<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
Filed by the Registrant[X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
Quintel Communications, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
QUINTEL COMMUNICATIONS, INC.
ONE BLUE HILL PLAZA
PEARL RIVER, NY 10965
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 21, 1999
The Annual Meeting of Stockholders of QUINTEL COMMUNICATIONS, INC. (the
"Company") will be held at the Company's Executive Offices, One Blue Hill Plaza,
Pearl River, New York, on September 21, 1999 at 9:30 a.m. local time, to
consider and act upon the following matters:
1. To elect eight directors to serve for the ensuing year.
2. To ratify the selection by the Board of Directors of
PricewaterhouseCoopers LLP as the Company's independent auditors for the
current fiscal year.
3. To ratify and approve the Company's Second Amended and Restated
1996 Stock Option Plan (the "Second Amended Plan"), amending the Company's
Amended and Restated 1996 Stock Option Plan by increasing the maximum
number of shares of the Company's Common Stock for which stock options may
be granted under the Second Amended Plan from 1,850,000 to 2,850,000
shares.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record as of the close of business on August 20, 1999 will
be entitled to notice of and to vote at the meeting or any adjournment thereof.
The stock transfer books of the Company will remain open.
By Order of the Board of Directors
Andrew Stollman
Secretary
Pearl River, New York
August 23, 1999
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 COMMUNICATIONS, INC.
ONE BLUE HILL PLAZA
PEARL RIVER, NY 10965
PROXY STATEMENT FOR THE 1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 21, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Quintel Communications, Inc. (the
"Company") for use at the 1999 Annual Meeting of Stockholders, to be held on
September 21, 1999 at the Company's Executive Offices, One Blue Hill Plaza,
Pearl River, New York, 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 August 23, 1999, to be accompanied by the Company's Annual Report to
Shareholders for the fiscal year ended November 30, 1998.
VOTING SECURITIES AND VOTES REQUIRED
At the close of business on August 20, 1999, the record date for the
determination of stockholders entitled to vote at the Annual Meeting, there were
outstanding and entitled to vote an aggregate of 15,379,746 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
PricewaterhouseCoopers LLP as the Company's independent auditors for the current
fiscal year and the adoption of the Company's Second Amended and Restated 1996
Stock Option Plan. 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 August 20, 1999, 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 of the Company named in
the Summary Compensation Table set forth under the caption "Executive
Compensation", below,
<PAGE> 4
(iii) each person who is known by the Company to own beneficially more than 5%
of the outstanding shares of its Common Stock and (iv) all executive officers
and directors of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS OF BENEFICIALLY PERCENT
BENEFICIAL OWNER(1) OWNED(2) OF CLASS(2)
- ------------------- ---------------- ------------
<S> <C> <C>
Jeffrey L. Schwartz......................................... 2,546,416(3) 16.5%
Jay Greenwald............................................... 2,858,816(4) 18.5
Andrew Stollman............................................. 1,157,367(5) 7.5
Daniel Harvey............................................... 7,584(6) *
Michael G. Miller........................................... 2,490,986(7) 16.1
Murray L. Skala............................................. 102,750(8) *
750 Lexington Avenue
New York, NY 10022
Edwin A. Levy............................................... 98,750(9) *
767 Third Avenue
New York, NY 10017
Mark Gutterman.............................................. 42,705(10) *
115 Broadway
New York, NY 10006
Lawrence Burstein........................................... 31,250(11) *
245 Fifth Avenue
New York, NY 10016
All executive officers and directors as a group (9
persons).................................................. 9,336,624(12) 58.5%
</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 or entity any shares which such person or entity has the right
to acquire within 60 days after August 20, 1999. The inclusion herein of
any shares deemed beneficially owned does not constitute an admission of
beneficial ownership of such shares.
(3) Includes 94,414 shares of Common Stock issuable upon exercise of options
held by Mr. Schwartz.
(4) Includes 94,414 shares of Common Stock issuable upon exercise of options
held by Mr. Greenwald.
(5) Includes 42,924 shares of Common Stock issuable upon exercise of options
held by Mr. Stollman.
(6) Represents 7,584 shares of Common Stock issuable upon exercise of options
held by Mr. Harvey.
(7) Includes 48,984 shares of Common Stock issuable upon exercise of options
held by Mr. Miller.
(8) Includes 98,750 shares of Common Stock issuable upon exercise of options
held by Mr. Skala.
(9) Represents 98,750 shares of Common Stock issuable upon exercise of options
held by Mr. Levy.
(10) Includes 39,115 shares of Common Stock issuable upon exercise of options
held by Mr. Gutterman. Also includes 3,590 shares of Common Stock issuable
upon the exercise of an option held by Feldman, Gutterman, Meinberg & Co.,
an accounting firm in which Mr. Gutterman was a partner.
