<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:
[_]CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[_]Preliminary Proxy Statement RULE 14A-6(E)(2))
[X]Definitive Proxy Statement
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
CMG Information Services, Inc.
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X]No fee required.
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange ActRule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_]Fee paid previously with preliminary materials.
[_]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
1
<PAGE>
CMG INFORMATION SERVICES, INC.
100 BRICKSTONE SQUARE
FIRST FLOOR
ANDOVER, MASSACHUSETTS 01810
November 27, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 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 17, 1998, 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/ D.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 17, 1998
To the Stockholders of CMG INFORMATION SERVICES, INC.:
NOTICE IS HEREBY GIVEN that the 1998 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 17, 1998, at 9:30 a.m. local
time, for the following purposes:
1. To elect two Class II Directors to serve until the 2001 Annual Meeting
of Stockholders or until their successors are elected and qualified.
2. To amend the Company's Restated Certificate of Incorporation to change
the name of the Company from "CMG Information Services, Inc." to "CMGI,
Inc."
3. To amend the Company's Restated Certificate of Incorporation to provide
for an increase in the number of authorized shares of Common Stock, $.01
par value per share, from 40,000,000 to 100,000,000.
4. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent accountants for the current fiscal year.
5. 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 Friday, October 30,
1998 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/ D.S. Wetherell
David S. Wetherell, Secretary
November 27, 1998
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
Company's 1998 Annual Meeting of Stockholders (the "Meeting") to be held at
the Andover Country Club, 60 Canterbury Street, Andover, Massachusetts 01810,
on Thursday, December 17, 1998, 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 27, 1998, 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 (978) 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 Friday, October 30, 1998,
will be entitled to notice of, and to vote at, the Meeting. As of October 30,
1998, the Company had outstanding 23,061,153 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 II Directors described herein, (II) FOR the
amendment to the Company's Restated Certificate of Incorporation changing the
name of the Company from "CMG Information Services, Inc." to "CMGI, Inc.",
(III) FOR the amendment to the Company's Restated Certificate of Incorporation
increasing the authorized shares of Common Stock to 100,000,000, (IV) FOR the
ratification of the appointment of KPMG Peat Marwick LLP as the Company's
independent accountants for the current fiscal year, and (V) 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.
1
<PAGE>
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 1999 Annual Meeting of Stockholders must
be received by the Corporate Secretary of the Company no later than July 30,
1999 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, a two for one stock split and a two for
one stock split effected on March 17, 1995, February 2, 1996 and May 11, 1998,
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, 1998, (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 executive
officers named in the Summary Compensation Table (the "Named Executive
Officers"), (III) by each of the Company's Directors; 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>
5% STOCKHOLDERS
David S. Wetherell (2)........... 4,610,364 19.5%
c/o CMG Information
Services, Inc.
100 Brickstone Square
First Floor
Andover, MA 01810
FMR Corp. (3).................... 2,499,600 10.8%
82 Devonshire Street
Boston, MA 02109
Scudder Kemper Investments, Inc.
(4)............................. 1,206,200 5.2%
345 Park Avenue
New York, NY 10154-0010
OTHER NAMED EXECUTIVE OFFICERS
Andrew J. Hajducky III (5)....... 39,438 *
Hans Hawrysz (6)................. 9,416 *
Richard F. Torre (7)............. 27,274 *
Paul L. Schaut (8)............... 0 0
OTHER DIRECTORS
William H. Berkman............... 0 0
Craig D. Goldman (9)............. 66,400 *
John A. McMullen (10)............ 0 *
Robert J. Ranalli................ 0 0
All Current Directors and
Executive Officers as a Group (9
persons) (11)................... 4,752,892 20.0%
</TABLE>
- --------
* Less than one percent
2
<PAGE>
(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, 1998 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
such options, but are not deemed outstanding for purposes of computing the
percentage ownership of any other person.
(2) Includes 600,000 shares issuable upon the exercise of outstanding options
that are exercisable prior to December 1, 1998. Includes 223,200 shares
held in trust for the benefit of Mr. Wetherell's minor children and 7,000
shares held by Mr. Wetherell and his wife as trustees for the David S.
Wetherell Charitable Trusts, for which 230,200 shares Mr. Wetherell
disclaims beneficial ownership.
(3) Based on the information provided on the Amendment No. 5 to the Schedule
13G filed by FMR Corp. with the Securities and Exchange Commission on
February 9, 1998. FMR Corp. has sole dispositive power with respect to
such shares, and sole power to vote 1,701,800 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 1,522,000 shares of Common Stock as
a result of its serving as investment manager of institutional accounts.
(4) Based on the information provided on the Amendment No. 1 to the Schedule
13G filed by Scudder Kemper Investments, Inc. ("Scudder Kemper") with the
Securities and Exchange Commission on February 13, 1998. Includes 559,200
shares with respect to which Scudder Kemper has the sole power to vote or
direct the vote. Includes 357,600 shares with respect to which Scudder
Kemper shares the power to vote or direct the vote. Scudder Kemper has
sole power to dispose or direct the disposition of all such shares.
(5) Includes 34,250 shares issuable upon the exercise of outstanding options
that are exercisable prior to December 1, 1998.
(6) Includes 5,416 shares issuable upon the exercise of outstanding options
that are exercisable prior to December 1, 1998. Mr. Hawrysz is also deemed
the beneficial owner of 229,166 shares of the common stock, par value
$.01, of Planet Direct Corporation ("Planet Direct"), a subsidiary of the
Company, which shares are issuable upon the exercise of outstanding
options that are exercisable prior to December 1, 1998. These shares
represent approximately three percent of the voting power of the
outstanding capital stock of Planet Direct.
