<PAGE> 1
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Quintel Entertainment, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name(s) of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed 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
09-11(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 24, 1998
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 24, 1998 at 9:30 a.m. local time, to consider
and act upon the following matters:
1. To elect nine directors to serve for the ensuing year.
2. To ratify the selection by the Board of Directors of
Pricewaterhouse Coopers LLP as the Company's independent auditors for the
current fiscal year.
3. To amend the Company's Certificate of Incorporation, changing the
name of the Company from Quintel Entertainment, Inc. to Quintel
Communications, Inc.
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 2, 1998 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 20, 1998
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 1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 24, 1998
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 1998 Annual Meeting of Stockholders to be held on August 24,
1998, at the Park Ridge Marriott Hotel, 300 Brae Boulevard, Park Ridge, New
Jersey, at 9:30 a.m. local time, 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 intends to mail this Proxy Statement to stockholders on or
about July 20, 1998, accompanied by the Company's Annual Report to Stockholders
for the fiscal year ended November 30, 1997.
VOTING SECURITIES AND VOTES REQUIRED
At the close of business on July 2, 1998, 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 16,679,746 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
ratification of the selection by the Board of Directors of Pricewaterhouse
Coopers LLP as the Company's independent auditors for the current fiscal year
and the amendment of the Company's Certificate of Incorporation changing the
name of the Company to Quintel Communications, Inc. 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 information, as of July 2, 1998, based upon
information obtained from the persons named below, regarding beneficial
ownership of the Company's Common Stock by (i) each current director and nominee
for director of the Company, (ii) each executive officer or former executive
officer of the Company named in the Summary Compensation Table set forth under
the caption "Executive Compensation", below, (iii) each person who is known by
the Company to own beneficially more than 5% of the
<PAGE> 4
outstanding shares of its Common Stock, and (iv) all executive officers and
directors of the Company as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT
BENEFICIAL OWNER(1) BENEFICIALLY OWNED(2) OF CLASS(2)
- ------------------- --------------------- -----------
<S> <C> <C>
Jeffrey L. Schwartz......................................... 2,477,002(3) 14.8%
Jay Greenwald............................................... 2,969,402(4) 17.7
Andrew Stollman............................................. 1,119,443(5) 6.7
Daniel Harvey............................................... 17,001(6) *
Claudia Newman Hirsch....................................... --(7) *
Michael G. Miller........................................... 2,515,752(8) 15.0
Steven L. Feder, Thomas H. Lindsey & Peter Stolz............ 2,439,481(9) 14.6
2455 East Sunrise Boulevard
Ft. Lauderdale, FL 33304
Murray L. Skala............................................. 77,750(10) *
750 Lexington Avenue
New York, NY 10022
Edwin A. Levy............................................... 73,750(11) *
767 Third Avenue
New York, NY 10017
Mark Gutterman.............................................. 68,750(12) *
280 Plandome Road
Manhasset, NY 11030
Paul Novelly................................................ 31,250(13) *
8182 Maryland Avenue
St. Louis, MO 63105
All executive officers and directors as a group (11
persons).................................................. 10,404,595(14) 60.8%
</TABLE>
- ---------------
* Less than 1% of the Company's outstanding shares.
(1) Unless otherwise provided, such person's address is at the Company's
executive offices, 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 2, 1998. 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 exercise of an option
held by Mr. Schwartz.
(4) Includes 25,000 shares of Common Stock issuable upon the exercise of an
option held by Mr. Greenwald and 180,000 shares held by a limited
partnership of which Mr. Greenwald is a partner.
(5) Includes 25,000 shares of Common Stock issuable upon exercise of an option
held by Mr. Stollman.
(6) Represents 17,001 shares of Common Stock issuable upon the exercise of
options held by Mr. Harvey. Does not include 8,999 shares underlying
options held by Mr. Harvey which are not exercisable within 60 days after
July 2, 1998.
2
<PAGE> 5
(7) In March 1998, Ms. Newman Hirsch resigned as an employee and director of
the Company, at which time the Company purchased all the shares of Common
Stock of the Company held by Ms. Newman Hirsch.
(8) Includes 73,750 shares of Common Stock issuable upon exercise of options
held by Mr. Miller.
(9) In 1996, Steven L. Feder (a director of the Company), Thomas H. Lindsey and
Peter Stolz filed a Form 13D with the Commission classifying themselves
collectively as a "group", as that term is defined in Section 13(d) of the
Exchange Act. Such individuals, as a "group", are the beneficial owners of
more than 5% of the outstanding shares of Common Stock of the Company.