(11) Represents 31,250 shares of Common Stock issuable upon exercise of options
held by Mr. Burstein.
(12) Includes 589,775 shares of Common Stock issuable upon exercise of options
held by the executive officers and directors of the Company. See footnotes
(3) through (11), above.
2
<PAGE> 5
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
The persons named in the enclosed proxy will vote to elect as directors the
eight 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 at least 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>
Chairman of the Board and Chief Executive
Jeffrey L. Schwartz.................. 50 Officer
President, Chief Operating Officer and
Jay Greenwald........................ 35 Director
Andrew Stollman...................... 34 Senior Vice President, Secretary and Director
Michael G. Miller.................... 51 Director
Murray L. Skala...................... 52 Director
Mark Gutterman....................... 44 Director
Edwin A. Levy........................ 62 Director
Lawrence Burstein.................... 56 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., a list brokerage and list management consulting firm,
Jami Data Services, Inc., a database management consulting firm, and Jami
Direct, Inc., 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. and, from July 1990 to January 1991,
President of Newald Marketing, Inc., 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 and a
consultant to the Company since May 1998. 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 of Jakks Pacific, Inc.
3
<PAGE> 6
Mark Gutterman has been a director of the Company since October 1995. Since
January 1, 1999, Mr. Gutterman has been the Chief Financial Officer of
Transaction Information Systems, Inc., a computer and consulting staffing
company. From 1980 through 1998, Mr. Gutterman was a partner in the accounting
firm of Feldman, Gutterman, Meinberg & Co. and its predecessor, Weiss & Feldman.
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.
Lawrence Burstein has been a director of the Company since April 1999.
Since March 1996, Mr. Burstein has been Chairman of the Board and a principal
shareholder of Unity Venture Capital Associates, Ltd., a private venture capital
firm. For approximately ten years prior thereto, Mr. Burstein was the President,
a director and principal stockholder of Trinity Capital Corporation, a private
investment banking concern. Mr. Burstein is a director of five public companies,
being, respectively, THQ, Inc., engaged in the development and sale of games for
Sony and Nintendo game systems and software games for personal computers; Brazil
Fast Food Corporation, which operates the second largest chain of fast food
outlets in Brazil; CAS Medical Systems, Inc., engaged in the manufacture and
marketing of blood pressure monitors and other medical products, principally for
the neonatal market; The MNI Group, Inc., engaged in the marketing of specially
formulated nutritional supplements; and Unity First Acquisition Corporation, a
publicly-held acquisition vehicle, of which Mr. Burstein is also President.
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 41, 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.
4
<PAGE> 7
Audit Committee. The functions of the Audit Committee include
recommendations to the Board of Directors with respect to the engagement of the
Company's independent certified public accountants and the review of the scope
and effect of the audit engagement. The current members of the Audit Committee
are Messrs. Levy, Burstein and Skala.
Compensation Committee. The function of the Compensation Committee is to
make recommendations to the Board with respect to compensation of management
employees. In addition, the Compensation Committee administers plans and
programs, with the exception of the Company's stock option plans, relating to
employee benefits, incentives and compensation. The current members of the
Compensation Committee are Messrs. Skala and Gutterman.
Stock Option Committee. The Stock Option Committee determines the persons
to whom options should be granted under the Company's stock option plans and the
number of options to be granted to each person. The current members of the Stock
Option Committee are Messrs. Burstein and Levy.
ATTENDANCE AT MEETINGS
From December 1, 1997 through November 30, 1998, the Board of Directors,
Stock Option Committee, Audit Committee and Compensation Committee each met or
acted without a meeting pursuant to unanimous written consent nine times, five
times, one time and one time, respectively.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Burton Feldman, a partner in the firm of Feldman, Gutterman, Meinberg & Co.
("FGM"), one of the Company's accountants, is the father-in-law of Jeffrey L.
Schwartz, the Chairman and Chief Executive Officer of the Company. Mark
Gutterman, a director of the Company, was a partner in FGM from 1980 through
1998. For the fiscal year ended November 30, 1998, the Company incurred charges
of approximately $91,000 for services rendered by FGM. FGM continues to provide
services to the Company during its current fiscal year. Its fees are based
primarily on hourly rates. The Company believes that its relationship with FGM
is on terms no less 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 from such firm of
approximately $431,000 during the fiscal year ended November 30, 1998. 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 had entered into a consulting agreement, effective October 1,
1995, with Michael G. Miller, a director and principal stockholder of the
Company, which expired on November 30, 1998. Under the terms of such consulting
agreement, Mr. Miller provided 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 provided that Mr.
