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CKS GROUP INC - DEF 14A - 19980227 - PROXY_STATEMENT
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of CKS Group, Inc., a Delaware
corporation (the "Company"), for use at the Annual Meeting of Stockholders (the
"Annual Meeting") to be held on Wednesday, April 22, 1998 at 10:00 a.m. local
time, or at any adjournment thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting
will be held at the Holiday Inn Palo Alto Hotel, 625 El Camino Real, Palo Alto,
California (phone no. (650) 328-2800).
These proxy solicitation materials will be mailed on or about March 18,
1998 to all stockholders entitled to vote at the meeting.
RECORD DATE AND OUTSTANDING SHARES
Stockholders of record at the close of business on February 24, 1998 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting.
On the Record Date, 15,213,798 shares of the Company's Common Stock, $0.001
par value, were issued and outstanding. The only persons known by the Company to
be the beneficial owners of more than 5% of the Company's Common Stock as of the
Record Date were The Interpublic Group of Companies, Inc. ("IPG"), Mark D.
Kvamme, Thomas K. Suiter, J. & W. Seligman & Co. Incorporated, Waddell & Reed,
Inc. and The Capital Group Companies, Inc. See "Security Ownership of Certain
Beneficial Owners and Management" below.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the meeting and voting in person.
VOTING AND SOLICITATION
The cost of this solicitation will be borne by the Company. The Company
will reimburse brokerage firms and other persons representing beneficial owners
of shares for their expenses in forwarding solicitation material to such
beneficial owners in accordance with applicable regulations. Proxies may also be
solicited by certain of the Company's directors, officers and regular employees,
without additional compensation, personally or by telephone, electronic mail or
facsimile.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting
is a majority of the shares of Common Stock issued and outstanding on the Record
Date. Shares that are voted "FOR," "AGAINST" or "WITHHELD FROM" a matter are
treated as being present at the meeting for purposes of establishing a quorum
and are also treated as shares "represented and voting" at the Annual Meeting
(the "Votes Cast") with respect to such matter.
While there is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both the presence or absence of a
quorum for the transaction of business and the total number of Votes Cast with
respect to a particular matter. In the absence of controlling precedent to the
contrary, the Company intends to treat abstentions in this manner. However,
because directors are elected by a plurality vote, abstentions in the election
of directors have no import once a quorum exists. In a 1988 Delaware case,
Berlin v. Emerald Partners, the Delaware Supreme Court held that, while broker
non-votes may be counted for purposes of determining the presence or absence of
a quorum for the transaction of business, broker non-votes should not be counted
for purposes of determining the number of Votes Cast with respect to the
particular proposal on which the broker has expressly not voted. Broker
non-votes with respect to proposals set forth in this Proxy Statement will
therefore not be considered "Votes Cast" and, accordingly, will not affect the
determination as to whether the requisite majority of Votes Cast has been
obtained with respect to a particular matter.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date, or by attending the meeting and voting in person. This Proxy Statement and
form of proxy will first be sent or given to stockholders on or about March 18,
1998, together with the Notice of Annual Meeting of Stockholders and the
Company's 1997 Annual Report to Stockholders.
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's next Annual Meeting of Stockholders must
be received by the Company no later than November 15, 1998 in order to be
considered for possible inclusion in the Company's proxy statement and form of
proxy relating to that meeting.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock of
the Company as of the Record Date, (i) each person known by the Company to
beneficially own more than 5% of the Company's Common Stock, (ii) each director,
(iii) the executive officers of the Company named in the Summary Compensation
Table below (the "Named Executive Officers"), and (iv) all directors and
executive officers as a group:
SHARES OF CKS COMMON STOCK
BENEFICIALLY OWNED(1)
------------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OF TOTAL
---------------------------------------------------------- --------- ----------------
The Interpublic Group of Companies, Inc.(2)............... 1,992,065 13.1%
1271 Avenue of the Americas
New York, NY 10020
Mark D. Kvamme(3)......................................... 1,599,836 10.5
10441 Bandley Drive
Cupertino, CA 95014
Thomas K. Suiter(4)....................................... 1,328,835 8.7
10441 Bandley Drive
Cupertino, CA 95014
J. & W. Seligman & Co. Incorporated(5).................... 1,025,000 6.7
100 Park Avenue
New York, New York 10017
Waddell & Reed, Inc.(6)................................... 867,700 5.7
6300 Lamar
Shawnee Mission, KS 66201
The Capital Group Companies, Inc.(7)...................... 785,500 5.2
333 South Hope Street
Los Angeles, CA 90071
Carlton H. Baab(8)........................................ 29,069 *
Robert T. Clarkson........................................ 3,543 *
Richard Villante.......................................... 13,402 *
Alexandre Balkanski(9).................................... 17,916 *
Pierre R. Lamond(10)...................................... 323,685 2.1
Barry R. Linsky(11)....................................... 6,250 *
Michael B. Slade(12)...................................... 7,250 *
All Executive Officers and Directors as a
Group (12 persons)(13).................................. 3,365,193 21.9
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* Less than 1%.
(1) Except pursuant to applicable community property laws or as indicated in
the footnotes to this table, to the Company's knowledge, each stockholder
identified in the table possesses sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by such
stockholder.
(2) Includes 259,470 shares held by Ammirati & Puris/Lintas, Inc. and 278,770
shares held by Lowe & Partners, both of which are wholly-owned subsidiaries
of IPG. Also includes 2,500 shares held by Mr. Barry R. Linsky, who is a
director of the Company and an officer of IPG, and options to purchase
3,750 shares exercisable within 60 days of the Record Date held by Mr.
Linsky.
(3) Includes 159,888 shares held by trusts for the benefit of Mr. Kvamme's
children and options to purchase 40,000 shares exercisable within 60 days
of the Record Date.
(4) Includes 200,000 shares held by trusts for the benefit of Mr. Suiter's
children and options to purchase 30,000 shares exercisable within 60 days
of the Record Date.
(5) Based on information provided by J. & W. Seligman & Co. Incorporated.
William C. Morris and Seligman Communications & Information Fund, Inc. also
beneficially own such shares.
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(6) Based on information provided by Waddell & Reed, Inc.
(7) Based on information provided by The Capital Group Companies, Inc. Capital
Research and Management Company also beneficially owns such shares.
(8) Includes options to purchase 28,334 shares exercisable within 60 days of
the Record Date.
(9) Consists of options to purchase 17,916 shares exercisable within 60 days of
the Record Date.
(10) Includes 310,935 shares held by the Pierre R. and Christine E. Lamond Trust
dated 11/22/85. Includes options to purchase 3,750 shares exercisable
within 60 days of the Record Date. Also includes 9,000 shares held by David
Lamond, Pierre R. Lamond's son, as to which Pierre R. Lamond disclaims
beneficial ownership.
(11) Does not include 1,985,815 shares held by IPG and its subsidiaries, of
which Mr. Linsky is a Senior Vice President. Includes options to purchase
3,750 shares exercisable within 60 days of the Record Date.
(12) Includes options to purchase 6,250 shares exercisable within 60 days of the
Record Date.
(13) Includes options to purchase 140,437 shares exercisable within 60 days of
the Record Date.
As of the Record Date, the per share market value of the Company's Common
Stock was $18.00, based on the closing price on that date on The Nasdaq National
Market.
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PROPOSAL 1
ELECTION OF DIRECTORS
DIRECTORS AND NOMINEES FOR DIRECTOR
The Company's Board of Directors currently consists of six persons, divided
into three classes serving staggered terms of office. Currently there are two
directors in each of Class I, Class II and Class III. Two Class III directors
are to be elected at the Annual Meeting. The Class III directors elected at the
Annual Meeting will serve for three-year terms, or until their successors have
been duly elected and qualified.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the Company's nominees: Mark D. Kvamme and Pierre R. Lamond
as Class III directors.
The nominees, and certain information about them as of the Record Date, are
set forth below:
DIRECTOR
NAME OF NOMINEE AGE POSITIONS SINCE
--------------------- --- -------------------------------------------------- --------
Mark D. Kvamme....... 36 Chairman of the Board and Chief Executive Officer 1989
Pierre R. Lamond..... 67 Director 1990
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Mark D. Kvamme joined the Company in 1989 as a Partner and since 1991 has
served as the Chairman of the Company's Board of Directors and Chief Executive
Officer. Prior to joining the Company, Mr. Kvamme served as Vice President of
Marketing for Pillar Corporation. From September 1986 to January 1989, Mr.
Kvamme was International Marketing Manager for Wyse Technology, Inc., a terminal
and personal computer manufacturer. Before joining Wyse, Mr. Kvamme founded and
served as President and Chief Executive Officer of International Solutions,
Inc., a global distributor of hardware and software products, from 1984 to 1986.
From 1980 to 1984, Mr. Kvamme held various management positions in international
sales and marketing and in product development for Apple Computer, as well as
being one of the initial managers of Apple France. Mr. Kvamme holds a B.A. in
French Economics and Literature from the University of California at Berkeley.
Pierre R. Lamond has been a general partner of Sequoia Capital, a venture
capital firm, since 1981. Prior to joining Sequoia, Mr. Lamond was Vice
President and Technical Director of National Semiconductor, a company he
co-founded in 1967. Mr. Lamond currently serves as the Chairman of the Board of
Directors of Cypress Semiconductor Corporation and Vitesse Semiconductor
Corporation, and is a director of a number of privately held companies. He holds
a B.S. in Electrical Engineering and an M.S. in Physics from the University of
Toulouse, France, as well as an M.S. in Electrical Engineering from Northeastern
University.