(10) Includes 73,750 shares of Common Stock issuable upon exercise of options
held by Mr. Skala.
(11) Represents 73,750 shares of Common Stock issuable upon exercise of options
held by Mr. Levy.
(12) Includes 53,750 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.,
an accounting firm in which Mr. Gutterman is a partner.
(13) Represents 31,250 shares of Common Stock issuable upon exercise of options
held by Mr. Novelly.
(14) Includes 413,251 shares of Common Stock issuable upon the exercise of
options held by the executive officers and directors of the Company. See
footnotes (3) through (8) and footnotes (10) through (13), above. Also
includes 1,054,495 shares held by Mr. Feder, a director of the Company, but
does not include the balance of the shares held by such "Group". See
footnote (9), above.
3
<PAGE> 6
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
The persons named in the enclosed proxy will vote to elect as directors the
nine nominees named below, unless authority to vote for the election of any or
all of the nominees is withheld by marking the proxy to that effect. All of the
nominees have indicated their willingness to serve, if elected, but if any
nominee should be unable to serve, the proxies may be voted for a substitute
nominee designated by management. Each director will be elected to hold office
until the next annual meeting of stockholders or until his 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....................... 49 Chairman of the Board and Chief Executive
Officer
Jay Greenwald............................. 34 President, Chief Operating Officer and
Director
Andrew Stollman........................... 33 Senior Vice President, Secretary and
Director
Michael G. Miller......................... 50 Director
Murray L. Skala........................... 51 Director
Mark Gutterman............................ 43 Director
Edwin A. Levy............................. 61 Director
Steven L. Feder........................... 48 Director
Paul Novelly.............................. 54 Director
</TABLE>
Jeffrey L. Schwartz has been Chairman and Chief Executive Officer of the
Company since January 1995, Secretary/Treasurer from September 1993 to December
1994 and a director since inception of the Company in 1993. From January 1979
until May 1998, Mr. Schwartz was also 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"). The Jami
Companies were sold by the principals thereof in May 1998.
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.
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. From
1979 until May 1998, Mr. Miller was the Co-President and a director of each of
the Jami Companies, which was sold by the principals thereof in May 1998. Mr.
Miller is also 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
4
<PAGE> 7
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.
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.
Paul Novelly has been a director of the Company since May 1998. Since 1978,
Mr. Novelly has been the President and Chief Executive Officer of Apex Oil
Company, Inc., a company which, together with its subsidiaries, is engaged in
oil and gas exploration, transportation, trading and storage and coal mining.
Mr. Novelly also serves on the Board of Directors of several publicly-held
companies, including, Coastcast Corp., Vista 2000, Inc., a marketer of personal
safety and home security devices, Imperial Bank, Imperial Bancorp, a bank
holding corporation, and Intrawest Corporation, a foreign company based in the
Bahamas.
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 four of its
existing principal stockholders have agreed to vote their shares of Common Stock
in favor of such designee. Whale has not yet exercised its right to designate
such a person. Such right of designation of Whale is in effect until December 5,
2000.
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. Directors who are not
employees 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. Three of the Company's four executive
officers, Jeffrey L. Schwartz, Jay Greenwald and Andrew Stollman, are also
directors of the Company. Information with regard to such persons is set forth
above under the heading "Nominees."
The remaining executive officer is Mr. Daniel Harvey, the Company's Chief
Financial Officer. Mr. Harvey, Age 39, 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 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
5
<PAGE> 8
review of the scope and effect of the audit engagement. The current members of
the Audit Committee are Messrs. Levy, Novelly 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. Novelly and Levy.
ATTENDANCE AT MEETINGS
From December 1, 1996, through November 30, 1997, there were three meetings
of the Board of Directors, six meetings of the Stock Option Committee and one
meeting of each of the Compensation Committee and Audit Committee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company obtains a substantial number of psychics for its live psychic
and other services from PRN, and 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 Lindsey and Peter
Stolz. Based upon information provided to the Company by counsel to such
individuals, the Company believes that such individuals own an aggregate of
2,439,481 shares of Common Stock, representing approximately 14.6% of the
outstanding Common Stock of the Company. In addition, Mr. Feder, is a director
and employee 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, 1997, the Company incurred charges of approximately $173,000
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 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 $472,000
during the fiscal year ended November 30, 1997 for services rendered by Feder
Kaszovitz. 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
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 and has
agreed to pay Mr. Miller consulting fees of
6
<PAGE> 9
$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, pursuant to the terms of the consulting agreement, as a
result of the May 1998 sale of the Jami Companies, Mr. Miller has the right to
become a full-time employee of the Company and to receive an initial base salary
at the rate of $200,000 per annum. Upon commencement of such full-time
employment, Mr. Miller will also be entitled to bonuses commensurate with the
Company's other executive employees.