Miller's services were subject to his availability and recognized his commitment
to other non-competitive business activities. The Company paid Mr. Miller
consulting fees of $10,416, $11,458 and $12,604 per month for the fiscal years
ended November 30, 1996, 1997 and 1998, respectively. The agreement provided
that Mr. Miller was precluded from involvement in any other business which
competed with the Company during the term of the consulting agreement and for a
period of two years thereafter. Although the consulting agreement with Mr.
Miller has expired, he continues to provide the consulting services enumerated
therein to the Company and the Company has been compensating Mr. Miller for such
services at the rate of $10,417 per month. Such arrangement has not been
formally agreed to and may be terminated by either party at-will.
5
<PAGE> 8
LEGAL PROCEEDINGS
On or about May 4, 1998, a complaint entitled "Joseph Chalverus, on behalf
of himself and all others similarly situated v. Quintel Entertainment, Inc.,
Jeffrey L. Schwartz and Daniel Harvey" was filed in the United States District
Court for the Southern District of New York; subsequently, a complaint entitled
"Richard M. Woodward, on behalf of himself and all others similarly situated v.
Quintel Entertainment, Inc., Jeffrey L. Schwartz and Daniel Harvey" was filed in
that same court, as was a complaint entitled "Dr. Michael Title, on behalf of
himself and all others similarly situated v. Jeffrey L. Schwartz, Jay Greenwald,
Claudia Newman Hirsch, Andrew Stollman, Mark Gutterman, Steven L. Feder, Michael
G. Miller, Daniel Harvey and Quintel Entertainment, Inc." (collectively, the
"Complaints"). In addition to the Company, the defendants named in the
Complaints are present and former officers and directors of the Company (the
"Individual Defendants"). The plaintiffs seek to bring the actions on behalf of
a purported class of all persons or entities who purchased shares of the
Company's Common Stock from July 15, 1997 through October 15, 1997 and who were
damaged thereby, with certain exclusions. The Complaints allege violations of
Sections 10(b) and 20 of the Securities Exchange Act of 1934, and allege that
the defendants made misrepresentations and omissions concerning the Company's
financial results, operations and future prospects, in particular, relating to
the Company's reserves for customer chargebacks and its business relationship
with AT&T. The Complaints allege that the alleged misrepresentations and
omissions caused the Company's Common Stock to trade at inflated prices, thereby
damaging plaintiffs and the members of the purported class. The amount of
damages sought by plaintiffs and the purported class has not been specified.
On September 18, 1998, the District Court ordered that the three actions be
consolidated, appointed a group of lead plaintiffs in the consolidated actions,
approved the lead plaintiffs' selection of counsel for the purported class in
the consolidated actions, and directed the lead plaintiffs to file a
consolidated complaint. The consolidated and amended class action complaint
("Consolidated Complaint") which has been filed asserts the same legal claims
based on essentially the same factual allegations as did the Complaints. On
February 19, 1999, the Company and the Individual Defendants filed a motion to
dismiss the Consolidated Complaint. Plaintiffs have filed papers in opposition
to the motion to dismiss and the Company and the Individual Defendants have
filed reply papers in further support of the motion. The District Court has not
yet ruled on the motion to dismiss. The Company believes that the allegations in
the Complaints are without merit, and intends to vigorously defend the
consolidated actions. No assurance can be given, however, that the outcome of
the consolidated actions will not have a materially adverse impact upon the
results of operations and financial condition of the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the best of the Company's knowledge, during the fiscal year ended
November 30, 1998, (i) Steven Feder, Thomas H. Lindsey, Michael G. Miller, Paul
Novelly, Peter Stolz and Vincent Tese each untimely filed one report on Form 4,
reporting one late transaction; (ii) Daniel Harvey, Jeffrey L. Schwartz and
Andrew Stollman each untimely filed two late reports on Form 4, reporting two
late transactions; (iii) Mark Gutterman untimely filed two late reports on Form
4, reporting three late transactions; (iv) Jay Greenwald untimely filed three
late reports on Form 4, reporting three late transactions; (v) Mr. Novelly
untimely filed a Form 3 and Form 5, each reporting one late transaction; and
(vi) Claudia Newman Hirsch failed to file a Form 5. All of such individuals were
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, 1998. 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, 1998 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, 1998, 1997 and 1996 for the
Chief Executive Officer and the Company's most
6
<PAGE> 9
highly compensated executive officers of the Company (other than the Chief
Executive Officer) whose cash compensation for the fiscal year ended November
30, 1998 exceeded $100,000 (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------- -------------------- --------------------
(A) (B) (C) (D) (E) (F) (G) (I)
OTHER RESTRICTED (H) ALL
ANNUAL STOCK PLAN OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSA- AWARDS OPTIONS PAY-OUTS COMPENS-
POSITION YEAR ($) ($) TION($) ($) (#) ($) ATION($)
- ------------------ ---- -------- -------- --------- ---------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jeffrey L. Schwartz... 1998 $453,750 $ 0 0 0 8,750(2) 0 0
Chairman and 128,495
Chief Executive 1997 $412,500 $418,347 0 0 0 0 0
Officer 1996 $375,000 $269,573 0 0 0 0 0
Jay Greenwald......... 1998 $453,750 $ 0 0 0 8,750(2) 0 0
President and 128,495
Chief Operating 1997 $412,500 $418,346 0 0 0 0 0
Officer 1996 $375,000 $269,573 0 0 0 0 0
Andrew Stollman....... 1998 $302,500 $ 0 0 0 8,750(2) 0 0
Senior Vice 96,260
President and 1997 $243,750 $418,346 0 0 0 0
Secretary 1996 $175,000 $269,573 0 0 0 0 0
Daniel Harvey(1)...... 1998 $127,500 $ 50,000 0 0 7,729(2) 0 0
Chief Financial 1997 $111,000 $ 25,000 0 0 0 0 0
Officer
</TABLE>
- ---------------
(1) 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.
