SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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CoActive Marketing Group, Inc.
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
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COACTIVE MARKETING GROUP, INC.
75 Ninth Avenue
New York, New York 10011
_______________________________
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
_______________________________
The Annual Meeting of the Stockholders (the "Annual Meeting") of
CoActive Marketing Group, Inc. (the "Company") will be held at the Company's
principal executive offices, 75 Ninth Avenue, New York, New York 10011, at 10:00
a.m., local New York time, on September 19, 2007, to consider the following
matters:
(1) The election of five directors to hold office until the next
Annual Meeting of Stockholders and until their respective
successors are duly elected and qualified;
(2) The approval of amendments to the Company's Certificate of
Incorporation and Bylaws to adopt a classified Board of
Directors; and
(3) The transaction of such other business as may properly come
before the Annual Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on July 30, 2007
as the record date for the Annual Meeting. Only stockholders of record of the
Company's Common Stock at the close of business on July 30, 2007 will be
entitled to notice of and to vote at the Annual Meeting or any adjournments or
postponements thereof. Shares can be voted at the Annual Meeting only if the
holder is present or represented by proxy.
The accompanying form of proxy is solicited by the Board of Directors
of the Company. Reference is made to the attached Proxy Statement for further
information with respect to the business to be transacted at the Annual Meeting.
Stockholders are cordially invited to attend the Annual Meeting.
Whether or not you expect to attend the Annual Meeting in person, please
complete, date and sign the accompanying proxy card and return it without delay
in the enclosed postage prepaid envelope. Your proxy will not be used if you are
present and prefer to vote in person or if you revoke the proxy.
By Order of the Board of Directors
/s/ MARC C. PARTICELLI
----------------------------------
Marc C. Particelli
Chairman of the Board
August 8, 2007
COACTIVE MARKETING GROUP, INC.
75 Ninth Avenue
New York, New York 10011
______________________________________
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 19, 2007
______________________________________
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of CoActive Marketing Group, Inc., a
Delaware corporation (the "Company"), for use at the 2007 Annual Meeting of
Stockholders of the Company and for any adjournments or postponements thereof
(the "Annual Meeting") to be held at the Company's principal executive offices,
75 Ninth Avenue, New York, New York 10011, at 10:00 a.m., local New York time,
on September 19, 2007, for the purposes set forth in the accompanying Notice of
Annual Meeting of Stockholders. A Board of Directors' proxy (the "Proxy") for
the Annual Meeting is enclosed, by means of which you may vote as to the
proposal described in this Proxy Statement.
All Proxies which are properly completed, signed and returned to the
Company prior to the Annual Meeting, and which have not been revoked, will be
voted in accordance with the stockholder's instructions contained in such Proxy.
In the absence of instructions, shares represented by such Proxy will be voted
FOR the election of the nominees of the Board of Directors for Director, and FOR
the approval of amendments to the Company's Certificate of Incorporation and
Bylaws to adopt a classified Board of Directors. The Board of Directors is not
aware of any business to be presented at the Annual Meeting except the matters
set forth in the Notice and described in this Proxy Statement. If any other
matters properly come before the Annual Meeting, the persons named in the
accompanying Proxy will vote on those matters in accordance with their best
judgment. A stockholder may revoke his or her Proxy at any time before it is
exercised by filing with the Secretary of the Company at its principal executive
offices at 75 Ninth Avenue, New York, New York 10011, either a written notice of
revocation or a duly executed Proxy bearing a later date, or by attending in
person at the Annual Meeting and expressing a desire to vote his or her shares
in person.
This Proxy Statement and the accompanying Notice of Annual Meeting of
Stockholders, Proxy and Annual Report on Form 10-K (including financial
statements) for the fiscal year ended March 31, 2007 ("Fiscal 2007"), are being
sent to stockholders on or about August 8, 2007.
1
VOTING SECURITIES
July 30, 2007 has been fixed as the record date for the determination
of stockholders entitled to notice of and to vote at the Annual Meeting or any
adjournment or postponement thereof. As of that date, the Company had
outstanding 7,475,925 shares of Common Stock, $.001 par value, excluding
treasury shares. The presence, in person or by proxy, of stockholders entitled
to cast a majority of votes which stockholders are entitled to cast on a
particular matter at the Annual Meeting will constitute a quorum for the Annual
Meeting. Holders of Common Stock are entitled to one vote for each share owned
upon all matters to be considered at the Annual Meeting. Under Delaware law,
abstentions and broker non-votes are treated as present for the purpose of
determining a quorum present at the Annual Meeting; however, broker non-votes
will be considered not to represent voting power present at the Annual Meeting,
while abstentions will be considered to represent voting power present at the
Annual Meeting. A "broker non-vote" occurs when a broker or other nominee
indicates on the Proxy that it does not have discretionary authority to vote on
a particular matter.
Directors will be elected by a plurality of the votes cast at the
Annual Meeting by the holders of shares of Common Stock present in person or
represented by proxy and entitled to vote on the election of Directors. Votes
withheld from the election of directors are excluded entirely from the vote and
will have no effect. There is no cumulative voting in the election of Directors.
The affirmative vote of a majority of the outstanding shares of Common
Stock is required for approval of the amendment to the Company's Certificate of
Incorporation to adopt a classified Board of Directors. Abstentions and broker
non-votes as to the proposal to adopt a classified Board of Directors will have
the same effect as a vote against the proposal.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of July 30, 2007
with respect to stock ownership of (i) those persons or groups known to the
Company to beneficially own more than 5% of the Company's outstanding Common
Stock, (ii) each of the Directors and nominees of the Company and the Company's
executive officers named in the summary compensation table, and (iii) the
Company's Directors and executive officers as a group. Unless otherwise
indicated, the named beneficial owner has sole voting and investment power with
respect to the shares.
Percent
Amount and Nature of
Name and Address of Beneficial Owner of Beneficial Ownership(1) Class(1)
------------------------------------ -------------------------- --------
(i) Beneficial Owners of More Than 5% of the Common
Stock (Other Than Directors, Nominees and Executive
Officers)
Rutabaga Capital Management 744,311(2) 9.9%
64 Broad Street, 3rd Floor
Boston, MA 02109
John P. Benfield 610,278(3) 8.1%
63 Murray Ave.
Port Washington, NY 11050
2
Percent
Amount and Nature of
Name and Address of Beneficial Owner of Beneficial Ownership(1) Class(1)
------------------------------------ -------------------------- --------
Donald A. Bernard 594,648(3) 7.9%
c/o CoActive Marketing Group, Inc.
75 Ninth Avenue
New York, NY 1011
Thomas E. Lachenman 464,448(4) 6.2%
7788 White Road
Rising Sun, Indian 47040
(ii) Directors, Nominees and Executive Officers
Brian Murphy 701,250 9.4%
c/o CoActive Marketing Group, Inc.
75 Ninth Avenue
New York, NY 10011
Herbert M. Gardner 290,373(5) 3.8%
c/o CoActive Marketing Group, Inc.
75 Ninth Avenue
New York, NY 10011
John A. Ward, III 188,491(6) 2.5%
c/o CoActive Marketing Group, Inc.
75 Ninth Avenue
New York, NY 10011
Charles F. Tarzian 206,955(7) 2.8%
c/o CoActive Marketing Group, Inc.
75 Ninth Avenue
New York, NY 10011
Marc C. Particelli 231,080(8) 3.0%
c/o CoActive Marketing Group, Inc.
75 Ninth Avenue
New York, NY 10011
James H. Feeney 57,841(9) *
c/o CoActive Marketing Group, Inc.
75 Ninth Avenue
New York, NY 10011
Susan Murphy 20,000 *
c/o CoActive Marketing Group, Inc.
75 Ninth Avenue
New York, NY 10011
Denise Felitti 0 *
c/o CoActive Marketing Group, Inc.
75 Ninth Avenue
New York, NY 10011
(iii) All Directors and Executive Officers as a Group (8 1,695,990(5)(6)(7)(8)(9) 21.7%
persons)
3
* Less than 1%.
(1) All information was determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934, as amended, based upon information
furnished by the persons listed or contained in filings made by them with
the Securities and Exchange Commission or otherwise available to the
Company.
(2) Based solely on a Form 13F-HR/A filed with the SEC on May 11, 2007.
(3) Includes 70,000 shares of Common Stock issuable upon exercise of
immediately exercisable options.
(4) Includes 28,750 shares of Common Stock issuable upon exercise of
immediately exercisable options and 325,698 shares of Common Stock
registered in the name of OG Holding Corporation Liquidation Trust. Mr.
Lachenman is the trustee of OG Holding Corporation Liquidation Trust and
owns the entire interest of the trust in the shares of Common Stock held by
the trust.
(5) Includes 40,766 shares of Common Stock issuable upon exercise of
immediately exercisable warrants, 66,250 shares of Common Stock issuable
upon exercise of immediately exercisable options, 10,000 shares of Common
Stock held in a qualified plan, and 46,299 shares of Common Stock held in
individual retirement accounts for the benefit of Mr. Gardner. Excludes (i)
23,766 shares of Common Stock held by Mr. Gardner's wife, as to which Mr.
Gardner disclaims any beneficial interest, and (ii) 5,880 shares of Common
Stock owned by the Gardner Family Foundation, a charitable organization, of
which Mr. Gardner is President and a board member.
(6) Includes 38,750 shares of Common Stock issuable upon exercise of
immediately exercisable options.
(7) Includes 2,000 shares owned by Mr. Tarzian's spouse as to which Mr. Tarzian
disclaims beneficial ownership.