(7) Includes 16,064 shares issuable upon the exercise of outstanding options
that are exercisable prior to December 1, 1998 and 3,000 shares held in
trust for the benefit of Mr. Torre's minor children. Mr. Torre is also
deemed the beneficial owner of 183,750 shares of the common stock, par
value $.01, of SalesLink Corporation ("SalesLink"), a subsidiary of the
Company, which shares are issuable upon the exercise of outstanding
options that are exercisable prior to December 1, 1998. These shares
represent approximately two percent of the voting power of the outstanding
capital stock of SalesLink.
(8) Mr. Schaut is deemed the beneficial owner of 75,000 shares of the common
stock, par value $0.01, of Engage Technologies, Inc. ("Engage"), a
subsidiary of the Company, which shares are issuable upon the exercise of
outstanding options that are exercisable prior to December 1, 1998. These
shares represent less than one percent of the voting power of the
outstanding capital stock of Engage.
(9) Includes 18,800 shares issuable upon the exercise of outstanding options
that are exercisable prior to December 1, 1998. Mr. Goldman is also deemed
the beneficial owner of 5,000 shares of the common stock, par value $0.01,
of SalesLink, which shares are issuable upon the exercise of outstanding
options that are exercisable prior to December 1, 1998. These shares
represent less than one percent of the voting power of the outstanding
capital stock of SalesLink.
(10) Mr. McMullen is deemed the beneficial owner of 5,000 shares of the common
stock, par value $0.01, of SalesLink, which shares are issuable upon the
exercise of outstanding options that are exercisable prior to December 1,
1998. These shares represent less than one percent of the voting power of
the outstanding capital stock of SalesLink.
(11) Includes 674,530 shares issuable upon the exercise of outstanding options
that are exercisable prior to December 1, 1998.
3
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
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 II Directors
will expire at this Meeting. The nominees for Class II Director are William H.
Berkman and John A. McMullen. Messrs. Berkman and McMullen are currently Class
II Directors of the Company and are available for re-election as Class II
Directors. The Class II Directors elected in 1998 will serve for a term of
three years which will expire at the Company's 2001 Annual Meeting of
Stockholders or when their successors are elected and qualified. It is
intended that the persons named as Proxies will vote for William H. Berkman
and John A. McMullen for election to the Board as Class II Directors.
The affirmative vote of the holders of a plurality of the Common Stock
represented and voting at the Meeting will be required to elect William H.
Berkman and John A. McMullen to the Board. If Messrs. Berkman and McMullen are
elected as Directors at the Meeting, the Board will consist of a total of five
Directors, four 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 NOMINEES
BIOGRAPHICAL INFORMATION
Biographical and certain other information concerning the Directors of the
Company is set forth below:
CLASS II NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2001
ANNUAL MEETING
WILLIAM H. BERKMAN, age 33. William H. Berkman has served as a Director of
the Company since May 1998. Mr. Berkman has served as President of Microwave
Systems, Inc., a subsidiary of The Associated Group, Inc., a diversified
communications company, since 1993. Since June 1997 Mr. Berkman has also
served as Secretary of The Associated Group, Inc. Mr. Berkman serves on the
Board of Directors of Teligent, Inc.
JOHN A. MCMULLEN, age 56. 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 DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING
DAVID S. WETHERELL, age 44. 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.
ROBERT J. RANALLI, age 61. Robert J. Ranalli has served as a Director of the
Company since May 1998. Prior to retiring in September 1994, Mr. Ranalli
served as President of AT&T Multimedia Services, a division of AT&T Corp.,
from March 1994 to September 1994. Mr. Ranalli served as President of AT&T
Consumer Communications Services, Inc. and Chairman of the Board of AT&T
Universal Card Services Corp. and AT&T Transtech Corp. from 1990 to 1994.
CLASS I DIRECTOR CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING
CRAIG D. GOLDMAN, age 54. 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 ("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.
4
<PAGE>
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended July 31, 1998 ("fiscal 1998"), the Board of
Directors held ten 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.
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, McMullen and Ranalli, none of whom is an employee
or consultant of the Company. Mr. McMullen serves as Chairman of the Audit
Committee. 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 consists of Messrs. Berkman, Goldman and McMullen, none of whom is
an employee or consultant of the Company. Mr. Goldman serves as Chairman of
the Compensation Committee. 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,
1998. Each incumbent Board member attended all of the meetings during the
fiscal year ended July 31, 1998 held by any committee of the Board upon which
such Director served.
PROPOSAL 2
AMENDMENT OF THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO CHANGE THE
NAME OF THE COMPANY TO "CMGI, INC."
On October 2, 1998 the Company's Board of Directors approved, and
recommended for adoption by the stockholders at the Meeting, a proposed
amendment to Article FIRST of the Company's Restated Certificate of
Incorporation to change the name of the Company from "CMG Information
Services, Inc." to "CMGI, Inc." For the reasons described below, the Board
believes that it would be in the best interests of the Company and its
stockholders to make such a change to the name of the Company. To accomplish
this name change, it is necessary to amend the applicable provision of the
Company's Restated Certificate of Incorporation.
The Company believes that the new name, "CMGI, Inc.," an acronym for
Collaborative Media Group Interactive, better focuses customer and consumer
awareness on the Company's current commitment to the internet interactive
market. The Company wants to avoid customer and consumer misunderstanding of
its current business focus which may result from its current name, CMG
Information Services, Inc., a name that stemmed from the Company's involvement
with list management services.