(2) Represents shares underlying options issued in exchange for the surrender of
options pursuant to the Option Exchange. See "Option Exchange."
The following table sets forth certain information regarding the granting
of options to the Named Officers during the fiscal year ended November 30, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSESSED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
- --------------------------------------------------------------------------------------- -----------------------
(A) (B) (C) (D) (E) (F) (G)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/ EMPLOYEES IN EXERCISE
SARS FISCAL OR BASE PRICE EXPIRATION
NAME GRANTED(#) YEAR(1) ($/SHARE) DATE 5%($) 10%($)
- ---- ----------- ------------ ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey L. Schwartz........... 8,750(2) 0.81% $ 1.75 9/30/05 $ 21,546 $ 29,840
128,495(3) 12.01 2.13125 10/8/03 349,516 441,046
Jay Greenwald................. 8,750(2) 0.81 1.75 9/30/05 21,546 29,840
128,495(3) 12.01 2.13125 10/8/03 349,516 441,046
Andrew Stollman............... 8,750(2) 0.81 1.75 9/30/05 21,546 29,840
96,260(3) 8.99 1.9375 10/8/03 238,031 300,366
Daniel Harvey................. 7,292(2) 6.80 1.75 9/4/01 14,772 16,985
437(2)(4) 0.04 1.75 12/26/02 930 1,120
</TABLE>
- ---------------
(1) Options to purchase a total of 1,069,580 shares of Common Stock were granted
to the Company's employees, including the Named Officers, during the fiscal
year ended November 30, 1998. Includes 181,940 shares issuable upon the
exercise of options granted pursuant to the Option Exchange. See "Option
Exchange."
(2) Represents shares issuable upon the exercise of options granted pursuant to
the Option Exchange.
(3) One-third of this option vested or vests on each of October 8, 1998, 1999
and 2000.
(4) One-third of this option vested or vests on each of December 26, 1997, 1998
and 1999.
7
<PAGE> 10
The following table sets forth certain information regarding options
exercised and exercisable during the fiscal year ended November 30, 1998 and the
value of the options held as of November 30, 1998 by the Named Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
OPTIONS AT FISCAL YEAR-END(1)
------------------------------
NAME EXERCISABLE UNEXERCISABLE
- ---- ----------- -------------
<S> <C> <C>
Jeffrey L. Schwartz............................... 8,750(2) 0
42,832 85,663
Jay Greenwald..................................... 8,750(2) 0
42,832 85,663
Andrew Stollman................................... 8,750(2) 0
32,087 64,173
Daniel Harvey..................................... 4,861(2) 2,431(2)
146(2)(3) 666(2)(3)
</TABLE>
- ---------------
(1) None of the options held by the Named Officers were in-the-money at November
30, 1998.
(2) Represents shares underlying options issued in exchange for the surrender of
options pursuant to the Option Exchange. See "Option Exchange."
(3) Such option was issued in the Option Exchange pursuant to Mr. Harvey's
surrender of an option to purchase 1,000 shares of common stock, which
option was granted to Mr. Harvey on December 26, 1997.
EMPLOYMENT AGREEMENTS
The employment agreements between the Company and each of Jeffrey L.