The remaining directors of the Company, and certain information about them
as of the Record Date, are set forth below:
DIRECTOR
NAME AGE POSITIONS SINCE
----------------------------------- --- ------------------------------------ --------
Thomas K. Suiter................... 43 Chief Creative Officer and Director 1991
Alexandre Balkanski................ 37 Director 1995
Barry R. Linsky.................... 56 Director 1995
Michael B. Slade................... 40 Director 1996
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Thomas K. Suiter joined CKS in 1991 as Chief Creative Officer, and has
served as a member of the Company's Board of Directors since that time. Mr.
Suiter assumed the position of President, CKS Partners in May 1996. Before
joining the Company, Mr. Suiter was World Wide Creative Director of Landor
Associates from 1985 to 1991. Prior to joining Landor, Mr. Suiter was Director
of Creative Services at Apple from 1984 to 1985 and Creative Director from
1982-1984 where he and his group were responsible for Apple's corporate identity
and the marketing communication materials for the MacIntosh and Apple II product
lines. Mr. Suiter attended San Diego State University and the Art Center College
of Design, Pasadena, California.
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Alexandre Balkanski is the President and CEO of C-Cube Microsystems, Inc.
("C-Cube"), a publicly-held company specializing in digital video compression
solutions, which he co-founded in July 1988. Dr. Balkanski was named Senior Vice
President of C-Cube in August 1989, served as its Vice President of Worldwide
Sales and Marketing from February 1994 to June 1995, and served as its Executive
Vice President and Chief Operating Officer from February 1994 to June 1995. Dr.
Balkanski currently serves on the board of directors of both C-Cube and Sierra
Semiconductor Corporation. Dr. Balkanski holds graduate degrees from Harvard
University in Physics, Economics and Business, as well as a B.A. in Physics from
Harvard College.
Barry R. Linsky has served as Senior Vice President, Planning and Business
Development of IPG since December 1990. Prior to joining IPG at the parent
company level, Mr. Linsky was Executive Vice President, Account Service, of Lowe
& Partners (formerly The Marschalk Company, a subsidiary of IPG), from 1980
until 1990. From 1972 to 1980, Mr. Linsky held various positions at The
Marschalk Company, including Senior Vice President and Director of the agency's
New Products Group and positions in account management. Previously, Mr. Linsky
had worked in consumer marketing for Lever Brothers Co., Bristol-Myers Company
and Squibb Beech-Nut, Inc. He holds a B.A. in Liberal Arts from Dartmouth
College and an M.B.A. from Amos Tuck School of Business.
Michael B. Slade has served as President and Chief Executive Officer of
Starwave Corp., a developer of multimedia information services for the Internet,
since February 1993. Prior to joining Starwave, Mr. Slade was Vice President of
Special Projects at Asymetrix, a multimedia software developer, from November
1992 to February 1993. From May 1991 to October 1992, Mr. Slade served in
various positions at NeXT Computer, Inc., a developer of object-oriented
software, most recently as Vice President of Marketing. Mr. Slade holds a B.A.
in Economics from Colorado College and an M.B.A. from Stanford University.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the Company's nominees named above. In the event that any
nominee is unable or declines to serve as a director at the time of the Annual
Meeting, the proxy holders will vote the proxies in their discretion for any
nominee who is designated by the current Board of Directors to fill the vacancy.
It is not expected that any nominee will be unable or will decline to serve as a
director. In the event that additional persons are nominated for election as
directors, the proxy holders intend to vote all proxies received by them in such
a manner as will assure the election of as many of the nominees listed below as
possible, and in such event the specific nominees to be voted for will be
determined by the proxy holders.
Mr. Kvamme is the son-in-law of Mr. Lamond and the cousin of Kimberly
Johnson, an executive officer of the Company. There are no other family
relationships between directors or executive officers of the Company.
BOARD MEETINGS AND COMMITTEES
During fiscal 1997, the Board of Directors held nine meetings. The standing
committees of the Board of Directors include an Audit Committee and a
Compensation Committee. There is no nominating committee.
The Audit Committee held one meeting in fiscal 1997. Messrs. Balkanski and
Lamond currently serve on the Audit Committee. The functions of the Audit
Committee include recommending appointment of the Company's independent auditors
to the Board of Directors and reviewing (i) the scope of the independent
auditors' annual audit and their compensation, (ii) the general policies and
procedures of the Company with respect to internal auditing, accounting and
financial controls and (iii) any change in accounting principles, significant
audit adjustments proposed by the auditors and any recommendations that the
auditors may have with respect to policies and procedures.
The Compensation Committee held one meeting in fiscal 1997. The
Compensation Committee consisted of Messrs. Lamond, Linsky and Slade during
fiscal 1997. In December 1997, Mr. Lamond resigned from the Compensation
Committee, leaving Messrs. Linsky and Slade as the sole members of the
committee. The Compensation Committee monitors the nature and levels of
compensation paid by the Company to its executive personnel.
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During fiscal 1997, no director attended fewer than seventy-five percent
(75%) of the aggregate of (i) the total number of meetings of the Board of
Directors held and (ii) the total number of meetings held by all committees of
the Board of Directors on which such director served.
DIRECTORS' COMPENSATION
Directors who are not employees of the Company receive compensation for
their services as directors at a rate of $1,000 per year and $2,500 per Board
meeting attended, excluding telephonic Board meetings. Non-employee directors
also are eligible to participate in the 1995 Director Option Plan. See
"Additional Information Relating to Directors and Officers of the
Company -- Benefit Plans -- 1995 Director Option Plan" below.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE COMPANY'S
NOMINEES FOR DIRECTORS.
VOTE REQUIRED
The two nominees for Class III director receiving the highest number of
affirmative votes of the shares entitled to be voted for them shall be elected
as directors. Votes withheld from any nominee are counted for purposes of
determining the presence or absence of a quorum, but have no other legal effect
under Delaware law.
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PROPOSAL 2
RATIFICATION AND APPROVAL OF THE 1997 EMPLOYEE STOCK PURCHASE PLAN
On December 18, 1997, the Board of Directors adopted the 1997 Employee
Stock Purchase Plan (the "1997 Purchase Plan") and reserved 300,000 shares of
Common Stock for issuance thereunder, subject to stockholder approval. At the
Annual Meeting, the stockholders are being asked to approve the 1997 Purchase
Plan and the reservation of shares thereunder.
REASONS FOR ADOPTION
The Board of Directors has adopted the 1997 Purchase Plan as the successor
to the Company's 1995 Employee Stock Purchase Plan (the "1995 Purchase Plan").
The Board of Directors believes that offering such a plan is necessary to
attract qualified employees. Due to recent changes in accounting rules, plans
such as the 1995 Purchase Plan that contain 24-month offering periods have
become significantly less attractive to implement. In addition, the number of
shares available for issuance under the 1995 Purchase Plan is insufficient to
fund future offerings under such Plan. Accordingly, the Board of Directors
believes it is in the best interests of the Company and its stockholders to
adopt the 1997 Purchase Plan, which contains six-month offering periods and a
total of 300,000 shares available for issuance.
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD OF DIRECTORS
The affirmative vote of the majority of the Votes Cast will be required
under Delaware law to approve the 1997 Purchase Plan.
THE COMPANY'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE 1997 PURCHASE
PLAN AND RECOMMENDS A VOTE "FOR" APPROVAL OF THE 1997 PURCHASE PLAN AS AMENDED,
INCLUDING THE RESERVATION OF 300,000 SHARES FOR ISSUANCE THEREUNDER.
SUMMARY OF THE 1997 PURCHASE PLAN
The essential features of the 1997 Purchase Plan are outlined below.
Purpose. The purpose of the 1997 Purchase Plan is to provide employees with
an opportunity to purchase Common Stock of the Company through payroll
deductions in a manner that qualifies under Section 423 of the Internal Revenue
Code (the "Code").
Administration. The 1997 Purchase Plan is administered by the Board of
Directors or a Committee of the Board (collectively, the "Administrator").
Eligibility. Only employees employed by the Company or its subsidiaries on
the first day of an offering period may participate in the 1997 Purchase Plan.
For this purpose, an "employee" is any person who is regularly employed at least
twenty hours per week and at least five months per calendar year by the Company
or any of its subsidiaries. No employee shall be granted an option under the
1997 Purchase Plan if: (i) immediately after the grant of the option, the
employee (or any other person whose stock would be attributed to the employee
pursuant to Section 424(d) of the Code) would own five percent or more of the
total combined voting power or value of the stock of the Company or any of its
subsidiaries; or (such participant's rights to purchase stock under all employee
stock purchase plans of the Company and its subsidiaries have accrued at a rate
which exceeds $25,000 worth of stock (determined with reference to the fair
market value of the Common Stock at the time of grant) in a calendar year.
Subject to these eligibility criteria, the 1997 Purchase Plan permits eligible
employees to purchase Common Stock through payroll deductions subject to certain
limitations described below. See "Payment of Purchase Price; Payroll
Deductions."
Offering Period. The 1997 Purchase Plan is implemented by offering periods
lasting six months with a new offering period commencing every six months.
Offering periods commence on or about April 1 and October 1 of each year. The
first offering period will last five months, commencing on the first trading day
on or after May 1, 1998 and ending on the last trading day on or before
September 30, 1998. Normally, a
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participant's payroll deductions are accumulated throughout an offering period
and, at the end of the offering period, shares of the Company's Common Stock are
purchased with the accumulated payroll deductions.