The change in the Company's name will not affect in any way the validity of
currently outstanding stock certificates. Stockholders will not be required to
surrender or exchange any stock certificates that they currently hold.
Stockholders should keep the certificates that they now hold and should not
send them to the Company or its transfer agent.
The Board believes that the adoption of the proposed amendment to the
Company's Restated Certificate of Incorporation is advisable and in the best
interests of the Company and its stockholders. Accordingly, the Board is
proposing that Article FIRST of the Company's Restated Certificate of
Incorporation be amended to change the name of the Company to "CMGI, Inc."
5
<PAGE>
If the amendment is authorized, Article FIRST of the Company's Restated
Certificate of Incorporation will be amended to read as follows:
"The name of the Corporation is CMGI, Inc."
The affirmative vote of holders of a majority of the shares of Common Stock
outstanding and entitled to vote at the Meeting is required to approve
Proposal Two and adopt the proposed amendment to the Company's Restated
Certificate of Incorporation changing the name of the Company to "CMGI, Inc."
For purposes of the vote to amend the Company's Restated Certificate of
Incorporation, abstentions and broker non-votes are treated as votes against
the proposal.
If approved by the Stockholders the change in the Company's name will become
effective upon the filing of an amendment to the Company's Restated
Certificate of Incorporation with the Secretary of State of the State of
Delaware.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF THE
CHANGE IN THE COMPANY'S NAME.
PROPOSAL 3
AMENDMENT OF THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
Currently the Company's Restated Certificate of Incorporation authorizes the
issuance of 40,000,000 shares of Common Stock, par value $0.01 per share. On
October 2, 1998, the Company's Board of Directors approved, and recommended
for adoption by the stockholders at the Meeting, a proposed amendment to the
Company's Restated Certificate of Incorporation which would, if approved by
the stockholders, effect an increase in the number of authorized shares of
Common Stock of the Company from 40,000,000 shares to 100,000,000 shares, $.01
par value per share.
As of the close of business on November 9, 1998, 23,076,521 shares of Common
Stock were issued and outstanding, after giving effect to the three-for-two
stock split of the Company's Common Stock in the form of a stock dividend on
March 17, 1995 and two-for-one stock splits of the Company's Common Stock in
the form of stock dividends effective on February 2, 1996 and May 11, 1998,
leaving 16,923,479 shares of Common Stock authorized but unissued. Of the
authorized but unissued shares the Company has currently reserved 2,688,862
shares under the Company's 1986 Stock Option Plan and 1995 Employee Stock
Purchase Plan and 470,000 shares under the Company's 1995 Stock Option Plan
for Non-Employee Directors.
The Board of Directors of the Company believes that the adoption of the
proposed amendment to the Company's Restated Certificate of Incorporation
increasing the authorized shares of Common Stock is advisable and in the best
interests of the Company and its stockholders and is recommending such
amendment to restore the flexibility to issue Common Stock that existed before
the stock splits mentioned above and to assure that an adequate supply of
authorized and unissued shares of Common Stock is available for general
corporate needs, including future stock dividends, stock splits, issuances
under the Company's 1986 Stock Option Plan, 1995 Stock Option Plan for Non-
Employee Directors and 1995 Employee Stock Purchase Plan, acquisitions and
equity financings. The availability of additional shares of Common Stock for
issue, without the delay and expense of obtaining the approval of stockholders
at a special meeting, will afford the Company greater flexibility in taking
corporate action.
The newly authorized Common Stock, like the currently authorized Common
Stock, may be used by the Company for any proper corporate purpose. Such
purposes may include, without limitation, issuance as part or all of the
consideration required to be paid by the Company in the acquisition of other
businesses or properties, or issuance in public or private sales for cash as a
means of obtaining additional capital for use in the Company's business and
operations.
6
<PAGE>
If approved by the stockholders, the increased number of authorized shares
of Common Stock will be available for issue from time to time for such
purposes and consideration as the Board of Directors may approve and no
further vote of the stockholders of the Company will be required, except as
required under the Delaware General Corporation Law or the rules of any
national securities exchange or quotation system, such as the NASDAQ National
Market, on which the shares of the Company are at the time listed or quoted.
The additional shares of Common Stock for which authorization is sought
would be identical to the shares of Common Stock of the Company currently
authorized. Although the Board of Directors will authorize the issuance of
additional Common Stock based on its judgment as to the best interests of the
Company and its stockholders, the issuance of Common Stock could have a
dilutive effect on the earnings per share, book value per share, and on the
equity and voting power of existing holders of Common Stock. Holders of Common
Stock are not now, and will not be entitled to preemptive rights to purchase
shares of any authorized capital stock of the Company. In addition, the
issuance of additional shares of Common Stock could, in certain instances,
render more difficult or discourage a merger, tender offer, or proxy contest
and thus potentially have an "anti-takeover" effect, especially if Common
Stock were issued in response to a potential takeover. Such an issuance could
deter the types of transactions which may be proposed or could discourage or
limit the stockholders' participation in certain types of transactions that
might be proposed (such as a tender offer), whether or not such transactions
were favored by the majority of the stockholders, and could enhance the
ability of officers and Directors to retain their positions. For example,
without further stockholder approval, the Board could (i) adopt a "poison
pill" which would, under certain circumstances related to an acquisition not
approved by the Board of Directors, give certain holders the right to acquire
additional shares of Common Stock at a low price, or (ii) sell shares of
Common Stock in a private transaction to purchasers who would oppose a
takeover or favor the current Board. Although this proposal to increase the
authorized shares of Common Stock has been prompted by business and financial
considerations and not by the threat of any known or threatened hostile
takeover attempt, stockholders should be aware that the approval of this
proposal could facilitate future efforts by the Company to deter or prevent
changes in control of the Company, including transactions in which the
stockholders might otherwise receive a premium for their shares over then
current market prices.
