<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
QUINTEL ENTERTAINMENT, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
QUINTEL ENTERTAINMENT, INC.
ONE BLUE HILL PLAZA
PEARL RIVER, NY 10965
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, SEPTEMBER 25, 1996
The Annual Meeting of Stockholders of QUINTEL ENTERTAINMENT, INC. (the
"Company") will be held at the Park Ridge Marriott Hotel, 300 Brae Boulevard,
Park Ridge, New Jersey, on Wednesday September 25, 1996, at 9:30 a.m. local
time, to consider and act upon the following matters:
1. To elect nine directors to serve for the ensuing year.
2. To ratify and approve the Company's 1996 Stock Option Plan.
3. To ratify the selection by the Board of Directors of Coopers & Lybrand
L.L.P. as the Company's independent auditors for the current fiscal
year.
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record as of the close of business on August 1, 1996 will
be entitled to notice of and to vote at the meeting or any adjournment thereof.
The stock transfer books of the Company will remain open.
By Order of the Board of Directors
Andrew Stollman
Secretary
Pearl River, New York
August 20, 1996
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO
ASSURE REPRESENTATION OF YOUR SHARES. YOU MAY REVOKE THE PROXY AT ANY TIME
BEFORE THE AUTHORITY GRANTED THEREIN IS EXERCISED.
<PAGE> 3
QUINTEL ENTERTAINMENT, INC.
ONE BLUE HILL PLAZA
PEARL RIVER, NY 10965
------------------------
PROXY STATEMENT FOR THE 1996 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, SEPTEMBER 25, 1996
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Quintel Entertainment, Inc. (the "Company")
for use at the 1996 Annual Meeting of Stockholders to be held on Wednesday,
September 25, 1996, and at any adjournment of that meeting (the "Annual
Meeting"). All proxies will be voted in accordance with a stockholder's
instructions and, if no choice is specified, the proxies will be voted in favor
of the matters set forth in the accompanying Notice of Meeting. Any proxy may be
revoked by a stockholder at any time before it is exercised by delivery of
written revocation or a subsequently dated proxy to the Secretary of the Company
or by voting in person at the Annual Meeting.
The Company's Annual Report for the fiscal year ended November 30, 1995 was
mailed to stockholders on August 2, 1996. The Company mailed this Proxy
Statement to stockholders on or about August 20, 1996.
VOTING SECURITIES AND VOTES REQUIRED
At the close of business on August 1, 1996, the record date for the
determination of stockholders entitled to vote at the Annual Meeting, there were
outstanding and entitled to vote an aggregate of 15,246,234 shares of Common
Stock of the Company. Stockholders are entitled to one vote per share.
The affirmative vote of the holders of a plurality of the shares of Common
Stock present or represented at the Annual Meeting is required for election of
directors. The affirmative vote of the holders of a majority of the shares of
Common Stock present or represented at the Annual Meeting is required for the
approval of the adoption of the Company's 1996 Stock Option Plan and the
ratification of the selection by the Board of Directors of Coopers & Lybrand
L.L.P. as the Company's independent auditors for the current fiscal year. Shares
of Common Stock represented in person or by proxy (including shares which
abstain or do not vote for any reason with respect to one or more of the matters
presented for stockholder approval) will be counted for purposes of determining
whether a quorum is present at the Annual Meeting. Abstentions will be treated
as shares that are present and entitled to vote for purposes of determining the
number of shares present and entitled to vote with respect to any particular
matter, but will not be counted as a vote in favor of such matter. Accordingly,
an abstention from voting on a matter has the same legal effect as a vote
against the matter. If a broker or nominee holding stock in "street name"
indicates on the proxy that it does not have discretionary authority to vote as
to a particular matter ("broker non-votes"), those shares will not be considered
as present and entitled to vote with respect to such matter. Accordingly, a
broker non-vote on a matter has no effect on the voting on such matter.
2
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of August 1, 1996,
with respect to the beneficial ownership of the Company's Common Stock by (i)
each current director and nominee for director of the Company, (ii) each
executive officer of the Company named in the Summary Compensation Table set
forth under the caption "Compensation of Executive Officers" below, (iii) all
directors and executive officers of the Company as a group and (iv) each person
known by the Company to own beneficially more than five per cent (5%) of the
outstanding shares of Common Stock of the Company.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENTAGE OF
NAME AND ADDRESS(1) BENEFICIAL OUTSTANDING SHARES
OF BENEFICIAL OWNER OWNERSHIP(2) OWNED
----------------------------------------------------- ------------ ------------------
<S> <C> <C>
Jay Greenwald........................................ 3,126,282(3) 20.4%
Jeffrey L. Schwartz.................................. 2,609,402(4) 17.1
Michael G. Miller.................................... 2,614,402(5) 17.1
Claudia Newman Hirsch................................ 2,092,521(6) 13.7
Andrew Stollman...................................... 1,173,843(7) 7.7
Murray L. Skala...................................... 38,000(8) *
750 Lexington Avenue
New York, NY 10022
Mark Gutterman....................................... 20,000(9) *
280 Plandome Road
Manhasset, NY 11030
Edwin A. Levy........................................ 40,500(10) *
767 Third Avenue
New York, NY 10017
Vincent Tese......................................... 25,000(11) *
245 Park Avenue
New York, NY 10167
All executive officers and directors as a group (ten
persons)(12)....................................... 11,744,284(12)(13) 75.9%
</TABLE>
- ---------------
* Less than 1% of the Company's outstanding shares.
(1) Unless otherwise listed, the addresses of all of the persons in the
foregoing table are at the Company's offices, One Blue Hill Plaza, Pearl
River, NY 10965.
(2) The number of Shares of Common Stock beneficially owned by each person or
entity is determined under rules promulgated by the Securities and Exchange
Commission (the "Commission"). Under such rules, beneficial ownership
includes any shares as to which the person or entity has sole or shared
voting power or investment power. The percentage of the Company's
outstanding shares is calculated by including among the shares owned by
such person any shares which such person or entity has the right to acquire
within 60 days after August 1, 1996. Unless otherwise indicated, each
person or entity referred to above has sole voting and investment power
with respect to the shares listed. The inclusion herein of any shares
deemed beneficially owned does not constitute an admission of beneficial
ownership of such shares.
(3) Includes 25,000 shares of Common Stock issuable upon the exercise of an
option held by Mr. Greenwald.
(4) Includes 25,000 shares of Common Stock issuable upon exercise of an option
held by Mr. Schwartz.
(5) Includes 30,000 shares of Common Stock issuable upon exercise of an option
held by Mr. Miller.
(6) Includes 25,000 shares of Common Stock issuable upon exercise of an option
held by Ms. Newman Hirsch.
(7) Includes 25,000 shares of Common Stock issuable upon exercise of an option
held by Mr. Stollman.
(8) Includes 30,000 shares of Common Stock issuable upon exercise of an option
held by Mr. Skala.
(9) Includes 20,000 shares of Common Stock issuable upon exercise of an option
held by Mr. Gutterman.
(10) Includes 30,000 shares of Common Stock issuable upon exercise of an option
held by Mr. Levy.
(11) Includes 25,000 shares of Common Stock issuable upon exercise of an option
held by Mr. Tese.
(12) Includes 4,334 shares of Common Stock beneficially owned by Mr. Raymond J.
Richter, Chief Financial Officer of the Company (which includes 3,334
shares of Common Stock issuable upon exercise of an option held by Mr.
Richter).
(13) Includes 238,334 shares of Common Stock issuable upon exercise of options
held by the above named individuals. See footnotes (3) through (12) above.
3
<PAGE> 5
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
The persons named in the enclosed proxy will vote to elect as directors the
nine nominees named below, unless authority to vote for the election of any or
all of the nominees is withheld by marking the proxy to that effect. All of the
nominees have indicated their willingness to serve, if elected, but if any
nominee should be unable to serve, the proxies may be voted for a substitute
nominee designated by management. Each director will be elected to hold office
until the next annual meeting of stockholders or until his or her successor is
elected and qualified. There are no family relationships between or among any
officers or directors of the Company.
NOMINEES
Set forth below for each nominee as a director of the Company is his name
and age, position with the Company, principal occupation and business experience
during the past five years and the date of the commencement of each director's
term as a director.