LEGAL PROCEEDINGS
On May 4, 1998, in the United States District Court for the Southern
District of New York, a class action lawsuit was filed against the Company,
Jeffrey L. Schwartz and Daniel Harvey. Mr. Schwartz is the Chairman and Chief
Executive Officer of the Company and a nominee for director, and Mr. Harvey is
the Chief Financial Officer of the Company. The plaintiffs in such action allege
that the defendants misrepresented that, as a result of improved collection
procedures for the Company's accounts receivable and the Company's expanded
business relationship with AT&T, the Company had achieved record operating
results for the fiscal quarter ended May 31, 1997. The plaintiffs further allege
that such statements caused the Company's Common Stock to trade at inflated
prices, and certain of the defendants benefitted therefrom by selling shares of
the Company's Common Stock during such period. The amount of damages sought has
not yet been quantified. The defendants do not believe that there is any merit
to the allegations, and intend to vigorously defend the action, which is still
in the pleadings stage. No assurance can be given, however, that the outcome of
such lawsuit will not have a materially adverse impact upon the operations of
the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the best of the Company's knowledge, Jay Greenwald, Mark Gutterman,
Edwin Levy, Thomas H. Lindsey, Michael Miller, Jeffrey L. Schwartz, Murray L.
Skala and Vincent Tese, executive officers, directors and/or beneficial owners
of more than 10% of the Common Stock of the Company as of November 30, 1997,
have untimely filed reports on Form 4 during the fiscal year ended November 30,
1997. Messrs. Greenwald, Levy, Miller, Schwartz, Skala and Tese each filed one
late report, reporting one transaction. Mr. Lindsey filed one late report,
reporting two transactions, and Mr. Gutterman filed two late reports, reporting
two late transactions. 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, 1997
were done so on a timely basis.
7
<PAGE> 10
EXECUTIVE COMPENSATION
The following table sets forth the Company's executive compensation paid
during the three fiscal years ended November 30, 1997, 1996 and 1995 for the
Chief Executive Officer and the Company's four most highly compensated executive
officers of the Company (other than the Chief Executive Officer) whose cash
compensation exceeded $100,000 for the fiscal year ended November 30, 1997 (the
"Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------- -------------------- -------------------
(a) (b) (c) (d) (e) (f) (g) (i)
OTHER RESTRICTED (h) ALL
ANNUAL STOCK PLAN OTHER
SALARY BONUS COMPENSA- AWARDS OPTIONS PAYOUTS COMPENSA-
NAME AND PRINCIPAL POSITION YEAR ($) ($) TION($) ($) (#) ($) TION($)
--------------------------- ---- -------- -------- --------- ---------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jeffrey Schwartz............. 1997 $412,500 $418,347 0 0 0 0 0
Chairman and Chief 1996 $375,000 $269,573 0 0 0 0 0
Executive Officer 1995 $187,879 0 0 0 25,000 0 0
Jay Greenwald................ 1997 $412,500 $418,346 0 0 0 0 0
President and Chief 1996 $375,000 $269,573 0 0 0 0 0
Operating Officer 1995 $518,387 0 0 0 25,000 0 0
Claudia Newman Hirsch(1)..... 1997 $330,000 $ 50,000 0 0 0 0 0
Executive Vice President 1996 $300,000 $ 89,858 0 0 0 0 0
1995 $405,291 0 0 0 25,000 0 0
Andrew Stollman.............. 1997 $243,750(2) $418,346 0 0 0 0
Senior Vice President 1996 $175,000 $269,573 0 0 0 0 0
and Secretary 1995 $103,346 0 0 0 25,000 0 0
Daniel Harvey(3)............. 1997 $111,000(2) $ 25,000 0 0 0 0 0
Chief Financial Officer
</TABLE>
- ---------------
(1) In March 1998, Ms. Newman Hirsch resigned as a director and executive
officer of the Company.