If the amendment is approved by the stockholders, Article FOURTH subsection
(a) of the Company's Restated Certificate of Incorporation will be amended to
read as follows:
FOURTH: (a) The total number of shares of capital stock which the
Corporation is authorized to issue is one hundred and five million
(105,000,000) shares of which one hundred million (100,000,000) shares
shall be common stock, par value $.01 per share ("Common Stock") and five
million (5,000,000) shares shall be preferred stock, par value $.01 per
share ("Preferred Stock").
The affirmative vote of holders of a majority of the shares of Common Stock
outstanding and entitled to vote at the Meeting is required to approve
Proposal Three and adopt the proposed amendment to the Company's Restated
Certificate of Incorporation increasing the number of authorized shares of
Common Stock of the Company. For purposes of the vote to amend the Company's
Restated Certificate of Incorporation to increase the number of authorized
shares of Common Stock, abstentions and broker non-votes are treated as votes
against the proposal. If the amendment is not approved by the Stockholders,
the Company's authorized Common Stock will remain at 40,000,000 shares.
If approved by the stockholders the amendment to the Company's Restated
Certificate of Incorporation increasing the authorized shares of Common Stock
will become effective upon the filing of an amendment to the Company's
Restated Certificate of Incorporation with the Secretary of State of the State
of Delaware.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF THE
INCREASE IN THE AUTHORIZED SHARES OF COMMON STOCK.
7
<PAGE>
PROPOSAL 4
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, 1999, 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 4.
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
- ---- --- --------
<S> <C> <C>
Andrew J. Hajducky III.. 44 Chief Financial Officer and Treasurer
Richard F. Torre........ 48 President and Chief Executive Officer, SalesLink Corporation
Hans Hawrysz............ 50 President and Chief Executive Officer, Planet Direct Corporation
Paul L. Schaut.......... 39 President and Chief Executive Officer, Engage Technologies, Inc.
</TABLE>
Andrew J. Hajducky III has served as Chief Financial Officer and Treasurer
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.
Paul L. Schaut has served as President and Chief Executive Officer of Engage
Technologies, Inc., a subsidiary of the Company, since November 1997. From
December 1996 to November 1997 Mr. Schaut was Vice President of Strategic
Partnering for Open Market, Inc., an internet commerce vendor. From May 1995
to December 1996 Mr. Schaut served as Vice President of Sales and Marketing
for ONTOS, Inc., an object middleware vendor. Prior to that Mr. Schaut worked
for InterSystems Corporation, a complex database vendor.
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) had completed at least five
years of continuous service on the Board of Directors; (iii) was not otherwise
an employee of the Company or any of its subsidiaries or affiliates; and (iv)
was 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 Director 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 94,000 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 94,000
shares of Common Stock upon ceasing to be an Affiliated Director. An aggregate
of 564,000 shares of Common Stock (subject to adjustments for capital changes)
has been reserved for issued under the Director Plan upon exercise of options.
9
<PAGE>
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
18,800 shares each, the first installment becoming exercisable immediately
after the first annual meeting of stockholders following the date of grant or
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. Berkman, Goldman, McMullen
and Ranalli are eligible to participate in the Director Plan. Mr. McMullen
received an option to purchase 94,000 shares of Common Stock under the
Director Plan during fiscal 1995. Mr. Goldman received an option to purchase
94,000 shares of Common Stock under the Director Plan during fiscal 1997.
Messrs. Berkman and Ranalli each received an option to purchase 94,000 shares
of Common Stock in June 1998.
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.
In addition to serving on the Board of Directors of the Company, Messrs.
Goldman, McMullen and Ranalli serve on the Boards of Directors of certain of
the Company's subsidiaries. In connection with his service on the Boards of
Directors of SalesLink, Engage and NaviSite Internet Services Corporation
("NaviSite"), Mr. Goldman was granted the following options: (i) on October
23, 1997 an option to purchase 25,000 shares of the common stock, par value
$0.01 per share, of SalesLink at an exercise price of $1.74 per share, (ii) on
March 6, 1998 an option to purchase 25,000 shares of the common stock, par
value $0.01 per share, of Engage at an exercise price of $0.48 per share and
(iii) on March 6, 1998 an option to purchase 25,000 shares of the common
stock, par value $0.01 per share, of NaviSite at an exercise price of $0.49
per share. In connection with his service on the Board of Directors of
SalesLink, Mr. McMullen was granted on October 23, 1997 an option to purchase
25,000 shares of the common stock, par value $0.01 per share, of SalesLink at
an exercise price of $1.74 per share. In connection with his service on the
Board of Directors of Planet Direct, Mr. Ranalli was granted on June 18, 1998
an option to purchase 25,000 shares of the common stock, par value $0.01 per
share, of Planet Direct at an exercise price equal to the fair market value
per share as of the date of grant of such option. All of the preceding options
vest in five equal annual cumulative installments, the first installment
becoming exercisable immediately after the first annual meeting of
stockholders for the company in question following the date of grant and each
further installment becoming exercisable immediately following each annual
meeting of stockholders thereafter, provided 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.