(8) Includes 120,000 shares of Common Stock issuable upon exercise of
immediately exercisable options. Also includes (i) 5,700 shares owned by
Mr. Particelli's IRA; and (ii) 19,000 shares owned by the Marc C & Kaye B
GRAT Trust (the "Trust"). The beneficiaries of the Trust are Mr.
Particelli's children, and Mr. Particelli's wife is a trustee of the Trust.
Mr. Particelli disclaims beneficial ownership of the shares held by the
Trust.
(9) Includes 55,000 shares of Common Stock issuable upon exercise of
immediately exercisable options.
4
PROPOSAL NO. 1
ELECTION OF DIRECTORS
A Board of five Directors of the Company is to be elected at the Annual
Meeting, each to serve, subject to the provisions of the Company's By-Laws,
until his successor is duly elected and qualified. It is management's
recommendation that the accompanying form of Proxy be voted FOR the election as
Director of the five persons named below, all of whom are currently Directors of
the Company. The Board of Directors believes that the nominees named below are
willing to serve as Directors. However, in the event that any of the nominees
should become unable or unwilling to serve as a Director, the Proxy will be
voted for the election of such person or persons as shall be designated by the
Directors.
If all nominees are elected, and Proposal 2 regarding the
classification of the Company's Board of Directors is approved, Mr. Tarzian will
be a Class I director, with an initial term expiring at the annual meeting in
2008; Messrs. Ward and Feeney will be Class II directors, with their initial
terms expiring at our annual meeting in 2009; and Messrs. Particelli and Gardner
will be Class III directors, with their initial terms expiring at our annual
meeting in 2010. If all nominees are elected and Proposal 2 is not approved,
each newly elected director will serve until the next Annual Meeting of the
Stockholders and until their successors have been elected and qualified.
The following table sets forth information with respect to each nominee
for Director of the Company, all of whom are currently serving as Directors of
the Company, and each executive officer of the Company.
NOMINEES
--------
Marc C. Particelli Chairman of the Board of the Company
Age: 62 since July 12, 2006, and its interim
Director since February 2005; President and Chief Executive Officer
Chairman of the Board from July 12, 2006 until October 9, 2006.
Mr. Particelli was the Chief Executive
Officer of Modem Media, an interactive
marketing services firm, from January
1991 until its acquisition by Digitas
Inc. in October 2004, and more recently,
from August 2005 until March 2006, he was
the Chief Executive Officer of TSM
Corporation, a telecommunications company
serving the Hispanic market. Earlier, Mr.
Particelli was a partner at Oak Hill
Capital Management, a private equity
investment firm, and managing director at
Odyssey Partners L.P., a hedge fund.
Prior to entering the private equity
business, Mr. Particelli spent 20 years
with Booz Allen where he helped create
the Marketing Industries Practice and led
its expansion across Europe, Asia and
South America. Mr. Particelli also
currently serves as a director of and
investor in several private companies,
and as an advisor to several private
equity firms. Mr. Particelli presently
serves as a director of Pacifichealth
Laboratories, Inc.
Charles F. Tarzian Chief Executive Officer of the Company
Age: 50 since October 9, 2006. From 1996 through
Director since October 2006; 1999, Mr. Tarzian was President of Blau
Chief Executive Officer Marketing Technologies, the technology
subsidiary of Barry Blau and Partners,
one of the largest independent direct
5
marketing agencies in the U.S. at that
time. In late 1998, he became Chief
Technology Officer of Circle.com, the
publicly traded subsidiary of Snyder
Communications Inc. providing Internet
professional services, including
strategic e-commerce consulting and
online marketing. Mr. Tarzian later
became Circle.com's Chief Strategy
Officer before being appointed its Chief
Executive Officer in November 2000. In
2001, Circle.com was integrated into Euro
RSCG Worldwide, the global advertising
unit of Havas, and Mr. Tarzian assumed
the title of Chief Executive Officer of
the New York region of Euro RSCG, a
position he held until May 2006.
James H. Feeney Principal of The Feeney Group LLC, an
Age: 68 advertising and marketing consulting firm
Director since July 2004 working with companies in developing
strategic positioning, since 2000. Also
Partner of O'Neil Lifton Huffstetler
Feeney & Barry, a venture marketing,
creative development firm, since May
2003. Prior thereto, from March 1996, was
President and CEO of Trone Advertising,
an advertising agency. Mr. Feeney was
President and Chairman of the Executive
Committee of Albert Frank-Guenther Law, a
125 year old international financial
service agency from 1993 to 1996. Prior
to AFGL, he spent 13 years as Executive
Vice President of Ally&Gargano where he
led the launch of MCI at the Agency for 5
years. He was at The Ted Bates
Advertising Agency for 12 years where he
was Managing Director, Senior Vice
President.
Herbert M. Gardner Executive Vice President, Barrett-Gardner
Age: 67 Associates, Inc., an investment and
Director since May 1997 merchant banking firm, since October
2002. Prior thereto, Senior Vice
President of Janney Montgomery Scott LLC,
an investment banking firm, since 1978.
Presently serves as Chairman of the Board
of Directors of Supreme Industries, Inc.
and as a director of Chase Packaging
Corp., Nu Horizons Electronics Corp., TGC
Industries, Inc. and Rumson Fair Haven
Bank and Trust Company.
John A. Ward, III Mr. Ward has been the Chief Executive
Age: 61 Officer of Innovative Card Technologies,
Director since July 2002 Inc. since August 15, 2006, and was the
interim Chief Executive Officer of Doral
Financial Corporation from September 15,
2005 until August 15, 2006. Previously,
Mr. Ward was the Chairman and Chief
Executive Officer of American Express
Bank from January 1996 until September
2000, and President of Travelers Cheque
Group from April 1997 until September
2000. Mr. Ward joined American Express
following a 27-year career at Chase
Manhattan Bank, during which he held
various senior posts in the United
States, Europe and Japan. His last
position at Chase was that of Chief
Executive Officer of ChaseBankCard
Services, which he held from 1993 until
1995. Presently serves as the Chairman of
the Board of Innovative Card Technologies
Inc. and as a director of Primus
Guaranty, Ltd. and Rewards Network Inc.
6
EXECUTIVE OFFICERS
------------------
Brian Murphy Vice Chairman of the Company since April
Age: 50 2, 2007. Previously, Chief Executive
Vice Chairman Officer of U.S. Concepts, a wholly-owned
subsidiary of the Company, since December
29, 1998, and until January 6, 2000,
President of such company, and President
of predecessor of U.S. Concepts from 1992
through December 29, 1998.
Susan Murphy Interim Chief Financial Officer of the
Age: 46 Company since July 2, 2007, and a
Interim Chief Financial Officer financial consultant to the Company since
March 2007, during which time she has
spearheaded the Company's efforts to
implement and improve its internal
controls over financial reporting. Ms.
Murphy has been a financial reporting and
internal controls consultant since July
2003, during which time she has been
retained by Euro-RSCG, a division of
Havas Advertising, and DoubleClick, among
others. Previously, from August 1987 to
June 2003, Ms. Murphy held numerous
senior level positions with Euro-RSCG,
and was the Chief Financial Officer for
its North American division from November
1999 until June 2003. From 1987 until
1999, she was the Chief Financial Officer
and Managing Partner of Cohn & Wells, a
direct marketing network, and a division
of Euro-RSCG.
Denise Felitti Vice President - Controller of the
Age: 43 Company since July 2, 2007. Ms. Felitti
Vice President - Controller has been employed by the Company in its
(Principal Accounting Officer) finance and accounting department since
August 2005. Previously, from 2003 to
June 2005, Ms. Felitti was the Assistant
Controller at Deutsch Advertising (a
subsidiary of IPG), and from 2000 until
May 2003, she was the Controller at
Messner, Vetere, Berger, McNamee
Schmetterer (a subsidiary of Euro RSCG).
Ms. Felitti was also employed for 10
years, ultimately as the
Controller/Finance Manager, of Charlex
Inc., a video production company. Ms.
Felitti holds an MBA in Management.
Director Independence
The Board of Directors has determined that each of the following
directors is an "independent director" as defined in Rule 4200(a)(15) of the
listing standards of the National Association of Securities Dealers (the "NASD
listing standards"): Herbert M. Gardner, James H. Feeney, Marc C. Particelli and
John A. Ward, III. The Board of Directors has also determined that each of the
members of the three Board committees listed below meets the independence
requirements applicable to those committees prescribed by the NASD listing
standards and the Securities and Exchange Commission, as currently in effect.
7
Committees of the Board of Directors
The Board of Directors has a standing Audit Committee, Compensation
Committee and Nominating Committee. The primary responsibilities of each of
these committees and their members are listed below.
Audit Committee
The Audit Committee is composed of Herbert M. Gardner (Chairman), John
A. Ward, III and James H. Feeney. The Audit Committee oversees the Company's
corporate accounting and financial reporting process. For this purpose, the
Audit Committee performs several functions. The Audit Committee evaluates the
performance and assesses the qualifications of the independent auditors;
determines and approves the engagement of the independent auditors; determines
whether to retain or terminate the existing independent auditors or to appoint
and engage new independent auditors; reviews and approves the retention of the
independent auditors to perform any proposed permissible non-audit services;
monitors the rotation of partners of the independent auditors on the Company's
audit engagement team as required by law; confers with management and the
independent auditors regarding the effectiveness of internal controls over
financial reporting; establishes procedures, as required under applicable law,
for the receipt, retention and treatment of complaints received by the Company
regarding accounting, internal accounting controls or auditing matters and the
confidential and anonymous submission by employees of concerns regarding
questionable accounting or auditing matters; reviews the financial statements to
be included in the Company's Annual Report on Form 10-K; and discusses with
management and the independent auditors the results of the annual audit and the
results of the Company's quarterly financial statements but is not responsible
for their content. The Board of Directors has determined that Herbert M. Gardner
is an "audit committee financial expert," as such term is defined in Item 401(h)
of Regulation S-K.
