented at the Annual Meeting, it is the intention of
the persons named in the enclosed form of proxy to vote the proxy in
accordance with their best judgment.
SUBMISSION OF SHAREHOLDER PROPOSALS
Any proposal of a shareholder intended to be presented for action at the
1998 Annual Meeting by any shareholder of the Company must be received by
Thomas R. King, Fredrikson & Byron P.A., 1100 International Centre, 900
Second Avenue South, Minneapolis, Minnesota 55402 not later than December
26, 1997, in order for such proposal to be included in the Company's Proxy
Statement and form of proxy for the 1998 Annual Meeting. The Company shall
not be required to include in its Proxy Statement and form of proxy for the
1998 Annual Meeting any shareholder proposal which does not meet all of the
requirements then in effect for inclusion.
<PAGE>
SOLICITATION OF PROXIES
A copy of the Annual Report of the Company for the year ended December
31, 1996, has been mailed with this Proxy Statement to each shareholder.
Additional copies of the Annual Report, the Notice of Annual Meeting, the
Proxy Statement and the accompanying Proxy may be obtained from Investor
Relations or the Chief Financial Officer, at the offices of the Company.
The cost of preparing, assembling and mailing this Proxy Statement, the
notice, the form of Proxy and other material which may be sent to the
shareholders will be borne by the Company. In addition, directors, officers
and regular employees of the Company, at no additional compensation, may
solicit proxies by telephone, telegram or in person. Upon request, the
Company will reimburse brokers and other persons holding shares for the
benefit of others for their expenses in forwarding proxies and accompanying
material in and obtaining authorization from beneficial owners of the
Company's Common Stock to give proxies.
In order to assure the presence of the necessary quorum at the Annual
Meeting, please sign and mail the enclosed Proxy promptly in the envelope
provided. No postage is required if mailed within the United States. The
signing of the Proxy will not prevent you from attending the meeting and
voting in person, should you desire to attend.
FORM 10-K
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS
BEING SOLICITED, UPON WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
1996, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE
FINANCIAL STATEMENTS AND SCHEDULES. THE COMPANY WILL FURNISH TO ANY SUCH
PERSON ANY EXHIBIT DESCRIBED IN THE FORM 10-K UPON THE ADVANCE PAYMENT OF
REASONABLE FEES. REQUESTS FOR A COPY OF THE FORM 10-K AND/OR ANY EXHIBIT(S)
SHOULD BE DIRECTED TO THE CHIEF FINANCIAL OFFICER OF IVI PUBLISHING, INC.,
7500 FLYING CLOUD DRIVE, MINNEAPOLIS, MINNESOTA 55344. YOUR REQUEST MUST
CONTAIN A REPRESENTATION THAT, AS OF MARCH 27, 1997, YOU WERE A BENEFICIAL
OWNER OF SHARES ENTITLED TO VOTE AT THE ANNUAL MEETING OF SHAREHOLDERS.
By Order of the Board of Directors
/s/ Joy A. Solomon
-------------------------------
Joy A. Solomon
President and Chief Executive Officer
April 30, 1997
<PAGE>
Please date, sign and mail your proxy card back as soon as possible!
Annual Meeting of Shareholders
IVI PUBLISHING, INC.
May 22, 1997
Please Detach and Mail in the Envelope Provided
/X/ Please mark your votes as in this example.
<TABLE>
<S><C>
FOR all nominees WITHHOLD
listed at right (except AUTHORITY to Nominees: Nicholas C. Bluhm
as marked to the vote for all nominees Michael A. Brochu
contrary below) listed at right Ronald E. Eibensteiner
2. To elect Alan D. Frazier
members of the / / / / Timothy I. Maudlin
Board of Charles A. Nickoloff
Directors: Joy A. Solomon
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
strike a line through such nominee's name listed at right.)
FOR AGAINST ABSTAIN
1. To set the number of directors to be elected at seven (7); / / / / / /
3. To ratify the appointment of Ernst & Young LLP as the
independent auditors for the Company for the year ending / / / / / /
December 31, 1997;
4. To amend the Director Option Plan as set forth in the Proxy / / / / / /
Statement.