10
<PAGE>
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, 1996, 1997, and 1998, to its Chief Executive Officer and
to each of its four other most highly compensated executive officers whose
salary plus bonus exceeded $100,000 in fiscal 1998 (all five being hereinafter
referred to as the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- ------------
SECURITIES
NAME AND PRINCIPAL UNDERLYING ALL OTHER
POSITION YEAR SALARY($) BONUS($) OPTIONS(1) COMPENSATION($)(2)
------------------ ---- ---------- --------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
David S. Wetherell(3)... 1998 180,250 75,000 -- 22,313(4)
Chairman, President 1997 180,250 75,000 -- 3,316
and Chief Executive 1996 180,250 75,000 -- 1,502
Officer
Hans Hawrysz(5)......... 1998 167,569 43,750 20,000 53,781(6)
President and Chief 1997 87,500 25,000 -- --
Executive Officer of
Planet Direct
Corporation
Paul L. Schaut.......... 1998 96,875 37,500 20,000 --
President and Chief
Executive Officer of
Engage Technologies,
Inc.(7)
Richard F. Torre........ 1998 156,600 37,500 20,000 16,235(8)
President and Chief 1997 145,790 42,500 20,000 3,014
Executive Officer of 1996 128,947 96,400 4,000 2,579
SalesLink Corporation
Andrew J. Hajducky 1998 154,976 50,000 60,000 21,787(10)
III(9).................
Chief Financial 1997 143,333 48,333 24,000 2,212
Officer and Treasurer 1996 81,667 33,333 120,000 --
</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 1996, 1997 and 1998 which are reflected in this column. All
stock options granted in fiscal 1996, 1997 and 1998 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 of five years.
(2) Amounts set forth in this column for the years ended July 31, 1996 and
1997 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, LP, a Delaware Limited Partnership.
In February 1998 CMG@Ventures, L.P. was reorganized as a limited
liability company under the name CMG@Ventures I, LLC ("CMG@Ventures I").
In October 1996, the Company formed a second Internet investment and
development arm, CMG@Ventures II, LLC ("CMG@Ventures II"), a Delaware
Limited Liability Company. The purpose of
11
<PAGE>
both CMG@Ventures I 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 member
(as defined) of CMG@Ventures I, and, in that capacity, received an
approximate 8.5% carried interest in the net realized gains (as defined in
the limited liability company agreement) of CMG@Ventures I. Mr. Wetherell's
interest in CMG@Ventures I 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 managing
member of CMG@Ventures II and in that capacity received a 7.75% carried
interest in the net realized gains (as defined in the operating agreement)
of CMG@Ventures II. Mr. Wetherell's interest in CMG@Ventures II vests in
twenty quarterly installments of 5%. For a discussion of allocations and
distributions related to CMG@Ventures I and CMG@Ventures II see "Certain
Relationships and Related Transactions."
(4) Of this amount $3,647 represents Company cash contributions under the
Company's 401(k) Plan and $18,666 represents the personal use component
of an automobile leased for Mr. Wetherell.
(5) 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.
(6) This amount represents sums associated with the reimbursement of Mr.
Hawrysz's relocation expenses.
(7) Mr. Schaut was hired as President and Chief Executive Officer of Engage
Technologies, Inc. on November 10, 1997. His compensation for 1998
represents amounts earned in such position between November 10, 1997 and
July 31, 1998.
(8) Of this amount $3,131 represents Company cash contributions under the
Company's 401(k) Plan and $13,104 represents the personal use component
of an automobile leased for Mr. Torre.
(9) 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 member (as defined) of CMG@Ventures I, and, in that
capacity, received an approximate 0.5% carried interest in the net
realized gains (as defined in the limited liability company agreement) of
CMG@Ventures I. Mr. Hajducky's interest in CMG@Ventures I 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 managing member of CMG@Ventures II and in
that capacity received a 0.5% carried interest in the net realized gains
(as defined in the operating agreement) of CMG@Ventures II. Mr.
Hajducky's interest in CMG@Ventures II vests in twenty quarterly
installments of 5%. For a discussion of allocations and distributions
related to CMG@Ventures I and CMG@Ventures II see "Certain Relationships
and Related Transactions."
(10) Of this amount $3,121 represents Company cash contributions under the
Company's 401(k) Plan and $18,666 represents the personal use component
of an automobile leased for Mr. Hajducky.
12
<PAGE>
STOCK OPTION GRANTS IN FISCAL YEAR 1998
The following table sets forth information concerning individual grants of
options to purchase Common Stock under the 1986 Stock Option Plan made to each
Named Executive Officer during the fiscal year ended July 31, 1998. Mr.
Wetherell was not granted any options to purchase Common Stock in the last
fiscal year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------
PERCENTAGE
OF TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF STOCK
SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES OR BASE TERM(3)
OPTIONS IN FISCAL PRICE EXPIRATION ------------------------------
NAME GRANTED(#)(1) 1998(2) ($/SHARE) DATE 5%($) 10%($)
---- ------------- ---------- --------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Hans Hawrysz............ 20,000 2.9% $9.25 10/26/02 $ 51,112 $ 112,944
Paul L. Schaut.......... 20,000 2.9% $9.25 10/26/02 $ 51,112 $ 112,944
Richard F. Torre........ 20,000 2.9% $9.25 10/26/02 $ 51,112 $ 112,944
Andrew J. Hajducky, III. 60,000 8.7% $9.25 10/26/02 $ 153,336 $ 338,833
</TABLE>
- --------
(1) See footnote 1 to the Summary Compensation Table above.
(2) Options to purchase an aggregate of 693,250 shares were granted to all
employees in fiscal 1998.
