<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (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
[X] Definite Proxy Statement by Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CMG INFORMATION SERVICES, 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 premliminary 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>
CMG INFORMATION SERVICES, INC.
100 BRICKSTONE SQUARE
FIRST FLOOR
ANDOVER, MASSACHUSETTS 01810
November 14, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
(the "Meeting") of CMG Information Services, Inc. which will be held at the
Andover Country Club, 60 Canterbury Street, Andover, Massachusetts, on
Thursday, December 18, 1997, at 9:30 a.m. local time. I look forward to
greeting as many of our stockholders as possible.
Details of the business to be conducted at the Meeting are given in the
attached Notice of Annual Meeting and Proxy Statement.
Whether or not you plan to attend the Meeting, it is important that your
shares be represented and voted at the Meeting. Therefore, I urge you to sign,
date and promptly return the enclosed proxy in the enclosed envelope so that
your shares will be represented at the Meeting. If you so desire, you may
withdraw your proxy and vote in person at the Meeting.
We look forward to meeting those of you who will be able to attend the
Meeting.
Sincerely,
/s/ David S. Wetherell
------------------------------------
David S. Wetherell
Chairman and Chief Executive Officer
<PAGE>
CMG INFORMATION SERVICES, INC.
100 BRICKSTONE SQUARE
FIRST FLOOR
ANDOVER, MASSACHUSETTS 01810
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY, DECEMBER 18, 1997
To the Stockholders of CMG INFORMATION SERVICES, INC.:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders (the
"Meeting") of CMG Information Services, Inc., a Delaware corporation (the
"Company"), will be held at the Andover Country Club, 60 Canterbury Street,
Andover, Massachusetts, on Thursday, December 18, 1997, at 9:30 a.m. local
time, for the following purposes:
1. To elect one Class I Director to serve until the 2000 Annual Meeting of
Stockholders or until his successor is elected and qualified.
2. To approve an amendment to the Company's 1986 Stock Option Plan (the
"Plan") to limit the number of shares of Common Stock subject to stock
options that may be granted under the Plan to any one person within any
fiscal year to 200,000 shares.
3. To ratify the appointment of KPMG Peat Marwick as the Company's
independent accountants for the current fiscal year.
4. To transact such other business as may properly come before the Meeting
or any adjournments or postponements thereof.
Only stockholders of record at the close of business on Monday, October 20,
1997 will be entitled to notice of and to vote at the Meeting and any
adjournments or postponements thereof.
By Order of the Board of Directors
/s/ David S. Wetherell
----------------------------------
David S. Wetherell, Secretary
November 14, 1997
All stockholders are cordially invited to attend the Meeting. To ensure your
representation at the Meeting, you are urged to mark, sign, and return the
enclosed proxy card in the accompanying envelope, whether or not you expect to
attend the Meeting. No postage is required if mailed in the United States. Any
stockholder attending the Meeting may vote in person even if that stockholder
has returned a proxy.
YOUR VOTE IS IMPORTANT TO VOTE YOUR SHARES, PLEASE SIGN, DATE AND COMPLETE THE
ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
<PAGE>
PROXY STATEMENT
OF
CMG INFORMATION SERVICES, INC.
GENERAL
This Proxy Statement and Notice of Annual Meeting of Stockholders are being
provided and the accompanying proxy is being solicited by the Board of
Directors of CMG Information Services, Inc. (the "Company") for use at the
1997 Annual Meeting of Stockholders (the "Meeting") to be held at the Andover
Country Club, 60 Canterbury Street, Andover, Massachusetts 01810, on Thursday,
December 18, 1997, at 9:30 a.m. local time, or at any adjournment or
postponement of the Meeting, for the purposes set forth in this Proxy
Statement and the foregoing Notice of Annual Meeting of Stockholders. This
Proxy Statement and accompanying proxy card are being mailed on or about
November 14, 1997, to all stockholders entitled to notice of and to vote at
the Meeting. The principal executive office of CMG Information Services, Inc.
is located at 100 Brickstone Square, First Floor, Andover, Massachusetts 01810
and the Company's telephone number is (508) 684-3600.
SOLICITATION
The cost of solicitation of proxies, including expenses in connection with
preparing and mailing this Proxy Statement, will be borne by the Company.
Copies of solicitation materials will be furnished to brokerage houses,
fiduciaries, and custodians to forward to beneficial owners of Common Stock of
the Company (the "Common Stock") held in their names. In addition, the Company
will reimburse brokerage firms and other persons representing beneficial
owners of stock for their expenses in forwarding solicitation materials to
such beneficial owners. Original solicitation of proxies by mail may be
supplemented by telephone, telegram, and personal solicitation by Directors,
officers and other regular employees of the Company. No additional
compensation will be paid to Directors, officers or other regular employees
for such services.
RECORD DATE, VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record at the close of business on Monday, October 20, 1997,
will be entitled to notice of, and to vote at, the Meeting. As of October 20,
1997, the Company had outstanding 9,716,508 shares of Common Stock. Each share
of Common Stock is entitled to one vote on each proposal that will come before
the Meeting. A majority of the outstanding shares of Common Stock will
constitute a quorum at the Meeting. Votes withheld, abstentions and broker
non-votes (where a broker or nominee does not exercise discretionary authority
to vote on a matter) are counted for purposes of determining the presence or
absence of a quorum for the transaction of business.
REVOCABILITY OF PROXY AND VOTING OF SHARES
Any stockholder giving a proxy has the power to revoke it at any time before
it is exercised. It may be revoked by filing with the Secretary of the
Company, at the principal executive offices of the Company, 100 Brickstone
Square, First Floor, Andover, Massachusetts 01810, an instrument of revocation
or a duly executed proxy bearing a later date. It may also be revoked by
attendance at the Meeting and an election given to the Secretary of the
Company to vote in person. If not revoked, the proxy will be voted at the
Meeting in accordance with the stockholder's instructions indicated on the
proxy card. If no instructions are indicated, the proxy will be voted (i) FOR
the election of the Class I Director described herein, (ii) FOR the amendment
to the 1986 Stock Option Plan, (iii) FOR the ratification of the appointment
of KPMG Peat Marwick as the Company's independent accountants for the current
fiscal year, and (iv) in accordance with the judgment of the proxies as to any
other matter that may be properly brought before the Meeting or any
adjournments or postponements thereof.
2
<PAGE>
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 1998 Annual Meeting of Stockholders must
be received by the Corporate Secretary of the Company no later than July 17,
1998 in order to be included in the Proxy Statement and form of proxy relating
to that meeting.
SECURITY OWNERSHIP BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS
All share amounts referred to in this Proxy Statement have been adjusted to
reflect a three for two stock split and a two for one stock split effected on
March 17, 1995 and February 2, 1996, respectively. The following table sets
forth certain information with respect to beneficial ownership of the
Company's shares of Common Stock as of October 1, 1997, (i) by each person (or
group of affiliated persons) who is known by the Company to own beneficially
more than five percent of the Company's outstanding shares of Common Stock;
(ii) by each of the Company's Directors; (iii) by each of the Company's
executive officers named in the Summary Compensation Table (the "Named
Executive Officers"), and (iv) by all current Directors and executive officers
as a group. Except as indicated in the footnotes to this table, the persons
named in the table have sole voting and investment power with respect to all
shares shown as beneficially owned by them.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED (1) PERCENT OF CLASS
------------------- ---------------------- ----------------
<S> <C> <C>
David S. Wetherell (2)........... 2,342,307 23.6%
c/o CMG Information Services,
Inc.
100 Brickstone Square
First Floor
Andover, MA 01810
FMR Corp. (3).................... 1,171,800 12.1%
82 Devonshire Street
Boston, MA 02109
Scudder Stevens & Clark, Inc.
(4)............................. 634,300 6.6%
345 Park Avenue
New York, NY 10154-0010
Gregory M. Avis (5).............. 18,800 *
John A. McMullen (6)............. 20,200 *
Hans Hawrysz..................... 0 --
Hemang Dave (7).................. 0 --
Richard F. Torre (8)............. 24,129 *
Andrew J. Hajducky III (9)....... 31,890 *
Craig D. Goldman................. 8,800 *
All Current Directors and
Executive Officers as a Group (7
persons) (10)................... 2,446,126 24.5%
</TABLE>
- - --------
* Less than one percent
(1) Beneficial ownership of Common Stock is determined in accordance with the
rules of the Securities and Exchange Commission, and includes shares for
which the holder has sole or shared voting or investment power. Shares of
Common Stock subject to options currently exercisable or which become
exercisable on or before December 1, 1997 are deemed to be beneficially
owned and outstanding by the person holding such options and are included
for purposes of computing the percentage ownership of the person holding
3
<PAGE>
such options, but are not deemed outstanding for purposes of computing the
percentage ownership of any other person.
(2) Includes 235,625 shares issuable upon the exercise of outstanding options
that are exercisable prior to December 1, 1997. Includes 111,600 shares
held in trust for the benefit of Mr. Wetherell's minor children, and for
which Mr. Wetherell disclaims beneficial ownership.