(2) Such amounts reflect the aggregate consideration paid to such Named
Executives during the fiscal year ended November 30, 1997, as the annual
compensation paid to such individuals was increased during such fiscal year.
(3) Mr. Harvey was first appointed the Company's Chief Financial Officer in
January 1997. Prior to that time, Mr. Harvey was not employed as an
executive officer of the Company.
8
<PAGE> 11
The following table sets forth certain information regarding options
exercised and exercisable during the fiscal year ended November 30, 1997 and the
value of the options held as of November 30, 1997 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
SHARES AT FISCAL YEAR-END AT FISCAL YEAR-END
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey L. Schwartz......... -- -- 25,000 0 $18,750(1) 0
Jay Greenwald............... -- -- 25,000 0 18,750(1) 0
Claudia Newman Hirsch....... -- -- 25,000 0 18,750(1) 0
Andrew Stollman............. -- -- 25,000 0 18,750(1) 0
Daniel Harvey............... 3,000 $21,750(2) 8,334 16,666 (3) (3)
</TABLE>
- ---------------
(1) The difference between (x) the product of the number of unexercised options
at fiscal year end multiplied by $5.75 (the closing price of the Company's
Common Stock at November 30, 1997, as listed on the Nasdaq National Market)
less (y) the product of the number of unexercised options at fiscal year end
multiplied by $5.00 (the exercise price of the options).
(2) The difference between (x) the product of the number of shares exercised
multiplied by $12.25 (the price of the Company's Common Stock at the time of
exercise, as listed on the Nasdaq National Market) less (y) the product of
the number of shares exercised multiplied by $5.00 (the exercise price of
such exercised options).
(3) Such options were out-of-the money at fiscal year end.
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements, effective October 1, 1995,
with each of Messrs. Schwartz, Greenwald and Stollman, which expire on November
30, 1998 (the "Agreements"). Pursuant to such Agreements, Mr. Schwartz is
employed as Chairman and Chief Executive Officer, Mr. Greenwald is employed as
President and Chief Operating Officer, and Mr. Stollman is employed as Senior
Vice President and Secretary. The Company also entered into an employment
agreement, effective October 1, 1995, with Ms. Newman Hirsch, whereby she was
employed as Executive Vice President of the Company. In March 1998, however, Ms.
Newman Hirsch resigned as an employee and director of the Company. The
Agreements for Messrs. Greenwald and Stollman provide for employment on a
full-time basis. The Agreement for Mr. Schwartz provides that he will devote not
less than 85% of his working time to the Company's business. Each of the
Agreements 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 agreed to pay each of Mr. Schwartz, Mr.
Greenwald and Mr. Stollman $412,500, $412,500, and $275,000 per annum,
respectively, for the fiscal year ended November 30, 1997. The Agreements
provide for an increase in each of the base salaries in the amount of 10% for
each fiscal year thereafter, and in the event the Company achieves pre-tax
earnings of $10,000,000 or more for the fiscal year ended November 30, 1997, 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. Pursuant to Ms. Newman Hirsch's employment
agreement, she was paid $330,000 for the fiscal year ended November 30, 1997.
For a summary of the bonuses granted in the fiscal year ended November 30, 1997,
see "Summary Compensation Table."
9
<PAGE> 12
BOARD COMPENSATION
As a result of the Company's policy to compensate directors who are not
employees of the Company for their services, the Company's Amended and Restated
1996 Stock Option Plan (the "Plan") provides for an automatic one-time grant to
all directors who are not employees of the Company upon becoming a director of
options to purchase 25,000 shares of Common Stock and for additional automatic
quarterly grants of options to purchase 6,250 shares of Common Stock. The
exercise prices for all of such options are the market value of the Common Stock
on their date of grant.
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors during the
fiscal year ended November 30, 1997 consisted of Mark Gutterman, Steven L. Feder
and Murray L. Skala. See "Certain Relationships and Related Transactions."
