<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 Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
QUINTEL ENTERTAINMENT, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(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 AUGUST 25, 1997
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 August 25, 1997 at 9:30 a.m. local time, to consider
and act upon the following matters:
1. To elect ten directors to serve for the ensuing year.
2. 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.
3. To ratify and approve the Company's Amended and Restated 1996 Stock
Option Plan.
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 July 14, 1997 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
July 21, 1997
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 1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 25, 1997
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 1997 Annual Meeting of Stockholders to be held on August 25,
1997, at the Park Ridge Marriott Hotel, 300 Brae Boulevard, Park Ridge, New
Jersey, 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 mailed this Proxy Statement to stockholders on or about July
21, 1997, and was accompanied by the Company's Annual Report to Shareholders for
the fiscal year ended November 30, 1996.
VOTING SECURITIES AND VOTES REQUIRED
At the close of business on July 14, 1997, 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 18,604,963 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 Amended and Restated 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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of July 14, 1997,
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 "Executive Compensation" below, (iii) all directors and
executive officers of the Company
<PAGE> 4
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>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT
BENEFICIAL OWNER(1) BENEFICIALLY OWNED(2) OF CLASS(2)
- ----------------------------------------------------------- ------------------------ -----------
<S> <C> <C>
Jay Greenwald.............................................. 3,104,402(3) 16.7%
Steven L. Feder, Thomas H. Lindsey & Peter Stolz........... 2,830,700(4) 15.2
2455 East Sunrise Boulevard
Ft. Lauderdale, FL 33304
Michael G. Miller.......................................... 2,623,252(5) 14.1
Jeffrey L. Schwartz........................................ 2,589,502(6) 13.9
Claudia Newman Hirsch...................................... 2,084,601(7) 11.2
Mellon Bank Corporation.................................... 1,241,800 6.7
One Mellon Bank Center
Pittsburgh, PA 15258
Andrew Stollman............................................ 1,169,443(8) 6.3
Edwin A. Levy.............................................. 54,250(9) *
767 Third Avenue
New York, NY 10017
Murray L. Skala............................................ 56,750(10) *
750 Lexington Avenue
New York, NY 10022
Mark Gutterman............................................. 53,750(11) *
280 Plandome Road
Manhasset, NY 11030
Vincent Tese............................................... 43,750(12) *
245 Park Avenue
New York, NY 10167
All executive officers and directors as a group (11 13,048,862(13)(14)
persons)................................................. 68.8
</TABLE>
- ---------------
* Less than 1% of the Company's outstanding shares.
(1) Unless otherwise provided, such person's address is c/o the Company, One
Blue Hill Plaza, Pearl River, New York 10965.
(2) The number of Shares of Common Stock beneficially owned by each person or
entity is determined under the 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 July 14, 1997. 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) Messrs. Feder, Lindsey and Stolz have filed a Form 13D with the Commission
classifying themselves collectively as a "group", as that term is defined
in Section 13(d) of the Securities and Exchange Act of 1934, as amended
(the "Exchange Act"). Such individuals, as a "group", are the beneficial
owners of more than 5% of the outstanding Common Stock of the Company. The
number of shares listed as beneficially owned by such "group" in the above
table does not include 109,000 shares of Common Stock held by Messrs. Feder
and Lindsey, as joint tenants with rights of survivorship, and 78,000
shares of Common Stock held by Mr. Stolz. Such shares were acquired by
Messrs. Feder, Lindsey and Stolz in individual capacities, rather than as
members of the "group".
(5) Includes 48,750 shares of Common Stock issuable upon exercise of options
held by Mr. Miller.
(6) Includes 25,000 shares of Common Stock issuable upon exercise of an option
held by Mr. Schwartz.
2
<PAGE> 5
(7) Includes 25,000 shares of Common Stock issuable upon exercise of an option
held by Ms. Newman Hirsch.