The Audit Committee operates pursuant to a charter which has been duly
adopted by the Board of Directors. A copy of the charter can be viewed on the
Company's website at http://www.coactivemarketing.com.
AUDIT COMMITTEE REPORT
The Audit Committee oversees the Company's financial reporting process
on behalf of the Board of Directors, including the Company's internal controls,
the quality of its financial reporting and the independence and performance of
the Company's independent certified public accountants.
Management has primary responsibility for the Company's financial
statements and the overall reporting process, including the Company's system of
internal controls. The independent certified public accountants audit the annual
financial statements prepared by management, express an opinion as to whether
those financial statements fairly present the consolidated financial position,
results of operations and cash flows of the Company and its subsidiaries in
conformity with accounting principles generally accepted in the United States
and discuss with management any issues that they believe should be raised with
management.
The Audit Committee reviewed the Company's audited financial statements
for Fiscal 2007 which were included in the Company's Annual Report on Form 10-K
for Fiscal 2007, and met with both management and Lazar Levine & Felix ("Lazar
Levine"), the Company's independent certified public accountants, to discuss
those financial statements. Management has represented to the Audit Committee
8
that the financial statements were prepared in accordance with accounting
principles generally accepted in the United States.
The Audit Committee has received from Lazar Levine the written
disclosures and the letter required by Independence Standards Board Standard No.
1 (Independence Discussions with Audit Committees), and discussed with Lazar
Levine their independence from the Company and its management. The Audit
Committee also discussed with Lazar Levine any matters required to be discussed
by Statement on Auditing Standards No. 61 (Communication with Audit Committees).
Based upon these reviews and discussions, the Audit Committee
recommended to the Board of Directors of the Company that the Company's audited
financial statements for Fiscal 2007 be included in the Company's Annual Report
on Form 10-K for Fiscal 2007 for filing with the Securities and Exchange
Commission.
Herbert M. Gardner, Chairman
John A. Ward, III
James H. Feeney
Compensation Committee
The Compensation Committee, composed of John A. Ward, III (Chairman),
Herbert M. Gardner, and James H. Feeney, is responsible for determining the
compensation packages of the Company's executives. The Compensation Committee of
the Board of Directors acts on behalf of the Board to review, adopt and oversee
the Company's compensation strategy, policies, plans and programs including:
o establishment of corporate and individual performance
objectives relevant to the compensation of the Company's
executive officers, other senior management and directors and
evaluation of performance in light of these stated objectives;
o review and approval of the compensation and other terms of
employment or service, including severance and
change-in-control arrangements, of the Company's Chief
Executive Officer and the other executive officers and
directors; and
o administration of the Company's equity compensation plans.
Commencing this year, the Compensation Committee also began to review
and discuss with management the Company's Compensation Discussion and Analysis
and to consider whether to recommend that it be included in proxy statements and
other filings.
The Company, on behalf of the Compensation Committee, from time to time
retains the services of an outside compensation consultant to review and make
recommendations with regard to executive compensation.
The Compensation Committee operates pursuant to a charter which has
been duly adopted by the Board of Directors. A copy of the charter can be viewed
on the Company's website at http://www.coactivemarketing.com.
Compensation Committee Interlocks and Insider Participation
None of the current members of the Compensation Committee have been, or
are, an officer or employee of the Company. During Fiscal 2007, none of our
executive officers served as a member of the board of directors or compensation
9
committee (or other committee performing equivalent functions) of any entity
that had one or more executive officers serving as a member of our Board of
Directors.
COMPENSATION COMMITTEE REPORT
We have reviewed and discussed the Compensation Discussion and Analysis
contained in this Proxy Statement with management. Based on that review and
discussion, we have recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in this Proxy Statement and incorporated
into our Annual Report on Form 10-K for the fiscal year ended March 31, 2007.
John A. Ward, III, Chairman
James H. Feeney
Herbert M. Gardner
Nominating Committee
The Nominating Committee, composed of James H. Feeney (Chairman),
Herbert M. Gardner and John A. Ward, III, is responsible for, among other
things, identifying individuals qualified to become Board members, and
recommending to the Board individuals for nomination as members of the Board.
The Nominating Committee operates pursuant to a charter which can be viewed on
the Company's website at http://www.coactivemarketing.com
The Nominating Committee believes that candidates for director should
have certain minimum qualifications, including being able to read and understand
basic financial statements, being over 21 years of age and having the highest
personal integrity and ethics. The Committee also intends to consider such
factors as possessing relevant expertise upon which to be able to offer advice
and guidance to management, having sufficient time to devote to the affairs of
the Company, demonstrating excellence in his or her field, having the ability to
exercise sound business judgment and having the commitment to rigorously
represent the long-term interests of the Company's stockholders. However, the
Committee retains the right to modify these qualifications from time to time.
Candidates for director nominees will be reviewed in the context of the current
composition of the Board, the operating requirements of the Company and the
long-term interests of stockholders. In conducting this assessment, the
Committee will consider diversity, age, skills, and such other factors as it
deems appropriate given the current needs of the Board and the Company to
maintain a balance of knowledge, experience and capability. In the case of
incumbent directors whose terms of office are set to expire, the Nominating
Committee will review such directors' overall service to the Company during
their term, including the number of meetings attended, level of participation,
quality of performance, and any other relationships and transactions that might
impair such directors' independence. In the case of new director candidates, the
Committee will also determine whether the nominee must be independent for Nasdaq
purposes, which determination will be based upon applicable Nasdaq listing
standards, applicable Securities and Exchange Commission rules and regulations
and the advice of counsel, if necessary. The Committee will use the Board's and
management's network of contacts to compile a list of potential candidates, but
may also engage, if it deems appropriate, a professional search firm. The
Committee will conduct any appropriate and necessary inquiries into the
backgrounds and qualifications of possible candidates after considering the
function and needs of the Board. The Committee will meet to discuss and consider
such candidates' qualifications and selects a nominee by majority vote.
The Nominating Committee will consider director candidates recommended
by stockholders. The Committee does not intend to alter the manner in which it
evaluates candidates, including the minimum criteria set forth above, based on
whether the candidate was recommended by a stockholder or not. Stockholders who
10
wish to recommend individuals for consideration by the Nominating Committee to
become nominees for election to the Board may do so by delivering a written
recommendation to the Nominating Committee at the following address: 75 Ninth
Avenue, New York, New York 10011, not less than six months prior to any meeting
at which directors are to be elected. Submissions must include the full name of
the proposed nominee, a description of the proposed nominee's business
experience for at least the previous five years, complete biographical
information, a description of the proposed nominee's qualifications as a
director and a representation that the nominating stockholder is a beneficial or
record owner of the Company's stock. Any such submission must be accompanied by
the written consent of the proposed nominee to be named as a nominee and to
serve as a director if elected.
Stockholders who wish to nominate a person for election as a director
(as opposed to making a recommendation to the Nominating Committee) must follow
the procedures described in Section 3.13 of the Company's by-laws.
Attendance at Board and Committee Meetings
During Fiscal 2007, the Board of Directors held eight meetings and
acted by unanimous written consent four times, the Audit Committee held 15
meetings, the Nominating Committee held two meetings, and the Compensation
Committee held three meetings and acted by unanimous written consent twice.
During Fiscal 2007, each director attended or participated in 75% or more of the
meetings of the Board of Directors and the meetings held by all committees of
the Board of Directors on which such director served.
It is the Company's policy to encourage each director to attend the
annual meeting of stockholders. The Board of Directors generally schedules a
meeting on the day of the annual meeting of stockholders and directors therefore
typically attend the annual meeting of stockholders. All of the Company's
directors then in office were present at the 2006 Annual Meeting of Stockholders
held on September 28, 2006.
Stockholder Communication with the Board of Directors
Stockholders may send communications to the Board of Directors as a
whole, any Committee or group of directors or a single director. Such
communications may be sent to the Board of Directors (or a Committee, group or
member thereof), c/o Corporate Secretary, 75 Ninth Avenue, New York, New York
10011. The Secretary will receive the correspondence and, unless such
communications are irrelevant or inappropriate (such as advertisements and
hostile communications) will forward it to the entire Board of Directors or to
any individual director or group or Committee of directors to whom the
communication is directed, as appropriate.
Code of Conduct
The Company maintains a Code of Conduct that is applicable to all of
the Company's employees, including the Company's Chief Executive Officer and
Chief Financial Officer. The Code of Conduct, which satisfies the requirements
of a "code of ethics" under applicable Securities and Exchange Commission rules,
contains written standards that are designed to deter wrongdoing and to promote
honest and ethical conduct, including the ethical handling of actual or apparent
conflicts of interest; full, fair, accurate, timely and understandable public
disclosures and communications, including financial reporting; compliance with
applicable laws, rules and regulations; prompt internal reporting of violations
of the code; and accountability for adherence to the code.
11
PROPOSAL NO. 2
APPROVAL OF A CLASSIFIED BOARD OF DIRECTORS
The Board has unanimously adopted a resolution proposing an amendment
to the Company's Certificate of Incorporation adding a new Article that
classifies the Board into three classes with staggered terms of office. The
Board has also unanimously adopted a resolution proposing an amendment to the
Company's Bylaws by adding a new Section of the Bylaws to create a classified
Board as provided for in the proposed amendment to the Certificate of
Incorporation. The Board of Directors currently consists of a single class of
five directors. All of the Company's directors are elected at each Annual
Meeting of Stockholders unless a vacancy occurs during the year and the
Nomination Committee finds a candidate to fill the vacancy. The classified board
amendment would classify the Board into three separate classes, as nearly equal
in number as possible, with one class being elected each year to serve a
staggered three-year term.