(3) Based on the information provided on the Amendment No. 4 to the Schedule
13G filed by FMR Corp. with the Securities and Exchange Commission on
February 14, 1997. FMR Corp. has sole dispositive power with respect to
such shares, and sole power to vote 804,100 of such shares. Fidelity
Management Trust Company, a wholly-owned subsidiary of FMR Corp. and a bank
as defined in Section 3(a)(6) of the Securities Exchange Act of 1934, as
amended, is the beneficial owner of 761,000 shares of Common Stock as a
result of its serving as investment manager of institutional accounts.
(4) Based on the information provided on the Schedule 13G filed by Scudder
Stevens & Clark, Inc. ("Scudder Stevens") with the Securities and Exchange
Commission on February 10, 1997. Includes 209,700 shares with respect to
which Scudder Stevens has the sole power to vote or direct the vote.
Includes 306,100 shares with respect to which Scudder Stevens shares the
power to vote or direct the vote. Scudder Stevens has sole power to dispose
or direct the disposition of all such shares.
(5) Consists of shares issuable upon the exercise of outstanding options that
are exercisable prior to December 1, 1997. Mr. Avis resigned from the
Company's Board of Directors effective on October 22, 1997.
(6) Includes 18,800 shares issuable upon the exercise of outstanding options
that are exercisable prior to December 1, 1997.
(7) Mr. Dave resigned as an officer of the Company effective June 4, 1997.
(8) Includes 18,524 shares issuable upon the exercise of outstanding options
that are exercisable prior to December 1, 1997 and 1,500 shares held in
trust for the benefit of Mr. Torre's minor children.
(9) Includes 30,250 shares issuable upon the exercise of outstanding options
that are exercisable prior to December 1, 1997.
(10) Includes 321,999 shares issuable upon the exercise of outstanding options
that are exercisable prior to December 1, 1997.
4
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTOR
The Board is divided into three classes. One class of Directors is elected
each year for a three-year term. The term of the Company's Class I Director
will expire at this Meeting. The nominee for Class I Director is Craig D.
Goldman. The Class I Director elected in 1997 will serve for a term of three
years which will expire at the Company's 2000 Annual Meeting of Stockholders
or when his successor is elected and qualified. It is intended that the
persons named as Proxies will vote for Craig D. Goldman for election to the
Board as a Class I Director. Prior to the resignation of Gregory M. Avis as a
Class I Director, effective on October 22, 1997, there were two Class I
Directors. The Board has decided for the time being to maintain its present
size at three directors and to name only one nominee for Class I Director.
Proxies will not be voted for more than one nominee.
Craig D. Goldman presently serves as a Class I Director of the Company and
is available for re-election as a Class I Director. The affirmative vote of
the holders of a plurality of the Common Stock represented and voting at the
Meeting will be required to elect Craig D. Goldman to the Board. If he is
elected as a Director at the Meeting, the Board will consist of a total of
three Directors, two of whom have principal occupations outside the Company
and one of whom is the Chief Executive Officer of the Company.
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF THE NAMED NOMINEE
BIOGRAPHICAL INFORMATION
Biographical and certain other information concerning the Directors of the
Company is set forth below:
CLASS I NOMINEE FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2000 ANNUAL
MEETING
CRAIG D. GOLDMAN, age 53. Mr. Goldman has served as a Director of the
Company since June 18, 1997. Mr. Goldman has served as President and Chief
Executive Officer for Cyber Consulting Services Corp., a technology consulting
firm, since March 1996. Mr. Goldman served with Chase Manhattan Bank Financial
Services ("Chase Manhattan") as Senior Vice President, Technology and
Operations from March 1988 until October 1991. From October 1991 until March
1996 Mr. Goldman served with Chase Manhattan as a Senior Vice President and
Chief Information Officer.
CLASS II DIRECTOR CONTINUING IN OFFICE UNTIL THE 1998 ANNUAL MEETING
JOHN A. MCMULLEN, age 55. John A. McMullen has served as a Director of the
Company since 1986. Mr. McMullen was a founder and has been a Managing
Principal of Cambridge Meridian Group, Inc., a management consulting firm,
since 1984.
CLASS III DIRECTOR CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING
DAVID S. WETHERELL, age 43. David S. Wetherell has served as Chairman of the
Board, President, Chief Executive Officer and Secretary of the Company since
1986. Mr. Wetherell also serves on the Board of Directors of Lycos, Inc., a
publicly-traded subsidiary of the Company.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended July 31, 1997 ("fiscal 1997"), the Board of
Directors held five meetings. The Board has two committees: an Audit Committee
and a Compensation Committee. There is no Nominating Committee or any
committee performing the functions of a nominating committee.
5
<PAGE>
The Audit Committee recommends to the Board each fiscal year the independent
public accountants who will audit the books of the Company for that year. The
independent public accountants meet with the Audit Committee with and without
the presence of the Company's management to review and discuss various matters
pertaining to the audit, including the Company's financial statements, the
report of the independent public accountants on the results, scope and terms
of their work, and their recommendations concerning the financial practices,
controls, procedures and policies employed by the Company. The Audit Committee
consists of Messrs. Goldman and McMullen, neither of whom is an employee or
consultant of the Company. Mr. McMullen serves as Chairman of the Audit
Committee. Prior to his resignation from the Board, effective as of October
22, 1997, Mr. Avis was a member of the Audit Committee during fiscal 1997. The
Audit Committee met once during the last fiscal year.
The Compensation Committee administers the Company's 1986 Stock Option Plan
and 1995 Employee Stock Purchase Plan, as well as the Company's short-term and
long-term cash incentive plans, and performance-based stock options. The
Compensation Committee approves salaries, bonuses and other compensation
arrangements and policies for the Company's officers. The Compensation
Committee currently consists of Messrs. Goldman and McMullen, neither of whom
is an employee or consultant of the Company. Mr. Goldman serves as Chairman of
the Compensation Committee. Prior to his resignation from the Board, effective
as of October 22, 1997, Mr. Avis was Chairman of the Compensation Committee
during fiscal 1997. The Compensation Committee met two times during the last
fiscal year.
Each incumbent Board member attended all of the meetings of the Board which
such Director was eligible to attend during the fiscal year ended July 31,
1997. Each incumbent Board member attended all of the meetings held by any
committee of the Board upon which such Director served.
PROPOSAL 2
AMENDMENT OF 1986 STOCK OPTION PLAN
A proposal will be presented at the Meeting that the Stockholders approve an
amendment to the Company's 1986 Stock Option Plan (the "Plan") to limit the
number of shares of Common Stock subject to stock options that may be granted
under the Plan to any one person within any fiscal year to 200,000 shares,
subject in each case to adjustments for stock splits, stock dividends and
certain transactions affecting the Company's capital stock. Approval of the
amendment to the Plan by the affirmative vote of the holders of a majority of
the shares of Common Stock present, or represented, and entitled to vote at
the Meeting is appropriate in order to ensure that the Company will be able to
exclude gain recognized on exercise of certain stock options from the
$1,000,000 limitation on the Company's tax deduction. Set forth below is a
brief summary of the principal provisions of the Plan.
GENERAL
The purpose of the Plan is to provide incentives to individuals the Company
believes may play a significant role in the future success of the Company and
its present and future subsidiaries by providing such individuals with
opportunities to purchase stock of the Company pursuant to the exercise of
options. The Plan provides for the grant of stock options (incentive and
nonstatutory) (together "Awards") to any individual the Company deems
appropriate (the "Eligible Persons"). Incentive stock options may only be
granted to employees of the Company.
Currently, Awards may be made under the Plan for up to 2,250,000 shares of
Common Stock (which number is reduced by the number of shares issued pursuant
to the Company's 1995 Employee Stock Purchase Plan), subject to adjustment for
stock splits, stock dividends and certain transactions affecting the Company's
capital stock.
As of October 22, 1997, the Company had approximately 917 employees, all of
whom were eligible to participate in the Plan. Since the Plan provides the
ability for the Company to make option grants to any individual which it deems
appropriate, the Company is not able to estimate the full class of persons to
which grants may be made under the Plan. The closing price of the Company's
Common Stock, as reported by the Nasdaq National Market, on October 22, 1997
was $23.125 per share.
6
<PAGE>
ADMINISTRATION
Awards under the Plan are granted at the discretion of the Compensation
Committee which determines the recipients and establishes the terms and
conditions of each Award, including the exercise price, the form of payment of
the exercise price, the number of shares subject to options and the time at
which such options become exercisable. The exercise price of any incentive
stock option or non-statutory stock option granted under the Plan may not be
less than the fair market value of the Common Stock on the date of grant (or
110% of the fair market value in the case of an incentive stock option granted
to a 10% stockholder of the Company).