(8) Includes 25,000 shares of Common Stock issuable upon exercise of an option
held by Mr. Stollman.
(9) Includes 48,750 shares of Common Stock issuable upon exercise of options
held by Mr. Levy.
(10) Includes 48,750 shares of Common Stock issuable upon exercise of options
held by Mr. Skala.
(11) Includes 38,750 shares of Common Stock issuable upon exercise of options
held by Mr. Gutterman. Also includes 15,000 shares of Common Stock issuable
upon the exercise of an option held by Feldman, Gutterman, Meinberg & Co.,
a firm in which Mr. Gutterman is a partner.
(12) Represents shares of Common Stock issuable upon exercise of options held by
Mr. Tese.
(13) Includes 16,667 shares of Common Stock issuable upon the exercise of
options held by Mr. Daniel Harvey, Chief Financial Officer of the Company
and 1,252,495 shares held by Mr. Feder. Does not include 8,333 shares of
Common Stock issuable upon the exercise of options held by Mr. Harvey that
do not vest until December 15, 1998 and 109,000 shares of Common Stock held
by Messrs. Feder and Lindsey as joint tenants with rights of survivorship.
See Footnote (4).
(14) Includes 360,417 shares of Common Stock issuable upon the exercise of
options held by the executive officers and directors of the Company. See
footnote (3) and footnotes (5) through (13), above.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
The persons named in the enclosed proxy will vote to elect as directors the
ten 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............................. 33 President, Chief Operating
Officer and Director
Claudia Newman Hirsch..................... 36 Executive Vice President
and Director
Andrew Stollman........................... 32 Senior Vice President,
Secretary and Director
Michael G. Miller......................... 49 Director
Murray L. Skala........................... 50 Director
Mark Gutterman............................ 42 Director
Edwin A. Levy............................. 60 Director
Vincent Tese.............................. 54 Director
Steven L. Feder........................... 47 Director
</TABLE>
3
<PAGE> 6
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, 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, 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.
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 Jakks 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 Jakks Pacific, Inc.
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.
Steven L. Feder has been a director of the Company since October 1996 and
the Chief Executive Officer of Psychic Readers Network, Inc., the provider of
substantially all of the Company's psychic operators, since 1991.
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 five of its
existing principal stockholders
4
<PAGE> 7
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.
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 Stock Option Plan.
EXECUTIVE OFFICERS
Officers are elected annually by the Board of Directors and serve at the
direction of the Board of Directors. Four of the Company's five 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 is set forth above under the heading "Directors".
The remaining executive officer is Mr. Daniel Harvey, the Company's Chief
Financial Officer. Mr. Harvey, Age 38, has been Chief Financial Officer of the
Company since January 1997. He joined the Company in September 1996. From
November 1991 to August 1996 he was a Senior Manager with the accounting firm of
Feldman, Gutterman, Meinberg & Co. Mr. Harvey is a Certified Public Accountant.
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 COMMITTEES
The Board of Directors 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.
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, Gutterman and Feder.
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. Tese and Levy.
ATTENDANCE AT MEETINGS
From December 1, 1995, through November 30, 1996, there were five meetings
of the Board of Directors. From December 1, 1995 through November 30, 1996 there
was one meeting of each of the Audit Committee and Stock Option Committee. The
Compensation Committee did not meet until February 1997.
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
5
<PAGE> 8
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
such services. The Company also engages Jami Data to assist with the Company's
data base requirements. Lastly, the Company obtains a substantial number of
psychics for its live psychic and other services from PRN. Central Talk
Management ("CTM"), an affiliate of PRN, has created and produced a significant
portion of the Company's television commercials and purchases a portion of the
Company's media time. PRN is principally owned and controlled by Steven L.