Members in each class would be elected at the Annual Meeting. The
director initially elected in Class I (Charles F. Tarzian) would serve until the
next Annual Meeting of Stockholders in 2008 or until his successor has been
elected and have qualified, or until his earlier death, resignation, retirement
or removal. The directors initially elected in Class II (John A. Ward, III and
James H. Feeney) would serve until the Annual Meeting of Stockholders in 2009 or
until their respective successors have been elected and qualified, or until
their earlier death, resignation, retirement or removal. The directors initially
elected in Class III (Marc C. Particelli and Herbert M. Gardner) would serve
until the Annual Meeting of Stockholders in 2010 or until their respective
successors have been elected and qualified, or until their earlier death,
resignation, retirement or removal.
Beginning with the election of directors to be held at the 2008 Annual
Meeting of Stockholders, the class of directors to be elected in such year would
be elected for a three-year term, and at each successive annual meeting, the
class of directors to be elected in such year would be elected for a three-year
term so that the term of office of one class of directors shall expire in each
year.
Unless a director is removed or resigns, three annual elections would
be needed to replace all of the directors on the classified Board. The
classified board amendment may therefore discourage an individual or entity from
acquiring a significant position in the Company's stock with the intention of
obtaining immediate control of the Board. If this Proposal No. 2 is adopted,
these provisions will be applicable to each annual election of directors,
including the elections following any change of control of the Company.
The Company is not aware of any present third-party plans to gain
control of the Company, and the classified board amendment is not being
recommended in response to any such plan. Rather, the Board is recommending the
classified board amendment as part of its periodic review of the Company's
corporate governance mechanism and to assist in assuring fair and equitable
treatment for all of the Company's stockholders in hostile takeover situations.
The Board has no present intention of soliciting a stockholder vote on any other
proposals relating to a possible takeover of the Company.
Advantages of the Classified Board Amendment
The classified board amendment is designed to assure continuity and
stability in the Board's leadership and policies by ensuring that at any given
time a majority of the directors will have prior experience with the Company
and, therefore, will be familiar with its business and operations. The Company
has not experienced continuity problems in the past and the Board wishes to
ensure that this experience will continue. The Board believes that the stability
in the Board of Directors' leadership and policies in the past has helped to
12
promote the creation of long-term stockholder value. The Board also believes
that the classified board amendment will assist the Board in protecting the
interests of the Company's stockholders in the event of an unsolicited offer for
the Company by encouraging any potential acquirer to negotiate directly with the
Board.
Disadvantages of the Classified Board Amendment; Potential Anti Takeover Effects
The classified board amendment may increase the amount of time required
for a takeover bidder to obtain control of the Company without the cooperation
of the Board, even if the takeover bidder were to acquire a majority of the
voting power of the Company's outstanding Common Stock. Without the ability to
obtain immediate control of the Board, a takeover bidder will not be able to
take action to remove other impediments to its acquisition of the Company. Thus,
the classified board amendment could discourage certain takeover attempts,
perhaps including some takeovers that stockholders may feel would be in their
best interests. By potentially discouraging accumulations of large blocks of the
Company's stock and fluctuations in the market price of the Company's stock
caused by accumulations, the classified board amendment could cause stockholders
to lose opportunities to sell their shares at temporarily higher prices.
Further, the classified board amendment will make it more difficult for
stockholders to change the majority composition of the Board, even if the
stockholders believe such a change would be desirable.
The complete text of the proposed amendment to the Company's
Certificate of Incorporation and the proposed amendments to the Company's Bylaws
providing for a classified Board are attached as Exhibits A and B, respectively.
Please read Exhibits A and B in their entirety.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
General
The Compensation Committee of the Board of Directors (the "Committee"),
under its charter, is charged with, among other things, determining the cash and
non-cash compensation of our executive officers, and exercising the authority of
the Board of Directors with respect to the administration of our stock-based and
other incentive compensation plans.
Our compensation arrangements with those persons who served as our
executive officers for all or part of Fiscal 2007 primarily reflect the
individual circumstances surrounding the applicable executive officer's hiring
or appointment, as reflected in the employment agreements we entered into with
those persons, and, in the case of departed executives, the separation
agreements we entered into with such persons. The foregoing information is
intended to provide context for the discussion that follows regarding our
compensation arrangements with those persons who served as our executive
officers for all or part of Fiscal 2007.
Compensation Philosophy
The Committee believes that the most effective executive compensation
programs are designed to attract and retain key employees, reward the
achievement of corporate and individual objectives, and reward superior
performance. The Committee evaluates both performance and compensation to make
sure that compensation provided to key employees remains competitive relative to
13
the compensation paid to executives at peer companies. The Committee believes
that the Company's compensation programs should include cash and equity-based
compensation and should reward performance as measured against individual and
Company goals.
Role of Management Officers in Compensation Decisions
The Committee makes all compensation decisions for executive officers.
The Chief Executive Officer, together with other members of management, evaluate
the performance of executive officers (other than the Chief Executive Officer),
and the Chief Executive Officer then makes recommendations to the Committee with
respect to annual salary adjustments, annual cash bonus awards and restricted
stock grants. The Committee can exercise its discretion in modifying any
recommended salary adjustments or discretionary cash or equity-based awards to
executives.
Principal Components of Compensation of Our Executive Officers
The principal components of the compensation we have historically paid
to our executive officers have consisted of:
o base salary;
o cash bonuses; and
o equity compensation, generally in the form of stock options,
and more recently in the form of restricted stock.
In addition, for Fiscal 2007, the Company awarded discretionary cash
bonuses to the persons serving as Chief Executive Officer and Chief Financial
Officer as of the end of the year.
Allocation and Objectives of Compensation
For Fiscal 2007, compensation of our executive officers primarily
reflected the individual circumstances surrounding the applicable executive
employment arrangements, as reflected in the agreements we entered into with
those persons. Beginning with Fiscal 2008, the Committee has established the
following policies and guidelines with respect to the mix of base salary, cash
bonus and equity awards to be paid or awarded to our executive officers.
o Target cash bonus for our Chief Executive Officer equal to 50%
of his base salary for the achievement of objectives
established by the Committee and the Board of Directors;
o Target cash bonus for our other executive officers equal to
30% of the base salary of each such officer, respectively, for
the achievement of objectives established by the Committee and
the Board of Directors; and
o Restricted stock grants vesting over five-years, awarded to
executive officers at the discretion of the Committee annually
and upon initial employment.
The principal objective used by the Company for determining cash
bonuses is EBITDA (earnings before interest, taxes, depreciation and
amortization).
14
Base Salary
Base salary levels for the Company's executive officers recognize the
experience, skills, knowledge and responsibilities required of each executive
officer and are determined, as applicable, based on prevailing market
conditions, terms of existing employment agreements, and arms' length
negotiation.
Chief Executive Officer
Charles F. Tarzian was appointed our Chief Executive Officer on October
9, 2006. Pursuant to an employment agreement entered into by the Company and Mr.
Tarzian, Mr. Tarzian's base salary is $375,000 per annum. The terms of Mr.
Tarzian's employment agreement were negotiated by our Chairman of the Board, in
consultation with the Committee, based on prevailing market conditions and
available data on the compensation of executives in similar positions with
comparable companies.
Interim and former Chief Executive Officer
John Benfield was the Company's Chief Executive Officer during Fiscal
2007 up until July 12, 2006, and was replaced by Marc Particelli, who served as
interim Chief Executive Officer until Mr. Tarzian's appointment in October 2006.
The base salaries for Messrs. Benfield and Particelli for service to the Company
as Chief Executive Officer were pursuant to the terms of the respective
employment agreements with such persons which were approved of by the Committee.
Other Executive Officers
The base salary for the Company's executive officers during Fiscal 2007
reflected the terms of their respective employment agreements, and in the case
of the Company's Chief Financial Officer, a $50,000 raise effective in July 2006
to $306,000 per annum, which was approved of by the Committee.
Equity Compensation
Chief Executive Officer
Upon his appointment, the Committee approved the award to Mr. Tarzian
of 200,000 shares of the Company's common stock under a Restricted Stock
Agreement. The shares will vest in one installment on October 9, 2011 (the
five-year anniversary of his appointment) if Mr. Tarzian is then employed by the
Company. In addition, the shares are subject to earlier incremental vesting to
the extent the Company's shares of common stock trade above specified thresholds
for a minimum period of 20 consecutive trading days during the term of his
employment with the Company.
Interim Chief Executive Officer
In connection with his appointment as interim Chief Executive Officer,
Mr. Particelli was issued a five-year stock option to purchase 80,000 shares of
the Company's common stock at a price of $1.57 per share, the market price of
the common stock on the date the grant was authorized.
Other Executive Officers
In recognition of his service to the Company, the Company's Chief
Financial Officer was granted 100,000 shares of the Company's common stock under
a Restricted Stock Agreement in August 2006. By the terms of such grant, 80,000
of such shares were forfeited to the Company subsequent to Fiscal 2007 upon his
departure from the Company. In addition, during Fiscal 2007, in order to
increase the number of shares of Common Stock available for the grant of awards
under the Company's 2002 Long-Term Incentive Plan, the Committee approved the
15
grant of an aggregate of 198,750 shares of restricted stock to two executive
officers in exchange for the cancellation by such officers of options to
purchase an aggregate of 265,000 shares of Common Stock. 52,500 of such
restricted shares were forfeited to the Company at the end of Fiscal 2007 upon
the departure of one of such officers from the Company.