As of October 22, 1997, options to purchase an aggregate of 766,493 shares
of Common Stock were outstanding under the Plan. Of the foregoing, options to
purchase an aggregate of 530,000 shares of Common Stock had been granted to
current executive officers of the Company as a group, no options to purchase
shares had been granted to current directors who are not executive officers of
the Company as a group and options to purchase an aggregate of 236,493 shares
of Common Stock had been granted to all other employees. After taking into
account shares available as a result of cancellation of options granted under
the Plan, 750,248 shares of Common Stock remain available for Awards under the
Plan. Because of the discretionary nature of Awards made under the Plan, it is
not currently determinable how many Awards will be made in the future to any
given individual, to current executive officers as a group, to current
directors who are not executive officers as a group or to employees who are
not current executive officers.
PROPOSED AMENDMENT TO THE PLAN
The Board of Directors has voted to amend the Plan to limit the number of
shares of Common Stock subject to stock options that may be granted under the
Plan to any one person within any fiscal year to 200,000 shares, subject in
each case to adjustments for stock splits, stock dividends and certain
transactions affecting the Company's capital stock.
This amendment is intended to ensure that the gain recognized on exercise of
certain stock options granted to the Company's highest paid executive officers
will not be subject to the $1,000,000 limitation on the Company's income tax
deduction for executive compensation imposed by Section 162(m) of the Internal
Revenue Code, as amended (the "Code"). Although the Company has not typically
granted stock options that approach these limits, such limits will give the
Company the flexibility to grant such Awards, should the Compensation
Committee determine that it would be in the best interest of the Company to do
so, without adversely affecting the Company's tax deduction for compensation.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO STOCK OPTIONS
Incentive Stock Options. An optionee does not realize taxable income upon
the grant or, except as described below, exercise of an incentive stock option
("ISO") under the Plan.
If no disposition of shares issued to an optionee pursuant to the exercise
of an ISO is made by the optionee within two years from the date of grant or
within one year from the date of exercise, then (a) upon sale of such shares,
any amount realized in excess of the option price (the amount paid for the
shares) is taxed to the optionee as mid-term or long-term capital gain and any
loss sustained will be a mid-term or long-term capital loss, depending on how
long the optionee has held the shares, and (b) no deduction is allowed to the
Company for Federal income tax purposes. The exercise of ISOs gives rise to an
adjustment in computing alternative minimum taxable income that may result in
alternative minimum tax liability for the optionee.
If shares acquired upon the exercise of an ISO are disposed of prior to the
expiration of the two-year and one-year holding periods described above (a
"disqualifying disposition") then (a) the optionee realizes ordinary income in
the year of disposition in an amount equal to the excess (if any) of the fair
market value of the shares at exercise (or, if less, the amount realized on a
sale of such shares) over the option price thereof and (b) the Company is
entitled to deduct such amount. Any further gain realized is taxed as a short-
term, mid-term or long-term capital gain and does not result in any deduction
to the Company. A disqualifying disposition in the year of exercise will
generally avoid the alternative minimum tax consequences of the exercise of an
ISO.
7
<PAGE>
Nonstatutory Stock Options. No income is realized by the optionee at the
time a nonstatutory option is granted. Upon exercise, (a) ordinary income is
realized by the optionee in an amount equal to the difference between the
option price and the fair market value of the shares on the date of exercise
and (b) the Company receives a tax deduction for the same amount. Upon
disposition of the shares, appreciation or depreciation after the date of
exercise is treated as a short-term, mid-term or long-term capital gain or
loss and will not result in any deduction by the Company.
APPROVAL
Stockholder approval of the proposed amendment is appropriate to ensure that
the Company will be able to exclude gain recognized on exercise of certain
stock options from the $1,000,000 limitation on the Company's tax deduction.
The affirmative vote by the holders of a majority of the shares of Common
Stock present, or represented, and entitled to vote at the Meeting is required
for such purpose. Broker non-votes will not be counted as present or
represented for this purpose. Abstentions will be counted as present and
entitled to vote and, accordingly, will have the effect of a negative vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED
AMENDMENT TO THE PLAN.
PROPOSAL 3
APPOINTMENT OF AUDITORS
The Board of Directors of the Company has appointed KPMG Peat Marwick LLP,
independent accountants, to audit the Company's consolidated financial
statements for the fiscal year ending July 31, 1998, and recommends that the
stockholders vote for ratification of such appointment. A representative of
KPMG Peat Marwick LLP will be present at the Meeting and will be available to
respond to appropriate stockholders' questions and to make a statement if he
or she desires to do so.
The affirmative vote of the holders of a majority of the shares of Common
Stock represented and voting at the Meeting will be required to ratify the
selection of KPMG Peat Marwick LLP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF PROPOSAL 3.
8
<PAGE>
ADDITIONAL INFORMATION
MANAGEMENT
Officers are elected annually by the Board and serve at the discretion of
the Board. Set forth below is information regarding the current executive
officers of the Company who are not directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Andrew J. Hajducky III 43 Chief Financial Officer and Treasurer
Richard F. Torre 47 President and Chief Executive Officer, SalesLink
Corporation
Hans Hawrysz 49 President and Chief Executive Officer, Planet
Direct Corporation
</TABLE>
Andrew J. Hajducky III has served as Chief Financial Officer of the Company
since October 1995. From 1990 until joining the Company, he was a partner with
the public accounting firm of Ernst & Young LLP. From 1983 through 1990, he
held various positions with Arthur Young & Co., which merged with Ernst &
Whinney to form Ernst & Young LLP.
Richard F. Torre has served as President of SalesLink Corporation
("SalesLink"), a subsidiary of the Company, since 1990. From 1990 until 1996
Mr. Torre also served as Chief Operating Officer of SalesLink. In 1996 Mr.
Torre was named Chief Executive Officer of SalesLink. From 1987 until joining
the Company in 1990, Mr. Torre was manager of CPU Upgrades at Digital
Equipment Corporation, a publicly held computer company.
Hans Hawrysz has served as President and Chief Executive Officer of Planet
Direct Corporation, a subsidiary of the Company, since January 24, 1997. From
April 1992 to January 1997 Mr. Hawrysz was Executive Vice President of AT&T
Universal Card Services.
There are no family relationships between any director, executive officer,
or person nominated or chosen by the Company to become a director or executive
officer of the Company.
COMPENSATION OF DIRECTORS
In 1995, the Company adopted the 1995 Stock Option Plan for Non-Employee
Directors (the "Director Plan"). Under the terms of the Director Plan, each
Director who (1)(i) was a Director of the Company when the Director Plan was
first adopted by the Board of Directors; (ii) has completed at least five
years of continuous service on the Board of Directors; (iii) is not otherwise
an employee of the Company or any of its subsidiaries or affiliates; and (iv)
is not an affiliate (as defined in the Director Plan) of an institutional
investor in the Company (an "Affiliated Director," and a director meeting all
of the foregoing criteria referred to as a "Current Director") or (2)(i) is
elected a Director of the Company for the first time either by the Board of
Directors or by the stockholders after the 1995 Plan is first adopted by the
Board of Directors or approved by the stockholders; (ii) is not otherwise an
employee of the Company or any of its subsidiaries or affiliates; and (iii) is
not an Affiliated Director (a "new Director") was, or shall be, granted an
option to purchase 47,000 shares of Common Stock upon the adoption of the
Director Plan by the Board of Directors, in the case of a Current Director, or
upon the election of the Director, in the case of a New Director. In addition,
if a director who is an Affiliated Director, and is otherwise eligible to
receive options under the Director Plan, ceases to be an Affiliated Director
(that is, ceases to be an affiliate of an institutional investor in the
Company), then such director shall be granted an option to purchase 47,000
shares of Common Stock upon ceasing to be an Affiliated Director. An aggregate
of 282,000 shares of Common Stock (subject to adjustments for capital changes)
has been reserved for issued under the Director Plan upon exercise of options.
Options are granted under the Director Plan at exercise prices equal to the
fair market value of the Company's Common Stock at the time the options are
granted. Fair market value is the last reported sales price per share of the
Company's Common Stock on the date of grant as reported in the over-the-
counter market. Options are exercisable in five cumulative installments of
9,400 shares each, the first installment becoming exercisable immediately
after the first annual meeting of stockholders following the date of grant or
9
<PAGE>
commensurate with the date of grant if the optionee first becomes a director
by vote of the stockholders and each further installment becoming exercisable
immediately after each Annual Meeting of stockholders thereafter, provided
that the option holder continues in office as a director at such time. No
option may be exercisable more than ten years from its date of grant. Of the
current members of the Board of Directors, Messrs. McMullen and Goldman are
eligible to participate in the Director Plan. Mr. McMullen received an option
to purchase 47,000 shares of Common Stock under the Director Plan during
fiscal 1995. Mr. Goldman received an option to purchase 47,000 shares of
Common Stock under the Director Plan during fiscal 1997.
In addition to the foregoing, directors of the Company receive reimbursement
of expenses incurred with respect to attendance at meetings of the Board and
meetings of committees of the Board.