Purchase Price. The purchase price per share at which shares will be sold
in an offering under the 1997 Purchase Plan is the lower of (i) 85% of the fair
market value of a share of Common Stock on the first day of an offering period
or (ii) 85% of the fair market value of a share of Common Stock on the last day
of each offering period. The fair market value of the Common Stock on a given
date is generally the closing sale price of the Common Stock as reported on the
Nasdaq National Market for such date.
Payment of Purchase Price; Payroll Deductions. The purchase price of the
shares is accumulated by payroll deductions over the offering period. The 1997
Purchase Plan provides that the aggregate of such payroll deductions during the
offering period shall not exceed 15% of the participant's compensation during
any offering period. During the offering period, a participant may discontinue
his or her participation in the 1997 Purchase Plan, and may decrease or increase
the rate of payroll deductions in an offering period within limits set by the
Administrator.
All payroll deductions made for a participant are credited to the
participant's account under the 1997 Purchase Plan, are withheld in whole
percentages only and are included with the general funds of the Company. Funds
received by the Company pursuant to exercises under the 1997 Purchase Plan are
also used for general corporate purposes. A participant may not make any
additional payments into his or her account.
Withdrawal. A participant may terminate his or her participation in the
1997 Purchase Plan at any time by giving the Company a written notice of
withdrawal. In such event, the payroll deductions credited to the participant's
account will be returned, without interest, to such participant. Payroll
deductions will not resume unless a new subscription agreement is delivered in
connection with a subsequent offering period.
Termination of Employment. Termination of a participant's employment for
any reason, including death, cancels his or her participation in the 1997
Purchase Plan immediately. In such event the payroll deductions credited to the
participant's account will be returned without interest to such participant, his
or her designated beneficiaries or the executors or administrators of his or her
estate.
Adjustments Upon Changes in Capitalization. In the event of any changes in
the capitalization of the Company effected without receipt of consideration by
the Company, such as a stock split, stock dividend, combination or
reclassification of the Common Stock, resulting in an increase or decrease in
the number of shares of Common Stock, proportionate adjustments will be made by
the Board in the shares subject to purchase and in the price per share under the
1997 Purchase Plan. In the event of liquidation or dissolution of the Company,
the offering periods then in progress will terminate immediately prior to the
consummation of such event unless otherwise provided by the Board. In the event
of a sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, each option under the
1997 Purchase Plan shall be assumed or an equivalent option shall be substituted
by such successor corporation or a parent or subsidiary of such successor
corporation.
Amendment and Termination. The Board may at any time and for any reason
amend or terminate the 1997 Purchase Plan, except that no such termination shall
affect options previously granted and no amendment shall make any change in an
option granted prior thereto which adversely affects the rights of any
participant. Shareholder approval for amendments to the 1997 Purchase Plan shall
be obtained in such a manner and to such a degree as required to comply with all
applicable laws or regulations. The Plan will terminate in 2007, unless
terminated earlier by the Board in accordance with the 1997 Purchase Plan.
Certain Federal Income Tax Information. The 1997 Purchase Plan, and the
right of participants to make purchases thereunder, is intended to qualify under
the provisions of Sections 421 and 423 of the Code. Under these provisions, no
income will be taxable to a participant until the shares purchased under the
1997 Purchase Plan are sold or otherwise disposed of. Upon sale or other
disposition of the shares, the participant will generally be subject to tax in
an amount that depends upon the holding period. If the shares are sold or
otherwise disposed of more than two years from the Enrollment Date and one year
from the applicable Exercise Date, the participant will recognize ordinary
income measured as the lesser of (a) the excess of the fair market value of the
shares at the time of such sale or disposition over the purchase price, or (b)
an
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amount equal to 15% of the fair market value of the shares as of the Enrollment
Date. Any additional gain will be treated as long-term capital gain. If the
shares are sold or otherwise disposed of before the expiration of these holding
periods, the participant will recognize ordinary income generally measured as
the excess of the fair market value of the shares on the date the shares are
purchased over the purchase price. Any additional gain or loss on such sale or
disposition will be long-term or short-term capital gain or loss, depending on
the holding period. The Company generally is not entitled to a deduction for
amounts taxed as ordinary income or capital gain to a participant except to the
extent of ordinary income recognized by participants upon a sale or disposition
of shares prior to the expiration of the holding periods described above.
THE FOREGOING BRIEF SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION UPON
THE PARTICIPANT AND THE COMPANY WITH RESPECT TO THE SHARES PURCHASED UNDER THE
1997 PURCHASE PLAN DOES NOT PURPORT TO BE COMPLETE AND DOES NOT DISCUSS THE TAX
CONSEQUENCES OF A PARTICIPANT'S DEATH OR THE INCOME TAX LAWS OF ANY MUNICIPALITY
STATE OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.
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PROPOSAL 3
RATIFICATION AND APPROVAL OF AMENDMENT TO 1995 DIRECTOR OPTION PLAN
The 1995 Director Option Plan (the "Director Plan") was adopted by the
Board in October 1995 and approved by the shareholders in November 1995. A total
of 100,000 shares of the Company's Common Stock have been reserved for issuance
under the Directors Plan. On December 18, 1997, the Board of Directors adopted
an amendment to the Director Plan increasing the total number of shares reserved
for issuance thereunder by 100,000 shares to a total of 200,000 shares, subject
to stockholder approval. At the Annual Meeting, the stockholders are asked to
approve the amendment to the Director Plan.
As of the Record Date, under the Director Plan, options to purchase 75,000
shares of the Company's Common Stock were outstanding at an average weighted
price of $28.60 per share, and 25,000 shares of the Company's Common Stock
remained available for future grant (before giving effect to the amendment to
the Director Plan).
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD OF DIRECTORS
The affirmative vote of the majority of the Votes Cast will be required
under Delaware law to approve the amendment to the Director Plan.
THE COMPANY'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AMENDMENT TO
THE DIRECTOR PLAN AND RECOMMENDS A VOTE "FOR" APPROVAL OF SUCH AMENDMENT.
SUMMARY OF THE 1995 DIRECTOR PLAN
The essential features of the Director Plan are outlined below.
Purpose. The purposes of the Director Plan are to attract and retain the
best available individuals for service as non-employee directors of the Company
("Outside Directors"), to provide additional incentive to the Outside Directors
and to encourage their continued service on the Board.
Administration. All grants of options under the Director Plan are automatic
and non-discretionary pursuant to the terms of the Director Plan.
Eligibility. Options under the Director Plan may be granted only to Outside
Directors of the Company. As of the Record Date, there were four Outside
Directors of the Company, all of whom will serve or have been nominated to serve
as directors for the next year.
Participation. The Director Plan provides for grants of options to be made
in two ways:
a. Each Outside Director who first became a director after the date
the Director Plan was adopted by the Board is automatically granted an
option to purchase 20,000 shares (the "First Option") on the date on which
such individual first becomes a director, whether through election by the
stockholders of the Company or by appointment by the Board of Directors in
order to fill a vacancy. However, a director who has been an employee of
the Company while serving on the Board will not receive a First Option upon
becoming an Outside Director.
b. Each Outside Director is automatically granted an option to
purchase 5,000 shares (the "Subsequent Option") two days following the date
of announcement of the Company's operating results for the previous fiscal
year.
TERMS OF OPTIONS
Each option granted under the Director Plan is evidenced by a written stock
option agreement between the Company and the optionee. Options are generally
subject to the terms and conditions listed below.
Exercise of the Option. Twenty-five percent (25%) of the shares subject to
the First Option or the Subsequent Option become exercisable on each of the
first four anniversaries of its date of grant, with the effect that this option
becomes exercisable as to the full number of shares on the fourth anniversary of
the date
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of its grant. Options granted under the Director Plan expire ten years after the
date of grant. An option is exercised by giving written notice of exercise to
the Company specifying the number of whole shares of Common Stock to be
purchased and by tendering payment of the purchase price. Payment for shares
purchased upon exercise of an option may be in the form of (i) cash, (ii) check,
(iii) certain other shares of the Company's Common Stock, (iv) delivery of a
properly executed exercise notice together with such other documentation as the
Company and the broker, if applicable, shall require to effect an exercise of
the option and delivery to the Company of the sale or loan proceeds required to
pay the exercise price or (v) any combination of these payment methods.
Exercise Price. The per share exercise price for shares to be issued
pursuant to exercise of an option under the Director Plan is 100% of the fair
market value per share of the Company's Common Stock on the date of grant of the
option. The fair market value is determined to be the closing sales price on any
established stock exchange or national market system on which the Common Stock
is listed on the date of the grant of the option, as reported in The Wall Street
Journal, or such other source as the Board deems reliable.
Termination of Status as Director. If an optionee ceases to serve as a
director (other than upon optionee's death or total and permanent disability),
he or she may, but only within three months after the date he or she ceases to
be a director of the Company, exercise his or her option to the extent that he
or she was entitled to exercise it at the date of such termination (but in no
event later than the expiration of its ten year term). In the event an optionee
ceases to serve as a director due to the optionee's death or total and permanent
disability (as defined in the Internal Revenue Code), the option will remain
exercisable (to the extent the option was exercisable at the date the optionee
ceased to be a director) for twelve months after the date the optionee ceases to
be a director (but in no event later than the expiration of the option's ten
year term). To the extent that the director was not entitled to exercise the
option at the date of such termination, or if he or she does not exercise such
option within the time specified, the option terminates.
Capital Changes. In the event of any changes made in the Company's
capitalization which result in an exchange of Common Stock for a greater or
lesser number of shares without receipt of consideration, appropriate adjustment
shall be made in the exercise price and in the number of shares subject to
options outstanding under the Director Plan, as well as the number of shares
reserved for issuance under the Director Plan.