Feder, Thomas H. Lindsey and Peter Stolz, holders of an aggregate of 3,017,700
shares of Common Stock, representing approximately 16.2% of the outstanding
Common Stock of the Company. In addition, Mr. Feder is employed by the Company
as the General Manager of New Lauderdale, L.C., a wholly-owned subsidiary of the
Company. The Company believes that all of the foregoing transactions and
agreements were advantageous to the Company and were on terms no less favorable
to the Company than could have been obtained from unaffiliated third parties.
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 fiscal year
ended November 30, 1996, the Company incurred charges of approximately $242,000
for services rendered by FGM. In December 1996 the Company granted FGM options
to purchase 15,000 shares of Common Stock in consideration for services
rendered. 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 incurred charges of approximately $334,000
during the fiscal year ended November 30, 1996. 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 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 paid or 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.
6
<PAGE> 9
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the best of the Company's knowledge, Steven L. Feder, Mark Gutterman,
Edwin Levy, Thomas H. Lindsey, Michael G. Miller, Murray L. Skala and Peter
Stolz, executive officers, directors and/or beneficial owners of more than 10%
of the Common Stock of the Company during the fiscal year ended November 30,
1996, have either untimely filed or failed to file reports on Forms 3, 4 or 5
during the fiscal year ended November 30, 1996. Messrs. Feder, Lindsey, Miller
and Skala each filed one late report, reporting one transaction. Messrs. Levy
and Gutterman each filed two late reports, reporting three and eight
transactions, respectively. Mr. Stolz failed to file a required Form 3, but
filed the related Form 5 in February 1997. To the best of the Company's
knowledge, all other Forms 3, 4 or 5 required to be filed during the fiscal year
ended November 30, 1996 were done so on a timely basis.
EXECUTIVE COMPENSATION
The following table sets forth the Company's executive compensation paid
during the three fiscal years ended November 30, 1996, 1995 and 1994 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 $100,000 (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------ ----------------------- -------
(e)
OTHER (f) (h) (i)
(a) (c) (d) ANNUAL RESTRICTED (g) PLAN ALL OTHER
NAME AND (b) SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- -------------------- ----- -------- -------- ------------ ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jeffrey Schwartz.... 1996 $375,000 $269,573 0 0 0 0 0
Chairman and 1995 187,879 0 0 0 25,000 0 0
Chief Executive 1994 381,758 0 0 0 0 0 0
Officer
Jay Greenwald....... 1996 $375,000 $269,573 0 0 0 0 0
President and 1995 518,387 0 0 0 25,000 0 0
Chief Operating 1994 551,152 0 0 0 0 0 0
Officer
Claudia Newman
Hirsch............ 1996 $300,000 $ 89,858 0 0 0 0 0
Executive Vice 1995 405,291 0 0 0 25,000 0 0
President 1994 422,557 0 0 0 0 0 0
Andrew Stollman..... 1996 $175,000 $269,573 0 0 0 0 0
Senior Vice 1995 103,346 0 0 0 25,000 0 0
President and 1994 225,518 0 0 0 0 0 0
Secretary(1)
</TABLE>
- ---------------
(1) Mr. Stollman's Employment Agreement was amended, effective January 1, 1997,
to provide for a base salary of $240,000.
7
<PAGE> 10
The following table sets forth certain information regarding options
exercised and exercisable during the fiscal year ended November 30, 1996 and the
value of the options held as of November 30, 1996 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
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Jeffrey L. Schwartz........................ 25,000 0 $65,625(1) 0
Jay Greenwald.............................. 25,000 0 65,625(1) 0
Claudia Newman Hirsch...................... 25,000 0 65,625(1) 0
Andrew Stollman............................ 25,000 0 65,625(1) 0
</TABLE>
- ---------------
(1) The difference between (x) the product of 25,000 multiplied by $7.625 (the
closing price of the Company's Common Stock at fiscal year ended November
30, 1996, as listed on the NASDAQ National Market) and (y) the product of
25,000 multiplied by $5.00 (the exercise price of the 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
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 paid to 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 ended November 30, 1996.