Schwartz, Jay Greenwald and Andrew Stollman expired on November 30, 1998. Each
of such individuals have agreed to continue to work for the Company as
employees-at-will until such time as the Board of Directors has had an
opportunity to discuss and approve a compensation package for inclusion in
written employment agreements between the Company and such individuals. The
Company and Messrs. Schwartz and Greenwald have agreed that the compensation to
be paid to each of them for their services rendered would be $400,000 per annum
until such time as written employment agreements between the Company and such
individuals have been executed. Such amount is a reduction of $53,750 per annum
from each of their 1998 salaries of $453,750. The Company and Mr. Stollman have
agreed that the compensation to be paid to such individual for his services
rendered would continue to be $302,500 per annum, the amount of Mr. Stollman's
1998 annual salary, until such time as a written employment agreement between
the Company and Mr. Stollman has been executed.
BOARD COMPENSATION
As a result of the Company's policy to compensate non-employee directors
for their services, the Company's Amended and Restated 1996 Stock Option Plan
provides for an automatic one-time grant to all non-employee directors 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 non-employee director 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, 1998 consisted of Mark Gutterman and Murray L.
Skala. See "Certain Relationships and Related Transactions."
8
<PAGE> 11
TOTAL SHAREHOLDER RETURNS
[LINE GRAPH DEPICTING TOTAL SHAREHOLDER RETURNS]
<TABLE>
<CAPTION>
QUINTEL NASDAQ U.S. PEER GROUP
COMMUNICATIONS, ----------- ----------
INC.
---------------
<S> <C> <C> <C>
05 Dec 95 100 100 100
Nov 96 152.5 121.59 108.08
Nov 97 115 151.4 99.23
Nov 98 31.88 185.64 71.85
</TABLE>
ANNUAL RETURN PERCENTAGE
<TABLE>
<CAPTION>
YEARS ENDED
--------------------------------
COMPANY NAME/ INDEX NOV 96 NOV 97 NOV 98
------------------- ------ ------ ------
<S> <C> <C> <C>
QUINTEL COMMUNICATIONS, Inc................................. 52.50 (24.59) (72.28)
NASDAQ U.S.................................................. 21.59 24.51 22.62
PEER GROUP (SIC 7900 -- Amusement and Recreation
Services)................................................. 8.08 (8.19) (27.59)
</TABLE>
INDEXED RETURNS
<TABLE>
<CAPTION>
BASE YEARS ENDED
PERIOD --------------------------------
COMPANY NAME/ INDEX 05 DEC 95 NOV 96 NOV 97 NOV 98
------------------- --------- ------ ------ ------
<S> <C> <C> <C> <C>
QUINTEL COMMUNICATIONS, Inc........................ 100 152.50 115.00 31.88
NASDAQ U.S......................................... 100 121.59 151.40 185.64
PEER GROUP (SIC 7900 -- Amusement and Recreation
Services)........................................ 100 108.08 99.23 71.85
</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
NASDAQ U.S. 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.
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,
10
<PAGE> 13
including market share; overall economic climate; individual contribution to the
Company; and such other factors as the Compensation Committee may deem
appropriate.
Mr. Schwartz's compensation is no longer governed by the terms of a written
employment agreement, which expired in November 1998 (see "Employment
Agreements"). Mr. Schwartz's present compensation package was first reviewed by
the Compensation Committee and ultimately approved thereby in accordance with
the above factors. In determining recommendations for any changes thereto,
including the granting of any bonuses, options or warrants, or salary
adjustments, the Compensation Committee will again consider the above factors.
Option Exchange. In September 1998, the Stock Option Committee of the
Board of Directors resolved that each officer and employee of the Company who
had been granted options under the Company's Amended and Restated 1996 Stock
Option Plan (the "Amended Plan") be offered, in recognition of their past and
present services performed on behalf of the Company and as an incentive for
their continued services in the future, the opportunity to surrender to the
Company any options previously granted them under the Amended Plan in exchange
for new options (the "Option Exchange"), in accordance with the following
formula:
The number of shares of the Company's Common Stock underlying the new
option will equal the quotient of (a) the product of (i) the number of
shares underlying the option surrendered for exchange and (ii) the closing
price of the Common Stock on the Nasdaq National Market System on the date
such option is surrendered for exchange, divided by (b) the exercise price
of the surrendered option.
Simultaneously therewith, an identical resolution was passed by the Board
of Directors (with any interested directors abstaining from voting thereon)
offering the directors who were not employees of the Company the opportunity to
participate in the Option Exchange.
The Company received notification on September 14, 1998 from the holders of
options to purchase 818,079 shares of Common Stock that such holders were
participating in the Option Exchange. The holders of the remaining options to
purchase 172,500 shares of Common Stock eligible to participate in the Option
Exchange did not elect to participate. The closing price of the Company's Common
Stock on September 14, 1998 was $1.75 per share. The number of shares underlying
the options issued in exchange for those surrendered for exchange was 230,140
shares.