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation (including salary, bonuses, stock options, and certain other
compensation) paid by the Company for services in all capacities for fiscal
years ended July 31, 1997, 1996, and 1995, to its Chief Executive Officer and
to each of its four other most highly compensated executive officers whose
salary plus bonus exceeded $100,000 in fiscal 1997 (all five being hereinafter
referred to as the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------- ------------
NAME AND SECURITIES
PRINCIPAL UNDERLYING ALL OTHER
POSITION YEAR SALARY($) BONUS($) OPTIONS(1) COMPENSATION($)(2)
--------- ---- ---------- --------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
David S.
Wetherell(3)... 1997 180,250 75,000 -- 3,316
Chairman,
President 1996 180,250 75,000 -- 1,502
and Chief
Executive 1995 180,250 175,000 150,000 3,383
Officer
Richard F.
Torre.......... 1997 145,790 42,500 10,000 3,014
President and
Chief 1996 128,947 96,400 2,000 2,579
Executive
Officer of 1995 124,525 19,400 26,250 2,479
SalesLink
Corporation
Hans Hawrysz(4). 1997 87,500 25,000 -- --
President and
Chief
Executive
Officer
of Planet
Direct
Corporation
Andrew J.
Hajducky
III(5)......... 1997 143,333 48,333 12,000 2,212
Chief Financial 1996 81,667 33,333 60,000 --
Officer and
Treasurer
Hemang Dave(6).. 1997 102,479 42,000 -- 813
1996 41,846 16,667 30,000 --
</TABLE>
- - --------
(1) The Company's 1986 Stock Option Plan is administered by the Compensation
Committee of the Board of Directors. The Committee granted stock options
during fiscal 1995, 1996 and 1997 which are reflected in
10
<PAGE>
this column. All stock options granted in fiscal 1995, 1996 and 1997 were
non-statutory (also called non-qualified) stock options, have an exercise
price equal to fair market value on the date of grant, vest for 25% on the
first anniversary of the date of grant with the remainder vesting in 36
equal monthly installments thereafter, and have terms varying from six to
ten years.
(2) Amounts set forth in this column represent Company cash contributions
under the Company's 401(k) Plan.
(3) In April 1995, the Company formed the first of its Internet investment and
development arms, CMG@Ventures, L.P., a Delaware Limited Partnership
("CMG@Ventures"), and, through two wholly-owned subsidiaries, was
committed to contribute up to $35,000,000 to CMG@Ventures. CMG@Ventures is
currently being reorganized as a limited liability company. In October
1996, the Company formed a second Internet investment and development arm,
CMG@Ventures II, L.L.C. ("CMG@Ventures II"). The purpose of both
CMG@Ventures and CMG@Ventures II is to provide intellectual and financial
capital to companies seeking to further the commercialization of the
Internet and other interactive media. Mr. Wetherell is a profit general
partner (as defined) of CMG@Ventures, and, in that capacity, received a
8.6% carried interest (the "Interest") in the net realized gains (as
defined in the partnership agreement) of CMG@Ventures. Mr. Wetherell's
Interest vests in forty quarterly installments of 3.75% of his Interest
for each of the first 20 installments and 1.25% of his Interest for each
of the next 20 installments. Mr. Wetherell is a member of CMG@Ventures II
and in that capacity will receive a 7.75% carried interest in the net
realized gains of CMG@Ventures II.
(4) On January 24, 1997, the Board of Directors elected Hans Hawrysz as
President and Chief Executive Officer of Planet Direct Corporation, a
subsidiary of the Company. The information shown in the table for fiscal
1997 reflects the compensation earned by Mr. Hawrysz from January 24, 1997
through July 31, 1997.
(5) On October 24, 1995, the Board of Directors elected Andrew J. Hajducky III
as Chief Financial Officer and Treasurer of the Company. The information
shown in the table for fiscal 1996 reflects the compensation earned by Mr.
Hajducky from October 24, 1995 through July 31, 1996. Mr. Hajducky is a
profit general partner (as defined) of CMG@Ventures, and, in that
capacity, received a 0.5% carried interest (the "Interest") in the net
realized gains (as defined in the partnership agreement) of CMG@Ventures.
Mr. Hajducky's Interest vests in forty quarterly installments of 3.75% of
his Interest for each of the first 20 installments and 1.25% of his
Interest for each of the next 20 installments. Mr. Hajducky is a member of
CMG@Ventures II and in that capacity will receive a 0.5% carried interest
in the net realized gains of CMG@Ventures II.
(6) Mr. Dave resigned as an officer of the Company effective June 4, 1997. The
information shown in the table for 1997 reflects the compensation earned
by Mr. Dave from August 1, 1996 through June 4, 1997. On February 26,
1996, Mr. Dave was elected as President of Engage Technologies, Inc., a
subsidiary of the Company formerly known as CMG Direct Interactive, Inc.
The information shown in the table for 1996 reflects the compensation
earned by Mr. Dave from February 26, 1996 through July 31, 1996.
11
<PAGE>
STOCK OPTION GRANTS IN FISCAL YEAR 1997
The following table sets forth information concerning individual grants of
options to purchase Common Stock under the 1986 Stock Option Plan made to each
Named Executive Officer during the fiscal year ended July 31, 1997. Mr.
Wetherell, Mr. Hawrysz and Mr. Dave were not granted any options to purchase
Common Stock in the last fiscal year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------- VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE OR FOR OPTION TERM (3)
OPTIONS IN FISCAL BASE PRICE EXPIRATION ----------------------
NAME GRANTED(#)(1) 1997(2) ($ /SHARE) DATE 5%($) 10%($)
- - ---- ------------- ---------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Richard F.
Torre.......... 10,000 8.2% $15.5625 11/20/01 $ 42,996 $ 95,011
President and
Chief Executive
Officer,
SalesLink
Andrew J.
Hajducky III... 12,000 9.8% $15.5625 11/20/01 $ 51,596 $ 114,013
Chief Financial
Officer and
Treasurer
</TABLE>
- - --------
(1) See footnote 1 to the Summary Compensation Table above.
(2) Options to purchase an aggregate of 122,050 shares were granted to all
employees in fiscal 1997.
(3) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compounded rates of appreciation (5% and 10%)
on the Company's Common Stock over the term of the options. These numbers
are calculated based on rules promulgated by the Securities and Exchange
Commission and do not reflect the Company's estimate of future stock price
growth. Actual gains, if any, on stock option exercises and Common Stock
holdings are dependent on the timing of such exercise and the future
performance of the Company's Common Stock. There can be no assurance that
the rates of appreciation assumed in this table can be achieved or that
the amounts reflected will be received by the option holder.
12
<PAGE>
1997 AGGREGATED OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES
Presented below is information with respect to unexercised stock options to
purchase the Company's Common Stock held by each Named Executed Officer as of
July 31, 1997. None of the Named Executive Officers exercised any stock
options to purchase shares of the Company's Common Stock during the year ended
July 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT JULY 31, 1997(#) AT JULY 31, 1997($)
NAME EXERCISABLE/ UNEXERCISABLE EXERCISABLE/ UNEXERCISABLE(1)
---- --------------------------- -----------------------------
<S> <C> <C>
David S. Wetherell ..... 193,125/256,875 $2,544,233/$3,474,367
President, Chief
Executive Officer and
Secretary
Richard F. Torre ....... 13,670/19,330 $ 165,671/$ 116,317
President and Chief
Executive Officer of
SalesLink Corporation
Hans Hawrysz ........... 0/0 0/0
President and Chief
Executive Officer of
Planet Direct
Corporation
Andrew J. Hajducky III.. 26,250/45,750 $ 164,063/$ 220,682
Chief Financial Officer
and Treasurer
Hemang Dave............. 10,000/0 0/0
</TABLE>
- - --------
(1) Based on the difference between the option exercise price and the closing
price of the underlying common stock on July 31, 1997, which closing price
was $16.375.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors (the "Committee") is
composed of two independent, disinterested Directors who are not employees of
the Company. The Committee regularly reviews and approves generally all
compensation and fringe benefit programs of the Company and also reviews and
determines the actual compensation of the Company's executive officers
(including the Named Executive Officers), as well as all stock option grants,
performance-based stock options and both long-term and short-term cash
incentive awards to all key employees. All compensation actions taken by the
Committee are reported to and approved by the full Board of Directors. The
Committee also reviews and makes recommendations to the Board on policies and
programs for the development of management personnel and management structure
and organization. The Committee reviews and administers the Company's 1986
Stock Option Plan and the Company's 1995 Employee Stock Purchase Plan. The
Committee regularly reviews Executive Compensation Reports prepared by
independent organizations in order to evaluate the appropriateness of its
Executive Compensation Program.
The Committee uses its base salary and incentive bonus program for the
Company's executive officers (including the Named Executive Officers) in order
to enhance short-term profitability and stockholder value and uses stock
options, performance-based stock options, and long-term cash incentive awards
to enhance long-term growth in profitability, return on equity and stockholder
value. In order to meet these objectives, the Committee first sets base
salaries for the Company's executive officers (including the Named Executive
Officers) for each fiscal year based on a review of average base salaries
among competitive peer groups and then sets target
13
<PAGE>
incentive bonus awards comprising varying percentages of total target
compensation depending on the position being reviewed.