(Mr. Stollman's contract was amended, effective January 1, 1997, to provide for
a base salary of $250,000.) The agreements 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 a
fiscal year, 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. For a summary of the bonuses granted in the
fiscal year ended November 30, 1996, see "Summary Compensation Table."
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
provided for a one-time automatic grant to all non-employee directors of options
to purchase 25,000 shares of Common Stock upon first becoming a director and for
the additional automatic annual grant of options to purchase 5,000 shares of
Common Stock (the "Additional Grant"). A new plan was adopted during the fiscal
year ended November 30, 1996 (the "1996 Plan"), whereby the number of shares
underlying the options included in the Additional Grant was increased from 5,000
shares per annum to 6,250 shares per calendar quarter (25,000 shares per annum).
The exercise prices for all of such non-employee director options are the market
value of the Common Stock on the date of each grant.
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors during the
fiscal year ended November 30, 1996 consisted of Mark Gutterman and Murray L.
Skala. For a discussion of Compensation Committee interlock and insider
participation, see the information relating to Messrs. Gutterman and Skala
contained herein under the heading "Certain Relationships and Related
Transactions."
8
<PAGE> 11
<TABLE>
<CAPTION>
Measurement Period S&P MIDCAP 400 QUINTEL
(Fiscal Year Covered) PEER GROUP INDEX ENTERTAINMENT INC
<S> <C> <C> <C>
5-Dec-95 100.00 100.00 100.00
Nov-96 113.10 118.09 152.50
</TABLE>
TOTAL SHAREHOLDER RETURNS
(DIVIDENDS REINVESTED)
ANNUAL RETURN PERCENTAGE
<TABLE>
<CAPTION>
YEAR
ENDING
COMPANY NAME/INDEX NOV. 96
------------------------------------------------------------------------------------------ --------
<S> <C>
QUINTEL ENTERTAINMENT INC................................................................. 52.50
S&P MIDCAP 400 INDEX...................................................................... 18.09
PEER GROUP (SIC 7900 -- Amusement and Recreation Services)................................ 13.10
</TABLE>
INDEXED RETURNS
<TABLE>
<CAPTION>
BASE YEAR
PERIOD ENDING
COMPANY NAME/INDEX 5 DEC. 95 NOV. 96
------------------------------------------------------------------------------ --------- --------
<S> <C> <C>
QUINTEL ENTERTAINMENT INC..................................................... 100 152.50
S&P MIDCAP 400 INDEX.......................................................... 100 118.09
PEER GROUP (SIC 7900 -- Amusement and Recreation Services).................... 100 113.10
</TABLE>
The Company's Common Stock commenced trading on the NASDAQ National Market
on December 5, 1995 at a price of $5.00 per share. Total returns presented above
assume $100 invested on December 5, 1995 in the Company's Common Stock, the S&P
Midcap 400 Index and the SIC 7900 Peer Group Companies.
9
<PAGE> 12
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 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 and bonuses that are determined by individual contributions
and sustained performance within an established competitive salary range.
- incentive programs that reward 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.
Each of these elements of compensation is discussed below.
Salary and Bonus. Initial salary and bonus levels for the Company's
executive officers are determined based primarily on historical compensation
levels of the executive officers at other companies within its industry.
Salaries for executive officers are reviewed by, and the amount of bonuses to be
granted are determined by, the Compensation Committee of the Board of Directors
of the Company, on an annual basis. In determining salary adjustments and annual
grants of bonuses, the Compensation Committee considers individual performance
and contributions to the Company, as well as overall adjustments of salaries and
grants of bonuses to executive officers of other companies within the industry.
10
<PAGE> 13
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 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.
Mr. Schwartz' salary is currently governed by an employment agreement,
expiring on November 30, 1998 (see "Employment Agreements"). However, the salary
of the Chief Executive Officer is reviewed by the Compensation Committee on an
annual basis and, in determining any recommendations for a 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
compensation package was 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 $17,000,000 in 1996.