<TABLE>
<CAPTION>
NAME AGE POSITION
--------------------------------------- --- ------------------------------------------
<S> <C> <C>
Jeffrey L. Schwartz.................... 48 Chairman of the Board and Chief Executive
Officer
Jay Greenwald.......................... 32 President, Chief Operating Officer and
Director
Claudia Newman Hirsch.................. 35 Executive Vice President and Director
Andrew Stollman........................ 31 Senior Vice President, Secretary and
Director
Michael G. Miller...................... 49 Director
Murray L. Skala........................ 49 Director
Mark Gutterman......................... 41 Director
Edwin A. Levy.......................... 59 Director
Vincent Tese........................... 53 Director
</TABLE>
Jeffrey L. Schwartz has been Chairman and Chief Executive Officer of the
Company since January 1995, Secretary/Treasurer from September 1993 to December
1994 and a director since inception of the Company in 1993. Since January 1979,
Mr. Schwartz has also been Co-President and a director of Jami Marketing
Services, Inc. ("Jami Marketing"), a list brokerage and list management
consulting firm, Jami Data Services, Inc. ("Jami Data"), a database management
consulting firm, and Jami Direct, Inc. ("Jami Direct"), a direct mail graphic
and creative design firm (collectively, the "Jami Companies").
Jay Greenwald has been President and Chief Operating Officer of the Company
since January 1995, Vice President from August 1992 to December 1994 and a
director since inception. From January 1991 to August 1992, Mr. Greenwald was
Vice President of Newald Direct, Inc. ("Newald Direct") and, from July 1990 to
January 1991, he was President of Newald Marketing, Inc. ("Newald Marketing"),
companies engaged in direct response marketing.
Claudia Newman Hirsch has been Executive Vice President of the Company
since January 1995, Vice President from August 1992 to December 1994 and a
director since inception. From January 1991 to August 1992, Ms. Newman Hirsch
was President of Newald Direct and from July 1990 to January 1991, was Vice
President of Newald Marketing.
Andrew Stollman has been Senior Vice President, Secretary and a director of
the Company since January 1995 and was President from September 1993 to December
1994. From August 1992 to June 1993, Mr. Stollman was a consultant to Cas-El,
Inc., from November 1992 to June 1993, manager at Media Management Group, Inc.,
and from December 1990 to August 1992, national marketing manager for Infotrax
Communications, Inc. and Advanced Marketing & Promotions, Inc., companies
engaged in providing telephone entertainment services.
4
<PAGE> 6
Michael G. Miller has been a director of the Company since inception. Since
1979, Mr. Miller has been the Co-President and a director of each of the Jami
Companies, as well as a director of Jaxxs Pacific, Inc., a publicly-held company
in the business of developing, marketing and distributing children's toys.
Murray L. Skala has been a director of the Company since October 1995. Mr.
Skala has been a partner in the law firm of Feder, Kaszovitz, Isaacson, Weber,
Skala & Bass LLP since 1976. Mr. Skala is also a director of Jaxxs Pacific,
Inc., THQ, Inc., a publicly-held company in the business of developing and
selling video games, and Katz Digital Technologies, Inc., a publicly-held
company which is in the business of producing digital printing and prepress
services.
Mark Gutterman has been a director of the Company since October 1995. Mr.
Gutterman has been a partner in the accounting firm of Feldman, Gutterman,
Meinberg & Co. and its predecessor, Weiss & Feldman, since 1980. Mr. Gutterman
is a Certified Public Accountant.
Edwin A. Levy has been a director of the Company since November 1995. Mr.
Levy has been the Chairman of the Board of Levy, Harkins & Co., Inc., an
investment advisor, since 1979, and is also a director of Coastcast Corp., a
publicly-held company in the business of manufacturing golf club heads.
Vincent Tese has been a director of the Company since March 1996. Mr. Tese
has been the Chairman of Wireless Cable International, Inc., a cable television
company, since 1988, Chairman of Cross County Wireless, Inc., which was in the
cable television business, from 1988 until July 1995, when such company was sold
to Pacific Telesis Inc., and the co-founder and Chairman of Cross County Cable
TV Inc. from 1976 to July 1995. Mr. Tese is also a director of the Bear Stearns
Companies, Inc., a publicly-held company in the investment banking and brokerage
business.
EXECUTIVE OFFICERS
Four of the Company's executive officers, Jeffrey L. Schwartz, Jay
Greenwald, Claudia Newman Hirsch and Andrew Stollman, are also directors of the
Company. Information with regard to such persons are set forth above under the
heading "Directors," which is hereby incorporated by reference.
Raymond J. Richter, age 45, has been Chief Financial Officer of the Company
since March 1995 and Treasurer since October 1995. From November 1993 to
February 1995, Mr. Richter was a financial consultant. From April 1990 to
October 1993, Mr. Richter was the Chief Financial Officer of All-Ways
Advertising Company, a promotional advertising company. Mr. Richter is a
Certified Public Accountant.
All directors hold office until the next annual meeting of stockholders and
the election and qualification of their successors. Directors receive no cash
compensation for serving on the Board of Directors other than reimbursement of
reasonable expenses incurred in attending meetings. Non-employee Directors of
the Company are compensated for their services and attendance at meetings
through the grant of options pursuant to the Company's Amended and Restated 1995
Stock Option Plan. Officers are elected annually by the Board of Directors and
serve at the discretion of the Board.
The Company has obtained "key man" life insurance in the amount of
$1,000,000 on each of the lives of Jeffrey L. Schwartz, Jay Greenwald, Claudia
Newman Hirsch and Andrew Stollman.
The Company has agreed, if so requested by the underwriter of the initial
public offering of the Company's securities, Whale Securities Co., L.P.
("Whale"), to nominate and use its best efforts to elect a designee of Whale as
a director of the Company or, at Whale's option, as a non-voting adviser to the
Company's Board of Directors. The Company's officers, directors and its five
existing principal stockholders have agreed to vote their shares of Common Stock
in favor of such designee. Whale has not yet exercised its right to designate
such a person. Such right of designation of Whale is in effect until December 5,
2000.
THE COMMITTEES
The Board has an Audit Committee, a Compensation Committee and a Stock
Option Committee. The Board of Directors does not have a Nominating Committee,
and the usual functions of such a committee are performed by the entire Board of
Directors.
5
<PAGE> 7
Audit Committee. The functions of the Audit Committee include
recommendations to the Board of Directors with respect to the engagement of
the Company's independent certified public accountants and the review of
the scope and effect of the audit engagement. The current members of the
Audit Committee are Messrs. Levy, Tese and Skala.
Compensation Committee. The function of the Compensation Committee is to
make recommendations to the Board with respect to compensation of
management employees. In addition, the Compensation Committee administers
plans and programs, with the exception of the Company's stock option plans,
relating to employee benefits, incentives and compensation. The current
members of the Compensation Committee are Messrs. Skala and Gutterman.
Stock Option Committee. The Stock Option Committee determines the persons
to whom options should be granted under the Company's stock option plans
and the number of options to be granted to each person. The current members
of the Stock Option Committee are Messrs. Skala and Gutterman. Such
committee met on October 17, 1995, at which meeting all the members of such
committee attended.
ATTENDANCE AT MEETINGS
From December 1, 1994, through November 30, 1995, there was one meeting of
the Board of Directors. Each director of the Company then serving on the Board
attended such meeting.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into transactions with Jami Marketing Services,
Inc. ("Jami Marketing"), a list brokerage and list management consulting firm,
Jami Data Services, Inc. ("Jami Data"), a database management consulting firm,
and Jami Direct, Inc. ("Jami Direct"), a direct mail graphic and creative design
firm (collectively, the "Jami Companies"). The Jami Companies are principally
owned and controlled by Jeffrey L. Schwartz, Chief Executive Officer, director
and a principal stockholder of the Company, and Michael G. Miller, a director
and principal stockholder of the Company. Pursuant to a list management
agreement dated June 1, 1993 between the Company and Jami Marketing, Jami
Marketing serves as exclusive manager in connection with the management of the
Company's mailing list for rental to third parties for which Jami Marketing
receives a management fee. Jami Marketing also provides occasional list
brokerage services to the Company, pursuant to an oral agreement, whereby Jami
Marketing obtains mailing lists from third parties for use by the Company in
connection with its telemarketing activities for which the Company pays Jami
Marketing a brokerage fee. In addition, although the Company currently creates
and designs substantially all of its print ads, direct mailings, newsletters and
other communications with club members, the Company has engaged Jami Direct to
provide some of such services. The Company also engages Jami Data to assist with
the Company's data base requirements. The Company believes that all of such
transactions were advantageous to the Company and were on terms no less
favorable to the Company than could have been obtained from unaffiliated third
parties. Any similar future transactions will be approved by a majority of the
independent and disinterested members of the Board of Directors, outside the
presence of any interested director and, to the extent deemed necessary or
appropriate by the Board of Directors, the Company will obtain fairness opinions
or stockholder approval in connection with any such transaction.