The Committee reviews the Company's annual performance plan for the ensuing
fiscal year and sets specific incentive target bonus awards which are directly
linked to the short term financial performance of the Company as a whole. The
executive officers of the Company then have an opportunity to earn a 25%
payout of their individual target bonuses in each fiscal quarter provided that
the Company meets or exceeds its performance plan for that quarter. These
quarterly bonuses are prorated to the extent that the Company achieves a
portion of its performance plan. If the full amount of the quarterly bonuses
are not earned in a fiscal quarter, the executive officers have an opportunity
to improve performance and thereby to earn retroactively the full amount of
the target quarterly bonuses to the extent not earned in prior quarters. The
annual performance plan is based on operating income before extraordinary
gains and losses and before taxes. The Committee has complete discretionary
authority to award full bonuses or special bonuses for special achievements.
In addition to salaries and incentive bonuses, the Committee also grants
stock options to executive officers and other key employees of the Company and
its subsidiaries in order to focus the efforts of these employees on the long-
term enhancement of profitability and stockholder value. Options may be
granted with respect to the common stock of the Company or of a subsidiary. In
the past, the Committee has also granted a long-term cash incentive award to
the President of SalesLink Corporation in order to focus his efforts on
increasing earnings and stockholder value in SalesLink. This arrangement was
terminated in fiscal 1997 and replaced with an option to purchase common stock
of SalesLink Corporation.
With respect to the Chief Executive Officer of the Company, the Compensation
Committee has utilized a base salary and incentive bonus, with the bonus being
based on individual performance with respect to each fiscal year. The Company
has entered into an Employment Agreement with Mr. Wetherell and in connection
therewith has issued to him a non-qualified performance stock option for the
purchase of up to 300,000 shares of Common Stock of the Company. See
"Employment Agreement." The Compensation Committee has also issued Mr.
Wetherell other stock options which vest over a period of four years.
In order to participate in the rapidly developing business opportunities
related to the Internet, the Company formed CMG@Ventures, L.P. (which is
currently being reorganized as a limited liability company) during fiscal 1995
and CMG@Ventures II, L.L.C. during fiscal 1997 (together the "CMG@Ventures
Funds") as captive venture capital funds competing with other funds to find
and invest in these opportunities. The CMG@Ventures Funds had ownership
interests in eleven Internet related companies as of July 31, 1997, and the
Company actively participates in their management. Three of these companies
were controlled by the CMG@Ventures Funds at July 31, 1997 and hence by the
Company. The Compensation Committee has granted Mr. Wetherell, who is a
general partner of CMG@Ventures, L.P., an eight-point-six percent (8.6%)
interest in the net realized gains (as defined in the partnership agreement)
of CMG@Ventures, L.P. in accordance with the practice in the venture capital
industry. The Compensation Committee has granted Mr. Hajducky, who is a
general partner of CMG@Ventures, L.P., a zero-point-five percent (0.5%)
interest in the net realized gains (as defined in the partnership agreement)
of CMG@Ventures, L.P. in accordance with the practice in the venture capital
industry. Mr. Wetherell and Mr. Hajducky are each members of CMG@Ventures II,
L.L.C., and, in that capacity, the Compensation Committee granted them 7.75%
and 0.5% carried interests, respectively, in the net realized gains of
CMG@Ventures II, L.L.C.
The Committee believes that the foregoing combination of base salaries,
incentive bonuses, stock options, performance-based stock options and long-
term cash incentives have helped develop a Senior Management Group dedicated
to achieving significant improvement in both the short-term and long-term
financial performance of the Company.
The foregoing report has been furnished by Craig D. Goldman (Chairman) and
John A. McMullen.
14
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fourth quarter of fiscal 1997, in conjunction with the Company's
dividend of shares of common stock of Lycos, Inc. ("Lycos"), a majority owned
subsidiary of the Company, to its stockholders, CMG@Ventures, L.P. allocated
110,627 shares of the common stock of Lycos to its profit partners. Of these
shares, 42,191 and 2,458 were allocated to the accounts of Mr. Wetherell and
Mr. Hajducky, respectively, in their capacity as profit partners of
CMG@Ventures, L.P. On August 21, 1997, Mr. Wetherell received a distribution
of 15,822 of his allocated shares of Lycos common stock. On August 21, 1997
and September 5, 1997, Mr. Hajducky received distributions of 369 and 276,
respectively, of his allocated shares of Lycos common stock.
During fiscal 1997, the Company formed a second Internet investment and
development arm, CMG@Ventures II, L.L.C., a Delaware Limited Liability Company
("CMG@Ventures II"). The purpose of CMG@Ventures II, like that of
CMG@Ventures, L.P., is to provide intellectual and financial capital to
companies seeking to further the commercialization of the Internet and other
interactive media. Mr. Wetherell and Mr. Hajducky are members of CMG@Ventures
II, and, in that capacity, will receive 7.75% and 0.5% carried interests (the
"Interests"), respectively, in the net realized gains of CMG@Ventures II.
In September 1996, CMG@Ventures, L.P. sold its equity investment in TeleT
Communications ("TeleT") to Premiere Technologies, Inc. ("Premiere") in
exchange for $550,000 and 320,833 shares of the common stock of Premiere. On
September 24, 1997 CMG@Ventures L.P. allocated 283,333 shares of common stock
of Premiere received upon the sale of its interest in TeleT between
CMG@Ventures Capital Corp. and its profit partners, with 22.5% of the net
realized gain (as defined in the partnership agreement of CMG@Ventures, L.P.)
allocated to the accounts of the profit partners. An allocation of 22,325
shares of the common stock of Premiere was made to the account of Mr.
Wetherell, 8,372 shares of which were distributed to Mr. Wetherell on
September 24, 1997. An allocation of 1,301 shares of the common stock of
Premiere was made to the account of Mr. Hajducky, 390 shares of which were
distributed to Mr. Hajducky on September 24, 1997.
On January 31, 1997, CMG@Ventures, Inc., the managing general partner of
CMG@Ventures, L.P., disposed of all of its interest in NetCarta to Microsoft
Corporation for net cash proceeds of $18,468,000. 22.5% of the net realized
gain (as defined in the partnership agreement of CMG@Ventures, L.P.) of
CMG@Ventures, Inc. realized upon the sale of its interest in NetCarta was
allocated to the accounts of the profit partners of CMG@Ventures, L.P.
pursuant to the CMG@Ventures, Inc. Deferred Compensation Plan. In their
capacities as profit partners of CMG@Ventures, L.P., $700,550 and $40,820 were
allocated to the accounts of Mr. Wetherell and Mr. Hajducky, respectively,
pursuant to the CMG@Ventures, Inc. Deferred Compensation Plan. Of the amounts
allocated to the accounts of Mr. Wetherell and Mr. Hajducky, to date,
distributions of $288,977 and $12,246 have been made to Mr. Wetherell and Mr.
Hajducky, respectively.
15
<PAGE>
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
The graph below compares the cumulative total stockholder return of the
Company's Common Stock from January 25, 1994 (the date of the Company's initial
public offering) through July 31, 1997 against the cumulative total return of
the NASDAQ Stock Market Index and the NASDAQ Computer and Data Processing
Services Index during the same period. Management cautions that the stock price
performance shown in the graph below should not be considered indicative of
potential future stock performance.
[Graph of Data Points Listed Below]
<TABLE>
<CAPTION>
Base Date Cumulative Return
Company/Index Name January 25, 1994 July 31, 1994 July 31, 1995 July 31, 1996 July 31, 1997
- - --------------------- ---------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CMB Information
Services, Inc. $100.00 $110.94 $501.56 $600.00 $655.08
NASDAQ Stock
Market Index $100.00 $ 92.12 $129.34 $140.91 $207.96
NASDAQ Computer and
Data Processing
Services Index $100.00 $ 95.68 $165.08 $185.18 $288.15
</TABLE>
The graph shown above assumes that $100 was invested in the Company's Common
Stock and in each index on January 25, 1994. In addition, the total return for
the Company's Common Stock and the indexes used assumes the reinvestment of all
dividends. On July 31, 1997 the Company paid a dividend of one share of the
common stock of Lycos, Inc. for every 16 shares of the Company's Common Stock
held.
16
<PAGE>
EMPLOYMENT AGREEMENT
In November of 1993, the Company entered into an employment agreement with
Mr. Wetherell, which runs through July 31, 1998, at a minimum annual salary
which is currently at $180,250. The agreement may be extended for an
additional five years by agreement of the parties. The agreement provides for
annual incentive awards in amounts to be determined by the Compensation
Committee and salary continuation for the shorter of two years or the entire
length of the agreement in the event (i) Mr. Wetherell terminates his
agreement following a change of control of the Company not approved by the
Board of Directors and a change in a majority of the Directors, or (ii) Mr.