COMPENSATION COMMITTEE
Steven L. Feder
Mark Gutterman
Murray L. Skala
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, 1997, subject to ratification by the
stockholders. Coopers & Lybrand L.L.P. served as the Company's independent
auditors during 1996. 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.
11
<PAGE> 14
ADOPTION OF THE COMPANY'S AMENDED AND
RESTATED 1996 STOCK OPTION PLAN
(PROPOSAL NO. 3)
The Board of Directors has unanimously adopted, subject to stockholder
approval, an Amended and Restated 1996 Stock Option Plan (the "Amended Plan"),
which amends certain aspects of the 1996 Plan, which was adopted by the
Company's stockholders and directors on September 25, 1995. If approved by the
stockholders of the Company, the Amended Plan would increase the number of
shares of the Company's Common Stock available under the 1996 Plan from
1,250,000 to 1,850,000 shares. The Company believes the increase of the number
of shares underlying the options available for grant under the Amended Plan will
advance the interests of the Company by encouraging and enabling a greater
number of employees, consultants, advisors and directors to acquire proprietary
interests in the Company, thereby providing the participating employees,
consultants, advisors 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 June 24, 1997, subject to stockholder approval.
The Amended Plan is summarized below. The full text of the Amended Plan is
set forth in Appendix A to this Proxy Statement, and the following discussion is
qualified by reference thereto.
ADMINISTRATION AND ELIGIBILITY
The Amended 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 1996
Plan is 1,250,000 shares, which the Company proposes to expand to 1,850,000
shares under the Amended Plan. Under the Amended Plan, the Company may grant
incentive stock options or options not intended to qualify as incentive stock
options (together, the "Options").
The Amended 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 (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 Amended 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 Amended 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 Amended Plan shall be employees
(including officers), consultants or advisors of either the 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
Amended 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.
On the date any person first becomes a Director of the Company during the
term of the Amended Plan, and such person is not an employee of the Company,
such person will automatically be granted, without further action by the Board
or Committee, a one-time grant of an option to purchase 25,000 shares of the
Company's Common Stock.
On the first day of each calendar quarter during the term of the Amended
Plan, directors who are not employees of the Company then serving in such
capacity, are each to be automatically granted, without further action by the
Board or Committee, an Option to purchase 6,250 shares of the Company's Common
Stock.
12
<PAGE> 15
Under the Amended Plan, directors who are not employees of the Company may
only be granted Nonstatutory Stock Options. Such individuals include attorneys,
accountants, consultants and advisors of the Company who, in addition to
providing services in such capacities, also serve as directors of the Company.
No Incentive Stock Option granted under the Amended 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 directors
who are not employees of the Company shall be the "fair market value" (as
defined pursuant to the Amended 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 Amended Plan shall be determined by the Board or
Committee at the time of the grant of the Option.
A Nonstatutory Stock Option granted to directors who are not employees 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 Amended 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 Amended 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 Amended 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 such disability.
If the services of a director who is not an employee 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 director who is not an employee of the Company), 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.
In the event of the death of a director who is not an employee of the Company,
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 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 Amended 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 Amended 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
13
<PAGE> 16
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 forty (40) employees and five (5) directors who are
not employees of the Company who are eligible for participation in the Amended
Plan. The Company cannot presently approximate the number of consultants and/or
advisors who will be eligible to receive Options under the Amended 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 Amended 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 Amended 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 AMENDED PLAN
The Amended Plan shall terminate on September 25, 2006, which is within ten
(10) years from the date of the adoption of the 1996 Plan by the Board of
Directors and stockholders, or sooner as hereinafter provided, and no Option
shall be granted after termination of the Amended Plan.
The Amended 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 Amended Plan, terminate the Amended Plan, or from time to time make such
modifications or amendments to the Amended 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 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.
14
<PAGE> 17
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 Amended 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 a 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.