Mr. Mark Gutterman, a director of the Company, is a partner in the firm of
Feldman, Gutterman, Meinberg & Co. ("FGM"), one of the Company's accountants.
Burton Feldman, a partner in FGM, is the father-in-law of Jeffrey L. Schwartz,
the Chairman and Chief Executive Officer of the Company. For the year ended
November 30, 1995, the Company incurred charges of approximately $168,000, for
services rendered by FGM. FGM continues to provide services to the Company
during its current fiscal year. Its fees are based primarily on hourly rates.
The Company believes that its relationship with FGM is on terms no less or more
favorable to the Company than could have been obtained from unaffiliated third
parties.
Murray L. Skala, a director of the Company, is a partner in the law firm of
Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP, the Company's attorneys
("Feder Kaszovitz"). The Company paid such firm approximately $140,000 during
the year ended November 30, 1995. In December 1995, the Company also issued to
Feder Kaszovitz 25,000 shares of the Company's Common Stock in consideration for
legal services rendered in connection with the Company's initial public offering
of its shares of Common Stock. Feder
6
<PAGE> 8
Kaszovitz continues to provide services to the Company during its current fiscal
year. Its fees are based primarily on hourly rates. The Company believes that
its relationship with such firm is on terms no less or more favorable to the
Company than could have been obtained from unaffiliated third parties.
The Company has entered into a consulting agreement, effective October 1,
1995, with Michael Miller, a director and principal stockholder of the Company,
which expires on November 30, 1998. Under the terms of such consulting
agreement, Mr. Miller provides services in connection with identification and
engagement of celebrities to endorse the Company's services, the Company's
engagement of independent producers to produce commercials and infomercials and
the development of new entertainment services. The agreement provides that Mr.
Miller's services are subject to his availability and recognizes his commitment
to other non-competitive business activities. The Company has agreed to pay Mr.
Miller consulting fees of $10,416, $11,458 and $12,604 per month for the fiscal
years ending November 30, 1996, 1997 and 1998, respectively. The agreement
provides that Mr. Miller is precluded from involvement in any other business
which competes with the Company during the term of the consulting agreement and
for a period of two years thereafter. In addition, Mr. Miller has the right to
become a full-time employee of the Company in the event of the sale of the Jami
Companies, and to receive an initial base salary at the rate of $200,000 per
annum with 10% annual increases. Upon commencement of such full-time employment,
Mr. Miller will also be entitled to bonuses along with the Company's other
executive employees.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES ACT OF 1934
During the fiscal year ended November 30, 1995, the Company did not have a
class of equity securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934 (the "Exchange Act"), and as such was not subject to the
filing requirements of Forms 3, 4 or 5 as promulgated under Section 16(a) of the
Exchange Act.
EXECUTIVE COMPENSATION
The following table sets forth the Company's executive compensation paid
during the three fiscal years ended November 30, 1995, 1994 and 1993 for the
Chief Executive Officer and the Company's most highly compensated executive
officers of the Company (other than the Chief Executive Officer) whose cash
compensation exceeded $100,000 (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------
AWARDS
-------------------- PAYOUTS
ANNUAL COMPENSATION -------
----------------------------------- (F)
(E) RESTRICTED (H) (I)
(A) (C) (D) OTHER STOCK (G) PLAN ALL
NAME AND PRINCIPAL (B) SALARY BONUS ANNUAL AWARDS OPTIONS PAYOUTS OTHER
POSITION YEAR ($) (4) COMPENSATION($) ($) (#) ($) COMPENSATION($)
- -------------------------- ----- -------- ----- --------------- ---------- ------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jeffrey Schwartz.......... 1995 $187,879 0 0 0 25,000 0 0
Chairman and Chief 1994 381,758 0 0 0 0 0 0
Executive Officer 1993 90,000 0 $ 297,526(2) 0 0 0 0
Jay Greenwald............. 1995 518,387 0 0 0 25,000 0 0
President and Chief 1994 551,152 0 0 0 0 0 0
Operating Officer 1993 108,000 0 357,031(2) 0 0 0 0
Claudia Newman Hirsch..... 1995 405,291 0 0 0 25,000 0 0
Executive Vice President 1994 422,557 0 0 0 0 0 0
1993 57,600 0 238,021(2) 0 0 0 0
Andrew Stollman........... 1995 103,346 0 0 0 25,000 0 0
Senior Vice President 1994 225,518 0 0 0 0 0 0
and Secretary 1993 19,000(1) 0 0 0 0 0 0
</TABLE>
- ---------------
(1) Mr. Stollman commenced employment with the Company in September 1993. The
amount shown in the table for 1993 with respect to Mr. Stollman are payments
from that date.
(2) These amounts represent each Named Officer's share of management fees paid
by the Company to affiliated entities, one of which was controlled by Mr.
Schwartz and Michael G. Miller (a director and
7
<PAGE> 9
principal stockholder of the Company), and the other of which was controlled
by Mr. Greenwald and Ms. Newman Hirsch. See "Certain Relationships and
Related Transactions."
The following table sets forth certain information regarding options
granted during the fiscal year ended November 30, 1995 by the Company to the
Named Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE
------------------------------------------------ VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
TOTAL OPTIONS STOCK APPRECIATION
GRANTED TO EXERCISE FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN OR BASE EXPIRATION ------------------
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
- ------------------------------ ------- ------------- -------- ----------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey L. Schwartz........... 25,000 6.3% $ 5.00 10/20/2005 $78,612 $199,218
Jay Greenwald................. 25,000 6.3% $ 5.00 10/20/2005 $78,612 $199,218
Claudia Newman Hirsch......... 25,000 6.3% $ 5.00 10/20/2005 $78,612 $199,218
Andrew Stollman............... 25,000 6.3% $ 5.00 10/20/2005 $78,612 $199,218
</TABLE>
- ---------------
(1) The product of (i) the difference between (a) the product of (x) the market
price at the time of grant and (y) the annual appreciation rate shown
compounded annually for the term of each option, less (b) the exercise
price, and (ii) the number of options granted. The dollar amounts set forth
under this heading are the result of calculations at the 5% and 10% rates
set by the SEC and therefore are not intended to forecast possible future
appreciation, if any, of the stock price of the Company. The Company did not
use an alternate formula for valuation as the Company is not aware of any
formula which will determine with reasonable accuracy a present value of
options based on future, unknown or volatile factors. The Company valued the
market price at the time of grant at the exercise price ($5.00) as the
Company's securities were not publicly traded as of the fiscal year ended
November 30, 1995.
The following table sets forth certain information regarding options
exercised during the fiscal year ended November 30, 1995 and the value of the
options held as of November 30, 1995 by the Named Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Jeffrey L. Schwartz........................ 0 25,000 0 0
Jay Greenwald.............................. 0 25,000 0 0
Claudia Newman Hirsch...................... 0 25,000 0 0
Andrew Stollman............................ 0 25,000 0 0
</TABLE>
- ---------------
(1) As the shares of Common Stock underlying the Options were unregistered at
the end of the fiscal year ended November 30, 1995, and thereby not publicly
traded, no dollar value can be attributed to the shares underlying such
unexercised Options.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements, effective October 1,
1995, with each of Messrs. Schwartz, Greenwald and Stollman and Ms. Newman
Hirsch, which expire on November 30, 1998. Pursuant to such agreements, Mr.
Schwartz is employed as Chairman and Chief Executive Officer, Mr. Greenwald is
employed as President and Chief Operating Officer, Ms. Newman Hirsch is employed
as Executive Vice President and Mr. Stollman is employed as Senior Vice
President and Secretary. The employment agreements provide for employment on a
full-time basis (except for Mr. Schwartz, whose agreement provides that he will
devote not less than 85% of his working time to the Company's business) and
8
<PAGE> 10
contain a provision that the employee will not compete or engage in a business
competitive with the current or anticipated business of the Company during the
term of the agreement and for a period of two years thereafter.
Under the agreements, the Company has agreed to pay each of Mr. Schwartz,
Mr. Greenwald, Ms. Newman Hirsch and Mr. Stollman $375,000, $375,000, $300,000,
and $175,000 per annum, respectively, for the fiscal year ending November 30,
1996. The Agreements also provide for an increase in each of their base salaries
in the amount of 10% for each fiscal year thereafter, and in the event the
Company achieves pre-tax earnings of $10,000,000 or more for the fiscal years
ending November 30, 1996 and each year thereafter, the Company may grant
bonuses, subject to approval of the Company's Board of Directors, to such
persons in an aggregate amount not to exceed 5% of pre-tax earnings for each
such year.