The Proxies are authorized to vote in their discretion with respect to any other matter that may properly come before the
meeting or any postponements or adjournments thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
SIGNATURE___________________ Dated _______________, 1997 SIGNATURE___________________ Dated _______________, 1997
Note: Please sign exactly as name appears above. When shares are held by joint tenants, both should sign. When signing as
an attorney, executor, administrator, trustee or guardian, please give your full title as such. If as a corporation,
sign the full corporate name by a duly authorized officer. If as a partnership, please sign in partnership name by
authorized person.
</TABLE>
PROXY
IVI PUBLISHING, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Charles A. Nickoloff and Joy A. Solomon,
and each of them, as Proxies, each with the power to appoint his substitute,
and hereby authorizes such Proxies to represent and to vote, as designated on
the reverse, all the shares of Common Stock, $.01 par value of IVI
Publishing, Inc. held of record by the undersigned on March 27, 1997, at the
Annual Meeting of Shareholders to be held on May 22, 1997, or any
postponements or adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THE PROXY
WILL BE VOTED "FOR" PROPOSALS 1, 2, 3, AND 4. THIS PROXY IS SOLICITED ON
BEHALF OF THE COMPANY'S BOARD OF DIRECTORS.
(To be Signed on Reverse Side)
<PAGE>
IVI PUBLISHING, INC.
DIRECTOR OPTION PLAN
(AMENDED AND RESTATED AS OF SEPTEMBER 16, 1996)
1. PURPOSE.
The purpose of the IVI Publishing Director Option Plan (the "Plan") is to
attract and retain outstanding individuals as directors of IVI Publishing,
Inc. (the "Company") and to provide them with an equity interest in the
Company.
2. ADMINISTRATION.
The Plan will be administered by the Board of Directors of the Company.
The Board of Directors shall interpret the plan, prescribe, amend and rescind
rules and regulations relating thereto, and make all other determinations
necessary or advisable for the administration of the Plan. The grant of
options shall be only as described herein.
3. PARTICIPANTS.
Participants in the Plan will consist solely of the members of the
Company's Board of Directors who are not now and have not been full-time
employees of the Company or any of its subsidiaries (collectively the
"Non-Employee Directors" and individually a "Non-Employee Director").
4. SHARES RESERVED UNDER THE PLAN.
There is hereby reserved for issuance under the Plan, subject to the
adjustments under paragraph 10 and the approval of a majority of
shareholders, an aggregate of 300,000 shares of Common Stock, $.01 par value
per share, of the Company (the "Common Stock"). If there is a lapse,
expiration, termination or cancellation of any Option (as defined in
paragraph 5 below) awarded under the Plan without the issuance of shares of
Common Stock, the shares subject to or reserved for such Option may again be
used for new Options under this Plan, provided that in no event may the
number of shares issued under this Plan exceed the total number of shares
reserved for issuance hereunder.
5. NON-QUALIFIED STOCK OPTION AWARDS.
(a) Subject to the approval of the amendment of this provision by the
shareholders, beginning on September 16, 1996, each new Non-Employee Director
shall receive a non-qualified stock option (the "Option") to purchase (i) an
Option for twenty-five thousand (25,000) shares of Common Stock on the date a
Non-Employee Director first becomes a member of the Board of Directors and (ii)
each Non-Employee Director shall receive an option for 5,000 shares of Common
Stock on March 1 of each year thereafter prior to termination of the Plan.
(b) Subject to the approval of the amendment of this provision by the
shareholders, beginning on September 16, 1996, the Board may, from time to
time grant options to Non-Employee Directors outside of the formula plan in
5(a).