Included in the individuals who elected to participate in the Option
Exchange were the four executive officers of the Company. The following table
sets forth certain information regarding the participation of such executive
officers in the Option Exchange:
TEN-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF MARKET
SECURITIES PRICE OF EXERCISE LENGTH OF
UNDERLYING COMMON STOCK PRICE OPTION TERM
OPTIONS/SARS AT TIME OF AT TIME OF REMAINING AT
REPRICED OR REPRICING OR REPRICING OR NEW DATE OF
AMENDED AMENDMENT AMENDMENT EXERCISE REPRICING OR
NAME DATE (#) ($) ($) PRICE AMENDMENT
(A) (B) (C) (D) (E) (F) (G)
- ---------------------- ------- ------------ ------------ ------------ -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey L. Schwartz... 9/14/99 25,000 $1.75 $5.00 $1.75 6 years 16 days
Jay Greenwald......... 9/14/99 25,000 $1.75 $5.00 $1.75 6 years 16 days
Andrew Stollman....... 9/14/99 25,000 $1.75 $5.00 $1.75 6 years 16 days
Daniel Harvey......... 9/14/99 25,000 $1.75 $6.00 $1.75 23 months 20 days
9/14/99 1,000 $1.75 $4.00 $1.75 39 months 12 days
</TABLE>
COMPENSATION COMMITTEE
Mark Gutterman
Murray L. Skala
11
<PAGE> 14
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 PricewaterhouseCoopers LLP, independent
certified public accountants, as the principal independent auditors of the
Company for the fiscal year ending November 30, 1999, subject to ratification by
the stockholders. PricewaterhouseCoopers LLP and its predecessor, Coopers &
Lybrand LLP, served as the Company's independent auditors since its inception.
If the appointment of the firm of PricewaterhouseCoopers 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 PricewaterhouseCoopers 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.
ADOPTION OF THE COMPANY'S
SECOND AMENDED AND RESTATED
1996 STOCK OPTION PLAN
(PROPOSAL NO. 3)
The Board of Directors has unanimously adopted, subject to stockholder
approval, a Second Amended and Restated 1996 Stock Option Plan (the "Second
Amended Plan"), which amends certain aspects of the Amended and Restated 1996
Stock Option Plan (the "Amended Plan"), which was adopted by the Company's
stockholders and directors on August 25, 1997. If approved by the stockholders
of the Company, the Second Amended Plan would increase the number of shares of
the Company's Common Stock available under the Amended Plan from 1,850,000
shares to 2,850,000 shares. The Company believes the increase in the number of
shares underlying the options available for grant under the Second 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 July 20, 1999, subject to stockholder approval.
The Second Amended Plan is summarized below. The full text of the Second
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 Second 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 Amended Plan is 1,850,000 shares, which the Company proposes to expand
to 2,850,000 shares under the Second Amended Plan. Under the Second Amended
Plan, the Company may grant incentive stock options or options not intended to
qualify as incentive stock options (together, the "Options").
The Second 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 Second 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 Second 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 Second Amended Plan shall be employees
(including officers), consultants or advisors of either the Company or any
subsidiary corporation of the
12
<PAGE> 15
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 Second 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 Second 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 Second
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.
Under the Second 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 Second 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 Second 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 Second 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 Second 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 Second 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 Second 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
13
<PAGE> 16
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 Second 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 Second 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 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 eighteen (18) employees and five (5) directors who
are not employees of the Company who are eligible for participation in the
Second Amended Plan. The Company cannot presently approximate the number of
consultants and/or advisors who will be eligible to receive Options under the
Second Amended Plan.
ADJUSTMENTS UPON CHANGES IN THE COMPANY'S CAPITALIZATION
In the event that the outstanding Common Stock of the Company is changed by
reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination of shares, stock dividends or
other increases or reductions of the number of outstanding shares of Common
Stock of the Company, an appropriate adjustment shall be made by the Board or
Committee in the aggregate number of shares available under the Second 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 or into
another corporation, or if all or substantially all of the assets of the Company
shall be sold or exchanged, the holder of an Option (an "Optionee") shall be
entitled to receive for those shares underlying the Option, upon payment of the
option price for such Option, such consideration (including, without limitation,
securities of such corporation with or into which the Company shall have been
merged or consolidated, cash or other property) as such Optionee would have
received had such Optionee, immediately prior to any recapitalization, merger,
consolidation or sale or exchange of assets, exercised his Option and paid for
and received the number of shares underlying 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 Second 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.