Wetherell's employment is terminated involuntarily and not for cause; except
that the two-year limit shall not apply in either event if the Company has
achieved certain specified performance goals. (See "Severance and Change of
Control Arrangements" below.) The minimum annual salary may be increased from
time to time at the discretion of the Compensation Committee. The agreement
contains non-competition covenants in favor of the Company. The agreement also
contains a non-qualified performance stock option granting to Mr. Wetherell
the right to purchase up to 300,000 shares of Common Stock of the Company at
an option price of $2.67 per share. This option was granted under the
Company's 1986 Stock Option Plan. The option becomes exercisable in ten annual
installments of up to 30,000 shares each, beginning on November 1, 1994, and
ending on November 1, 2003, but only if and to the extent that the Company
meets certain performance goals relating to (i) the return on stockholders'
investment for each year and (ii) the percentage increase in earnings per
share over the prior year. The option also becomes exercisable if and to the
extent that the Company meets these performance goals on an average basis of
(i) up to the prior three years, or (ii) for five years, and (iii) for an
additional five years, if extended. In any event, the option becomes
exercisable (to the extent not previoulsy exercisable) as to the first 150,000
shares on November 1, 1998, and as to the second 150,000 shares on November 1,
2003.
SEVERANCE AND CHANGE OF CONTROL ARRANGEMENTS
The Company's employment agreement with Mr. Wetherell provides for certain
benefits in the event of involuntary termination of his employment not for
cause or in the event he terminates his employment following a change of
control of the Company that is not approved by the Company's Board of
Directors. In the event of a change of control of the Company not approved by
the Board of Directors, followed by a change in a majority of the Directors,
Mr. Wetherell would have the right to terminate his agreement and a percentage
of all remaining installments of his 300,000 share stock option would become
exercisable equal to the percentage of installments that had previously become
exercisable. In the event of the involuntary termination of Mr. Wetherell's
employment not for cause, a percentage of up to three remaining 30,000 share
installments of his 300,000 share stock option would become exercisable, equal
to the percentage of installments that had previously become exercisable.
Any compensation payable to Mr. Wetherell contingent on a change of control
which qualifies as a parachute payment under Section 280G of the Internal
Revenue Code of 1986, as amended, shall be limited to the maximum amount that
may be paid to him without any part of all of such compensation being deemed
an excess parachute payment under that Section. This maximum amount is
determined by multiplying the average of Mr. Wetherell's base salary and bonus
for the previous five years by three.
The Limited Partnership Agreement of CMG@Ventures, L.P. provides that, upon
a change of control (as defined), each profit general partner, including Mr.
Wetherell, may elect, within two months of the date of the change of control,
to have CMG@Ventures, L.P. repurchase all, and not less than all, of the
interest in CMG@Ventures, L.P. held by each profit general partner at the fair
market value of such interest as determined by an independent appraisal
pursuant to a procedure set forth in the Limited Partnership Agreement. A
change of control is defined to mean, among other things, a change of control
of the Company (i) which has not been approved by a majority of all of the
members of the Board of Directors of the Company, or (ii) which has been
approved by a majority of all the members of the Board of Directors of the
Company but which has not been approved by a majority in interest of the
profit general partners of CMG@Ventures, L.P. and which is likely by its terms
to have a material adverse effect upon the business and prospects of
CMG@Ventures, L.P. and which
17
<PAGE>
change of control in either event is of a nature that would be required to be
reported in response to Items 6(e) or 14(i), (iv) or (v) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), provided that, in the case of a change of
control reportable under Item 6(e), such change of control involves the
acquisition by any "person" (as such term in used in Sections 13(d)(3) and
14(d)(2) of the Exchange Act, but expressly excluding Mr. Wetherell) of
beneficial ownership, directly or indirectly, of securities or interests in
the Company which represent more than 30% of the combined voting power of the
Company's outstanding securities.
On August 1, 1996 Richard F. Torre, President and Chief Executive Officer of
SalesLink Corporation ("SalesLink"), was granted an option to purchase 300,000
shares of the common stock, $.01 par value per share, of SalesLink at $1.20
per share. This option becomes exercisable for 25% of the shares on the first
anniversary of the date of grant and then cumulatively for an additional 2.78%
each month thereafter. This option becomes immediately exercisable in full in
the event of a change in control of SalesLink (as defined below). A change of
control of SalesLink shall be deemed to have occurred when there has occurred
the acquisition by purchase, merger, or otherwise, by any Person (as such term
is defined in Section 13(d)(3) and 14(d)(2) of the Exchange Act, excluding any
business entity controlling, controlled by, or under common control with the
Company) of beneficial ownership, directly or indirectly, of securities of
SalesLink representing 80% or more of the combined voting power of SalesLink's
then outstanding securities.
On January 22, 1997 Hans Hawrysz, President and Chief Executive Officer of
Planet Direct Corporation ("Planet Direct"), was granted an option to purchase
500,000 shares of the common stock, $.01 par value per share, of Planet Direct
at $.01 per share. This option becomes exercisable for 25% of the shares on
the first anniversary of the date of grant and then cumulatively for the
remainder in 36 monthly installments. In the event that Planet Direct is sold
during the first year of the vesting period the option immediately vests for
25% and if Planet Direct is sold at any other time the option vests to the
next cumulative monthly installment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Craig D. Goldman and
John A. McMullen. Gregory M. Avis, who resigned from the Company's Board of
Directors effective as of October 22, 1997, served as a member of the
Compensation Committee during the year ended July 31, 1997. No member of the
Compensation Committee has at any time been an officer or employee of the
Company or any of its subsidiaries. No executive officer of the Company served
as a member of the compensation committee or board of directors of any other
entity which has an executive officer serving as a member of the Company's
Board of Directors or Compensation Committee.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act 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 reports of ownership and
changes in ownership with the Securities and Exchange Commission (the "SEC").
Directors, executive officers, and greater than ten percent holders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received or written
representations from certain reporting persons, the Company believes that,
during fiscal 1997, other than a late filing made by Andrew J. Hajducky and
described below, all filing requirements under Section 16(a) applicable to its
directors and executive officers were met.
In February 1997 Mr. Hajducky filed a Statement of Changes in Beneficial
Ownership of Securities on Form 4 for the month of October 1996. This filing
reported the purchase of 1,000 shares of the Company's Common Stock on October
15, 1996 and the grant of a stock option to purchase 12,000 shares of the
Company's Common Stock.
18
<PAGE>
ANNUAL REPORT
The Company's Annual Report on Form 10-K for the year ended July 31, 1997 is
available upon request from the Company.
OTHER MATTERS
The Board does not know of any other matter which may come before the
Meeting. If any other matters are properly presented to the Meeting, it is the
intention of the persons named in the accompanying proxy to vote, or otherwise
to act, in accordance with their best judgment on such matters.
The Board hopes that stockholders will attend the Meeting. Whether or not
you plan to attend, you are urged to complete, sign and return the enclosed
proxy in the accompanying envelope. A prompt response will greatly facilitate
arrangements for the Meeting, and your cooperation will be appreciated.
Stockholders who attend the Meeting may vote their shares even though they
have sent in their proxies.
By Order of the Board of Directors
/s/ David S. Wetherell
----------------------------------
David S. Wetherell, Secretary
Andover, Massachusetts
November 14, 1997
19
<PAGE>
Appendix A
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
- - ------------------------------
CMG INFORMATION SERVICES, INC. 1. Election of Class 1 Director: For With-
- - ------------------------------ held
Nominee: Craig D. Goldman [_] [_]
RECORD DATE SHARES: For Against Abstain
2. Approval of Amendment
to 1986 Stock Option
Plan. [_] [_] [_]
3. Approval of Independent
Accountant. [_] [_] [_]
----------
Please be sure to sign Date Mark box at right if an address change or
and date this Proxy. comment has been noted on reverse side
- - ---------------------------------- of this card. [_]
- - ---------------------------------------------------
Stockholder sign here Co-owner sign here
DETACH CARD DETACH CARD
CMG INFORMATION SERVICES, INC.
Dear Stockholder,
Please take note of the important information enclosed with this Proxy
Ballot. There are a number of issues related to the management and
operation of your Company that require your immediate attention and
approval. These are discussed in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your
right to vote your shares.
Please mark the boxes on this proxy card to indicate how your shares
will be voted. Then sign the card, detach it and return your proxy vote
in the enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders,
December 18, 1997. Thank you in advance for your prompt consideration
of these matters.
Sincerely,
CMG Information Services, Inc.
<PAGE>
CMG INFORMATION SERVICES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David S. Wetherell and Andrew J. Hajducky III
and each of them as Proxies of the undersigned, each with the power to appoint a
substitute, and hereby authorizes each of them to represent the undersigned at
the Annual Meeting of Stockholders to be held on December 18, 1997, or any
adjournment thereof, and there to vote all the shares of CMG Information
Services, Inc. held of record by the undersigned on October 20, 1997, as
directed on the reverse side hereof. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED FOR THE NOMINEE FOR CLASS 1 DIRECTOR AND FOR PROPOSALS 2 AND 3. If the
nominee for director is unable or unwilling to serve, the shares represented
hereby will be voted for another person in accordance with the judgment of the
Proxies named herein.