Liquidation or Dissolution. In the event of a proposed liquidation or
dissolution of the Company, options under the Director Plan shall terminate
immediately prior to the consummation of such proposed action.
Merger or Asset Sale. In the event of a merger of the Company or the sale
of substantially all of the assets of the Company, each option may be assumed or
an equivalent option substituted by the successor corporation. If an option is
assumed or substituted for, the option or equivalent option shall continue to be
exercisable for so long as the optionee serves as a director of Company or the
successor corporation. Following such assumption or substitution, if the
optionee's status as a director of the Company or the successor corporation, as
applicable, is terminated other than upon a voluntary resignation by the
optionee, the option shall become fully exercisable, including as to shares for
which it would not otherwise be exercisable. If the successor does not agree to
assume or substitute the option, each option shall also become fully exercisable
for a period of thirty days from the date the Board notifies the optionee of the
option's full exercisability, after which period the option shall terminate.
Nontransferability of Option. Options granted pursuant to the Director Plan
may not be sold, pledged, assigned, hypothecated, transferred or disposed of in
any manner other than by will or by the laws of descent or distribution and may
be exercised, during the lifetime of the optionee, only by the optionee.
Other Provisions. Option agreements under the Director Plan may contain
such other terms, provisions and conditions not inconsistent with the Director
Plan as may be determined by the Board.
AMENDMENT AND TERMINATION OF THE DIRECTOR PLAN
The Board may at any time amend, alter, suspend or discontinue the Director
Plan, but no amendment, alteration, suspension or discontinuance shall be made
which would impair the rights of any optionee under
12
any grant theretofore made without such optionee's consent. In addition, to the
extent necessary and desirable to comply with any applicable law or regulation,
including the requirements of an established stock exchange or quotation system,
the Company shall obtain stockholder approval of any amendment to the Director
Plan in such a manner and to such a degree as required.
TAX INFORMATION -- THE DIRECTOR PLAN
Options granted pursuant to the Director Plan are "nonstatutory options"
and will not qualify for any special tax benefits to the optionee.
An optionee will not recognize any taxable income at the time the option is
granted. Upon exercise of the option, the optionee will generally recognize
ordinary income for federal tax purposes measured by the excess, if any, of the
fair market value of the shares over the exercise price. Because shares held by
directors might be subject to restrictions on resale under Section 16(b) of the
Exchange Act, the date of taxation may be deferred unless the optionee files an
election with the Internal Revenue Service pursuant to Section 83(b) of the Code
within thirty days after the date of exercise.
Upon a resale of shares acquired pursuant to, an option under the Director
Plan, any difference between the sales price and the exercise price, to the
extent not recognized as ordinary income as provided above, will be treated as
capital gain or loss. The tax rate on net capital gain (net long-term capital
gain minus net short-term capital loss) for shares held between one year and
eighteen months is capped at 28%. The tax rate on net capital gain for shares
held more than eighteen months is capped at 20%. Capital losses are allowed in
full against capital gains plus $3,000 of other income.
The Company will be entitled to a tax deduction in the amount and at the
time that the optionee recognizes ordinary income upon exercise of an option
under the Director Plan. The Company is not required to withhold any amount for
tax purposes on any such income recognized by the optionee.
THE FOREGOING BRIEF SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION UPON
THE OPTIONEE AND THE COMPANY WITH RESPECT TO THE GRANT OF OPTIONS UNDER THE
DIRECTOR PLAN DOES NOT PURPORT TO BE COMPLETE AND DOES NOT DISCUSS THE TAX
CONSEQUENCES OF AN OPTIONEE'S DEATH OR THE INCOME TAX LAWS OF ANY MUNICIPALITY,
STATE OR FOREIGN COUNTRY IN WHICH THE OPTIONEE MAY RESIDE.
13
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected KPMG Peat Marwick LLP, independent
auditors, to audit the financial statements of the Company for the fiscal year
ending November 29, 1998. If the stockholders do not ratify the appointment of
KPMG Peat Marwick LLP, the selection of independent auditors will be
reconsidered by the Board of Directors. Representatives of KPMG Peat Marwick LLP
are expected to be present at the meeting, will have the opportunity to make a
statement if they desire to do so, and are expected to be available to respond
to appropriate questions.
RECOMMENDATION
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE APPOINTMENT OF KPMG
PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR FISCAL 1998 AND
RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THIS PROPOSAL.
14
ADDITIONAL INFORMATION RELATING TO
DIRECTORS AND OFFICERS OF THE COMPANY
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid by the Company for services rendered during the fiscal year ended November
30, 1997 by the Chief Executive Officer of the Company and each of the four
other most highly compensated executive officers of the Company who were serving
executive officers as of November 30, 1997 ("Named Executive Officers"), based
upon salary and bonus earned by such executive officers in fiscal 1997:
LONG-TERM
COMPENSATION
---------------
AWARDS
ANNUAL COMPENSATION ---------------
---------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS/SARS(1) COMPENSATION
---------------------------- ---- -------- -------- ------------ --------------- ------------
Mark D. Kvamme.............. 1997 $243,950 $ -- $8,344(2) 40,000 $ --
Chief Executive Officer 1996 187,917 159,922 3,344(2) -- --
1995 165,000 116,370 3,236(2) -- 1,268(3)
Carlton H. Baab............. 1997 220,833 -- 6,386(2) 17,500 2,665(3)
Executive Vice President
and 1996 173,751 121,607 3,614(2) 40,000 2,665(3)
Chief Financial Officer 1995 137,600 75,774 7,464(2) 40,000 2,665(3)
Thomas K. Suiter............ 1997 224,417 -- 6,939(2) 30,000 --
Chief Creative Officer 1996 183,334 143,983 2,668(2) -- 107,000(4)
1995 165,000 74,517 2,668(2) -- --
Robert T. Clarkson(5)....... 1997 199,115 -- 6,000(2) 150,000 --
Executive Vice President
of Operations, CKS
Technology Group, CKS
International, and
Business Development, and
Secretary
Richard Villante(6)......... 1997 136,379 -- -- 75,000 --
Executive Vice President
of Operations, CKS East
|
(1) All options were granted pursuant to the Company's 1995 Stock Plan and are
subject to vesting. See "-- Employee Benefit Plans."
(2) Consists of automobile allowance and life insurance premiums paid by the
Company.
(3) Consists of forgiveness of interest due on loans payable to the Company.
(4) Consists of a gift of an original artwork from the Company.
(5) Mr. Clarkson joined the Company in February 1997.
(6) Mr. Villante joined the Company in May 1997.
15
OPTION GRANTS IN FISCAL 1997
The following table sets forth information with respect to stock options
granted to Named Executive Officer in the fiscal year ended November 30, 1997.
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES AT STOCK
SECURITIES OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERMS(5)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION -------------------------
NAME GRANTED(1) FISCAL YEAR(2) SHARE(3) DATE(4) 5% 10%
----------------------- --------- -------------- --------- ---------- ---------- ----------
Mark D. Kvamme......... 40,000 2.6% $ 26.875 12/18/2006 $ 676,062 $1,713,273
Carlton H. Baab........ 17,500 1.2 26.00 12/17/2006 286,147 725,153
Thomas K. Suiter....... 30,000 2.0 26.875 02/18/2006 507,046 1,284,955
Robert T.
Clarkson(6).......... 150,000 9.8 13.5625 12/06/2006 1,279,408 3,242,270
Richard Villante(7).... 75,000 4.9 13.5625 04/01/2007 639,704 1,621,135
|
(1) This option to purchase shares of Common Stock was granted under the 1995
Stock Plan and provides for vesting as to 25% of the underlying Common Stock
one year after the date of grant, then ratably over 36 months thereafter.
(2) Options to purchase an aggregate of 1,517,556 shares of Common Stock of the
Company were granted to employees during the fiscal year ended November 30,
1997.
(3) Options were granted at an exercise price equal to 100% of the fair market
value of the Company's Common Stock on the date of grant, as determined by
the closing price of the Common Stock on the Nasdaq National Market on the
date of grant.
(4) Options may terminate before their expiration dates if the optionee's status
as an employee or consultant is terminated, upon the optionee's death or
disability or upon an acquisition of the Company.
(5) This column shows the hypothetical gains or option spreads for the option
granted based on assumed annual compound stock appreciation rates of 5% and
10% over the full ten-year term of the option. The assumed rates of
appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent the company's estimate or projection of
future Common Stock prices.
(6) This option was originally granted with an exercise price of $21.25 and
subsequently repriced in December 1997. The option is subject to a one-year
prohibition on exercise beginning on the date of the repricing. See
"-- Report of the Compensation Committee -- Option Repricing."
(7) This option was originally granted with an exercise price of $21.75 and
subsequently repriced in December 1997. The option is subject to a one-year
prohibition on exercise beginning on the date of the repricing. See
"-- Report of the Compensation Committee -- Option Repricing."
16
AGGREGATE STOCK OPTION EXERCISES IN FISCAL 1997 AND FISCAL YEAR-END VALUES
The following table sets forth information regarding the value of options
to purchase shares of the Company's Common Stock that were exercised or held by
the Named Executive Officers during fiscal 1997.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES NOVEMBER 30, 1997 NOVEMBER 30, 1997(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---------------------------- ----------- ----------- ----------- ------------- ----------- -------------
Mark D. Kvamme.............. -- -- -- 40,000 -- --
Carlton H. Baab............. 34,165 $ 809,071 3,334 60,001 $20,421 $ 2,246,013
Thomas K. Suiter............ -- -- -- 30,000 -- --
Robert T. Clarkson.......... -- -- -- 150,000 -- --
Richard Villante............ -- -- -- 75,000 -- --
|
(1) This column represents the difference between the fair market value of the
Common Stock on the date of exercise of the stock option by the identified
executive officer and the price paid for the shares by the officer.