BOARD COMPENSATION
As a result of the Company's policy to compensate non-employee directors
for their services, the Company's Amended and Restated 1995 Stock Option Plan
(the "1995 Plan") provides for the automatic grant to all non-employee directors
of options to purchase 25,000 shares of Common Stock and for the additional
automatic annual grant of options to purchase 5,000 shares of Common Stock. The
exercise prices for all of such non-employee director options are the market
values of the Common Stock on the date of each grant. The Company is proposing
in this Proxy Statement to adopt a new 1996 Stock Option Plan (the "1996 Plan")
whereby the Company, among other things, will increase the number of shares
underlying the annual grants of options to non-employee directors from 5,000 to
25,000. For a complete discussion of such proposal and the 1996 Plan, see
"Adoption of the Company's 1996 Stock Option Plan."
COMPENSATION COMMITTEE REPORT
Executive Compensation Philosophy
The Company's executive compensation program is designed to align executive
compensation with financial performance, business strategies and Company values
and objectives. This program seeks to enhance the profitability of the Company,
and thereby enhance stockholder value, by linking the financial interests of the
Company's executives with those of the stockholders. Under the guidance of the
Company's Compensation Committee of the Board of Directors, the Company has
developed and implemented an executive compensation program to achieve these
objectives while providing executives with compensation opportunities that are
competitive with companies of comparable size in related industries.
In applying this philosophy, the Compensation Committee has established a
program to (i) attract and retain executives of outstanding abilities who are
critical to the long-term success of the Company, and (ii) reward executives for
long-term strategic management and the enhancement of stockholder value by
providing equity ownership in the Company. Through these objectives, the Company
integrates its compensation programs with its annual and long-term strategic
planning.
Executive Compensation Program
The Compensation Committee, which is comprised solely of outside directors,
approves the executive compensation program on an annual basis, including
specified levels of compensation for all executive officers. The Company's
executive compensation program has been designed to implement the objectives
described above and is comprised of the following fundamental elements:
- base salary that is determined by individual contributions and sustained
performance within an established competitive salary range.
- long-term incentive program that rewards executives when stockholder
value is created through an increase in the market value of the Company's
Common Stock or through significant performance achievements that enhance
the long-term success of the Company.
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Each of these elements of compensation is discussed below.
Salary. Salary levels for the Company's executive officers are determined
based primarily on historical compensation levels of the executive officers and
salary levels at companies within its industry. Salaries for executive officers
are reviewed by the Compensation Committee on an annual basis and, in
determining salary adjustments, the Compensation Committee considers individual
performance and contributions to the Company.
Incentive Compensation. The Company's incentive compensation program is
primarily implemented through the grant of stock options. This program is
intended to align executive interests with the long-term interests of
stockholders by linking executive compensation with stockholder enhancement. In
addition, the program motivates executives to improve long-term stock market
performance by allowing them to develop and maintain a significant, long-term
equity ownership position in the Company's Common Stock. Stock options are
granted at prevailing market rates and will only have value if the Company's
stock price increases in the future. The Compensation Committee recommends to
the Stock Option Committee the number of shares to be issued pursuant to option
grants made to the Company's executive officers, based on individual
accomplishments measured against certain non-budgeted objectives and
contributions to the Company. The Compensation Committee also considers the
number and value of options held by each executive officer that will vest in the
future.
Chief Executive Officer Compensation
The Compensation Committee evaluates the performance of the Chief Executive
Officer on an annual basis and reports its assessment to the outside members of
the Board of Directors. The Compensation Committee's assessment of the Chief
Executive Officer is based on a number of factors, including the following:
achievement of short- and long-term financial and strategic targets and
objectives, considering factors such as sales and earnings per share; Company
position within the industry in which it competes, including market share;
overall economic climate; individual contribution to the Company; and such other
factors as the Compensation Committee may deem appropriate.
The salary of the Chief Executive Officer is reviewed by the Compensation
Committee on an annual basis and, in determining any salary adjustment, the
Compensation Committee considers the above factors.
The Chief Executive Officer's compensation is determined pursuant to the
principles noted above and by the terms of his employment agreement. Such terms
were based on Mr. Schwartz's leadership and contributions to the Company and his
successful role in the increase of the Company's pre-tax net income from
approximately $1,500,000 in 1994 to over $13,000,000 in 1995.
COMPENSATION COMMITTEE
Mark Gutterman
Murray L. Skala
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RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
(PROPOSAL NO. 2)
Upon the recommendation of the Audit Committee of the Board of Directors,
none of whose members are officers of the Company, the Board of Directors of the
Company has selected the firm of Coopers & Lybrand L.L.P., independent certified
public accountants, as the principal independent auditors of the Company for the
fiscal year ending November 30, 1996, subject to ratification by the
stockholders. Coopers & Lybrand L.L.P. served as the Company's independent
auditors during 1995. If the appointment of the firm of Coopers & Lybrand L.L.P.
is not approved or if that firm shall decline to act or their employment is
otherwise discontinued, the Board of Directors will appoint other independent
auditors. Representatives of Coopers & Lybrand L.L.P. are expected to be present
at the Annual Meeting, will have the opportunity to make a brief statement at
the Annual Meeting, if they so desire, and will be available to answer
appropriate questions from Stockholders.
ADOPTION OF THE COMPANY'S
1996 STOCK OPTION PLAN
(PROPOSAL NO. 3)
The Board of Directors has unanimously adopted, subject to stockholder
approval, a 1996 Stock Option Plan (the "1996 Plan"), which amends certain
aspects of the 1995 Plan, which was adopted by the Company's stockholders and
directors on October 17, 1995. If approved by the stockholders of the Company,
the 1996 Plan would (i) increase the number of shares of the Company's Common
Stock available under the 1995 Plan from 750,000 to 1,250,000 shares and (ii)
increase the number of shares of the Company's Common Stock included in the
options automatically granted to all non-employee directors from 5,000 to 25,000
shares, granted in equal quarterly installments of 6,250 shares, commencing on
each January 1st during the term of the 1996 Plan. The Company believes the
increase of the number of shares included in such grants will advance the
interests of the Company by inducing persons of outstanding ability and
potential to join and remain with the Company by encouraging and enabling
employees and directors to acquire proprietary interests in the Company, and by
providing the participating employees and directors with an additional incentive
to promote the success of the Company.
The above-described amendment was unanimously approved by the Company's
Board of Directors as of August 1, 1996, subject to stockholder approval.
The 1996 Plan is summarized below. The full text of the 1996 Plan is set
forth in Appendix A to this Proxy Statement, and the following discussion is
qualified by reference thereto.
ADMINISTRATION AND ELIGIBILITY
The 1996 Plan provides for the grant of stock options to officers,
directors, eligible employees, consultants and advisors of the Company. The
maximum number of shares of Common Stock available for issuance under the 1995
Plan is 750,000 shares, which the Company proposes to expand to 1,250,000 shares
under the 1996 Plan. Under the 1996 Plan, the Company may grant incentive stock
options or options not intended to qualify as incentive stock options.
The 1996 Plan provides for the granting of (i) Incentive Stock Options
intended to meet the requirements of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), to the Company's eligible employees and (ii)
Nonstatutory Stock Options which are not to be treated as incentive stock
options to the Company's directors, eligible employees, consultants or advisors.
The 1996 Plan is to be administered by the Board of Directors or the Stock
Option Committee (the "Committee"). Any construction or interpretation of terms
and provisions of the 1996 Plan by the Board or Committee are final and
conclusive. The class of persons which shall be eligible to receive
discretionary grants of Options under the 1996 Plan shall be employees
(including officers), consultants or advisors of either the
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<PAGE> 13
Company or any subsidiary corporation of the Company. Employees shall be
entitled to receive Incentive Stock Options and Nonstatutory Stock Options.
Consultants and advisors shall be entitled only to receive Nonstatutory Stock
Options. The Board or the Committee, in their sole discretion, but subject to
the provisions of the 1996 Plan, shall determine the employees, consultants or
advisors of the Company or its subsidiary corporations to whom Options shall be
granted and the number of shares to be covered by each Option taking into
account the nature of the employment or services rendered by the individuals
being considered, their annual compensation, their present and potential
contributions to the success of the Company and such other factors as the Board
or Committee may deem relevant.
As of the date of the adoption of the 1996 Plan by the Company's
stockholders, on the date any person first becomes a non-employee Director, such
person will automatically be granted, without further action by the Board or
Committee, an option to purchase 25,000 shares of the Company's Common Stock.
Under the 1995 Plan, on each January 1st during the term of the 1995 Plan,
non-employee Directors of the Company then serving in such capacity, were each
to be automatically granted, without further action by the Board or Committee,
an Option to purchase 5,000 shares of the Company's Common Stock. Under the 1996
Plan, the Company is proposing to (i) increase the amount of such shares to
25,000 and (ii) grant such Options in equal quarterly installments of 6,250
shares, commencing on each January 1st during the term of the 1996 Plan.