In addition, in their discretion, the Proxies are hereby authorized to vote upon
such other business as may properly come before the meeting or any adjournment
thereof. This Proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder.
- - --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Please sign this proxy card exactly as your name or names appear hereon. Joint
owners should each sign personally. Trustees and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
- - --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED: DO YOU HAVE ANY COMMENTS?
- - --------------------------------- ----------------------------------
- - --------------------------------- ----------------------------------
- - --------------------------------- ----------------------------------
<PAGE>
Appendix B
CMG INFORMATION SERVICES, INC.
1986 STOCK OPTION PLAN, AS AMENDED BY THE BOARD OF DIRECTORS
------------------------------------------------------------
ON SEPTEMBER 24, 1997
---------------------
Article 1 - Purpose
- - -------------------
This 1986 Stock Option Plan (the "Plan") is intended to provide incentives
to individuals that CMG Information Services, Inc. (the "Company") believes may
play a significant role in the future success of the Company and its present and
future subsidiaries (as defined in Section 424(f) of the Internal Revenue Code
of 1986, as amended (the "Code")) by providing them with opportunities to
purchase stock in the Company pursuant to the exercise of options. The Company
intends certain options granted under the Plan which are designated as incentive
stock options to be "incentive stock options" complying with, and subject to,
the terms and conditions of Section 422 of the Code; and with respect to those
incentive stock options this Plan shall be interpreted in accordance with that
section of the Code, as amended, and the rules and regulations promulgated from
time to time thereunder. Stock options granted hereunder which do not comply
with Section 422 of the Code or are otherwise intended to be non-qualified stock
options shall be designated as non-qualified stock options.
Article 2 - Administration of the Plan
- - --------------------------------------
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors (the "Board") of the Company. The
Committee shall consist solely of two or more members of the Board who are
"Outside Directors" as defined in the Code. The Board may remove members from
the Committee at any time with or without cause, or may add members to the
Committee. Vacancies on the Committee, howsoever caused, shall be filled by the
Board. Acts by a majority of the Committee at a meeting, or acts approved in
writing by all the members of the Committee, shall be the valid acts of the
Committee. Subject to the terms of the Plan, and subject to such overall
policies with respect thereto as may be established from time to time by the
Board, the Committee shall have authority to determine the time or times at
which options shall be granted, the persons to whom options shall be granted,
the number of shares covered by each option, the price per share specified in
each option, the time or times when each option or portions or installments of
each option shall become exercisable and the duration of the exercise period or
periods thereof, the conditions for the exercise of each option or portions or
installments of each option or for acceleration of the exercise date or dates of
each option or portions or installments thereof, or for the cancellation or
termination of each option or portions or installments thereof, and all other
terms and provisions of each option and each instrument by which each option
shall be evidenced.
All determinations and interpretations made by the Committee with respect
to the Plan and each option granted thereunder shall be binding and conclusive
on all interested parties
<PAGE>
unless otherwise determined by the Board. The Committee may from time to time
adopt such rules and regulations for carrying out the Plan as it may determine
in its sole discretion. No member of the Board or the Committee shall be liable
with respect to any action or determination made in good faith regarding the
Plan or any option granted under it.
Article 3 - Eligible Persons
- - ----------------------------
Options be granted to any individual that the Company deems appropriate
subject to the restriction that incentive stock options may only be granted to
employees. The granting of any option to a person shall neither entitle such
person to, nor disqualify him from, participation in any other grant of options
pursuant to this Plan or any other plan. Directors who are not employees of the
Company or its subsidiaries shall not be eligible to receive options under this
Plan.
Article 4 - Stock
- - -----------------
The stock subject to the options granted hereunder shall be shares of the
Company's authorized but unissued shares of Common Stock, par value $0.01 per
share, or shares of Common Stock reacquired by the Company including shares
purchased in the open market ("Common Stock"). The maximum number of shares
which are hereby reserved for issuance and may be issued pursuant to this Plan
is 2,250,000 less such number of shares as may from time to time be issued
pursuant to the CMG Information Services, Inc. 1995 Employee Stock Purchase
Plan, subject to adjustment as provided in Article 13. In the event any option
granted under the Plan shall expire, terminate or be cancelled for any reason
without having been exercised in full, or shall cease for any reason to be
exercisable in whole or in part, the unpurchased shares subject thereto, to the
extent the option ceases to be exercisable, shall again be available under the
Plan.
Article 5 - Grant of Options
- - ----------------------------
Options may be granted to eligible persons in such number and at such times
during the term of the Plan as the Committee shall determine.
The maximum number of shares of Common Stock subject to options that may be
granted to any eligible person in the aggregate in any calendar year shall not
exceed 200,000 shares, subject to adjustment as provided in Article 13.
Article 6 - Minimum Price of Options
- - ------------------------------------
The price per share specified in each option granted under the Plan shall
in no event be less than 100% (110% in the case of an incentive stock option
granted to a 10% shareholder as defined in Section 422(b)(6) and related
sections of the Code) of the fair market value per share of Common Stock on the
date the option is granted. Fair market value shall be determined by
- 2 -
<PAGE>
the Committee in good faith in accordance with applicable regulations under the
Code. If there is a public market for the Common Stock of the Company, fair
market value shall be the last closing price before or on the valuation date, or
the mean between the highest and lowest quoted selling prices in the market
before or on the valuation date, or an average of such prices, all as the
Committee in its sole discretion shall determine.
Article 7 - Duration of Options
- - -------------------------------
Subject to earlier termination as provided in Articles 9 and 10, each
option shall expire on the date specified by the Committee, but in the case of
incentive stock options such expiration date shall be not more than ten years
(five years in the case of an incentive stock option granted to a 10%
shareholder as defined in Section 422(b)(6) and related sections of the Code)
from its date of grant. The Committee may extend the term of any previously
granted option provided that if such option is an incentive stock option it must
expire not more than ten or five years from its original date of grant as
provided above.
Article 8 - Exercise of Options
- - -------------------------------
Subject to the provisions of Articles 9 through 12, each option granted
under the Plan shall be exercisable as follows:
A. The option shall either be fully exercisable at the time of grant or
shall become exercisable in such installments or portions and at such
time or times or upon the happening of such conditions as the
Committee may determine. The installments or portions may be
cumulative or noncumulative as the Committee may determine.
B. Once all or any installment or portion of any option becomes
exercisable it shall remain exercisable until cancellation thereof or
until expiration or termination of the option, unless otherwise
specified by the Committee.
C. Each option may be exercised from time to time, in whole or in part,
up to the total number of shares with respect to which it is then
exercisable.
D. The date of exercise of any option or any portion or installment of
any option may be accelerated by fulfillment of such conditions as the
Committee may determine. Furthermore, the Committee shall have the
right to accelerate the date of exercise of any option or any portion
or installment thereof for any reason.
E. The aggregate fair market value (determined at the time the option is
granted) of the Common Stock with respect to which incentive stock
options granted after December 31, 1986, are exercisable for the first
time by an optionee during any calendar year (under all incentive
stock option plans of the company and its parent and subsidiary
corporations) shall not exceed $100,000.
- 3 -
<PAGE>
Article 9 - Termination of Relationship
- - ---------------------------------------
If an optionee's employment with the Company or any subsidiary is
terminated for any reason other than death, disability (within the meaning of
Section 22(e)(3) of the Code), or termination for cause, his options may be
exercised to the extent they were exercisable on the date of such termination,
but no further installments or portions of such options will become exercisable
(unless otherwise determined by the Committee) and each such option shall
terminate on the date one month following the date of such termination (but not
later than its specified expiration date). The aforesaid one month period may
be extended by the Committee in its sole discretion up to the expiration date of
each such option in the case of non-qualified stock options. If an optionee's
employment with the Company or any subsidiary is terminated for cause (as
defined by the Committee in its sole discretion), all his options shall
terminate immediately and be of no further force or effect. Whether authorized
leaves of absence or absence on military or governmental service may constitute
termination for purposes of the Plan shall be conclusively determined by the
Committee. Nothing in the Plan or in any option granted hereunder shall be
deemed to give any optionee the right to continue his employment with the
Company or any of its subsidiaries or shall be deemed to interfere in any way
with the right of the Company to terminate any optionee's employment at any time
and for any reason. Options granted under the Plan shall not be affected by any
change of employment among the Company and its subsidiaries so long as the
optionee continues to be an employee of the Company or one of its subsidiaries.
Article 10 - Disability; Death
- - ------------------------------
If an optionee becomes disabled (within the meaning of Section 22(e)(3) of
the Code), his options may be exercised to the extent they were exercisable on
the date he ceased to have an employment relationship with the Company or any
subsidiary, but no further installments or portions of such options will become
exercisable (unless otherwise determined by the Committee) and each such option
shall terminate on the date one month following the date of such cessation (but
not later than its specified expiration date). The aforesaid one month period
may be extended by the Committee in its sole discretion up to an additional
eleven months in the case of incentive stock options and up to the expiration
date of each such option in the case of non-qualified stock options.