(2) Calculated by determining the difference between the closing price of the
Company's Common Stock on the Nasdaq National Market on November 28, 1997
($13.250) and the weighted-average exercise price of in-the-money options.
STOCK PLANS
The following is a brief summary of the Company's stock plans in effect
during the fiscal year ended November 30, 1997 under which executive officers
and directors of the Company received benefit.
1995 STOCK PLAN
The 1995 Stock Plan of the Company (the "Stock Plan") provides for the
grant of stock options and stock purchase rights to employees, officers and
consultants of the Company and its subsidiaries. Under the Stock Plan, the
Company may grant options that are intended to qualify as incentive stock
options within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), options not intended to qualify as incentive stock
options and rights to purchase restricted stock. Incentive stock options granted
under the Stock Plan must be granted by September 2005. As of the Record Date,
options to purchase 891,125 shares of Common Stock were outstanding under to the
Stock Plan and options to purchase 1,197,965 shares of Common Stock were
available for future grant under the Stock Plan. The Stock Plan was approved by
the Board of Directors in October 1995 and approved by the stockholders of
Company in November 1995. An amendment to the Stock Plan increasing the number
of shares of Common Stock available for issuance thereunder by 1,600,000 shares
was approved by the Board of Directors in October 1996 and by the Company's
stockholders in December 1996.
The Stock Plan is administered by the Board of Directors or a committee
thereof. Subject to the provisions of the Stock Plan, the Board of Directors or
a committee thereof has the authority to select the persons to whom awards are
granted and determine the terms of each award, including (i) the number of
shares of Common Stock covered by the award, (ii) when the award becomes
exercisable, (iii) the exercise price of the award and (iv) the duration of the
option (which may not exceed ten years). Generally options vest over four years
and must be exercised within 10 years. All options are nontransferable other
than by will or the laws of descent and distribution.
The Stock Plan provides that, in the event of a merger of the Company with
or into another corporation, the sale of more than fifty persons (50%) of the
Company's voting stock, a sale of substantially all of the Company's assets or a
liquidation or dissolution of the Company ("Transfer of Control"), the acquiring
or successor corporation may assume or substitute substantially equivalent
awards for the awards outstanding. To the extent awards are not assumed or
substituted for, they will vest in full prior to the Transfer of Control. To
17
the extent options are not assumed, substituted for or exercised prior to the
Transfer of Control, they will terminate.
1995 EMPLOYEE STOCK PURCHASE PLAN
The Company's 1995 Employee Stock Purchase Plan (the "1995 Purchase Plan")
provides for the purchase by eligible employees of shares of the Company's
Common Stock. The 1995 Purchase Plan was adopted by the Board of Directors in
October 1995 and approved by the stockholders in November 1995. A total of
300,000 shares of Common Stock have been reserved for issuance under the 1995
Purchase Plan. The 1995 Purchase Plan, which is intended to qualify under
Section 423 of the Code, is administered by the Board of Directors or by a
committee appointed by the Board. Employees (including officers and employee
directors) of the Company or any subsidiary of the Company designated by the
Board for participation in the 1995 Purchase Plan are eligible to participate in
the 1995 Purchase Plan if they are customarily employed for more than 20 hours
per week and more than five months per year. The 1995 Purchase Plan is
implemented during concurrent 24-month offering periods, each of which is
divided into four consecutive six month purchase periods, subject to change by
the Board of Directors. Offering periods generally begin on January 1 and July 1
of each year. The 1995 Purchase Plan permits eligible employees to purchase
Common Stock through payroll deductions, which may not exceed 15% of an
employee's compensation. Shares are purchased on the last day of each purchase
period. The price at which stock may be purchased under the 1995 Purchase Plan
is equal to 85% of the lower of the fair market value of the Company's Common
Stock on the first day of the offering period or the last day of the purchase
period. Employees may end their participation in the offering at any time during
the offering period, and participation ends automatically on termination of
employment with the Company. In addition, participants generally may not
purchase stock having a value (measured at the beginning of the offering period)
greater than $12,500 in any purchase period, except the first offering period,
during which an employee may purchase stock having a value of up to $25,000. The
1995 Purchase Plan will be terminated after the expiration of the current
offering periods.
1997 EMPLOYEE STOCK PURCHASE PLAN
The Company's 1997 Purchase Plan provides for the purchase by eligible
employees of shares of the Company's Common Stock. The 1997 Purchase Plan was
adopted by the Board of Directors in December 18, 1997, subject to approval by
the stockholders. See Proposal No. 2 above for a more detailed description of
the 1997 Purchase Plan. A total of 300,000 shares of Common Stock have been
reserved for issuance under the 1997 Purchase Plan. The 1997 Purchase Plan,
which is intended to qualify under Section 423 of the Code, is administered by
the Board of Directors or by a committee appointed by the Board. Employees
(including officers and employee directors) of the Company or any subsidiary of
the Company designated by the Board for participation in the 1997 Purchase Plan
are eligible to participate in the 1997 Purchase Plan if they are customarily
employed for more than 20 hours per week and more than five months per year. The
1997 Purchase Plan is implemented by offering periods lasting six months with a
new offering period commencing every six months. Offering periods commence on or
about April 1 and October 1 of each year. The first offering period will last
five months, commencing on the first trading day on or after May 1, 1998 and
ending on the last trading day on or before September 30, 1998. The 1997
Purchase Plan permits eligible employees to purchase Common Stock through
payroll deductions, which may not exceed 15% of an employee's compensation.
Shares are purchased on the last day of each purchase period. The price at which
stock may be purchased under the 1997 Purchase Plan is equal to 85% of the lower
of the fair market value of the Company's Common Stock on the first day of the
offering period or the last day of the purchase period. Employees may end their
participation in the offering at any time during the offering period, and
participation ends automatically on termination of employment with the Company.
In addition, participants generally may not purchase stock having a value
(measured at the beginning of the offering period) greater than $12,500 in any
purchase period.
18
Participation in the 1997 Purchase Plan is voluntary and is dependent on
each eligible employee's election to participate and his or her determination as
to the level of payroll deductions. Accordingly, future purchases under the 1997
Purchase Plan are not determinable. The following table sets forth, as to the
Named Executive Officers, all current executive officers as a group and all
other employees who participated in the 1995 Purchase Plan: (i) the number of
shares of the Company's Common Stock purchased under the 1995 Purchase Plan
during the last fiscal year; and (ii) the dollar value of the benefit (see
footnote (1) to the table):
NUMBER OF
SHARES
NAME OF INDIVIDUAL OR IDENTITY OF GROUP PURCHASED DOLLAR VALUE(1)
----------------------------------------------------------- --------- ---------------
Mark D. Kvamme............................................. -- --
Carlton H. Baab............................................ 1,222 $ 8,098
Thomas K. Suiter........................................... -- --
Robert T. Clarkson......................................... 199 2,149
Richard Villante........................................... -- --
All current executive officers as a group (8 persons)...... 4,419 59,086
All other employees as a group............................. 100,126 1,540,648
|
(1) This column represents the market value of the shares on date of purchase,
minus the purchase price.
1995 DIRECTOR OPTION PLAN
The Director Plan was adopted by the Board of Directors in October 1995. A
total of 100,000 shares of Common Stock has been reserved for issuance under the
Director Plan. See Proposal No. 3 for a more detailed description of the
Director Plan and a proposal to amend the Director Plan to increase the number
of shares reserved for issuance thereunder by 100,000 shares. The Director Plan
provides for the grant of nonstatutory stock options to non-employee directors
of the Company. The Director Plan is designed to work automatically, without
administration; however, to the extent administration is necessary, it will be
provided by the Board of Directors. As of the Record Date, options to purchase
75,000 shares of the Company's Common Stock were outstanding at an average
weighted price of $36.50 per share, and 25,000 shares of the Company's Common
Stock remained available for future grant (before giving effect to the amendment
to the Director Plan).
The Director Plan provides that each non-employee director shall be granted
an option to purchase 20,000 shares of Common Stock (the "First Option") on the
date upon which the optionee first becomes a director of the Company.
Thereafter, each non-employee director will be granted an option to purchase
5,000 shares of Common Stock (a "Subsequent Option") each year two days
following announcement of the Company's operating results for the previous
fiscal year. The Director Plan provides that each Option shall become
exercisable as to 25% of the shares subject to such Option on each of the four
anniversaries of the date of grant of such Option. Each Option will become
exercisable in full on the fourth anniversary of its date of grant. The exercise
price of all Options granted under the Director Plan will be equal to the fair
market value of a share of the Company's Common Stock on the date of grant of
the Option. Options granted under the Director Plan have a term of 10 years.
In the event of a merger of the Company or the sale of substantially all of
the assets of the Company, each option may be assumed or an equivalent option
substituted by the successor corporation. If an option is assumed or substituted
for, the option or equivalent option shall continue to be exercisable for so
long as the optionee serves as a director of Company or the successor
corporation. Following such assumption or substitution, if the optionee's status
as a director of the Company or the successor corporation, as applicable, is
terminated other than upon a voluntary resignation by the optionee, the option
shall become fully exercisable, including as to shares for which it would not
otherwise be exercisable. If the successor does not agree to assume or
substitute the option, each option shall also become fully exercisable for a
period of thirty days from the date the Board notifies the optionee of the
option's full exercisability, after which period the option shall terminate.