(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.
13
<PAGE>
1998 AGGREGATED OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES
Presented below is information with respect to the number of shares issued
upon option exercises by the Named Executive Officers during the year ended
July 31, 1998 and the value realized by the Named Executive Officers upon such
exercises. The table also provides information about the number and value of
unexercised stock options to purchase the Company's Common Stock held by each
Named Executed Officer as of July 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY
ACQUIRED JULY 31, OPTIONS AT
ON VALUE 1998(#) JULY 31, 1998($)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) (1) UNEXERCISABLE UNEXERCISABLE(2)
---- -------- ---------- --------------- -----------------------
<S> <C> <C> <C> <C>
David S. Wetherell ..... 0 0 521,250/378,750 $34,674,533/$25,287,976
President, Chief
Executive Officer and
Secretary
Hans Hawrysz ........... 0 0 0/20,000 $0/$1,177,500
President and Chief
Executive Officer of
Planet Direct
Corporation
Paul L. Schaut.......... 0 0 0/20,000 $0/$1,177,500
President and Chief
Executive Officer of
Engage Technologies,
Inc. 0 0
Richard F. Torre ....... 44,434 $1,062,958 5,367/36,199 $343,949/$2,176,213
President and Chief
Executive Officer of
SalesLink Corporation
Andrew J. Hajducky III . 83,000 $1,132,223 9,500/111,500 $593,657/$6,742,160
Chief Financial Officer
and Treasurer
</TABLE>
- --------
(1) Based on the difference between the option exercise price of such options
and the closing price of the underlying common stock on the date of
exercise.
(2) Based on the difference between the option exercise price and the closing
price of the underlying common stock on July 31, 1998, which closing price
was $68.125.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors (the "Committee") is
composed of three 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, 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 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 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 for
each fiscal year based on a review of average base salaries among competitive
peer groups and then sets target incentive bonus awards comprising varying
percentages of total target compensation depending on the position being
reviewed.
14
<PAGE>
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.
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 600,000 shares of Common Stock of the Company. See
"Employment Agreements and Severance and Change of Control Arrangements." 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, LP (reorganized as a
limited liability company under the name CMG@Ventures I, LLC in February 1998)
during fiscal 1995 and CMG@Ventures II, LLC 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 seventeen (17) Internet related companies as of July
31, 1998, and the Company actively participates in their management. Two (2)
of these companies were controlled by the CMG@Ventures Funds at July 31, 1998
and hence by the Company. The Compensation Committee has granted Mr.
Wetherell, who is a profit member of CMG@Ventures I, LLC, an approximate
eight-point-five percent (8.5%) interest in the net realized gains (as defined
in the limited liability company agreement) of CMG@Ventures I, LLC in
accordance with the practice in the venture capital industry. The Compensation
Committee has granted Mr. Hajducky, who is a profit member of CMG@Ventures I,
LLC, an approximate zero-point-five percent (0.5%) interest in the net
realized gains (as defined in the limited liability company agreement) of
CMG@Ventures I, LLC in accordance with the practice in the venture capital
industry. Mr. Wetherell and Mr. Hajducky are each managing members of
CMG@Ventures II, LLC., and, in that capacity, the Compensation Committee
granted them 7.75% and 0.5% carried interests, respectively, in the net
realized gains (as defined in the limited liability company operating
agreement) of CMG@Ventures II, LLC.
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),
William H. Berkman and John A. McMullen.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 1998, CMG@Ventures I allocated 2,012,374 shares of common
stock of Lycos, Inc. ("Lycos") to the accounts of its profit members. Of these
shares, 735,048 shares and 42,828 shares were
15
<PAGE>
allocated to the accounts of Mr. Wetherell and Mr. Hajducky, respectively, in
their capacity as profit members of CMG@Ventures I. During fiscal 1998, Mr.
Wetherell received distributions totaling 399,470 of his allocated shares of
Lycos common stock as follows: 31,644 shares in August 1997; 187,620 shares in
November 1997; 49,832 shares in April 1998; and 130,374 shares in May 1998.
During fiscal 1998, Mr. Hajducky received distributions totaling 17,908 of his
allocated shares of Lycos common stock as follows: 738 shares in August 1997;
552 shares in September 1997; 8,002 shares in November 1997; 3,776 shares in
April 1998; and 4,840 shares in May 1998. All Lycos common share amounts have
been retroactively adjusted to reflect a 2-for-1 stock split effected by Lycos
in August 1998.
In September 1998, CMG@Ventures I allocated 955,839 shares of Lycos common
stock to the accounts of its profit members. Of these shares, 396,964 shares
and 23,130 shares were allocated to the accounts of Mr. Wetherell and Mr.
Hajducky, respectively. Also in September 1998, Mr. Wetherell and Mr. Hajducky
received distributions of 239,138 shares and 11,327 shares, respectively, of
their allocated shares of common stock of Lycos.
In September 1996, CMG@Ventures I 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 I allocated 58,538 shares of common stock of
Premiere received upon the sale of its interest in TeleT to the accounts of
its profit members. An allocation of 22,325 shares of the common stock of
Premiere was made to the account of Mr. Wetherell, 8,372 shares and 3,349
shares of which were distributed to Mr. Wetherell on September 24, 1997 and
September 28, 1998, respectively. An allocation of 1,301 shares of the common
stock of Premiere was made to the account of Mr. Hajducky, 390 shares and 147
shares of which were distributed to Mr. Hajducky on September 24, 1997 and
September 28, 1998, respectively.