NEW PLAN BENEFITS
Because the value of the options to be granted under the Amended Plan are
based upon the fluctuating market price of the Company's Common Stock, the
Company cannot presently determine the benefits to be received by any particular
individual or particular group of individuals for such options under the Amended
Plan. The following table, however, sets forth the benefits that would have been
received in 1996 by the
15
<PAGE> 18
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 Amended Plan had
been in effect during 1996.
<TABLE>
<CAPTION>
THE AMENDED 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)(2)
January 1, 1996........................... $ 4 3/4 per share(3) 31,250
April 1, 1996............................. $10 7/8 per share(3) 31,250
July 1, 1996.............................. $11 7/8 per share(3) 31,250
October 1, 1996........................... $ 7 3/4 per share(3) 31,250
Non-Executive Officer Employee Group........ * *
</TABLE>
- ---------------
* The Amended Plan provides for the automatic granting of Options only to
directors who are not employees of the Company. Such individuals would
receive, subject to stockholder approval of the Amended Plan, options to
purchase 6,250 shares of Common Stock on the first day of each calendar
quarter the Amended Plan is in effect. Grants of Options under the Amended
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 Amended Plan.
(2) The information provided represents the benefits that would have been
received in 1996 by the Non-Executive Officer Group, as if the Amended Plan
had been in effect during 1996.
(3) Represents the closing price of the Company's Common Stock on the date the
Options would have been granted had the Amended Plan been in effect during
1996, or if there was no trading on that day, the closing price of the
Company's Common Stock on the most recent day preceding the date the Options
would have been granted.
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.
1998 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company at its executive offices
in Pearl River, New York not later than February 1, 1998 for inclusion in the
proxy statement for that meeting.
16
<PAGE> 19
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.
By Order of the Board of Directors,
ANDREW STOLLMAN
Secretary
July 21, 1997
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.
17
<PAGE> 20
APPENDIX A
QUINTEL ENTERTAINMENT, INC.
AMENDED AND RESTATED 1996 STOCK OPTION PLAN
1. Purpose of the Plan. The Quintel Entertainment, Inc. Amended and
Restated 1996 Stock Option Plan (the "Amended 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 Amended Plan also provides for the
granting of "Nonstatutory Stock Options" to all Directors who are not employees
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 Amended Plan shall be administered by the Board of
Directors (the "Board"), or by a committee (the "Committee") consisting of at
least two (2) Directors chosen by the Board, each of which is a "Non-employee
Director," 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 Board
or Committee of any provision of the Amended 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 Amended Plan, except
as otherwise provided by law.
3. Shares subject to the Amended Plan. The stock subject to grant under
the Amended 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
Amended Plan. The maximum number of shares of Common Stock which may be issued
pursuant to Options granted under the Amended Plan shall not exceed one million
eight hundred fifty thousand (1,850,000) shares, subject to adjustment in
accordance with the provisions of Section 13 hereof. The Company shall at all
times while the Amended 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 Amended Plan. In the event any Option granted under
the Amended 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 Amended Plan.
4. Stock Option Agreement. Each Option granted under the Amended Plan
shall be authorized by the Board or Committee and shall be evidenced by a
Certificate of Stock Option Agreement which shall be executed by the Company.
The Certificate of 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 Amended 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 Board or Committee, in its sole
discretion, but subject to the provisions of the Amended 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
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<PAGE> 21
compensation, their present and potential contributions to the success of the
Company and such other factors as the Board or Committee may deem relevant.
6. Participation of Directors Who Are Not Employees of the Company
(a) As of August 25, 1997, the date of the adoption of the Amended
Plan by the Company's stockholders, on the date any person who is not an
employee of the Company first becomes a Director, such person shall
automatically be granted, without further action by the Board or Committee,
an option to purchase 25,000 shares of the Company's Common Stock.