Bonus Compensation
On April 2, 2007, the Committee approved the payment of discretionary
cash bonuses of $85,000 to Mr. Tarzian, and $65,000 to the Company's then Chief
Financial Officer in respect of such officers' performance during Fiscal 2007.
Such bonuses were paid in July 2007.
Other Benefits
The Company believes that establishing competitive benefit packages for
its employees is an important factor in attracting and retaining highly
qualified personnel. Executive officers are eligible to participate in all of
our employee benefit plans, such as medical, dental, and the Company's 401(k)
plan, in each case on the same basis as other employees. During 2007, consistent
with the Company's practice with respect to all of its employees, the Company
provided matching contributions under its 401(k) plan. Other than the 401(k)
plan offered to all of its eligible employees, the Company does not offer
retirement benefits.
16
SUMMARY COMPENSATION TABLE
The following table shows for Fiscal 2007 compensation awarded to or
earned by Charles F. Tarzian, the Company's Chief Executive Officer; John
Benfield and Marc Particelli, each of whom served as Chief Executive Officer of
the Company during portions of Fiscal 2007; Erwin Mevorah, who was the Company's
Chief Financial Officer during Fiscal 2007; Paul A. Amershadian, who was an
executive officer of the Company during Fiscal 2007; and Brian Murphy, who
served as Chief Executive Officer of the Company's U.S. Concepts subsidiary
during Fiscal 2007, and who is currently the Company's Vice Chairman
(collectively, the "Named Executive Officers"). Messrs. Benfield, Mevorah and
Amershadian are no longer employed by the Company.
Option All Other
Name and Fiscal Salary Stock Awards (1) Compensation
Principal Position Year ($) Bonus ($) Awards ($) ($) (2) ($) Total ($)
- ----------------------------------------------------------------------------------------------------------------------------------
Charles F. Tarzian,
Chief Executive Officer 2007 $ 179,087 $ 85,000 $ 38,000 -- -- $ 302,087
Marc Particelli,
former Chief Executive Officer 2007 $ 72,917 $ 55,480(7) -- $ 128,397
John Benfield,
former Chief Executive Officer 2007 $ 324,000(3) -- -- $ 7,650 $ 331,650
Erwin Mevorah,
former Chief Financial Officer 2007 $ 307,940(4) $ 65,000 $ 76,800 -- $ 7,650 $ 457,390
Brian Murphy,
Vice Chairman and former
Chief Executive Officer
of US Concepts 2007 $ 362,000(5) -- $ 4,826 -- $ 7,500 $ 389,326
Paul Amershadian,
former Exec. VP of Sales 2007 $ 316,148(6) $ 2,958 $ 1,249 $ 320,355
(1) The value of option awards granted to the Named Executive Officers has
been estimated pursuant to SFAS No. 123(R), except that for purposes of
this table, we have assumed that none of the options will be forfeited.
The Named Executive Officers will not realize the estimated value of
these awards in cash until these awards are vested and exercised or
sold. For information regarding our valuation of option awards, see
"Stock Options" in Note 8 of our financial statements for the period
ended March 31, 2007.
(2) Consists of 401(k) matching contributions.
(3) Includes $6,000 in respect of a car allowance.
(4) Includes $2,000 in respect of a car allowance.
(5) Includes $4,000 in respect of a car allowance.
(6) Includes $10,148 in respect of a car allowance.
(7) Reflects options to purchase 80,000 shares of Common Stock at an
exercise price of $1.57, all of which are currently exercisable.
17
Grants of Plan-Based Awards in Fiscal 2007
All Other Stock All Other Option Grant Date
Awards: Number Awards: Number of Exercise or Fair Value of
of Shares of Securities Base Price of Stock and
Stock or Units Underlying Options Option Awards Option Awards
Name Grant Date (#) (#) ($/Sh) ($)
- ---------------------------------------------------------------------------------------------------------------------
Charlie Tarzian 10/9/2006 200,000 -- -- $380,000
Marc Particelli 6/20/2006 -- 80,000 $1.57 $ 55,480
John Benfield -- -- -- -- --
Erwin Mevorah 8/9/2006 100,000 -- -- $171,000
Brian Murphy 2/14/2007 146,250 -- -- $289,575
Paul Amershadian 1/18/2007 52,500 -- -- $ 88,725
Outstanding Equity Awards at March 31, 2007
- -------------------------------------------------------------------------------------------------------------------------
Option Awards Stock Awards
- -------------------------------------------------------------------------------------------------------------------------
Number of
Number of Number of shares or
Securities Securities Units of Market Value of
Underlying Underlying Stock That shares or Units
Unexercised Unexercised Option Option Have Not of Stock That
Options Options Exercise Expiration Vested Have Not Vested
Name (#) Exercisable (#) Unexercisable Price ($) Date (#) ($)
- -------------------------------------------------------------------------------------------------------------------------
Charlie Tarzian -- -- -- -- 200,000 $398,000
Marc Particelli (1) 80,000 -- $1.57 6/14/2011 -- --
John Benfield 125,000 -- $4.00 5/2/2007 -- --
70,000 $3.00 6/17/2008
Erwin Mevorah -- -- -- -- 160,000(2) $318,400
Brian Murphy -- -- -- -- 146,250 $291,038
Paul Amershadian -- -- -- -- -- --
(1) Does not include options awarded for services as a director.
(2) These shares were subsequently forfeited to the Company upon Mr. Mevorah's
departure from the Company.
18
Option Exercises and Stock Vested in Fiscal 2007
Option Awards Stock Awards
------------------------------------------------------------------
Number of Number of
Shares Value Shares Value
Acquired on Realized on Acquired on Realized on
Exercise Exercise Vesting Vesting
Name (#) ($) (#) ($)
- ----------------------------------------------------------------------------------------------------
Charlie Tarzian -- -- -- --
Marc Particelli -- -- -- --
John Benfield 125,000 $150,000 -- --
Erwin Mevorah -- -- 40,000 $79,600
Brian Murphy -- -- -- --
Paul Amershadian 108,880 $130,656 -- --
Executive Employment Contracts, Termination of
Employment and Change-in-Control Arrangements
- ---------------------------------------------
Charles F. Tarzian. On October 9, 2006, the Company entered into an
Employment Agreement with Charles F. Tarzian under which Mr. Tarzian joined the
Company as its President and Chief Executive Officer, replacing Marc C.
Particelli. The Employment Agreement with Mr. Tarzian is for a three-year term
and provides Mr. Tarzian with (i) an annual base salary of $375,000, (ii) an
annual bonus targeted at 50% of his base salary, (iii) an initial award of
200,000 shares of the Company's common stock under a Restricted Stock Agreement,
and (iv) up to an additional 50,000 shares of restricted Common Stock per year
based on the achievement of annual targets approved by the Company's Board of
Directors. Pursuant to the Employment Agreement, in the event that Mr. Tarzian's
employment is terminated by the Company without "Cause" or by Mr. Tarzian for
"Good Reason", Mr. Tarzian will be entitled to six months severance pay.
John Benfield. On June 14, 2006, the Board of Directors of the Company
accepted the resignation of John Benfield, the Company's President, Chief
Executive Officer and Chairman of the Board, and appointed Marc C. Particelli, a
member of the Company's Board of Directors, to serve as Mr. Benfield's
replacement on an interim basis. Mr. Benfield's resignation was effective as of
July 12, 2006. In connection with Mr. Benfield's resignation, the Company and
Mr. Benfield entered into an Agreement pursuant to which Mr. Benfield continued
to be compensated at the rate of $300,000 per annum and received the same
benefits previously provided to him by the Company as its Chief Executive
Officer until July 1, 2007. Pursuant to that Agreement, Mr. Benfield remained
employed by the Company to assist in the transition for a period of three-months
following his resignation.
Marc C. Particelli. In connection with his appointment as interim Chief
Executive Officer, Mr. Particelli entered into an Employment Agreement with the
Company pursuant to which Mr. Particelli was paid an annual salary of $250,000
for devoting approximately 50% of his working time to the Company. In addition,
for his agreement to serve as interim President, Chief Executive Officer and
Chairman of the Board, the Board approved the grant to Mr. Particelli of a
19
five-year stock option to purchase 80,000 shares of the Company's Common Stock
at a price of $1.57 per share, the market price of the common stock on the date
the grant was authorized.
Brian Murphy. On April 2, 2007, the Company entered into an Employment
Agreement with Brian Murphy under which Mr. Murphy serves as the Company's Vice
Chairman. This Employment Agreement superseded and replaced an employment
agreement under which Mr. Murphy had served as the Chief Executive Officer of
the Company's U.S. Concepts subsidiary. The Employment Agreement with Mr. Murphy
is for a three-year term and provides Mr. Murphy with an annual base salary of
$362,000. Pursuant to the Employment Agreement, in the event Mr. Murphy's
employment is terminated by the Company without "Cause" or by Mr. Murphy for
"Good Reason", Mr. Murphy will be entitled to one month's severance payment for
each year of service to the Company, with a maximum of twelve months of
severance payments.
Erwin Mevorah. Pursuant to an Agreement dated as of April 30, 2007, the
Company and Mr. Mevorah agreed to Mr. Mevorah's resignation as Chief Financial
Officer and the termination of his employment with the Company. Pursuant to the
Agreement, the Company (i) agreed to pay Mr. Mevorah up to six months' of
severance payments in the amount of $153,000, and in no event less than four
months of severance payments, and (ii) paid Mr. Mevorah his previously approved
bonus of $65,000 plus approximately $11,000 for accrued and unused vacation
days.