14
<PAGE> 17
AMENDMENT AND TERMINATION OF THE SECOND AMENDED PLAN
The Second Amended Plan shall terminate on September 25, 2006, which is
within ten (10) years from the date of the adoption of the original 1996 Stock
Option Plan by the stockholders of the Company, or sooner as hereinafter
provided, and no Option shall be granted after termination of the Second Amended
Plan.
The Second 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 Second Amended Plan, terminate the Second Amended Plan, or from time to
time make such modifications or amendments to the Second 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.
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 Second 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 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
15
<PAGE> 18
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 Second 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 Second Amended Plan. The following table, however, sets forth the benefits
(losses) that would have been received in 1998 by the Named Officers, all
executive officers as a group, non-executive officer directors as a group and
non-executive officer employees as a group, as if the Second Amended Plan had
been in effect during 1998.
<TABLE>
<CAPTION>
THE SECOND AMENDED PLAN(1)(2)
--------------------------------
DOLLAR NUMBER OF
NAME AND POSITION VALUE($) SHARES
- ----------------- ------------------- ---------
<S> <C> <C>
Jeffrey L. Schwartz......................................... * *
Jay Greenwald............................................... * *
Andrew Stollman............................................. * *
Daniel Harvey............................................... * *
Executive Officer Group..................................... * *
Non-Executive Officer Director Group (5 Persons)(2).........
January 1, 1998........................................... $5.4375 per share(3) 31,250
April 1, 1998............................................. $ 6.00 per share(3) 31,250
July 1, 1998.............................................. $3.8125 per share(3) 31,250
October 1, 1998........................................... $ 2.625 per share(3) 31,250
Non-Executive Officer Employee Group........................ * *
</TABLE>
- ---------------
* The Second 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 Second Amended Plan, options
to purchase 6,250 shares of Common Stock on the first day of each calendar
quarter the Second Amended Plan is in effect. Grants of Options under the
Second 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 Second Amended Plan.
(2) The information provided represents the benefits (losses) that would have
been received in 1998, as if the Second Amended Plan had been in effect
during 1998.
(3) Represents what the exercise prices of the Options would have been upon
their grant, which is equal to the closing price of the Company's Common
Stock on the NASDAQ National Market on the date the Options would have been
granted, had the Second Amended Plan been in effect during 1998.
16
<PAGE> 19
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.
2000 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 2000 Annual
Meeting of Stockholders must be received by the Company at its executive offices
in Pearl River, New York not later than April 25, 2000 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 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
August 23, 1999
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
EXHIBIT A
QUINTEL COMMUNICATIONS, INC.
SECOND AMENDED AND RESTATED 1996 STOCK OPTION PLAN
1. Purpose of the Plan. The Quintel Communications, Inc. Second Amended
and Restated 1996 Stock Option Plan (the "Second Amended Plan") is intended to
advance the interests of Quintel Communications, 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 Second 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 Second 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 Second 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 Second
Amended Plan, except as otherwise provided by law.
3. Shares subject to the Second Amended Plan. The stock subject to grant
under the Second 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 Second Amended Plan. The maximum number of shares of Common Stock
which may be issued pursuant to Options granted under the Second Amended Plan
shall not exceed two million eight hundred fifty thousand (2,850,000) shares,
subject to adjustment in accordance with the provisions of Section 13 hereof.
The Company shall at all times while the Second 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 Second Amended Plan.
In the event any Option granted under the Second 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 Second Amended
Plan.
4. Stock Option Agreement. Each Option granted under the Second Amended
Plan shall be authorized by the Board or Committee and shall be evidenced by a
Stock Option Agreement which shall be executed by the Company and the person to
whom such option is granted. The Stock Option Agreement shall specify the number
of shares of Common Stock as to which any Option is granted, the period during
which the Option is exercisable and the option price per share thereof.
5. Discretionary Grant Participation. The class of persons which shall be
eligible to receive discretionary grants of Options under the Second Amended
Plan shall be all qualified 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 Second Amended Plan, shall
determine the employees, consultants or advisors to whom Options shall be
granted and the number of shares to be
A-1
<PAGE> 21
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.
6. Participation of Directors Who Are Not Employees of the Company
(a) 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
Second 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 Second 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 qualified employees of the Company or of a subsidiary corporation of
the Company.
(b) Each Incentive Stock Option under the Second Amended Plan must be
granted prior to September 25, 2006, which is within ten (10) years from
the date the original 1996 Stock Option Plan was adopted by the
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 Second 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 Second 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 Second 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 Second 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 Second 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 Second 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 Second 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 Second 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
Second 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 Second 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 Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder and, during the lifetime of such
individual, shall not be exercisable by any other person, but only by him.