TOTAL SHAREHOLDER RETURNS
<TABLE>
<CAPTION>
'QUINTEL
MEASUREMENT PERIOD ENTERTAINMENT, S&P MIDCAP
(FISCAL YEAR COVERED) INC.' 400 INDEX PEER GROUP
<S> <C> <C> <C>
5-DEC-95 100.00 100.00 100.00
NOV-96 152.50 118.09 105.16
NOV-97 115.00 150.51 101.11
</TABLE>
<TABLE>
<CAPTION>
ANNUAL RETURN PERCENTAGE
YEARS ENDED
COMPANY NAME/INDEX NOV96 NOV97
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
QUINTEL ENTERTAINMENT, INC. 52.50 -24.59
S&P MIDCAP 400 INDEX 18.09 27.45
PEER GROUP (SIC 7900 -- Amusement and Recreation Services) 5.16 -3.85
INDEXED RETURNS
BASE
PERIOD YEARS ENDED
COMPANY NAME/INDEX 05DEC95 NOV96 NOV97
- ---------------------------------------------------------------------------------------------------
QUINTEL ENTERTAINMENT, INC. 100 152.50 115.00
S&P MIDCAP 400 INDEX 100 118.09 150.51
PEER GROUP (SIC 7900 -- Amusement and Recreation Services) 100 105.16 101.11
</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.
10
<PAGE> 13
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. In addition, this program seeks to enhance the profitability of
the Company, and thereby enhance stockholder value, by also linking the
financial interests of the Company's executives with those of the stockholders.
Under the guidance of the 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 in accordance with the terms of individual employment
agreements, and bonuses that are determined by individual contributions
and sustained performance within an established competitive 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 in accordance with the terms of individual
employment agreements. 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.
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 or the Board 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.
11
<PAGE> 14
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.
Although Mr. Schwartz's salary is currently governed by his employment
agreement with the Company, expiring in November 1998 (see "Employment
Agreements"), his entire compensation package is reviewed by the Compensation
Committee on an annual basis and, in determining recommendations for the
granting of any bonuses, granting of options or warrants, or salary adjustment,
the Compensation Committee considers the above factors.
Mr. Schwartz's compensation package for 1997 was based upon the terms of
his employment agreement, as well as his 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 $24,000,000 in 1997.
COMPENSATION COMMITTEE
Steven L. Feder
Mark Gutterman
Murray L. Skala
12
<PAGE> 15
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 Pricewaterhouse Coopers LLP, formerly Coopers &
Lybrand L.L.P., independent certified public accountants, as the principal
independent auditors of the Company for the fiscal year ending November 30,
1998, subject to ratification by the stockholders. Coopers & Lybrand L.L.P.
served as the Company's independent auditors during 1997. If the appointment of
the firm of Pricewaterhouse Coopers LLP 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
Pricewaterhouse Coopers LLP 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.
AUTHORIZATION TO CHANGE THE NAME OF THE COMPANY
FROM QUINTEL ENTERTAINMENT, INC.
TO QUINTEL COMMUNICATIONS, INC.
(PROPOSAL NO. 3)
Management has informed the Board of Directors that part of the Company's
growth strategy is to expand its involvement in the telecommunications industry,
and, consistent therewith, to change the name of the Company to Quintel
Communications, Inc. Accordingly, the Board of Directors, on March 18, 1998,
unanimously adopted a resolution, subject to stockholder approval, authorizing
the amendment of the Company's Certificate of Incorporation to change the name
of the Company to Quintel Communications, Inc.
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.
1999 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Company at its executive offices
in Pearl River, New York not later than February 1, 1999 for inclusion in the
proxy statement for that meeting.
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
13
<PAGE> 16
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,
/s/ ANDREW STOLLMAN
--------------------------------------
ANDREW STOLLMAN, Secretary
July 20, 1998
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.
14
<PAGE> 17
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD AUGUST 24, 1998
QUINTEL ENTERTAINMENT, INC.
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 2, 1998, at the Annual Meeting of
Stockholders of the Company to be held on August 24, 1998 at the Park Ridge
Marriott Hotel, 300 Brae Boulevard, Park Ridge, New Jersey, at 9:30 a.m. local
time, 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:
<TABLE>
<S> <C>
[ ] FOR [ ] AGAINST
</TABLE>
NOMINEES ARE: Jeffrey L. Schwartz, Jay Greenwald, Andrew Stollman, Michael G.
Miller, Murray L. Skala, Mark Gutterman, Edwin A. Levy, Paul Novelly and Steven
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 Pricewaterhouse Coopers LLP as the Company's
auditors.
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
(Continued and to be signed on the reverse side.)
<PAGE> 18
(continued from other side)
3. Authorization to amend the Company's Certificate of Incorporation, changing
the name of the Company from Quintel Entertainment, Inc. to Quintel
Communications, Inc.
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
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.
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
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
- ---------------.
Date:
----------------------------------
------------------------------------
SIGNATURE(S)
Date:
----------------------------------
------------------------------------
SIGNATURE(S)
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.