Paul Amershadian. Pursuant to an Agreement dated as of March 27, 2007,
the employment relationship between Paul Amershadian, the Company's former
Executive Vice President of Marketing and Sales and the Company terminated on
March 31, 2007, the last day of the term of his employment under his Employment
Agreement with the Company. Pursuant to the Agreement (i) the Company paid Mr.
Amershadian a severance payment of $50,000, plus $12,500 per month for the
three-month period ending June 30, 2007 for consulting services, (ii) Mr.
Amershadian sold to three directors of the Company 163,196 shares of the
Company's Common Stock for aggregate consideration of $258,568, which proceeds
were paid to the Company to reduce Mr. Amershadian's obligations to the Company
under a promissory note, and (iii) Mr. Amershadian's remaining obligations under
that promissory note in the amount of approximately $306,000 were cancelled.
Neither Susan Murphy, the Company's interim Chief Financial Offer, nor
Denise Felitti, the Company's Vice President - Controller, are party to an
employment agreement with the Company.
20
Compensation of Directors
The following table shows for the Fiscal 2007 certain information with
respect to the compensation of all non-employee directors of the Company.
Fees Earned or Option
Paid in Cash Awards (1) Total
Name ($) ($) ($)
- ------------------------------------------------------------------------------------
Marc C. Particelli (2) 98,750 17,136 115,886
Herbert M. Gardner (3) 60,250 7,603 67,853
John A. Ward, III (4) 54,750 7,603 62,353
James H. Feeney (5) 72,500 17,136 89,636
Thomas Lachenman (6) 16,000 7,603 23,603
(1) The value of option awards granted to directors has been estimated pursuant
to SFAS No. 123(R) for options granted in Fiscal 2007. The directors will
not realize the estimated value of these awards in cash until these awards
are vested and exercised or sold. For information regarding our valuation
of option awards, see "Stock Options" in Note 8 of our financial statements
for the period ended March 31, 2007.
(2) At March 31, 2007, Mr. Particelli held options to purchase an aggregate of
115,000 shares of Common Stock.
(3) At March 31, 2007, Mr. Gardner held options to purchase an aggregate of
68,125 shares of Common Stock.
(4) At March 31, 2007, Mr. Ward held options to purchase an aggregate of 33,750
shares of Common Stock.
(5) At March 31, 2007, Mr. Feeney held options to purchase an aggregate of
50,000 shares of Common Stock.
(6) At March 31, 2007, Mr. Lachenman held options to purchase an aggregate of
28,750 shares of Common Stock. Mr. Lachenman ceased to be a director on
September 28, 2006.
For Fiscal 2007, each non-employee Director received an annual stipend
of $20,000, a fee of $1,500 per Board meeting attended and a fee of $750 per
Committee meeting attended, and the Chairman of the Audit Committee received a
special one-time payment of $10,000 in light of additional time commitments
required of him in connection with the restatement of the Company's financial
statements and change in auditors. All Directors are reimbursed for reasonable
travel expenses incurred in connection with attending Board meetings. Pursuant
to the Company's 2002 Long-Term Incentive Plan, each of the Company's
non-employee Directors was granted an option to purchase 10,000 shares of Common
Stock on April 30, 2006, exercisable at the fair market value of the shares of
Common Stock on the date of grant. Each such option became exercisable as to
5,000 of the shares covered thereby on the date of grant and as to the remaining
5,000 shares on the first anniversary of the date of grant.
In addition, on April 28, 2006, the Company's Board of Directors formed
a Strategic Committee and appointed Marc C. Particelli and James H. Feeney to
serve as members of that Committee. For serving on the Strategic Committee, each
of Messrs. Particelli and Feeney received a one time fee of $15,000 and a
five-year option to purchase 15,000 shares of Common Stock at a price of $1.70
per share. During Fiscal 2007, the Strategic Committee conducted an in-depth
review of the Company's personnel and operations and made recommendation to the
Company's Board of Directors and senior management based on such review.
In connection with Mr. Tarzian's appointment as President and Chief
Executive Officer in October 2006, the Company's Board of Directors approved
compensation for Mr. Particelli, as the Company's non-executive Chairman of the
Board following such appointment, in the amount of $100,000 per annum, which is
in lieu of the $20,000 stipend paid to non-employee directors.
21
For Fiscal 2008, in addition to the fees and stipends set forth above,
the Board has approved annual payments of $15,000 and $7,500 for Chairmen of the
Audit and Compensation Committees, respectively. During Fiscal 2008, the Board
also approved the replacement of the annual grant to non-employee directors of
options to purchase 10,000 shares of Common Stock, with the quarterly grant, on
the first day of each fiscal quarter, of shares Common Stock with a value of
$7,500 as of the last day of the preceding quarter. Half of the shares with
respect to each such grant are subject to forfeiture in the event the grantee
ceases to be a director of the Company during the one-year period following the
date of grant. The first such grant to the Company's non-employee directors was
effected on July 2, 2007.
TRANSACTIONS WITH RELATED PERSONS
RELATED-PERSON TRANSACTIONS POLICY AND PROCEDURES
In 2007, the Company adopted a written Related-Person Transactions
Policy that sets forth the Company's policies and procedures regarding the
identification, review, consideration and approval or ratification of
"related-persons transactions." For purposes of our policy only, a
"related-person transaction" is a transaction, arrangement or relationship (or
any series of similar transactions, arrangements or relationships) in which the
Company and any "related person" are participants involving an amount that
exceeds $50,000. Transactions involving compensation for services provided to
the Company as an employee, director, consultant or similar capacity by a
related person are not covered by this policy. A related person is any executive
officer, director, or more than 5% stockholder of the Company, including any of
their immediate family members, and any entity owned or controlled by such
persons.
Under the policy, where a transaction has been identified as a
related-person transaction, management must present information regarding the
proposed related-person transaction to the Audit Committee (or, where Audit
Committee approval would be inappropriate, to another independent body of the
Board) for consideration and approval or ratification. The presentation must
include a description of, among other things, the material facts, the interests,
direct and indirect, of the related persons, the benefits to the Company of the
transaction and whether any alternative transactions were available. To identify
related-person transactions in advance, the Company relies on information
supplied by its executive officers and directors. In considering related-person
transactions, the Committee takes into account the relevant available facts and
circumstances including, but not limited to (a) the risks, costs and benefits to
the Company, (b) the impact on a director's independence in the event the
related person is a director, immediate family member of a director or an entity
with which a director is affiliated, (c) the terms of the transaction, (d) the
availability of other sources for comparable services or products, and (e) the
terms available to or from, as the case may be, unrelated third parties or to or
from employees generally. In the event a director has an interest in the
proposed transaction, the director must recuse himself or herself form the
deliberations and approval. The policy requires that, in determining whether to
approve, ratify or reject a related-person transaction, the Committee look at,
in light of known circumstances, whether the transaction is in, or is not
inconsistent with, the best interests of the Company and its stockholders, as
the Committee determines in the good faith exercise of its discretion.
RELATED-PERSON TRANSACTIONS
Paul Amershadian
Prior to Fiscal 2007, the Company made loans to Paul Amershadian
aggregating $550,000, which were evidenced by an Amended and Restated Promissory
Note dated May 24, 2001. Prior to cancellation in March 2007, the Amended Note
was secured by (i) a first lien and security interest in 163,196 shares of the
22
Company's Common Stock owned by Mr. Amershadian (after giving effect to the
surrender of 153,052 shares described below), and (ii) a second mortgage on Mr.
Amershadian's home. The Amended Note provided for payment of interest at a
floating rate equal to the highest rate at which we pay interest on our bank
borrowings, monthly payment of one-half of the interest that accrued over the
preceding month, payment of accrued interest and principal from one-half of the
after-tax amount, if any, of bonuses paid to Mr. Amershadian by the Company, and
payment of the remaining balance of principal and accrued interest on May 24,
2006. Until April 2006, Mr. Amershadian did not make any of the required monthly
interest payments under the Amended Note. On April 26, 2006, Mr. Amershadian
surrendered to the Company for cancellation 153,052 shares of Common Stock as
payment in full of interest in the amount of $283,147 accrued through May 24,
2006.
Pursuant to an Agreement dated as of March 27, 2007, the employment
relationship between the Company and Mr. Amershadian terminated effective March
31, 2007, the last day of the term of his employment under his Employment
Agreement with the Company. Pursuant to the Agreement (i) the Company paid Mr.
Amershadian a severance payment of $50,000, plus $12,500 per month for the
three-month period ending June 30, 2007 for consulting services, (ii) Mr.
Amershadian sold to three directors of the Company 163,196 shares of the
Company's Common Stock for aggregate consideration of $258,568, which proceeds
were paid to the Company to reduce Mr. Amershadian's obligations to the Company
under the Amended Note, and (iii) Mr. Amershadian's remaining obligations under
the Amended Note in the amount of approximately $306,000 were cancelled.
Lease of Optimum Office
In connection with the Company's acquisition of its Optimum subsidiary
in 1998, the Company entered into an agreement with Thomas Lachenman, a
principal stockholder of the Company and former owner of Optimum, for the lease
of the Cincinnati principal office of Optimum, which is owned by Mr. Lachenman.
The agreement provides for annual rental payments, in the amount of $173,000 for
Fiscal 2007, adjusted annually based upon changes in the local consumer price
index. The lease expires in December 2010.
Termination Agreements
As described above under "Executive Employment Contracts, Termination
of Employment and Change-in-Control Arrangements", during Fiscal 2007, the
Company entered into an agreement with respect to John Benfield's resignation as
Chief Executive Officer of the Company, and subsequent to Fiscal 2007, the
Company entered into agreement with respect to Erwin Mevorah's resignation as
Chief Financial Officer of the Company.