11. Termination of Employment or Death.
(a) If the employment of an employee by the Company or any subsidiary
of the Company shall be terminated voluntarily by the employee or for
cause, then his Options shall expire forthwith. Except as provided in
subsections (b) and (c) of this Section 11, if such employment or services
shall, terminate for any other reason, then such Options may be exercised
at any time within three (3) months after such termination, subject to the
provisions of subparagraph (f) of this Section 11. For purposes of the
Second 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 Second 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
A-3
<PAGE> 23
employee or by a person who acquired the right to exercise such Options by
bequest or inheritance or by reason of the death of such employee at any
time within one (1) year after such death.
(c) If the holder of any Options under the Second 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 statute or by
contract.
12. Exercise of Options.
(a) Unless otherwise provided in the Stock Option Agreement, any
Option granted under the Second 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 Stock Option
Agreement that the exercise of any Option granted under the Second 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 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.
A-4
<PAGE> 24
(b) An Option granted under the Second 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 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 Second 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 of the Company is
hereafter changed by reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, combination of shares,
stock dividends or other increases or reductions of the number of
outstanding shares of Common Stock of the Company, an appropriate
adjustment shall be made by the Board or Committee in the aggregate number
of shares available under the Second Amended Plan and in the number of
shares and option price per share subject to outstanding Options.
(b) In the event of the recapitalization, merger or consolidation of
the Company with or into another corporation or a sale or exchange of all
or substantially all of the Company's assets, the holder of an Option (an
"Optionee") shall be entitled to receive upon payment of the Exercise Price
such securities or other property of such other corporation with or into
which the Company shall have been merged or consolidated, or the cash or
other property paid upon the sale or exchange of all or substantially all
of the Company's assets, as the Optionee would have received if he had
immediately prior to such recapitalization, merger, consolidation or sale
or exchange of assets exercised his Option in full, whether or not then
fully vested, and paid for and received the Common Stock; 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.
(c) 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 Common Stock
until it has been listed on each securities exchange on which the Common
Stock may then be listed or until there has been qualification under or
compliance with such state or federal laws, rules or regulations as the
Company
A-5
<PAGE> 25
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 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. The
Second Amended Plan was adopted by the Board of Directors on July 20, 1999 and
approved by the affirmative vote of a majority of the outstanding shares of
capital stock of the Company on September 21, 1999.
16. Termination, Modification and Amendment.
(a) The Second Amended Plan (but not Options previously granted under
the Second 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
shareholders of the Company, or sooner as hereinafter provided, and no
Option shall be granted after termination of the Second Amended Plan.
(b) The Second 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 Second
Amended Plan, or from time to time make such modifications or amendments to
the Second 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 Second 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 Second Amended
Plan or in any Stock Option Agreement executed pursuant hereto shall be deemed
to confer upon any individual to whom an Option is or may be granted hereunder
any right to remain in the employ or service of the Company or a subsidiary
corporation of the Company.
18. Use of Proceeds. The proceeds from the sale of shares pursuant to
Options granted under the Second 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 Second 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.
A-6
<PAGE> 26
20. Definitions. For purposes of the Second Amended Plan, the terms
"parent corporation" and "subsidiary corporation" shall have the same meanings
as set forth in Sections 425(e) and 425(f) of the Code, respectively, and the
masculine shall include the feminine and the neuter as the context requires.
21. Governing Law. The Second 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.
A-7
<PAGE> 27
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD SEPTEMBER 21, 1999
QUINTEL COMMUNICATIONS, 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 Communications, Inc., standing in the name of the
undersigned at the close of business on August 20, 1999, at the Annual Meeting
of Shareholders of the Company to be held on September 21, 1999 at the Company's
Executive Offices, One Blue Hill Plaza, Pearl River, New York, 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> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
Nominees are: Jeffrey L. Schwartz, Jay Greenwald, Andrew Stollman, Michael G.
Miller, Murray L. Skala, Mark Gutterman, Edwin A. Levy and
Lawrence Burstein
(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 PricewaterhouseCoopers LLP as the Company's
auditors.
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
(Continued and to be signed on the reverse side.)
<PAGE> 28
(continued from other side)
3. Approval of the Company's Second Amended and Restated 1996 Stock Option Plan
as to which options may be granted to the Company's employees and others for
2,850,000 Shares.
<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
- ---------------.
Signature(s):
------------------------------------
Date:
------------------------------------
Signature(s):
------------------------------------
Date:
------------------------------------
IMPORTANT: PLEASE SIGN EXACTLY AS YOUR NAME OR NAMES ARE PRINTED HERE.
EXECUTORS, ADMINISTRATORS, TRUSTEES AND OTHER PERSONS SIGNING IN A
REPRESENTATIVE CAPACITY SHOULD GIVE FULL TITLE.