(b) On the first day of each calendar quarter during the term of the
Amended Plan, Directors of the Company who are not employees of the Company
then serving in such capacity, shall each be granted an Option to purchase
6,250 shares of the Company's Common Stock.
(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.
(d) Directors who are not employees of the Company include attorneys,
accountants, consultants and advisors of the Company who, in addition to
providing services in such capacity, serve as Directors of the Company.
7. Incentive Stock Options. The Board or Committee may grant Options
under the Amended 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 Amended Plan must be granted
prior to September 25, 2006, which is within ten (10) years from the date
the Amended Plan was adopted by the Board of Directors and shareholders of
the Company.
(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 Amended 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 Amended 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 Amended Plan, fair market value shall be
determined by the Board or 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
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<PAGE> 22
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 Amended 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.
8. Nonstatutory Stock Options. The Board or Committee may grant Options
under the Amended 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 Amended 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 Amended Plan,
without any determination by the Board or 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 Board or 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 Amended Plan may be of such duration as
shall be determined by the Board or 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
Amended 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 Amended 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 Securities 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
Amended 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, shall not be considered to have terminated his
employment.
(b) If the holder of any Options under the Amended 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.
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<PAGE> 23
(c) If the holder of any Options under the Amended 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.
(d) If the services of a Director who is not an employee 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 such 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 Director who is not an employee of the
Company, 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 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 Certificate of Stock Option
Agreement, any Option granted under the Amended Plan shall be exercisable
in whole at any time, or in part from time to time, prior to expiration.
The Board or Committee, in its absolute discretion, may provide in any
Certificate of Stock Option Agreement that the exercise of any Option
granted under the Amended 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 Board or 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 Certificate of 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 Board or 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 Amended 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
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<PAGE> 24
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 Amended 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 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 Board or 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
Board or Committee in the aggregate number of shares available under the
Amended 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 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 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 or 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 shares of Common
Stock until such shares have been listed on each securities exchange on
which the Common Stock of the Company 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 Company's 1996 Stock Option Plan (the
"Plan") was originally adopted by the Board of Directors on August 1, 1996 and
approved by the affirmative vote of a majority of the outstanding shares of
capital stock of the Company on September 25, 1996. The Amended Plan was adopted
by the Board of Directors on June 24, 1997 and approved by the affirmative vote
of a majority of the outstanding shares of capital stock of the Company on
August 25, 1997.
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<PAGE> 25
16. Termination, Modification and Amendment.
(a) The Amended Plan (but not Options previously granted under the
Amended Plan) shall terminate on September 25, 2006, which is within ten
(10) years from the date of the adoption of the Plan by the Board of
Directors and shareholders of the Company, or sooner as hereinafter
provided, and no Option shall be granted after termination of the Amended
Plan.
(b) The Amended 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.
(c) The Board of Directors may at any time, on or before the
termination date referred to in Section 16(a) hereof, terminate the Amended
Plan, or from time to time make such modifications or amendments to the
Amended 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 Amended 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 Amended Plan
or in any Certificate of 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 Amended 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 Amended 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 Amended Plan, the terms "parent
corporation" and "subsidiary corporation" shall have the same meanings a 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 Amended 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> 26
QUINTEL ENTERTAINMENT, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD AUGUST 25, 1997
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 July 14, 1997, at the Annual Meeting of
Shareholders of the Company to be held on August 25, 1997 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.
[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, Vincent Tese and Steven L. Feder
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. APPROVAL OF APPOINTMENT OF COOPERS & LYBRAND, LLP AS THE COMPANY'S AUDITORS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. APPROVAL OF THE COMPANY'S AMENDED AND RESTATED 1996 STOCK OPTION PLAN AS TO
WHICH OPTIONS MAY BE GRANTED TO THE COMPANY'S EMPLOYEES AND OTHERS FOR
1,850,000 SHARES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on the reverse side.)
<PAGE> 27
(continued from other side)
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.
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:
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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.