19
EXECUTIVE BONUS PROGRAM
Certain officers and employees of the Company are eligible to receive
quarterly bonus compensation under an Executive Bonus Program maintained by the
Company. Bonus compensation payments under the Executive Bonus Program are based
on attainment of sales revenue and profitability targets during the fiscal year
to date, and are keyed to each eligible employee's base salary. No bonuses were
paid under the Executive Bonus Program in fiscal 1997. The financial performance
targets on which bonus payments are based are set on an annual basis by the
Company's Chief Executive Officer and approved by the Compensation Committee of
the Board of Directors.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities ("10% Stockholders") to
file reports of ownership on Form 3 and changes in ownership on Form 4 or 5 with
the Securities and Exchange Commission (the "SEC") and the National Association
of Securities Dealers. Such officers, directors and 10% Stockholders are also
required by SEC rules to furnish the Company with copies of Section 16(a) forms
that they file.
Based solely on its review of the copies of such forms received by it, the
Company believes that, during the fiscal year ended November 30, 1997, all
Section 16(a) filing requirements applicable to its officers, directors and 10%
Stockholders were satisfied.
EMPLOYMENT AGREEMENTS AND CHANGE-IN CONTROL ARRANGEMENTS
The Company has agreed to employ Mr. Baab as Executive Vice President of
Finance and Chief Financial Officer at a salary of $225,000 per year, subject to
periodic review, and Mr. Clarkson as Executive Vice President of Business
Development at a salary of $220,000 per year, subject to periodic review. Each
officer is eligible for an annual personal bonus of up to 50% of his base salary
in addition to bonus received pursuant to the Company's Executive Bonus Program.
Neither individual received any bonus payments under the Executive Bonus Plan or
pursuant to their respective employment agreements during fiscal 1997. In the
event such officer's employment is terminated without Cause (as defined in the
employment agreement) and not in connection with a Change of Control (as defined
in the employment agreement) or if the officer terminates his employment for
Good Reason (as defined in the employment agreement), such officer shall receive
(i) continuation of his base salary for a period of twelve months, (ii) an
amount equal to total bonus and incentive compensation received or earned during
the preceding twelve months, (iii) continued benefits and perquisites for a
period of twelve months and (iv) an additional twelve months vesting on all
options held by such officer. On the effectiveness of any Change of Control, the
vesting of all options granted to each officer by the Company shall be
accelerated so that one half of the unvested shares shall become vested. If,
following a Change of Control, the officer's employment is terminated
involuntarily or by Constructive Termination (as defined in the employment
agreement), such officer shall receive (i) a lump sum equal to twelve months'
base salary plus total bonus and incentive compensation received or earned
during the twelve months preceding the Change of Control or date of termination,
whichever is greater, (ii) continued benefits and perquisites for a period of
twelve months and (iv) accelerated vesting on all options held by such officer.
In December 1997, the Company and Mr. Clarkson orally agreed that he would
assume operational responsibility for the Company's technology and international
operations, in addition to his business development responsibilities, with the
title of Executive Vice President of Operations, CKS Technology Group and
International, in addition to his title of Executive Vice President of Business
Development.
The Company has agreed to employ Mr. Villante as President of Global
Communications Company at a salary of $225,000 per year, subject to periodic
review. Based on an annual performance review, Mr. Villante is entitled to bonus
compensation, which may be in the form of options to purchase shares of the
Company's Common Stock. If Mr. Villante's employment agreement is terminated
prior to May 2002, Mr. Villante will be entitled to severance benefits in an
amount equal to six months salary. In December 1997, the Company
20
and Mr. Villante orally agreed that he would assume operational responsibility
for the Company's operations in the eastern United States, with the title of
Executive Vice President of Operations, CKS East.
The Company does not currently have any employment contracts in effect with
the Chief Executive Officer or any of the other Named Executive Officers.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Act of 1934, as amended, that might incorporate future filings, including this
Proxy Statement, in whole or in part, the following report shall not be
incorporated by reference into any such filings.
INTRODUCTION
The Compensation Committee of the Board of Directors establishes the
general compensation policies of the Company, and establishes the compensation
plans and specific compensation levels for executive officers. The Committee
strives to ensure that the Company's executive compensation programs will enable
the Company to attract and retain key people and motivate them to achieve or
exceed certain key objectives of the Company by making individual compensation
directly dependent on the Company's achievement of certain financial goals, such
as profitability and asset management and by providing rewards for exceeding
those goals.
COMPENSATION PROGRAMS
Base Salary. The Committee establishes base salaries for executive
officers, normally within ten percent of the average paid for comparable
positions at other similarly sized companies as set forth in national and local
compensation surveys. Base pay increases vary according to individual
contributions to the Company's success and comparisons to similar positions
within the Company and at other comparable companies.
Bonus Plans. Each executive officer is eligible to participate in the
Company's Executive Bonus Program which provides for the payment of a quarterly
bonus determined by a formula based on improvements of sales revenue and
profitability over preset threshold levels for the executive officer's operating
group or business unit, and for the Company as a whole. (See "Executive
Compensation -- Benefit Plans.")
Stock Options. The Committee believes that stock options provide additional
incentive to officers to work towards maximizing stockholder value. The
Committee views stock options as one of the more important components of the
Company's long-term, performance-based compensation philosophy. These options
are provided through initial grants at or near the date of hire and through
subsequent periodic grants. Options granted by the Company to its executive
officers and other employees have exercise prices equal to the fair market value
at the time of grant. Stock options generally vest over a four year period. The
initial option grant is designed to be competitive with those of comparable
companies for the level of the job that the executive holds and is designed to
motivate the officer to make the kind of decisions and implement strategies and
programs that will contribute to an increase in the Company's stock price over
time. Periodic additional stock options within the comparable range for the job
are granted to reflect the executives ongoing contributions to the Company, to
create an incentive to remain at the Company and to provide a long-term
incentive to achieve or exceed the Company's financial goals.
Other. In addition to the foregoing, officers participate in compensation
plans available to all employees, such as a quarterly profit sharing plan and
participation in both the Company's 401(k) retirement plan, the 1995 Purchase
Plan and the 1997 Purchase Plan. See "Executive Compensation -- Benefit Plans."
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The factors considered by the Compensation Committee in determining the
compensation of the Chief Executive Officer, in addition to survey data, include
the Company's operating and financial performance, as well as his leadership and
establishment and implementation of strategic direction for the Company.
21
OPTION REPRICING
In December 1997, the Compensation Committee authorized the reduction of
the exercise price under options granted to employees, including executives,
which had an exercise price higher than the current market price of the
Company's Common Stock at the time of the repricing ($13.5625). The options
granted to employees were designed to provide incentive to the employees to work
to achieve long term success for the Company. The decline in the market price of
the Company's Common Stock since the date the options were granted frustrated
the purpose of the options and the Committee deemed it to be in the best
interests of the Company to allow the amendment of the options to reduce the
exercise price to the market price at the time of the reissue. All repriced
options are subject to a six-month (one-year in the case of certain employees,
including all executive officers) prohibition on exercise beginning on the date
of the repricing. The other terms of such options remained unchanged.
The following table sets forth information with respect to the repricing of
those options held by executive officers of the Company.
TEN-YEAR OPTION REPRICINGS
LENGTH OF
NUMBER OF MARKET ORIGINAL
SECURITIES PRICE OF EXERCISE OPTION TERM
UNDERLYING STOCK AT PRICE AT NEW REMAINING AT
REPRICING OPTIONS TIME OF TIME OF EXERCISE DATE OF
NAME DATE REPRICED REPRICING REPRICING PRICE REPRICING
------------------------------ --------- ---------- --------- --------- -------- ---------------
Carlton H. Baab............... 11/18/96 40,000 $ 20.00 $32.00 $20.00 9 yrs, 172 days
Executive Vice President and
Chief Financial Officer
Kimberly A. Johnson........... 12/18/97 10,000 13.5625 26.00 13.5625 8 yrs, 364 days
Executive Vice President
Fergus O'Daly................. 12/18/97 100,000 13.5625 23.50 13.5625 4 yrs, 153 days
President CKS East
Ian Small..................... 12/18/97 10,000 13.5625 20.00 13.5625 8 yrs, 142 days
Executive Vice President 12/18/97 35,000 13.5625 21.75 13.5625 9 yrs, 104 days
and Chief Technology Officer
Robert T. Clarkson............ 12/18/97 150,000 13.5625 21.25 13.5625 8 yrs, 353 days
Executive Vice President and
Secretary
Richard Villante.............. 12/18/97 75,000 13.5626 21.75 13.5625 9 yrs, 104 days
Executive Vice President
|
THE 1997 COMPENSATION COMMITTEE
Pierre R. Lamond
Barry R. Linsky
Michael B. Slade
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors of CKS consisted of
Messrs. Lamond, Linsky and Slade during fiscal 1997. In December 1997, Mr.
Lamond resigned from the Compensation Committee, leaving Messrs. Linsky and
Slade as the sole members of the committee. Mr. Lamond is the father-in-law of
Mark D. Kvamme, the Company's Chairman, President and Chief Executive Officer.
Mr. Linsky is a Senior Vice President of IPG. None of Messrs. Lamond, Linsky or
Slade were at any time during fiscal 1997, or at any other time, an officer or
employee of the Company. No executive officer of the Company serves as a member
of the board of directors or compensation committee of any entity that has one
or more executive officers serving as a member of the Company's Board of
Directors or Compensation Committee.