Under the 1996 Plan, non-employee directors may only be granted
Nonstatutory Stock Options.
No Incentive Stock Option granted under the 1996 Plan shall be exercisable
after the expiration of ten (10) years from the date of its grant. However, if
an Incentive Stock Option is granted to an individual who owns, at the time the
Incentive Stock Option is granted, more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of a subsidiary
corporation of the Company, such Incentive Stock Option shall not be exercisable
after the expiration of five (5) years from the date of its grant.
The exercise price of the Nonstatutory Stock Options granted to
non-employee directors of the Company shall be the "fair market value" (as
defined pursuant to the 1996 Plan) of the Company's Common Stock on the date
such options are granted. The exercise price of all other Nonstatutory Stock
Options granted under the 1996 Plan shall be determined by the Committee at the
time of the grant of the Option.
A Nonstatutory Stock Option granted to non-employee directors of the
Company shall vest entirely on the date granted and shall be exercisable for a
period of ten (10) years. All other Nonstatutory Stock Options granted under the
1996 Plan may be of such duration as shall be determined by the Board or
Committee (not to exceed 10 years).
If the employment of an employee by the Company or any subsidiary of the
Company shall be terminated either voluntarily by the employee or for cause,
then such employee's Options shall immediately expire. If such employment or
services shall terminate for any other reason, then such Options may be
exercised at any time within three (3) months after such termination. The
retirement of an individual either pursuant to a pension or retirement plan
adopted by the Company or at the normal retirement date prescribed from time to
time by the Company shall be deemed to be termination of such individual's
employment other than voluntarily or for cause.
If the holder of any Options under the 1996 Plan dies (i) while employed by
the Company or a subsidiary of the Company, or (ii) within three (3) months
after the termination of his employment or services other than voluntarily by
the employee or for cause, then such Options may be exercised by the estate of
such employee or by a person who acquired the right to exercise such Options by
bequest or inheritance or by reason of the death of such employee at any time
within one (1) year after such death.
If the holder of any Options under the 1996 Plan ceases employment because
of permanent and total disability (within the meaning of Section 22(e)(3) of the
Code) while employed by the Company or a subsidiary of the Company, then such
Options may be exercised at any time within one (1) year after his termination
of employment due to this disability.
If the services of a non-employee Director of the Company shall be
terminated by the Company for cause, then his Options shall immediately expire.
If such services shall terminate for any other reason (including the death or
disability of a non-employee Director), he shall resign as a director of the
Company or
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<PAGE> 14
his term shall expire, then such Options may be exercised at any time within one
(1) year after such termination. In the event of the death of a non-employee
Director, his Options may be exercised by his estate or by a person who acquired
the right to exercise such Options by bequest or inheritance or by reason of the
death of such non-employee Director at any time within one (1) year after such
death.
Upon the death of any consultant or advisor to the Company or any of its
subsidiaries, who is granted any Options under the 1996 Plan, such Options may
be exercised by the estate of such person or by a person who acquired the right
to exercise such Options by bequest or inheritance or by reason of the death of
such person at any time within one (1) year after such death.
Options granted under the 1996 Plan may provide for the payment of the
exercise price by the delivery of a check to the order of the Company in an
amount equal to the exercise price, by delivery to the Company of shares of
Common Stock of the Company already owned by the optionee having a fair market
value equal in amount to the exercise price of the options being exercised, or
by any combination of such methods of payment.
All options are nontransferable other than by will or the laws of descent
and distribution or pursuant to a domestic relations order as defined by the
Code or Title I of the Employee Retirement Income Security Act, or the rules
thereunder.
There are approximately 35 employees and 5 non-employee directors eligible
for participation in the 1996 Plan. The Company cannot presently approximate the
number of consultants and/or advisors who will be eligible to receive Options
under the 1996 Plan.
MERGER, CONSOLIDATION, ASSET SALE, LIQUIDATION, ETC.
In the event that the outstanding Common Stock is hereafter changed by
reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination of shares, stock dividends or the
like, an appropriate adjustment shall be made by the Board or Committee in the
aggregate number of shares available under the 1996 Plan and in the number of
shares and option price per share subject to outstanding Options. If the Company
shall be reorganized, consolidated or merged with another corporation, or if all
or substantially all of the assets of the Company shall be sold or exchanged,
the holder of an Option shall, at the time of issuance of the stock under such a
corporate event, be entitled to receive upon the exercise of his Option and
payment of the exercise price, the same number and kind of shares of stock or
the same amount of property, cash or securities as he would have been entitled
to receive upon the happening of such corporate event as if he had been,
immediately prior to such event, the holder of the number of shares covered by
his Option; provided, however, that in such event the Board or Committee shall
have the discretionary power to take any action necessary or appropriate to
prevent any Incentive Stock Option granted pursuant to the 1996 Plan from being
disqualified as an "incentive stock option" under the then existing provisions
of the Code or any law amendatory thereof or supplemental thereto.
AMENDMENT AND TERMINATION OF THE 1996 PLAN
The 1996 Plan would terminate on September 25, 2006, which would be within
ten (10) years from the date of its adoption by the Board of Directors and
stockholders, or sooner as hereinafter provided, and no Option shall be granted
after termination of the 1996 Plan.
The 1996 Plan may from time to time be terminated, modified or amended by
the affirmative vote of the holders of a majority of the outstanding shares of
capital stock of the Company present in person or by proxy at a meeting of
stockholders of the Company convened for such purpose.
The Board of Directors may at any time, on or before the termination date
of the 1996 Plan, terminate the 1996 Plan, or from time to time make such
modifications or amendments to the 1996 Plan as it may deem advisable; provided,
however, that the Board of Directors shall not, without approval by the
affirmative vote of the holders of a majority of the outstanding shares of
capital stock of the Company present in person or by proxy at a meeting of
stockholders of the Company convened for such purpose, increase the maximum
number of shares as to which Incentive Stock Options may be granted, or change
the designation of the
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<PAGE> 15
employees or other persons, or class of employees or other persons eligible to
receive Options or make any other change which would prevent any Incentive Stock
Option granted hereunder which is intended to be an "incentive stock option"
from being disqualified as such under the then existing provisions of the Code
or any law amending or supplementing the Code.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the federal income tax treatment of incentive
stock options and non-statutory stock options. The tax consequences recognized
by an optionee may vary; therefore, an optionee should consult his or her tax
advisor for advice concerning any specific transaction.
Incentive Stock Options. No taxable income will be recognized by an
optionee upon the grant or exercise of an incentive stock option granted under
the 1996 Plan. The difference between the exercise price and the fair market
value of the stock on the date of exercise will be included in alternative
minimum taxable income for purposes of the alternative minimum tax. The
alternative minimum tax is imposed upon an individual's alternative minimum
taxable income at rates of 26% to 28%, but only to the extent that such tax
exceeds the taxpayer's regular income tax liability for the taxable year.
Generally, if an optionee holds shares acquired upon the exercise of
incentive stock options until the later of (i) two years form the date of grant
of the option and (ii) one year from the date of transfer of the purchased
shares to him or her (the "Statutory Holding Period"), any gain recognized by
the optionee on a sale of such shares will be treated as capital gain. The gain
recognized upon the sale of the stock is the difference between the option price
and the sale price of the stock. The net federal income tax effect on the holder
of incentive stock options is to defer, until the stock is sold, taxation of any
increase in the stock's value from the time of grant to the time of exercise,
and to treat such increase as capital gain.
If the optionee sells the shares prior to the expiration of the Statutory
Holding Period, he or she will realize taxable income at ordinary income tax
rates in an amount equal to the lesser of (i) the fair market value of the
shares on the date of exercise less the option price, or (ii) the amount
realized on the disposition of the stock less the option price, and the Company
will receive a corresponding business expense deduction. However, special rules
may apply to options held by persons required to file reports under Section 16
of the Exchange Act. The amount by which the proceeds of the sale exceeds the
fair market value of the shares on the date of exercise will be treated as
long-term capital gain if the shares are held for more than one year prior to
the sale and as short-term capital gain if the shares are held for a shorter
period. If an optionee sells the shares acquired upon exercise of an option at a
price less than the option price, he or she will recognize a capital loss equal
to the difference between the sale price and the option price. The loss will be
long-term capital loss if the shares are held for more than one year prior to
the sale and a short-term capital loss if the shares are held for a shorter
period.