Indemnification Agreements
The Company has entered into individual indemnification agreements with
its directors. The agreements implement with more specificity, and supplement,
the indemnification provisions provided by Delaware law and the Company's
By-Laws. The terms of the Indemnification Agreements provide, among other
things, that to the extent permitted by Delaware law, the Company will indemnify
the director party to the agreement against any and all losses, expenses and
liabilities arising out of such person's service as a director of the Company.
23
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and Directors and persons who
own more than 10% of a registered class of the Company's equity securities
(collectively, the "Reporting Persons") to file reports of ownership and changes
in ownership with the Securities and Exchange Commission and to furnish the
Company with copies of these reports. To the Company's knowledge, based solely
on a review of the Forms 3, 4, and 5 submitted to the Company during and with
respect to Fiscal 2007, there were no known failures to file a required Form 3,
4 or 5 and no known late filings of a required Form 3, 4 or 5 during Fiscal 2006
by any person required to file such forms with respect to the Company pursuant
to Section 16 of the Exchange Act, other than two late filings of a Form 4 by
Mr. Amershadian, and one late filing of a Form 4 by Mr. Particelli.
RELATIONSHIP WITH INDEPENDENT AUDITORS
BDO Seidman, LLP served as the Company's auditors for Fiscal 2006. On
July 26, 2006, the Company was informed by BDO of BDO's resignation effective
upon the completion of their review of the Company's financial statements for
its first fiscal quarter ended June 30, 2006. BDO's review of the Company's
first quarter financial statements was completed on August 14, 2006.
Accordingly, BDO's resignation became effective on that date.
The audit reports of BDO on the financial statements of the Company as
of March 31, 2006 and 2005 and for the years then ended did not contain any
adverse opinion or disclaimer of opinion, nor were such reports qualified or
modified as to uncertainty, audit scope or accounting principles. During the two
most recent fiscal years of the Company and the subsequent interim period
through August 14, 2006, there were no disagreements between the Company and BDO
as to any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of BDO would have caused BDO to make reference in their
reports on the financial statements for such years to the subject matter of the
disagreement, except for matters that were addressed by Grant Thornton in its
letter dated January 23, 2007 included as Exhibit 16 to the Company's Form 8-K/A
filing on January 25, 2007. Additionally, during the fiscal years ended March
31, 2006 and 2005, and through August 14, 2006, there were no "reportable
events" as that term is defined in Item 304(a)(1)(v) of Regulation S-K.
On September 27, 2006, following the approval of its Audit Committee,
the Company engaged Grant Thornton LLP, as its independent accountants to audit
the Company's financial statements for its fiscal year ending March 31, 2007. In
the Company's two most recent fiscal years and subsequent interim periods prior
to such engagement, the Company had not (itself or through someone acting on its
behalf) consulted with Grant Thornton on either (i) the application of
accounting principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on the Company's financial
statements, or (ii) any matter that was either the subject of a disagreement, as
that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related
instructions to Item 304 of Regulation S-K, or a reportable event, as that term
is defined in Item 304(a)(1)(v) of Regulation S-K.
On January 10, 2007, following the approval of its Audit Committee, the
Company, dismissed Grant Thornton as the Company's independent registered public
accounting firm. At the time of such dismissal, Grant Thornton had not audited,
or issued any report in respect of, any financial statements of the Company.
24
During the two most recent fiscal years of the Company prior to their
dismissal and the subsequent interim period through January 10, 2007, there were
no disagreements between the Company and Grant Thornton as to any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
Grant Thornton would have caused Grant Thornton to make reference in their
reports on the financial statements for such years to the subject matter of the
disagreement, had Grant Thornton issued a report with respect to such financial
statements. Additionally, during the fiscal years ended March 31, 2006 and 2005,
and through January 10, 2007, except as set forth below, there were no
"reportable events" as that term is defined in Item 304(a)(1)(v) of Regulation
S-K.
In connection with their review of our financial statements for the
quarter ended September 30, 2006, Grant Thornton communicated to management and
the Company's Audit Committee the existence of internal control deficiencies
that constituted material weaknesses under standards established by the Public
Company Accounting Oversight Board. A material weakness is a significant
deficiency or combination of significant deficiencies, that results in more than
a remote likelihood that a material misstatement of financial statements will
not be prevented or detected. The material weaknesses identified by Grant
Thornton were the Company's:
o failure to properly monitor and account for state sales and
use tax liabilities in various jurisdictions; and
o misapplication of revenue recognition policies.
These material weaknesses resulted in the restatement of the Company's
financial statements for the quarter ended June 30, 2006 and the years ended
March 31, 2006, 2005 and 2004. To remedy the weakness related to sales and use
taxes, the Company retained third-party consultants with expertise in State and
local sales and use taxes to further assist it in understanding and properly
paying these obligations and recording these obligations on our financial
statements.
In addition, with the May 2007 restatement of the Company's financial
statements, the Company corrected its misapplication of EITF 00-21, "Accounting
for Revenue Arrangements with Multiple Deliverables," to a particular
promotional program. Prior to the restatement, the Company's misapplication of
EITF 00-21 had resulted in the premature recording of revenues and related
expenses during the fiscal year ended March 31, 2006. This error resulted in the
understatement of revenues by approximately $524,000 and an overstatement of
operating expenses by approximately $398,000 in the quarter ended June 30, 2006.
Originally, the Company had determined that the design of the promotional
program itself and the acquiring of participating partners entitled the Company
to recognize a portion of the revenues to be generated by this program. The
Company subsequently concluded that under EITF 00-21, revenues could only be
recognized as certain field events of the program were executed on behalf of
clients. Such execution occurred during the period of April 2006 through July
2006. The Company does not expect future errors of this nature to occur in
connection with its application of EITF 00-21.
Grant Thornton also advised the Audit Committee that it believed there
existed several other significant deficiencies that in the aggregate constituted
material weaknesses. The Company believes the following significant deficiencies
identified by Grant Thornton adversely impacted its internal controls during
Fiscal 2007:
o Resource constraints faced by the Company's accounting
department.
25
o Excessive reliance on Excel spreadsheets in key areas,
including as support for revenue recognition on certain
customer contracts.
o Insufficient controls in monitoring and controlling the
posting of journal entries.
o Ineffective controls over access by information technology
personnel to information technology programs and systems.
The Company's management and current independent auditors, Lazar Levine
& Felix LLP, have discussed the material weaknesses described above with the
Company's Audit Committee. By implementing the following remedial measures,
management intends to improve its internal control over financial reporting and
to avoid future material misstatements of our financial statements. The Company
has implemented or is in the process of implementing the following measures:
o The restructuring of the accounting and finance department;
o The engagement of a consultant specializing in accounting and
financial reporting to augment our accounting staff;
o The upgrading of our accounting and financial reporting
software systems;
o Additional monitoring and review of selected journal entries;
and
o The initiation of a comprehensive review of financial controls
and procedures to address the issues identified above and to
bring us into compliance with the requirements of the
Sarbanes-Oxley Act with respect to internal controls and
procedures.
The Company is monitoring the effectiveness of these measures, and may
take further action as it deems appropriate to strengthen its internal control
over financial reporting. However, management does not expect that the Company's
disclosure controls and procedures or our internal control over financial
reporting will prevent all error and all fraud. A control system, no matter how
well designed and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. Because of the inherent
limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any,
within the Company have been or will be detected.
On January 10, 2007, following the approval of its Audit Committee, the
Company engaged Lazar Levine, as its independent registered public accounting
firm to audit the Company's financial statements for its fiscal year ending
March 31, 2007.
As part of the Company's process in retaining Lazar Levine, members of
the Company's management met with Lazar Levine and communicated to Lazar Levine
the subject matter of accounting issues raised by Grant Thornton with respect to
financial statements that had been audited and reviewed, as applicable, by BDO.
In addition, the Company provided Lazar Levine with memoranda analyzing such
accounting issues. In accordance with the Company's specific request, Lazar
Levine did not make a determination with respect to such matters prior to their
engagement by the Company.
Other than as set forth above, in the Company's two most recent fiscal
years and subsequent interim periods prior to such engagement, the Company has
not (itself or through someone acting on its behalf) consulted with Lazar Levine
26
on either (i) the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on the Company's financial statements, or (ii) any matter that
was either the subject of a disagreement, as that term is defined in Item
304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of
Regulation S-K, or a reportable event, as that term is defined in Item
304(a)(1)(v) of Regulation S-K.
Principal Accounting Firm Fees
The following table sets forth the aggregate fees billed to and accrued
by the Company for Fiscal 2007 and Fiscal 2006, by BDO Seidman, LLP and Lazar
Levine & Felix LLP:
Fiscal 2007(1) Fiscal 2006(2)
--------------- ---------------
Audit Fees (for audit of annual financial statements
and review of quarterly financial statements) $ 421,300 $ 273,000
Audit-Related Fees (review workpapers of predecessor auditors) 64,500 --
Tax Fees (for federal, State and local tax compliance and planning) 107,850 30,000
All Other Fees (in connection with restatement of financial statements for
prior periods) 163,594 21,000
--------------- ---------------
Total $ 757,850 $ 324,800
=============== ===============
In addition to the fees set forth above, during Fiscal 2007, the
Company paid $290,000 to Grant Thornton for services rendered during the period
they served as the Company's independent auditor.
It is expected that a representative of Lazar Levine will be present at
the 2007 Annual Meeting of Stockholders and will be afforded the opportunity to
make a statement and respond to appropriate questions from stockholders present
at the meeting.