22
COMPARISON OF TOTAL CUMULATIVE STOCKHOLDER RETURN
The following graph sets forth the Company's total cumulative stockholder
return as compared to the S&P 500 Index and the Dow Jones Technology Index since
inception of trading of the Company's Common Stock on the Nasdaq National Market
on December 14, 1995 through November 30, 1997. The total stockholder return
assumes $100 invested at the beginning of the period in Common Stock of the
Company, the S&P 500 Index , and the Dow Jones Technology Index. Total return
assumes reinvestment of dividends. Historical stock price performance is not
necessarily indicative of future stock price performance.
Dow Jones
Measurement Period S&P 500 Technology
(Fiscal Year Covered) CKSG Index Index
12/14/95 100 100 100
2/29/96 195.6 103.9 106.7
5/31/96 227.2 108.4 112.7
8/31/96 158.9 105.7 106.9
11/30/96 122 122.8 130.2
3/2/97 197 128.2 132.8
6/1/97 169.9 137.5 148.6
8/31/97 196.324 145.9 169.4
11/30/97 78 154.8 164.9
|
CERTAIN TRANSACTIONS
RELATIONSHIP WITH THE INTERPUBLIC GROUP OF COMPANIES, INC.
The Company and IPG have entered into a Shareholder Rights Agreement
pursuant to which IPG agreed to limit its ownership of CKS capital stock to no
more than 37% of all outstanding voting shares of CKS and to vote its shares for
election of the slate of nominees for the Board of Directors of the Company
selected by the Company, provided that such slate includes a nominee selected by
IPG. These provisions terminate in January 2002.
INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements with each of its
directors and executive officers. Such agreements require the Company to
indemnify such individuals to the fullest extent permitted by law.
23
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: March 18, 1998
24
APPENDIX A
CKS GROUP, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean CKS Group, Inc., a Delaware corporation,
and any Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross
earnings and commissions, exclusive of payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary which has
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of
the Company for tax purposes whose customary employment with the Company is at
least twenty (20) hours per week and more than five (5) months in any calendar
year. For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each Offering
Period.
(i) "Exercise Date" shall mean the last day of each Offering
Period.
(j) "Fair Market Value" shall mean, as of any date, the value of
Common Stock determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day on the date of such determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable, or;
(2) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of such determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable, or;
(3) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(k) "Offering Period" shall mean a period of approximately six
(6) months during which an option granted pursuant to the Plan may be exercised,
commencing on the first Trading Day on or after April 1 and terminating on the
last Trading Day in the period ending the following September 30, or commencing
on the first Trading Day on or after October 1 and terminating on the last
Trading Day in the period ending the following March 31. The first Offering
Period under the Plan shall commence with the first Trading Day on or after May
1, 1998 and on the last Trading Day on or before September 30, 1998. The
duration of Offering Periods may be changed pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
(m) "Purchase Price" shall mean an amount equal to 85% of the
Fair Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(n) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(o) "Subsidiary" shall mean a corporation, domestic or foreign,
of which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(p) "Trading Day" shall mean a day on which national stock
exchanges and the Nasdaq System are open for trading.
-2-
3. Eligibility.
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding,
no Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. Offering Periods. The Plan shall be implemented by consecutive
Offering Periods with a new Offering Period commencing on the first Trading Day
on or after April 1 and October 1 each year, or on such other date as the Board
shall determine, and continuing thereafter until terminated in accordance with
Section 20 hereof. The first Offering Period under the Plan shall commence with
the first Trading Day on or after May 1, 1998. The Board shall have the power to
change the duration of Offering Periods (including the commencement dates
thereof) with respect to future offerings without stockholder approval if such
change is announced at least five (5) days prior to the scheduled beginning of
the first Offering Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the
first payroll following the Enrollment Date and shall end on the last payroll in
the Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding fifteen percent (15%) of
the Compensation which he or she receives on each pay day during the Offering
Period.
-3-
(b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
participant's payroll deductions may be decreased to zero percent (0%) at any
time during an Offering Period. Payroll deductions shall recommence at the rate
provided in such participant's subscription agreement at the beginning of the
first Offering Period which is scheduled to end in the following calendar year,
unless terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or
at the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on the Exercise Date of such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Offering Period more than 900
shares (subject to any adjustment pursuant to Section 19), and provided further
that such purchase shall be subject to the limitations set forth in Sections
3(b) and 12 hereof. Exercise of the option shall occur as provided in Section 8
hereof, unless the participant has withdrawn pursuant to Section 10 hereof. The
Option shall expire on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares
shall be exercised automatically on the
-4-
Exercise Date, and the maximum number of full shares subject to option shall be
purchased for such participant at the applicable Purchase Price with the
accumulated payroll deductions in his or her account. No fractional shares shall
be purchased; any payroll deductions accumulated in a participant's account
which are not sufficient to purchase a full share shall be retained in the
participant's account for the subsequent Offering Period, subject to earlier
withdrawal by the participant as provided in Section 10 hereof. Any other monies
left over in a participant's account after the Exercise Date shall be returned
to the participant. During a participant's lifetime, a participant's option to
purchase shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal.
(a) A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any time by giving written notice to the
Company in the form of Exhibit B to this Plan. All of the participant's payroll
deductions credited to his or her account shall be paid to such participant
promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period shall be automatically terminated, and no further payroll
deductions for the purchase of shares shall be made for such Offering Period. If
a participant withdraws from an Offering Period, payroll deductions shall not
resume at the beginning of the succeeding Offering Period unless the participant
delivers to the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not
have any effect upon his or her eligibility to participate in any similar plan
which may hereafter be adopted by the Company or in succeeding Offering Periods
which commence after the termination of the Offering Period from which the
participant withdraws.
11. Termination of Employment. Upon a participant's ceasing to be an
Employee for any reason, he or she shall be deemed to have elected to withdraw
from the Plan and the payroll deductions credited to such participant's account
during the Offering Period but not yet used to exercise the option shall be
returned to such participant or, in the case of his or her death, to the person
or persons entitled thereto under Section 15 hereof, and such participant's
option shall be automatically terminated. The preceding sentence
notwithstanding, a participant who receives payment in lieu of notice of
termination of employment shall be treated as continuing to be an Employee for
the participant's customary number of hours per week of employment during the
period in which the participant is subject to such payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
-5-
13. Stock.
(a) The maximum number of shares of the Company's Common Stock
which shall be made available for sale under the Plan shall be three hundred
thousand (300,000) shares, subject to adjustment upon changes in capitalization
of the Company as provided in Section 19 hereof. If, on a given Exercise Date,
the number of shares with respect to which options are to be exercised exceeds
the number of shares then available under the Plan, the Company shall make a pro
rata allocation of the shares remaining available for purchase in as uniform a
manner as shall be practicable and as it shall determine to be equitable.
(b) The participant shall have no interest or voting right in
shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall
be registered in the name of the participant or in the name of the participant
and his or her spouse.
14. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to an
Exercise Date on which the option is exercised but prior to delivery to such
participant of such shares and cash. In addition, a participant may file a
written designation of a beneficiary who is to receive any cash from the
participant's account under the Plan in the event of such participant's death
prior to exercise of the option. If a participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for such
designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
-6-
16. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution,
Liquidation, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the stockholders of the Company, the Reserves, the maximum number of shares each
participant may purchase per Offering Period (pursuant to Section 7), as well as
the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.
-7-
(c) Merger or Asset Sale. In the event of a proposed sale of all
or substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, the Offering Period
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date"). The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for
any reason terminate or amend the Plan. Except as provided in Section 19 hereof,
no such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Plan is in the best
interests of the Company and its stockholders. Except as provided in Section 19
hereof, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Section 423 of the Code (or any other applicable law, regulation or
stock exchange rule), the Company shall obtain shareholder approval in such a
manner and to such a degree as required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
21. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
-8-
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
-9-
APPENDIX B
CKS GROUP, INC.
1995 DIRECTOR OPTION PLAN
(AS AMENDED DECEMBER 1997)
1. Purposes of the Plan. The purposes of this 1995 Director Option Plan
are to attract and retain the best available personnel for service as Outside
Directors (as defined herein) of the Company, to provide additional incentive to
the Outside Directors of the Company to serve as Directors, and to encourage
their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" means the Common Stock of the Company.
(d) "Company" means CKS Group, Inc., a Delaware corporation.
(e) "Director" means a member of the Board.
(f) "Employee" means any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a Director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.
(g) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(h) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq Stock Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the Fair Market Value of a Share of
Common Stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in Common Stock) on the date of
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System
(but not on the Stock Market) or regularly quoted by a recognized securities
dealer but selling prices are not reported, the Fair Market Value of a Share of
Common Stock shall be the mean between the high bid and low
asked prices for the Common Stock on the date of determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable, or;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Board.
(i) "Inside Director" means a Director who is an Employee.
(j) "Option" means a stock option granted pursuant to the
Plan.
(k) "Optioned Stock" means the Common Stock subject to an
Option.
(l) "Optionee" means a Director who holds an Option.
(m) "Outside Director" means a Director who is not an
Employee.
(n) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(o) "Plan" means this 1995 Director Option Plan.
(p) "Share" means a share of the Common Stock, as adjusted
in accordance with Section 10 of the Plan.
(q) "Subsidiary" means a "subsidiary corporation," whether
now or hereafter existing, as defined in Section 424(f) of the Internal Revenue
Code of 1986.
3. Stock Subject to the Plan. Subject to the provisions of Section 10 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 200,000 Shares of Common Stock (the "Pool"). The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. Administration and Grants of Options under the Plan.
(a) Procedure for Grants. The provisions set forth in this
Section 4(a) shall not be amended more than once every six months, other than to
comport with changes in the Code, the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder. All grants of Options to Outside
Directors under this Plan shall be automatic and nondiscretionary and shall be
made strictly in accordance with the following provisions:
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(i) No person shall have any discretion to select which
Outside Directors shall be granted Options or to determine the number of Shares
to be covered by Options granted to Outside Directors.