Non-Statutory Stock Options. No taxable income is recognized by the
optionee upon the grant of a Non-Statutory Option. The optionee must recognize
as ordinary income in the year in which the option is exercised the amount by
which the fair market value of the purchased shares on the date of exercise
exceeds the option price. However, special rules may apply to options held by
persons required to file reports under Section 16 of the Exchange Act. The
Company will be entitled to a business expense deduction equal to the amount of
ordinary income recognized by the optionee, subject to Section 162(m) of the
Code. Any additional gain or any loss recognized upon the subsequent disposition
of the purchased shares will be a capital gain or loss, and will be a long-term
gain or loss if the shares are held for more than one year.
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NEW PLAN BENEFITS
Because the option grants under the 1996 Plan are discretionary, the
Company cannot presently determine the benefits to be received by any particular
individual or particular group of individuals for such options under the 1996
Plan. The following table, however, sets forth the benefits (losses) that would
have been received in 1995 by the below-Named Officers, all executive officers
as a group, non-executive directors as a group and non-executive officer
employees as a group, as if the Plan had been in effect during 1995.
<TABLE>
<CAPTION>
THE 1996 PLAN(1)
-----------------------------
DOLLAR NUMBER OF
NAME AND POSITION VALUE($) SHARES
- ----------------------------------------------------------------- --------------- ---------
<S> <C> <C>
Jeffrey L. Schwartz.............................................. * *
Jay Greenwald.................................................... * *
Claudia Newman Hirsch............................................ * *
Andrew Stollman.................................................. * *
Executive Officer Group.......................................... * *
Non-Executive Officer Director Group (5 persons)................. $5.00 per share(2) 125,000
Non-Executive Officer Employee Group............................. * *
</TABLE>
- ---------------
* The 1996 Plan provides for the automatic granting of Options only to
non-employee directors. Grants of Options under the 1996 Plan to all other
groups, including executive officers and non-executive officer employees,
may include Incentive Stock Options, the granting of which are discretionary
and not determinable as to amount or dollar value as of the date of this
Proxy Statement.
(1) Subject to shareholder approval of the 1996 Plan.
(2) As the shares of Common Stock underlying the Options would have been
unregistered at their time of grant had the 1996 Plan been in effect in
fiscal 1995, the dollar value attributed to such shares for purposes of this
table is the exercise price of the Options for such shares ($5.00).
BOARD RECOMMENDATION
The Board of Directors believes that the approval of the foregoing three
proposals is in the best interests of the Company and its stockholders and
therefore recommends that the stockholders vote FOR such proposals.
OTHER MATTERS
Management does not know of any other matters which may come before the
Annual Meeting. However, if any other matters are properly presented at the
Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote, or otherwise act, in accordance with their judgment on such
matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph, facsimile, mail and personal interviews, and the Company reserves the
right to compensate outside agencies for the purpose of soliciting proxies.
Brokers, custodians and fiduciaries will be requested to forward proxy
soliciting material to the owners of shares held in their names and the Company
will reimburse them for out-of-pocket expenses incurred on behalf of the
Company.
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Proposals of stockholders intended to be presented at the 1997 Annual
Meeting of Stockholders must be received by the Company at its principal office
in Pearl River, New York not later than February 1, 1997 for inclusion in the
proxy statement for that meeting.
By Order of the Board of Directors,
--------------------------------------
ANDREW STOLLMAN, Secretary
August 20, 1996
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. STOCKHOLDERS WHO ATTEND
THE ANNUAL MEETING MAY VOTE THEIR SHARES PERSONALLY, EVEN THOUGH THEY HAVE SENT
IN THEIR PROXIES.
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APPENDIX A
QUINTEL ENTERTAINMENT, INC.
1996 STOCK OPTION PLAN
1. Purpose of the Plan. The Quintel Entertainment, Inc. 1996 Stock Option
Plan (the "Plan") is intended to advance the interests of Quintel Entertainment,
Inc. (the "Company") by inducing persons of outstanding ability and potential to
join and remain with the Company, by encouraging and enabling employees to
acquire proprietary interests in the Company, and by providing the participating
employees with an additional incentive to promote the success of the Company.
This is accomplished by providing for the granting of "Options" (which term as
used herein includes both "Incentive Stock Options" and "Nonstatutory Stock
Options," as later defined, to qualified employees. In addition, the Plan also
provides for the granting of "Nonstatutory Stock Options" to all non-employee
Directors of the Company, as consideration for their services and for attending
meetings of the Board of Directors, and also provides for the granting of
"Nonstatutory Stock Options" to consultants and advisors who provide services to
the Company.
2. Administration. The Plan shall be administered by a committee (the
"Committee") consisting of at least two (2) Directors chosen by the Board of
Directors, each of which is a "disinterested person", as such term is defined in
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Except as herein specifically provided, the interpretation
and construction by the Committee of any provision of the Plan or of any Option
granted under it shall be final and conclusive. The receipt of Options by
Directors, or any members of the Committee, shall not preclude their vote on any
matters in connection with the administration or interpretation of the Plan,
except as otherwise provided by law.
3. Shares subject to the Plan. The stock subject to grant under the Plan
shall be shares of the Company's common stock, $.001 par value (the "Common
Stock"), whether authorized but unissued or held in the Company's treasury or
shares purchased from stockholders expressly for use under the Plan. The maximum
number of shares of Common Stock which may be issued pursuant to Options granted
under the Plan shall not exceed one million two hundred fifty thousand
(1,250,000) shares, subject to adjustment in accordance with the provisions of
Section 13 hereof. The Company shall at all times while the Plan is in force
reserve such number of shares of Common Stock as will be sufficient to satisfy
the requirements of all outstanding Options granted under the Plan. In the event
any Option granted under the Plan shall expire or terminate for any reason
without having been exercised in full or shall cease for any reason to be
exercisable in whole or in part, the unpurchased shares subject thereto shall
again be available for Options under this Plan.
4. Stock Option Agreement. Each Option granted under the Plan shall be
authorized by the Committee and shall be evidenced by a Stock Option Agreement
which shall be executed by the Company and by the person to whom such Option is
granted. The Stock Option Agreement shall specify the number of shares of Common
Stock as to which any Option is granted, the period during which the Option is
exercisable and the option price per share thereof.
5. Discretionary Grant Participation. The class of persons which shall be
eligible to receive discretionary grants of Options under the Plan shall be all
key employees (including officers) of either the Company or any subsidiary
corporation of the Company and consultants and advisors who provide services to
the Company or any subsidiary of the Company, other than in connection with the
offer or sale of securities in a capital raising transaction. Employees shall be
entitled to receive (i) Incentive Stock Options, as described in Section 7
hereafter and (ii) Nonstatutory Stock Options, as described in Section 8
hereafter. Consultants and advisors shall be entitled only to receive
Nonstatutory Stock Options. The Committee, in its sole discretion, but subject
to the provisions of the Plan, shall determine the employees, consultants or
advisors to whom Options shall be granted and the number of shares to be covered
by each Option taking into account the nature of the employment or services
rendered by the individuals being considered, their annual compensation, their
present and potential contributions to the success of the Company and such other
factors as the Committee may deem relevant.
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<PAGE> 19
6. Non-Employee Director Participation.
(a) As of September 25, 1996, the date of the adoption of the Plan by the
Company's Board of Directors and stockholders, each non-employee Director then
serving in such capacity will be automatically granted, without further action
by the Committee, an option to purchase 25,000 shares of the Company's Common
Stock. Thereafter, on the date any person first becomes a non-employee Director,
such person shall automatically be granted, without further action by the
Committee, an option to purchase 25,000 shares of the Company's Common Stock.
(b) Commencing on each January 1st during the term of the Plan,
non-employee Directors of the Company then serving in such capacity, shall each
be granted Options to purchase 25,000 shares of the Company's Common Stock, to
be granted in equal quarterly installments of 6,250 shares.
(c) The option price of the shares subject to the Options set forth in
Sections 6(a) and 6(b) hereof shall be the fair market value (as defined in
Section 7(f) hereafter) of the Company's Common Stock on the date such Options
are granted. All of such Options shall be Nonstatutory Stock Options, as
described in Section 8 hereafter. The Options granted pursuant to this Section 6
shall vest entirely on the date they are granted and shall be exercisable for a
period of ten (10) years.
7. Incentive Stock Options. The Committee may grant Options under the Plan
which are intended to meet the requirements of Section 422 of the Internal
Revenue Code of 1986 (the "Code") (such an Option referred to herein as an
"Incentive Stock Option"), and which are subject to the following terms and
conditions and any other terms and conditions as may at any time be required by
Section 422 of the Code:
(a) No Incentive Stock Option shall be granted to individuals other than
key employees of the Company or of a subsidiary corporation of the Company.