On December 22, 1997, CMG@Ventures I allocated $123,750 of the cash received
upon the sale of its interest in TeleT to the accounts of its profit members.
An allocation of $47,196 was made to the account of Mr. Wetherell, $19,468 and
$5,310 of which was distributed to Mr. Wetherell on February 26, 1998 and
September 15, 1998, respectively. An allocation of $2,750 was made to the
account of Mr. Hajducky, $928 and $206 of which was distributed to Mr.
Hajducky on February 26, 1998 and September 15, 1998, respectively.
On January 31, 1997, CMG@Ventures, Inc., the managing member of CMG@Ventures
I, 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 limited liability company agreement of CMG@Ventures I) of CMG@Ventures,
Inc. realized upon the sale of its interest in NetCarta was allocated to the
accounts of the profit members of CMG@Ventures I pursuant to the CMG@Ventures,
Inc. Deferred Compensation Plan. In their capacities as profit members of
CMG@Ventures I, $700,550 and $40,820 were allocated to the accounts of Mr.
Wetherell and Mr. Hajducky, respectively, during fiscal 1997 pursuant to the
CMG@Ventures, Inc. Deferred Compensation Plan. During fiscal 1998, Mr.
Wetherell and Mr. Hajducky received distributions totaling $105,082 and
$7,654, respectively, of the amounts allocated to their accounts. Since August
1, 1998, Mr. Wetherell and Mr. Hajducky have received distributions of $26,270
and $1,531, respectively, of the amounts allocated to their accounts.
In August 1998, CMG@Ventures II converted its equity interest in Sage
Enterprises, Inc. into 225,558 shares of Amazon.com, Inc. ("Amazon.com")
common stock pursuant to a merger wherein Amazon.com acquired Sage
Enterprises, Inc ("the Merger"). On October 30, 1998, CMG@Ventures II
allocated 33,463 shares of common stock of Amazon.com received in the Merger
to the accounts of its managing members. Of these shares, 12,967 shares and
837 shares were allocated to the accounts of Mr. Wetherell and Mr. Hajducky,
respectively, in their capacity as managing members of CMG@Ventures II. On
November 4, 1998, Mr. Wetherell and Mr. Hajducky received distributions of
5,835 shares and 377 shares, respectively, of their allocated shares of common
stock of Amazon.com.
Subsequent to July 31, 1998, the Company formed a third Internet investment
and development arm, CMG@Ventures III, LLC, a Delaware Limited Liability
Company ("CMG@Ventures III"). The purpose of CMG@Ventures III, like that of
CMG@Ventures I and II, is to provide intellectual and financial capital to
16
<PAGE>
companies seeking to further the commercialization of the Internet and other
interactive media. Mr. Wetherell and Mr. Hajducky are managing members of
CMG@Ventures III, and, in that capacity, will receive carried interests, in an
amount to be determined, in the net realized gains of CMG@Ventures III.
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, 1998 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.
Comparison of Cumulative Total Return Among CMG Information Services, Inc., the
NASDAQ Stock Market Index, and the NASDAQ Computer and Data Processing Services
Index.
[Graph of the plot points set forth in the table below.]
<TABLE>
<CAPTION>
BASE DATE JULY JULY JULY JULY
JANUARY 25, 31, 31, 31, 31, JULY 31,
COMPANY/INDEX NAME 1994 1994 1995 1996 1997 1998
------------------ ----------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
CMG Information Services,
Inc..................... $100.00 $110.94 $501.56 $600.00 $656.31 $5,460.90
NASDAQ Stock Market
Index................... $100.00 $ 92.12 $129.36 $140.91 $207.92 $ 245.48
NASDAQ Computer and Data
Processing Services
Index................... $100.00 $ 95.68 $165.07 $185.21 $288.17 $ 382.63
</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. On July 31, 1997 the
17
<PAGE>
closing price for a share of the common stock of Lycos, Inc. was $18.875. The
graph assumes that the Lycos, Inc. common stock received as a dividend was
sold on the date received and that the proceeds of such sale, as well as the
proceeds for the fractional shares of Lycos, Inc., were used to purchase
additional shares of the Company's Common Stock on July 31, 1997. Fractional
shares of Lycos, Inc. common stock were paid out on July 31, 1997 based upon
the closing price of the Lycos, Inc. common stock on June 5, 1997.
EMPLOYMENT AGREEMENTS AND SEVERANCE AND CHANGE OF CONTROL ARRANGEMENTS
In November of 1993, the Company entered into an employment agreement with
Mr. Wetherell, which ran through July 31, 1998, at a minimum annual salary
which is currently at $180,250. The agreement could be extended for an
additional five years by agreement of the parties and was so extended on
October 2, 1998. 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. 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
600,000 shares of Common Stock of the Company at an option price of $1.34 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 60,000 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 as
determined by the Compensation Committee. In any event, the option becomes
exercisable (to the extent not previously exercisable) as to the first 300,000
shares on November 1, 1998, and as to the second 300,000 shares on November 1,
2003.
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 600,000 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 60,000 share
installments of his 600,000 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 Liability Company Agreement of CMG@Ventures I, LLC provides
that, upon a change of control (as defined), each profit member, including
Messrs. Wetherell and Hajducky, may elect, within two months of the date of
the change of control, to have CMG@Ventures I, LLC repurchase all, and not
less than all, of the interest in CMG@Ventures I, LLC held by each profit
member at the fair market value of such interest as determined by an
independent appraisal pursuant to a procedure set forth in the Limited
Liability Company 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 members of CMG@Ventures I, LLC and which is
likely by its terms to have a material adverse effect upon the business and
prospects of
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<PAGE>
CMG@Ventures I, LLC and which 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.