(ii) Each Outside Director who first becomes a director
after the date the Plan is adopted by the Board shall be automatically granted
an Option to purchase 20,000 Shares (the "First Option") on the date on which
such person first becomes an Outside Director, whether through election by the
shareholders of the Company or appointment by the Board to fill a vacancy;
provided, however, that an Inside Director who ceases to be an Inside Director
but who remains a Director shall not receive a First Option.
(iii) Each Outside Director shall be automatically
granted an Option to purchase 5,000 Shares (a "Subsequent Option") two days
following the date of announcement of the Company's operating results for the
previous fiscal year.
(iv) Notwithstanding the provisions of subsections (ii)
and (iii) hereof, any exercise of an Option granted before the Company has
obtained shareholder approval of the Plan in accordance with Section 16 hereof
shall be conditioned upon obtaining such shareholder approval of the Plan in
accordance with Section 16 hereof.
(v) The terms of a First Option granted hereunder shall
be as follows:
(A) the term of the First Option shall be ten (10)
years.
(B) the First Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of the
Fair Market Value per Share on the date of grant of the First Option. In the
event that the date of grant of the First Option is not a trading day, the
exercise price per Share shall be the Fair Market Value on the next trading day
immediately following the date of grant of the First Option.
(D) subject to Section 10 hereof, the First Option shall
become exercisable as to 1/4th of the Shares subject to the First Option on each
of the first four anniversaries of the date of grant.
(vi) The terms of a Subsequent Option granted hereunder
shall be as follows:
(A) the term of the Subsequent Option shall be ten (10)
years.
(B) the Subsequent Option shall be exercisable only
while the Outside Director remains a Director of the Company, except as set
forth in Sections 8 and 10 hereof.
-3-
(C) the exercise price per Share shall be 100% of the
Fair Market Value per Share on the date of grant of the Subsequent Option. In
the event that the date of grant of the Subsequent Option is not a trading day,
the exercise price per Share shall be the Fair Market Value on the next trading
day immediately following the date of grant of the Subsequent Option.
(D) subject to Section 10 hereof, the Subsequent Option
shall become exercisable as to one of the Shares subject to the Subsequent
Option on each of the first four anniversaries of the date of grant.
(vii) In the event that any Option granted under the
Plan would cause the number of Shares subject to outstanding Options plus the
number of Shares previously purchased under Options to exceed the Pool, then the
remaining Shares available for Option grant shall be granted under Options to
the Outside Directors on a pro rata basis. No further grants shall be made until
such time, if any, as additional Shares become available for grant under the
Plan through action of the Board or the shareholders to increase the number of
Shares which may be issued under the Plan or through can cellation or expiration
of Options previously granted hereunder.
5. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof.
The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate the Director's relationship with the
Company at any time.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 16 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 11 of the Plan.
7. Form of Consideration. The consideration to be paid for the Shares to
be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) delivery of a properly
executed exercise notice together with such other documentation as the Company
and the broker, if applicable, shall require to effect an exercise of the Option
and delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (v) any combination of the foregoing methods of payment.
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times as are set forth in Section
4 hereof; provided, however, that no Options
-4-
shall be exercisable until shareholder approval of the Plan in accordance with
Section 16 hereof has been obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 10 of
the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Rule 16b-3. Options granted to Outside Directors must comply
with the applicable provisions of Rule 16b-3 promulgated under the Exchange Act
or any successor thereto and shall contain such additional conditions or
restrictions as may be required thereunder to qualify Plan transactions, and
other transactions by Outside Directors that otherwise could be matched with
Plan transactions, for the maximum exemption from Section 16 of the Exchange
Act.
(c) Termination of Continuous Status as a Director. Subject to
Section 10 hereof, in the event an Optionee's status as a Director terminates
(other than upon the Optionee's death or total and permanent disability (as
defined in Section 22(e)(3) of the Code)), the Optionee may exercise his or her
Option, but only within three (3) months following the date of such termination,
and only to the extent that the Optionee was entitled to exercise it on the date
of such termination (but in no event later than the expiration of its ten (10)
year term). To the extent that the Optionee was not entitled to exercise an
Option on the date of such termination, and to the extent that the Optionee does
not exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.
(d) Disability of Optionee. In the event Optionee's status as a
Director terminates as a result of total and permanent disability (as defined in
Section 22(e)(3) of the Code), the Optionee may exercise his or her Option, but
only within twelve (12) months following the date of such termina tion, and only
to the extent that the Optionee was entitled to exercise it on the date of such
termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an Option on
the date of termination, or if he or she does not exercise such Option (to the
extent otherwise so entitled) within the time specified herein, the Option shall
terminate.
-5-
(e) Death of Optionee. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
9. Non-Transferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger,
Asset Sale or Change of Control.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares which have been authorized for issuance
under the Plan but as to which no Options have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option, as well
as the price per Share covered by each such outstanding Option, and the number
of Shares issuable pursuant to the automatic grant provisions of Section 4
hereof shall be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation or the sale of substantially all of the assets
of the Company, outstanding Options may be assumed or equivalent options may be
substituted by the successor corporation or a Parent or Subsidiary thereof (the
"Successor Corporation"). If an Option is assumed or substituted for, the Option
or equivalent option shall continue to be exercisable as provided in Section 4
hereof for so long as the Optionee serves as a Director or a director of the
Successor Corporation. Following such assumption or substitution, if the
Optionee's status as a Director or director of the Successor Corporation, as
applicable, is terminated other than upon a voluntary resignation by the
Optionee, the Option or option shall become fully exercisable, including as to
Shares for which it would not otherwise be exercisable.
-6-
Thereafter, the Option or option shall remain exercisable in accordance with
Sections 8(c) through (e) above.
If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested and
exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares).
11. Amendment and Termination of the Plan.
(a) Amendment and Termination. Except as set forth in Section 4,
the Board may at any time amend, alter, suspend, or discontinue the Plan, but no
amendment, alteration, suspension, or discontinuation shall be made which would
impair the rights of any Optionee under any grant theretofore made, without his
or her consent. In addition, to the extent necessary and desirable to comply
with Rule 16b-3 under the Exchange Act (or any other applicable law or
regulation), the Company shall obtain shareholder approval of any Plan amendment
in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4 hereof.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in
-7-
the opinion of counsel for the Company, such a representation is required by any
of the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
14. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
16. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company at or prior to the first annual
meeting of shareholders held subsequent to the granting of an Option hereunder.
Such stockholder approval shall be obtained in the degree and manner required
under applicable state and federal law.
-8-
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CKS GROUP, INC.
PROXY FOR 1998 ANNUAL MEETING OF STOCKHOLDERS
APRIL 22, 1997
The undersigned stockholder of CKS Group, Inc. (the "Company") hereby
acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy
Statement for the 1998 Annual Meeting of Stockholders of the Company to be held
on Wednesday, April 22, 1998 at 10:00 a.m., local time, at the Holiday Inn Palo
Alto Hotel 625 El Camino Real, Palo Alto, California, and hereby revokes all
previous proxies and appoints Mark D. Kvamme and Carlton H. Baab, or either of
them, with full power of substitution, Proxies and Attorneys-in-Fact, on behalf
and in the name of the undersigned, to vote and otherwise represent all of the
shares registered in the name of the undersigned at said Annual Meeting, or any
adjournment thereof, with the same effect as if the undersigned were present and
voting such shares, on the following matters and in the following manner:
TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE MARK, SIGN AND DATE
THIS PROXY AND RETURN IT AS PROMPTLY AS POSSIBLE.
Please mark[ X ]
your votes as
indicated in
this example
FOR WITHHOLD
all of the nominees AUTHORITY
listed below (except to vote for all of the
as indicated) nominees listed below
1. ELECTION OF DIRECTORS
If you wish to [ ] [ ]
withhold authority
to vote for
any individual
nominee, strike
a line through
that nominee's
name in the list
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below:
In their discretion, the Proxies are entitled to vote upon such other matters as
may property come before the Annual Meeting or any adjournments thereof.
Nominees: MARK D. KVAMME; I plan to attend the meeting:
PIERRE R. LAMOND [ ]
2. Proposal to ratify FOR AGAINST ABSTAIN
and approve the
Company's 1997 Employee [ ] [ ] [ ]
Stock Purchase Plan
and the reservation
of 300,000 shares of
Common Stock
for issuance thereunder.
3. Proposal to ratify FOR AGAINST ABSTAIN
and approve an
amendment to the [ ] [ ] [ ]
Company's 1995 Director
Option Plan increasing
the number of shares
of Common Stock for
issuance thereunder
by 100,000 shares.
(Continued and to be signed on reverse side)
4. Proposal to ratify FOR AGAINST ABSTAIN
the appointment of
KPMG Peat at Marwick [ ] [ ] [ ]
LLP as the independent
auditors of Company
for the fiscal year
ending November 28,
1998.
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THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE. IF NO SPECIFICATION IS MADE, THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED FOR EACH OF THE ABOVE PERSONS AND PROPOSALS, AND FOR SUCH
OTHER MATTERS AS MAY PROPERTY COME BEFORE THE MEETING AS THE PROXYHOLDERS DEEM
ADVISABLE.
Signature(s) Date , 1998
(This proxy should be marked, dated and signed by each stockholder exactly as
such stockholder's name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. A
corporation is requested to sign its name by its President or other authorized
officer, with the office held designated. If shares are held by joint tenants or
as community property, both holders should sign.)
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