(b) Each Incentive Stock Option under the Plan must be granted prior to
September 25, 2006, which is within ten (10) years from the date the Plan was
adopted by the Board of Directors.
(c) The option price of the shares subject to any Incentive Stock Option
shall not be less than the fair market value of the Common Stock at the time
such Incentive Stock Option is granted; provided, however, if an Incentive Stock
Option is granted to an individual who owns, at the time the Incentive Stock
Option is granted, more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of a subsidiary corporation of
the Company, the option price of the shares subject to the Incentive Stock
Option shall be at least one hundred ten percent (110%) of the fair market value
of the Common Stock at the time the Incentive Stock Option is granted.
(d) No Incentive Stock Option granted under the Plan shall be exercisable
after the expiration of ten (10) years from the date of its grant. However, if
an Incentive Stock Option is granted to an individual who owns, at the time the
Incentive Stock Option is granted, more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of a subsidiary
corporation, of the Company, such Incentive Stock Option shall not be
exercisable after the expiration of five (5) years from the date of its grant.
Every Incentive Stock Option granted under the Plan shall be subject to earlier
termination as expressly provided in Section 11 hereof.
(e) For purposes of determining stock ownership under this Section 7, the
attribution rules of Section 425(d) of the Code shall apply.
(f) For purposes of the Plan, fair market value shall be determined by the
Committee and, if the Common Stock is listed on a national securities exchange
or traded on the Over-the-Counter market, the fair market value shall be the
closing price of the Common Stock on such exchange, or on the Over-the-Counter
market as reported by the National Quotation Bureau, Incorporated, as the case
may be, on the day on which the Option is granted or on the day on which a
determination of fair market value is required under the Plan, or, if there is
no trading or closing price on that day, the closing price on the most recent
day preceding the day for which such prices are available.
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<PAGE> 20
8. Nonstatutory Stock Options. The Committee may grant Options under the
Plan which are not intended to meet the requirements of Section 422 of the Code,
as well as Options which are intended to meet the requirements of Section 422 of
the Code, but the terms of which provide that they will not be treated as
Incentive Stock Options (referred to herein as a "Nonstatutory Stock Option").
Nonstatutory Stock Options which are not intended to meet these requirements
shall be subject to the following terms and conditions:
(a) A Nonstatutory Stock Option may be granted to any person eligible to
receive an Option under the Plan pursuant to Section 5 hereof.
(b) Persons eligible to receive Nonstatutory Stock Options pursuant to
Section 6 hereof are granted Options automatically under the Plan, without any
determination by the Committee.
(c) Subject to the price provisions of Section 6 hereof, the option price
of the shares subject to a Nonstatutory Stock Option shall be determined by the
Committee, in its absolute discretion, at the time of the grant of the
Nonstatutory Stock Option.
(d) Subject to the provisions of Section 6 hereof, a Nonstatutory Stock
Option granted under the Plan may be of such duration as shall be determined by
the Committee (not to exceed 10 years), and shall be subject to earlier
termination as expressly provided in Section 11 hereof.
9. Rights of Option Holders. The holder of any Option granted under the
Plan shall have none of the rights of a stockholder with respect to the shares
covered by his Option until such shares shall be issued to him upon the exercise
of his Option.
10. Transferability. No Option granted under the Plan shall be
transferable by the individual to whom it was granted otherwise than by Will or
the laws of decent and distribution or pursuant to a domestic relations order as
defined by the Internal Revenue Code of 1986, as amended, or Title I of the
Employee Retirement Income Security Act, or the rules thereunder, and, during
the lifetime of such individual, shall not be exercisable by any other person,
but only by him.
11. Termination of Employment or Death.
(a) If the employment of an employee by the Company or any subsidiary of
the Company shall be terminated voluntarily by the employee or for cause, then
his Options shall expire forthwith. Except as provided in subsections (b) and
(c) of this Section 11, if such employment or services shall, terminate for any
other reason, then such Options may be exercised at any time within three (3)
months after such termination, subject to the provisions of subparagraph (f) of
this Section 11. For purposes of the Plan, the retirement of an individual
either pursuant to a pension or retirement plan adopted by the Company or at the
normal retirement date prescribed from time to time by the Company shall be
deemed to be termination of such individual's employment other than voluntarily
or for cause. For purposes of this subparagraph, an employee who leaves the
employ of the Company to become an employee of a subsidiary corporation of the
Company or a corporation (or subsidiary or parent corporation of the
corporation) which has assumed the Option of the Company as a result of a
corporate reorganization, etc., shall not be considered to have terminated his
employment.
(b) If the holder of any Options under the Plan dies (i) while employed by
the Company or a subsidiary of the Company, or (ii) within three (3) months
after the termination of his employment or services other than voluntarily by
the employee or for cause, then such Options may, subject to the provisions of
subparagraph (f) of this Section 11, be exercised by the estate of the employee
or by a person who acquired the right to exercise such Options by bequest or
inheritance or by reason of the death of such employee at any time within one
(1) year after such death.
(c) If the holder of any Options under the Plan ceases employment because
of permanent and total disability (within the meaning of Section 22(e)(3) of the
Code) while employed by the Company or a subsidiary of the Company, then such
Options may, subject to the provision of subparagraph (f) of this Section 11, be
exercised at any time within one (1) year after his termination of employment
due to this disability.
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<PAGE> 21
(d) If the services of a non-employee Director of the Company shall be
terminated by the Company for cause, then his Options shall expire forthwith. If
such services shall terminate for any other reason (including the death or
disability of a non-employee Director), he shall resign as a director of the
Company or his term shall expire, then such Options may be exercised at any time
within one (1) year after such termination, subject to the provisions of
subparagraph (f) of this Section 11. In the event of the death of a non-employee
Director, his Options may be exercised by his estate or by a person who acquired
the right to exercise such Options by bequest or inheritance or by reason of the
death of such non-employee Director at any time within one (1) year after such
death.
(e) Upon the death of any consultant or advisor to the Company or any of
its subsidiaries, who is granted any Options hereunder, such Options may,
subject to the provisions of subparagraph (f) of this Section 11, be exercised
by the estate of such person or by a person who acquired the right to exercise
such Options by bequest or inheritance or by reason of the death of such person
at any time within one (1) year after such death.
(f) An Option may not be exercised pursuant to this Section 11 except to
the extent that the holder was entitled to exercise the Option at the time of
termination of employment, termination of Directorship, or death, and in any
event may not be exercised after the expiration of the Option.
(g) For purposes of this Section 11, the employment relationship of an
employee of the Company or of a subsidiary corporation of the Company will be
treated as continuing intact while he is on military or sick leave or other bona
fide leave of absence (such as temporary employment by the Government) if such
leave does not exceed ninety (90) days, or, if longer, so long as his right to
reemployment is guaranteed either by status or by contract.
12. Exercise of Options.
(a) Unless otherwise provided in the Stock Option Agreement, any Option
granted under the Plan shall be exercisable in whole at any time, or in part
from time to time, prior to expiration. The Committee, in its absolute
discretion, may provide in any Stock Option Agreement that the exercise of any
Option granted under the Plan shall be subject (i) to such condition or
conditions as it may impose, including but not limited to, a condition that the
holder thereof remain in the employ or service of the Company or a subsidiary
corporation of the Company for such period or periods of time from the date of
grant of the Option, as the Committee, in its absolute discretion, shall
determine; and (ii) to such limitations as it may impose, including, but not
limited to, a limitation that the aggregate fair market value of the Common
Stock with respect to which Incentive Stock Options are exercisable for the
first time by any employee during any calendar year (under all plans of the
Company and its parent and subsidiary corporations) shall not exceed One Hundred
Thousand Dollars ($100,000). In addition, in the event that under any Stock
Option Agreement the aggregate fair market value of the Common Stock with
respect to which Incentive Stock Options are exercisable for the first time by
any employee during any calendar year (under all plans of the Company and its
parent and subsidiary corporations) exceeds One Hundred Thousand Dollars
($100,000), the Committee may, when shares are transferred upon exercise of such
Options, designate those shares which shall be treated as transferred upon
exercise of an Incentive Stock Option and those shares which shall be treated as
transferred upon exercise of a Nonstatutory Stock Option.