6. TERMS OF THE OPTIONS.
(a) Options Granted Pursuant to Paragraph 5(a). The exercise price for
an Option awarded under paragraph 5(a) of this Plan shall be the Fair Market
Value per share of the Common Stock on the date on which the Non-Employee
Director is automatically entitled to the grant of an Option or, if such date
is not a business day, the immediately preceding business day on which the
Fair Market Value of the Common Stock can be determined. An Option granted
under paragraph 5(a) of this Plan shall vest as to one-quarter of the
underlying shares of Common Stock immediately upon grant and shall vest as to
the remaining underlying shares one-quarter on each of the first, second and
third anniversaries of the date of grant. The period during which an Option
is awarded under paragraph 5(a) of this Plan may be exercised as to vested
shares shall commence six months and one day after the date on which the
Non-Employee Director is entitled to receive such Option. The term of the
Option expires on the earlier of (i) ten (10) years after the date on which
the Non-Employee Director is entitled to receive the Option (five (5) years
in the case of a Non-Employee Director who is a party to a partnership or
other agreement requiring a reduction in compensation pursuant to such
agreement based on the value of options granted under this Plan), or (ii) one
(1) year after such Non-Employee Director ceases to be a member of the
Company's Board of Directors. The term "Fair Market Value" shall mean the
last reported sales price on the Nasdaq National Market if the Common Stock
is traded on the Nasdaq National Market or SmallCap Market or the closing
price of the Common Stock on a national exchange if the Common Stock is
traded on a national exchange. Payment for shares of Common Stock purchased
upon the exercise of an Option must be made in full at the time the Option is
exercised.
(b) Options Granted Pursuant to Paragraph 5(b). The Board of Directors,
in its sole discretion, shall set the terms of an Option at the time of
grant. Payment for shares of Common Stock purchased upon the exercise of an
Option must be made in full at the time the Option is exercised.
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7. NON-TRANSFERABILITY.
Each Option awarded under this Plan shall not be transferable other than
by will or the laws of descent and distribution, and shall be exercisable
during the participant's lifetime, only by the participant or the
participant's guardian or legal representative.
8. TERM OF PLAN.
No Options shall be awarded under this Plan after March 6, 1999.
9. TAXES.
The Company shall be entitled to withhold from directors' fees, if any,
or to be paid the amount of any tax attributable to any shares deliverable
upon exercise of any Option awarded under this Plan after giving the person
entitled to receive such shares notice as far in advance as practicable, and
the Company may defer making delivery if any such tax may be pending unless
and until indemnified to its satisfaction.
10. ADJUSTMENT PROVISIONS.
If the Company shall at any time change the number of issued shares of
Common Stock without new consideration to the Company (such as stock
dividends or stock splits), the total number of shares reserved for issuance
under the Plan and the number of shares covered by such outstanding Option
shall be adjusted so that the aggregate consideration payable to the Company
shall not be changed. The Board of Directors shall also have the right to
provide for other equitable adjustments after changes in the Common Stock
resulting from reorganization, sale, merger, consolidation or similar
occurrence.
11. AMENDMENT AND TERMINATION OF THE PLAN.
The Board of Directors may amend this Plan from time to time or terminate
the Plan at any time except that without the affirmative vote of the holders
of a majority of the shares of the Company's Common Stock present and
entitled to vote at a meeting at which a quorum is present, the Board of
Directors may not amend the Director Option Plan (a) to increase the
aggregate number of shares of Common Stock which may be issued or sold under
the Director Option Plan (except such number of shares may be adjusted in the
event of a recapitalization, stock dividend or similar event), (b) to
decrease the exercise price for shares subject to options granted under the
Director Option plan, (c) to extend the period during which the options may
be granted, or (d) to change the requirements as to the class of persons
eligible to receive options. Paragraph 5(a) of this Plan may not be amended
more frequently than once every six months other than to comply with changes
in the Internal Revenue Code of 1986, as amended, or the rules or regulations
thereunder.
12. SHAREHOLDER APPROVAL.
This Plan, originally adopted by the Board of Directors of the Company on
March 7, 1994, was amended by the Board on September 16, 1996, and such
amendment is subject to approval by the Shareholders of the Company. The
amendment to this Plan and any Options granted under the Plan, as amended,
shall be null and void if shareholder approval of the amendment is not
obtained within twelve (12) months of its adoption.