Pre-Approval Policies and Procedures
The Audit Committee has adopted a policy requiring pre-approval by the
Audit Committee of all services (audit and non-audit) to be provided to the
Company by its independent auditor. In accordance with that policy, the Audit
Committee approved all non-audit services rendered to the Company by BDO in
Fiscal 2007 and has determined that the provision of non-audit services by such
auditors was compatible with maintaining their independence. Lazar Levine has
not provided the Company with any non-audit services.
EXPENSES
The entire cost of preparing, assembling, printing and mailing this
Proxy Statement, the enclosed Proxy, Annual Report on Form 10-K and other
materials, and the cost of soliciting Proxies with respect to the Annual
Meeting, will be borne by the Company. The Company will request banks and
brokers to solicit their customers who beneficially own shares listed of record
in names of nominees, and will reimburse those banks and brokers for the
reasonable out-of-pocket expenses of such solicitations. The solicitation of
Proxies by mail may be supplemented by telephone by officers and other regular
employees of the Company, but no additional compensation will be paid to such
individuals.
27
STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present
proper proposals for inclusion in the Company's proxy statement and for
consideration at the next annual meeting of its stockholders by submitting their
proposals to the Company in a timely manner. To be included in the proxy
statement for the Company's Annual Meeting of Stockholders in 2008, stockholder
proposals must be received by the Company at its principal executive office no
later than April 10, 2008 and must otherwise comply with the requirements of
Rule 14a-8. In addition, the Company's By-laws establish an advance notice
procedure with regard to certain matters, including stockholder proposals not
included in the Company's proxy statement, to be brought before an annual
meeting of stockholders. In general, notice must be received by the Secretary of
the Company not less than 60 days nor more than 90 days prior to the anniversary
date of the immediately preceding annual meeting and must contain specified
information concerning the matters to be brought before such meeting and
concerning the stockholder proposing such matters. Therefore, to be presented at
the Company's Annual Meeting of Stockholders in 2008, such a proposal must be
received by the Company after June 21, 2008 but no later than July 23, 2008.
However, if the date of the Company's Annual Meeting of Stockholders in 2008 is
more than 30 days earlier or more than 30 days later than the date of the
immediately preceding Annual Meeting (i.e., prior to August 20, 2008 or after
October 19, 2008), then notice must be received not later than the close of
business on the earlier of the 10th day following the day on which notice of the
date of the meeting is mailed or public disclosure of the date of such meeting
is made. If a stockholder who has notified the Company of his intention to
present a proposal at an annual meeting does not appear or send a qualified
representative to present his proposal at such meeting, the Company need not
present the proposal for a vote at such meeting. All notices of proposals by
stockholders, whether or not to be included in the Company's proxy materials,
should be sent to the Secretary of the Company at 75 Ninth Avenue, New York
10011.
By Order of the Board of Directors
Marc C. Particelli
Chairman of the Board
New York, New York
August 8, 2007
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED MARCH 31,
2007, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (INCLUDING THE
FINANCIAL STATEMENTS AND THE SCHEDULES THERETO, BUT EXCLUDING EXHIBITS), IS
BEING MAILED WITH THIS PROXY STATEMENT. THE COMPANY WILL PROVIDE TO EACH PERSON
SOLICITED BY THIS PROXY STATEMENT, ON THE WRITTEN REQUEST OF ANY SUCH PERSON AND
UPON PAYMENT OF A FEE OF $3.00 PER EXHIBIT, A COPY OF ANY EXHIBIT TO THE
ENCLOSED ANNUAL REPORT ON FORM 10-K. A LIST OF EXHIBITS IS SET FORTH IN SECTION
IV OF THE ANNUAL REPORT ON FORM 10-K. REQUESTS FOR COPIES OF EXHIBITS SHOULD BE
DIRECTED TO, COACTIVE MARKETING GROUP, INC., 75 NINTH AVENUE, NEW YORK, NEW YORK
10011, ATTENTION CORPORATE SECRETARY (TELEPHONE: (212) 660-3800).
28
EXHIBIT A
PROPOSED CERTIFICATE OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION OF
COACTIVE MARKETING GROUP, INC.
Under Section 242 of the Delaware General
Corporation Law
Pursuant to the provisions of Section 242 of the General Corporation
Law of the State of Delaware, the undersigned, being the President and Chief
Executive Officer of CoActive Marketing Group, Inc., does hereby certify that:
FIRST: The name of the corporation is CoActive Marketing Group, Inc.
(hereinafter referred to as the "Corporation").
SECOND: The Certificate of Incorporation of the Corporation is hereby
amended by adding the following new Article THIRTEENTH, to read as follows:
"THIRTEENTH: Subject to the rights of the holders of any
series of Preferred Stock to elect additional directors under specified
circumstances, the directors shall be divided into three classes
designated as Class I, Class II and Class III, respectively. At the
first annual meeting of stockholders following the initial
classification of the Board of Directors, the term of office of the
Class I directors shall expire and Class I directors shall be elected
for a full term of three years. At the second annual meeting of
stockholders following such initial classification, the term of office
of the Class II directors shall expire and Class II directors shall be
elected for a full term of three years. At the third annual meeting of
stockholders following such initial classification, the term of office
of the Class III directors shall expire and Class III directors shall
be elected for a full term of three years. At each succeeding annual
meeting of stockholders, directors shall be elected for a full term of
three years to succeed the directors of the class whose terms expire at
such annual meeting. Notwithstanding the foregoing provisions of this
section, each director shall serve until his successor is duly elected
and qualified or until his death, resignation or removal. No decrease
in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director."
THIRD: This amendment to the Certificate of Incorporation of the
Corporation was duly adopted by the Board of Directors and by a majority of the
stockholders of the Corporation entitled to vote thereon in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Amendment to the Certificate of Incorporation of the Corporation this ____ day
of September, 2007.
By: ____________________________________
Charles F. Tarzian,
President and Chief Executive Officer
29
EXHIBIT B
If Proposal No. 2, relating to the classification of the Board of
Directors, is approved, the By-laws of the Corporation will be amended by adding
a new Section 3.1(c), to read in its entirety as set forth below, and by
deleting Section 3.11 of the By-laws and replacing it as set forth below:
(c) Classes of Directors. Subject to the rights of the
holders of any series of Preferred Stock to elect additional directors
under specified circumstances, the directors shall be divided into
three classes designated as Class I, Class II and Class III,
respectively. At the first annual meeting of stockholders following the
initial classification of the Board of Directors, the term of office of
the Class I directors shall expire and Class I directors shall be
elected for a full term of three years. At the second annual meeting of
stockholders following such initial classification, the term of office
of the Class II directors shall expire and Class II directors shall be
elected for a full term of three years. At the third annual meeting of
stockholders following such initial classification, the term of office
of the Class III directors shall expire and Class III directors shall
be elected for a full term of three years. At each succeeding annual
meeting of stockholders, directors shall be elected for a full term of
three years to succeed the directors of the class whose terms expire at
such annual meeting. Notwithstanding the foregoing provisions of this
section, each director shall serve until his successor is duly elected
and qualified or until his earlier death, resignation or removal. No
decrease in the number of directors constituting the Board of Directors
shall shorten the term of any incumbent director.
3.11 Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may
be filled by a majority of the directors then in office, although less
than a quorum, or by a sole remaining director, and the directors so
chosen shall hold office until the next election of the Class for which
such directors have been chosen and until their successors are duly
elected and qualified, or until their earlier resignation or removal.
Any director elected to fill a vacancy not resulting from an increase
in the number of directors shall have the same remaining term as that
of his or her predecessor.
30
PROXY
COACTIVE MARKETING GROUP, INC.
75 Ninth Avenue, New York, New York 10011
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS - SEPTEMBER 19, 2007
The undersigned hereby appoints Marc C. Particelli and Charles F.
Tarzian, or either of them, as Proxy or Proxies of the undersigned with full
power of substitution to attend and to represent the undersigned at the Annual
Meeting of Stockholders of CoActive Marketing Group, Inc. (the "Company") to be
held on September 19, 2007, and at any adjournments thereof, and to vote thereat
the number of shares of stock of the Company the undersigned would be entitled
to vote if personally present, in accordance with the instructions set forth on
this proxy card. Any proxy heretofore given by the undersigned with respect to
such stock is hereby revoked.
(Continued and to be signed on reverse side)
1
ANNUAL MEETING OF STOCKHOLDERS OF
COACTIVE MARKETING GROUP, INC.
SEPTEMBER 19, 2007
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
- Please detach along perforated line and mail in the envelope provided. -
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR
VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
___________________________________________________________________________________________________________________________________
1. Election Of Directors: 2. For the approval of amendments to the Company's
Certificate of Incorporation and Bylaws to
[ ] FOR ALL NOMINEES NOMINEES: adopt a classified Board of Directors.
[ ] James H. Feeney
[ ] WITHHOLD AUTHORITY [ ] Herbert M. Gardner
FOR ALL NOMINEES [ ] Marc C. Particelli
[ ] Charles F. Tarzian 3. On such other matters as may properly come
[ ] FOR ALL EXCEPT [ ] John A. Ward, III before the meeting.
(See instructions below)
INSTRUCTION: To withhold authority to vote for any If no specification is made, this proxy will be voted FOR
individual nominee(s), mark "FOR ALL EXCEPT" and fill in the Proposal 1 listed above.
circle next to each nominee you wish to withhold, as shown here: [X]
____________________________________________________________________
____________________________________________________________________
To change the address on your account, please check the box
at right and indicate your new address in the address space
above. Please note that changes to the registered name(s) on
the account may not be submitted via this method. [ ]
____________________________________________________________________
Signature of Stockholder: ________________________ Date:______ Signature of Stockholder: ________________________ Date:______
Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When
signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a
corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
2