(b) An Option granted under the Plan shall be exercised by the delivery by
the holder thereof to the Company at its principal office (attention of the
Secretary) of written notice of the number of shares with respect to which the
Option is being exercised. Such notice shall be accompanied by payment of the
full option price of such shares, and payment of such option price shall be made
by the holder's delivery of his check payable to the order of the Company;
provided, however, that notwithstanding the foregoing provisions of this Section
12 or any other terms, provisions or conditions of the Plan, at the written
request of the optionee and upon approval by the Board of Directors or the
Committee, shares acquired pursuant to the exercise of any Option may be paid
for in full at the time of exercise by the surrender of shares of Common Stock
of the Company held by or for the account of the optionee at the time of
exercise to the extent permitted by subsection (c)(5) of Section 422 of the Code
and, with respect to any person who is subject to the reporting requirements of
Section 16(a) of the Exchange Act, to the extent permitted by Section 16(b) of
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<PAGE> 22
the Exchange Act and the Rules of the Securities and Exchange Commission,
without liability to the Company. In such case, the fair market value of the
surrendered shares shall be determined by the Committee as of the date of
exercise in the same manner as such value is determined upon the grant of an
Incentive Stock Option.
13. Adjustment Upon Change in Capitalization.
(a) In the event that the outstanding Common Stock is hereafter changed by
reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination of shares, stock dividends or the
like, an appropriate adjustment shall be made by the Committee in the aggregate
number of shares available under the Plan and in the number of shares and option
price per share subject to outstanding Options. If the Company shall be
reorganized, consolidated or merged with another corporation, or if all of
substantially all of the assets of the Company shall be sold or exchanged, the
holder of an Option shall, at the time of issuance of the stock under such a
corporate event, be entitled to receive upon the exercise of his Option the same
number and kind of shares of stock or the same amount of property, cash or
securities as he would have been entitled to receive upon the happening of such
corporate event as if he had been, immediately prior to such event, the holder
of the number of shares covered by his Option; provided, however, that in such
event the Committee shall have the discretionary power to take any action
necessary or appropriate to prevent any Incentive Stock Option granted hereunder
from being disqualified as an "incentive stock option" under the then existing
provisions of the Code or any law amendatory thereof or supplemental thereto.
(b) Any adjustment in the number of shares shall apply proportionately to
only the unexercised portion of the Option granted hereunder. If fractions of a
share would result from any such adjustment, the adjustment shall be revised to
the next lower whole number of shares.
14. Further Conditions of Exercise.
(a) Unless prior to the exercise of the Option the shares issuable upon
such exercise have been registered with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended (the "Securities Act"), the
notice of exercise shall be accompanied by a representation or agreement of the
individual exercising the Option to the Company to the effect that such shares
are being acquired for investment and not with a view to the resale of
distribution thereof or such other documentation as may be required by the
Company unless in the opinion of counsel to the Company such representation,
agreement or documentation is not necessary to comply with the Securities Act.
(b) The Company shall not be obligated to deliver any Common Stock until it
has been listed on each securities exchange on which the Common Stock may then
be listed or until there has been qualification under or compliance with such
state or federal laws, rules or regulations as the Company may deem applicable.
The Company shall use reasonable efforts to obtain such listing, qualifications
and compliance.
15. Effectiveness of the Plan. The Plan was originally adopted by the
Board of Directors as of August 1, 1996. The Plan was approved by the
affirmative vote of a majority of the outstanding shares of capital stock of the
Company present in person or by proxy at a meeting of stockholders of the
Company convened for such purpose on September 25, 1996.
16. Termination, Modification and Amendment.
(a) The Plan (but not Options previously granted under the Plan) shall
terminate on September 24, 2006, which is within ten (10) years from the date of
its adoption by the Board of Directors and stockholders, or sooner as
hereinafter provided, and no Option shall be granted after termination of the
Plan.
(b) The Plan may from time to time be terminated, modified or amended by
the affirmative vote of the holders of a majority of the outstanding shares of
capital stock of the Company present in person or by proxy at a meeting of
stockholders of the Company convened for such purpose; provided, however, that
Section 6 of the Plan may not be amended more than once every six (6) months,
other than to comply with changes in the Code, the Employee Retirement Income
Security Act, or the rules thereunder.
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<PAGE> 23
(c) The Board of Directors may at any time, on or before the termination
date referred to in Section 16(a) hereof, terminate the Plan, or from time to
time make such modifications or amendments to the Plan as it may deem advisable;
provided, however, that the Board of Directors shall not, without approval by
the affirmative vote of the holders of a majority of the outstanding shares of
capital stock of the Company present in person or by proxy at a meeting of
stockholders of the Company convened for such purpose, increase (except as
provided by Section 13 hereof) the maximum number of shares as to which
Incentive Stock Options may be granted, or change the designation of the
employees or class of employees eligible to receive Options or make any other
change which would prevent any Incentive Stock Option granted hereunder which is
intended to be an "incentive stock option" from disqualifying as such under the
then existing provisions of the Code or any law amendatory thereof or
supplemental thereto.
(d) No termination, modification or amendment of the Plan, may without the
consent of the individual to whom an Option shall have been previously granted,
adversely affect the rights conferred by such Option.
17. Not a Contract of Employment. Nothing contained in the Plan or in any
Stock Option Agreement executed pursuant hereto shall be deemed to confer upon
any individual to whom an Option is or may be granted hereunder any right to
remain in the employ or service of the Company or a subsidiary corporation of
the Company.
18. Use of Proceeds. The proceeds from the sale of shares pursuant to
Options granted under the Plan shall constitute general funds of the Company.
19. Indemnification of Board of Directors or Committee. In addition to
such other rights of indemnification as they may have, the members of the Board
of Directors or the Committee, as the case may be, shall be indemnified by the
Company to the extent permitted under applicable law against all costs and
expenses reasonably incurred by them in connection with any action, suit or
proceeding to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any rights
granted thereunder and against all amounts paid by them in settlement thereof or
paid by them in satisfaction of a judgment of any such action, suit or
proceeding, except a judgment based upon a finding of bad faith. Upon the
institution of any such action, suit or proceeding, the member or members of the
Board of Directors or the Committee, as the case may be, shall notify the
Company in writing, giving the Company an opportunity at its own cost to defend
the same before such member or members undertake to defend the same on their own
behalf.
20. Definitions. For purposes of the Plan, the terms "parent corporation"
and "subsidiary corporation" shall have the same meanings as set forth in
Sections 425(e) and 425(f) of the Code, respectively, and the masculine shall
include the feminine and the neuter as the context requires.
21. Governing Law. The Plan shall be governed by, and all questions
arising hereunder shall be determined in accordance with, the law of the State
of New York.
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<PAGE> 24
QUINTEL ENTERTAINMENT, INC.
Proxy for Annual Meeting of Shareholders to be held September 25, 1996
Know all men by these presents, that the undersigned hereby constitutes and
appoints Jeffrey L. Schwartz and Andrew Stollman and each of them, the true and
lawful attorneys, agents and proxies of the undersigned, with full power of
substitution, to represent and vote with respect to all of the shares of the
common stock of Quintel Entertainment, Inc., standing in the name of the
undersigned at the close of business on August 1, 1996, at the Annual Meeting
of Shareholders of the Company to be held on September 25, 1996 at the Park
Ridge Marriott Hotel, 300 Brae Boulevard, Park Ridge, New Jersey, and at any
and all adjournments thereof, with all the powers that the undersigned would
possess if personally present, and especially (but without limiting the general
authorization and power hereby given) to vote as follows.
This proxy is solicited by the Board of Directors of the Company.
(Continued and to be signed on reverse side.)
<PAGE> 25
/X/ PLEASE MARK YOUR VOTES AS THIS EXAMPLE
1. Election of Directors / / FOR / / AGAINST
NOMINEES ARE: Jeffrey L. Schwartz, Jay Greenwald, Claudia Newman Hirsch,
Andrew Stollman, Michael G. Miller, Murray L. Skala,
Mark Gutterman , Edwin A. Levy and Vincent Tese
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- -------------------------------------------------------------------------------
2. Approval of the Company's Stock Option Plan as to which options may be
granted to the Company's Employees and others for 1,250,000 Shares.
/ / FOR / / AGAINST / / ABSTAIN
3. Approval of appointment of Coopers & Lybrand LLP as the Company's auditors.
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion upon such other measures as may properly come before the
meeting, hereby ratifying and confirming all that said proxy may lawfully do
or cause to be done by virtue hereof and hereby revoking all proxies
heretofore given by the undersigned to vote at said meeting or any
adjournment thereof.
/ / FOR / / AGAINST / / ABSTAIN
The shares represented by this proxy will be voted in the manner indicated, and
if no instructions to the contrary are indicated, will be voted FOR all
proposals listed above.
Number of shares owned by undersigned .
--------------------------
Signature(s): Date:
------------------------------------------ -----------------
Signature(s): Date:
------------------------------------------ -----------------
IMPORTANT: Please sign exactly as your name or names are printed here.
Executors, administrators, trustees and other persons signing in a
representative capacity should give full title.