If an optionee dies while he has an employment relationship with the
Company or during the one month (or extended) periods referred to in Article 9
or referred to above in this Article 10, his options may be exercised to the
extent they were exercisable on the date of his death, by his estate, or duly
appointed representative, or beneficiary who acquires the options by will or by
the laws of descent and distribution, but no further installments or portions of
such options will become exercisable and each such option shall terminate on the
date one year following the date of the optionee's death (but not later than its
specified expiration date).
Article 11 - Assignability
- - --------------------------
- 4 -
<PAGE>
Except to the extent otherwise set forth in the applicable option agreement
or other instrument evidencing the option, no option shall be assignable or
transferable by the optionee except by will or by the laws of descent and
distribution, and during the lifetime of the optionee each option shall be
exercisable only by him.
Article 12 - Terms and Conditions of Options
- - --------------------------------------------
Options shall be evidenced by instruments (which need not be identical) in
such forms as the Committee may from time to time approve. Such instruments
shall conform to the terms and conditions set forth in Article 6 through 11 and
may contain such other provisions not inconsistent with the Plan, including
restrictions on transfer, stock repurchase restrictions, forfeiture
restrictions, cancellation restrictions and other restrictions applicable to
shares of Common Stock issuable upon exercise of options granted under the Plan,
as the Committee deems advisable provided such provisions would not cause any
incentive stock option to fail to qualify as an incentive stock option under
Section 422 of the Code. Common Stock issuable upon the exercise of options
granted to persons subject to Section 16 of the Securities Exchange Act of 1934
(the "1934 Act") may not be disposed of within six months following date of
grant of such options. Options granted to persons subject to Section 16 of the
1934 Act may contain additional restrictions necessary to comply with Rule 16b-3
promulgated pursuant to the 1934 Act. The Company shall not be obligated to
deliver any shares unless and until, in the opinion of the Company's counsel,
all applicable Federal and state laws and regulations have been complied with,
nor, in the event the outstanding Common Stock is at the time listed upon any
stock exchange, unless and until the shares to be delivered have been listed, or
authorized to be added to the list upon official notice of issuance, upon such
exchange, nor unless and until all other legal matters in connection with the
issuance and delivery of shares have been approved by the Company's counsel.
Without limiting the generality of the foregoing, the Company may require from
the optionee such investment representation or such agreement, if any, as
counsel for the Company may consider necessary in order to comply with the
Securities Act of 1933. The Company shall use its best efforts to effect any
such compliance and listing, and the optionee shall take any action reasonably
requested by the Company in this regard.
Options may be granted hereunder (the "CMG Options") in tandem with options
granted under a subsidiary's stock option plan (the "Subsidiary Options") with
the condition that to the extent that a tandem Subsidiary Option is exercised
the corresponding tandem CMG Option (or corresponding installment or portion
thereof) shall be automatically cancelled and to the extent that a tandem CMG
Option is exercised the corresponding tandem Subsidiary Option (or corresponding
installment or portion thereof) shall be automatically cancelled.
Article 13 - Adjustments
- - ------------------------
Upon the happening of the following described events, an optionee's rights
under options granted hereunder shall be adjusted as hereinafter provided:
A. In the event shares of Common Stock of the Company shall be subdivided
or combined into a greater or smaller number of shares or if, upon a
merger,
- 5 -
<PAGE>
consolidation, reorganization, split-up, liquidation, combination,
recapitalization or the like of the Company, the shares of the
Company's Common Stock shall be exchanged for other securities of the
Company or of another corporation, each optionee shall be entitled,
subject to the conditions herein stated and to the terms and
conditions of each individual option, to purchase such number of
shares of Common Stock or amount of other securities of the Company or
such other corporation as were exchangeable for the number of shares
of Common Stock of the Company which such optionee would have been
entitled to purchase except for such action, and appropriate
adjustments shall be made in the purchase price per share to reflect
such subdivision, combination, or exchange; and
B. In the event the Company shall issue any of its shares as a stock
dividend upon or with respect to the shares of stock of the class
which shall at the time be subject to option hereunder, each optionee
upon exercising such an option shall be entitled to receive (for the
purchase price paid upon such exercise) the shares as to which he is
exercising his option and, in addition thereto (at no additional
cost), such number of shares of the class or classes in which such
stock dividend or stock dividends were declared or paid, and such
amount of cash in lieu of fractional shares, as he would have received
if he had been the holder of the shares as to which he is exercising
his option at all times between the date of the granting of such
option and the date of its exercise.
Upon the happening of any of the foregoing events, the class and aggregate
number of shares set forth in Article 4 hereof which are reserved for issuance
pursuant to the Plan or are subject to options which have heretofore been or may
hereafter be granted under the Plan shall also be appropriately adjusted to
reflect the events specified in paragraphs A and B above.
The Committee shall determine the adjustments to be made under this Article
13, and its determination shall be conclusive and binding on all interested
parties.
Article 14 - Exercise of Options
- - --------------------------------
An option (or any part or installment thereof) shall be exercised by giving
written notice to the Company at its principal office address, identifying the
option being exercised, specifying the number of shares as to which such option
is being exercised and accompanied by full payment of the purchase price
therefor either (1) in United States Dollars, in cash or by certified or bank
check, or (2) with the approval of the Committee (which it may grant or withhold
in its sole discretion), in shares of Common Stock of the Company owned by the
optionee having a fair market value (as defined in Article 6 and determined on
the business day immediately preceding the day on which the option is exercised)
equal to, or a fraction of a shares less than, such purchase price (together
with cash or certified or bank check equal in value to such fraction of a
share), or (3) in a combination of such Common Stock (with the approval of the
Committee) and cash or check. Unless the Committee otherwise determines the
holder of an option shall have no rights of a shareholder with respect to the
shares covered by his option until the date of issuance of a stock certificate
to him for such shares. Unless the Committee otherwise determines no adjustment
will be made for cash dividends or similar rights for which the record
- 6 -
<PAGE>
date occurs after the exercise of the option but prior to the date such stock
certificate is issued. In no case may a fraction of a share be purchased or
issued under the Plan.
Article 15 - Termination and Amendments to Plan
- - -----------------------------------------------
The Plan was adopted by the Board on May 2, 1986; and became effective on
that date subject to approval by the holders of a majority of the outstanding
shares of voting stock of the Company, which occurred on May 12, 1986. The Plan
as originally adopted expired on May 1, 1996 (except as to options outstanding
on that date). The Plan was extended to December 6, 2004, by the Board of
Directors of the Company on July 29, 1994, subject to approval by the
stockholders at the Annual Meeting of Stockholders of the Company to be held on
December 6, 1994. Subject to such approval, the Plan shall expire on December
6, 2004 (except as to options outstanding on that date). Options may be granted
under the Plan prior to the date of shareholder approval of the Plan (or
approval of the extension of the Plan), but such options shall be granted
subject to such approval. The Board may terminate or amend the Plan in any
respect at any time, except that, without the approval of the shareholders (a)
the total number of shares that may be issued under the Plan may not be
increased (except by adjustment pursuant to Article 13); (b) the provisions of
Article 3, regarding eligibility, may not be modified; (c) the provisions of
Article 6, regarding the exercise price at which shares may be offered pursuant
to options, may not be modified (except by adjustment pursuant to Article 13);
(d) the expiration date of the Plan may not be extended; and (e) the benefits
accruing to participants under the Plan may not be materially increased. No
action of the Board or shareholders, however, may, without the consent of an
optionee, substantially impair his rights under any option previously granted to
him; and no amendment may cause any incentive stock options previously granted
or to be granted under the Plan to cease to qualify as incentive stock options
in accordance with the terms and conditions of the Plan.
Article 16 - Governmental Regulation
- - ------------------------------------
The Plan and the grant and exercise of options thereunder, and the
Company's obligation to sell and deliver shares of the Company's Common Stock
under such options, shall be subject to all applicable laws (including tax
laws), rules and regulations.
Article 17 - Withholding Taxes
- - ------------------------------
At any time when an optionee is required to pay to the Company an amount to
be withheld under applicable income tax laws upon the exercise of a non-
qualified stock option, the optionee may satisfy this obligation (to the extent
of the minimum amount required to be withheld) in whole or in part by electing
(the "Election") to have the Company withhold from the distribution of shares of
Common Stock, a number of shares of Common Stock having a value equal to the
amount required to be withheld. The value of the shares to be withheld shall be
based on the fair market value of the Common Stock on the Tax Date. Any
fractional share amount left over after satisfying the withholding requirement
must be paid to the optionee in
- 7 -
<PAGE>
cash. "Tax Date" means the date on which the amount of tax to be withheld with
respect to the exercise of the non-qualified stock option is determined.
Each such election must be made prior to the Tax Date. The Committee may
disapprove the Election, may suspend or terminate the right to make an Election,
or may provide with respect to any non-qualified option that right to make an
Election shall not apply to such option. An Election is irrevocable.
- 8 -