The Operating Agreement of CMG@Ventures II, LLC provides that, upon a change
of control (as defined), each managing member, including Messrs. Wetherell and
Hajducky, may elect, within two months of the date of the change of control,
to have CMG@Ventures II, LLC repurchase all, and not less than all, of the
interest in CMG@Ventures II, LLC held by each managing member at the fair
market value of such interest as determined by an independent appraisal
pursuant to a procedure set forth in the Operating 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 members of CMG@Ventures
II, LLC and which is likely by its terms to have a material adverse effect
upon the business and prospects of CMG@Ventures II, LLC and which 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 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.
Mr. Wetherell and Mr. Hajducky are profit members of CMG@Ventures III, LLC
and, although some of the terms of the operating agreement for CMG@Ventures
III, LLC are still being finalized, it is anticipated that such agreement will
contain provisions regarding changes in control similar to the provisions
described for CMG@Ventures I and CMG@Ventures II above.
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. On November 13, 1997 Mr. Torre was granted an additional option to
purchase 35,000 shares of the common stock of SalesLink at $1.74 per share.
These options become 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. These options become 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 became 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. If Planet Direct is sold the option vests to the
next cumulative monthly installment.
On November 10, 1997 Paul L. Schaut, President and Chief Executive Officer
of Engage Technologies, Inc. ("Engage"), was granted an option to purchase
300,000 shares of the common stock, $.01 par value per shares, of Engage at
$.37 per share. The 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. Mr. Schaut is also eligible to receive options to
purchase an additional 200,000 shares of the common stock of Engage upon the
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<PAGE>
achievement of certain defined financial performance milestones by Engage.
These additional options would vest in the same manner as the option for
300,000 shares described above. The 1995 Equity Incentive Plan of Engage,
which governs Mr. Schaut's options, provides that in the event of a change in
control of Engage the compensation committee of Engage may, in its discretion,
take one or more of the following actions: (i) provide for the acceleration of
the time remaining for the vesting of the option, (ii) provide for payment to
Mr. Schaut of cash or property having a fair market value equal to the amount
Mr. Schaut would have received if he exercised the option upon the change in
control, (iii) adjust the option to reflect the change in control, (iv) cause
the option to be assumed by a new entity or (v) make such other provision as
it deems equitable.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are William H. Berkman,
Craig D. Goldman and John A. McMullen. 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 1998, other than a late filing made by Richard F. Torre and
described below, all filing requirements under Section 16(a) applicable to its
directors and executive officers were met.
In May 1998 Mr. Torre filed a Statement of Changes in Beneficial Ownership
of Securities on Form 4 covering transactions during January and March of
1998. This Form 4 reported the exercise of options to purchase 3,791 shares of
the Company's Common Stock on January 14, 1998 and the sale of the shares
received upon such option exercise on the same date. The Form 4 also reported
the exercise of options to purchase 9,000 shares and 8,879 shares of the
Company's Common Stock on March 18, 1998 and March 30, 1998, respectively,
with all such shares being sold on the dates of the respective option
exercises.
20
<PAGE>
ANNUAL REPORT
The Company's Annual Report on Form 10-K for the year ended July 31, 1998 is
available without charge upon request from the Company. Requests for copies of
the Annual Report on Form 10-K should be sent to the Company's Director,
Investor Relations, Catherine Taylor, at CMG Information Services, Inc., 100
Brickstone Square, First Floor, Andover, Massachusetts 01810
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/ D.S. Wetherell
David S. Wetherell, Secretary
Andover, Massachusetts
November 27, 1998
21
<PAGE>
CMGIS-PS-98
<PAGE>
Appendix A
PLEASE MARK VOTES
[X]
AS IN THIS EXAMPLE
- ---------------------------------
CMG INFORMATION SERVICES, INC.
- ---------------------------------
<TABLE>
<CAPTION>
<S> <C>
Mark box at right if an address
change or comment has been noted
on the reverse side of this card [_]
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
WITHHOLD
FROM FOR ALL
FOR BOTH BOTH NOMINEES
1. Election Of Class II Directors. NOMINEES NOMINEES EXCEPT
Nominees: William H. Berkman [_] [_] [_]
John A. McMullen
Note: If you do not wish your shares voted "For" a
particular nominee, mark the "For All Nominees Except"
box and strike a line through the name of the nominee.
Your shares will be voted for the remaining nominee.
FOR AGAINST ABSTAIN
2. Amendment to Restated Certificate of Incorporation to [_] [_] [_]
change name of Company to "CMGI, Inc."
3. Amendment to Restated Certificate of Incorporation [_] [_] [_]
to increase number of authorized shares of common
stock to 100,000,000.
4. Ratification of appointment of KPMG Peat Marwick [_] [_] [_]
RECORD DATE SHARES: LLP as independent accountants.
</TABLE>
<TABLE>
<S> <C>
Please be sure to sign and date this Proxy.
----------------------------------
Date
- ---------------------------------------- ----------------------------------
Stockholder sign here Co-owner sign here
</TABLE>
<PAGE>
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 17, 1998. 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 17, 1998, or any
adjournment thereof, and there to vote all the shares of CMG Information
Services, Inc. held of record by the undersigned on October 30, 1998, as
directed on the reverse side hereof. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED FOR THE NOMINEES FOR CLASS II DIRECTOR AND FOR PROPOSALS 2, 3 AND 4.
If a 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 exactly as your name(s) appear(s) on the books of the
Company. 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?
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