<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:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] 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:
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<PAGE> 2
QUINTEL COMMUNICATIONS, INC.
ONE BLUE HILL PLAZA
PEARL RIVER, NY 10965
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 12, 2000
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 12, 2000 at 9:30 a.m. local time, to
consider and act upon the following matters:
1. To elect six 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 Third Amended and Restated 1996
Stock Option Plan (the "Third Amended Plan"), amending the Company's Second
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 thereunder from 2,850,000 to 4,850,000 shares.
4. To amend the Company's Certificate of Incorporation, changing the
name of the Company from Quintel Communications, Inc. to D2B, Inc.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record as of the close of business on July 27, 2000 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
, 2000
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 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 12, 2000
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 its 2000 Annual Meeting of Stockholders, to be held on
September 12, 2000 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 , 2000, to be accompanied by the Company's Annual Report to
Shareholders for the fiscal year ended November 30, 1999.
VOTING SECURITIES AND VOTES REQUIRED
At the close of business on July 27, 2000, 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 15,864,164 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, the adoption of the Company's Third Amended and Restated 1996 Stock
Option Plan and the amendment of the Company's Certificate of Incorporation
changing the name of the Company to D2B, Inc. Shares of Common Stock represented
in person or by proxy (including shares which abstain or do not vote for any
reason with respect to one or more of the matters presented for stockholder
approval) will be counted for purposes of determining whether a quorum is
present at the Annual Meeting. Abstentions will be treated as shares that are
present and entitled to vote for purposes of determining the number of shares
present and entitled to vote with respect to any particular matter, but will not
be counted as a vote in favor of such matter. Accordingly, an abstention from
voting on a matter has the same legal effect as a vote against the matter. If a
broker or nominee holding stock in "street name" indicates on the proxy that it
does not have discretionary authority to vote as to a particular matter ("broker
non-votes"), those shares will not be considered as present and entitled to vote
with respect to such matter. Accordingly, a broker non-vote on a matter has no
effect on the voting on such matter.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of July 27, 2000, 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, (iii) each
<PAGE> 4
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>
Jay Greenwald............................................ 2,754,959(3) 17.2%
Jeffrey L. Schwartz...................................... 2,592,279(4) 16.1
Michael G. Miller........................................ 2,283,823(5) 14.3
Andrew Stollman.......................................... 1,220,156(6) 7.6
767 Third Avenue
New York, NY 10017
Jack Silver.............................................. 813,200 5.1
660 Madison Avenue
15th Floor
New York, NY 10021
Edwin A. Levy............................................ 112,500(7) *
767 Third Avenue
New York, NY 10017
Murray L. Skala.......................................... 80,250(8) *
750 Lexington Avenue
New York, NY 10022
Lawrence Burstein........................................ 56,250(9) *
245 Fifth Avenue
New York, NY 10016
All executive officers and directors as a group (9
persons)............................................... 6,871,958(10)(11) 40.9%
</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 July 27, 2000. The inclusion herein of any
shares deemed beneficially owned does not constitute an admission of
beneficial ownership of such shares.
(3) Includes 194,414 shares of Common Stock issuable upon exercise of options
held by Mr. Greenwald.
(4) Includes 194,414 shares of Common Stock issuable upon exercise of options
held by Mr. Schwartz.
(5) Includes 58,615 shares of Common Stock issuable upon exercise of options
held by Mr. Miller.
(6) Includes 172,924 shares of Common Stock issuable upon exercise of options
held by Mr. Stollman.
(7) Represents shares of Common Stock issuable upon exercise of options held by
Mr. Levy.
(8) Includes 76,250 shares of Common Stock issuable upon exercise of options
held by Mr. Skala.
(9) Represents shares of Common Stock issuable upon exercise of options held by
Mr. Burstein.
(10) Includes 22,230 shares of Common Stock issuable upon exercise of options
held by Mr. Daniel Harvey, Chief Financial Officer of the Company, and
33,334 shares of Common Stock issuable upon exercise of options held by Mr.
Joshua Gillon, Chief Investment Officer and General Counsel of the Company.
(11) Includes 862,316 shares of Common Stock issuable upon exercise of options
held by the executive officers and directors of the Company. See footnotes
(3), (4) and (6) through (10), above.
2
<PAGE> 5
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
The persons named in the enclosed proxy will vote to elect as directors the
six 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>
Jeffrey L. Schwartz.................. 51 Chairman of the Board and Chief Executive Officer
Jay Greenwald........................ 36 President, Chief Operating Officer and Director
Andrew Stollman...................... 35 Executive Vice President, Secretary and Director
Murray L. Skala...................... 53 Director
Edwin A. Levy........................ 63 Director
Lawrence Burstein.................... 57 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 was Senior Vice President, Secretary and a director of the
Company from January 1995 until February 15, 2000. On February 15, 2000, Mr.
Stollman's title was changed to Executive Vice President. In addition, Mr.
Stollman was the Company's 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.
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., a publicly-held company in the business of developing, marketing and
distributing children's toys.
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.
3
<PAGE> 6
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 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 officers are Joshua B. Gillon, Esq., the Company's
Chief Investment Officer and General Counsel, and Mr. Daniel Harvey, the
Company's Chief Financial Officer.
Mr. Gillon, age 38, was appointed Chief Investment Officer and General
Counsel of the Company in April 2000. From April 1999 through March 2000, Mr.
Gillon served as the Project Director for Total Energy, Inc., a home heating oil
industry consolidation. From February 1986 to March 1999, he was a partner at
the law firm of Schneck, Weltman & Hashmall, LLP, specializing in mergers,
acquisitions and securities law. From 1990 to 1996, he was associated with the
law firm of Kronish Leib Weiner & Hellman, LLP, and from 1988 to 1990, he was
associated with the law firm of Seward & Kissel, LLP.
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 are to recommend to
the Board of Directors the engagement of the independent accountants, review the
audit plan and results of the audit engagement, review the independence of the
auditors and review the adequacy of the Company's system of internal accounting
controls. On June 13, 2000, the Board of Directors adopted a new Audit Committee
Charter that complies with the new standards set forth in Securities and
Exchange Commission regulations and Nasdaq's independent director and audit
committee listing standards. These changes require, in part, that all companies
listed on Nasdaq or that had applied for listing on Nasdaq prior to December 14,
1999, certify by June 14, 2000 that they have adopted a formal written Audit
Committee Charter and that they will review and assess the adequacy of the
charter on an annual basis. In addition, all of such companies must also certify
that they comply, and will continue to comply, with the new Audit Committee
structure and membership requirements set forth in such regulations and listing
standards by June 14, 2001. The Company's new Audit Committee Charter is
attached to this Proxy Statement as Appendix A. 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 Burstein.
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. Levy and Burstein.
ATTENDANCE AT MEETINGS
From December 1, 1998 through November 30, 1999, the Board of Directors,
Stock Option Committee, Audit Committee and Compensation Committee each met or
acted without a meeting pursuant to unanimous written consent six times, one
time, one time and one time, respectively.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 $367,000 during the fiscal year ended November 30, 1999. 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.
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
5
<PAGE> 8
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. The District Court has denied the motion to
dismiss. The Company and the Individual Defendants have answered the
Consolidated Complaint, denying all liability and raising various affirmative
defenses. Discovery has commenced. The Company believes that the allegations in
the Complaints are without merit, and intends to vigorously defend the
consolidated actions. The Company maintains Directors, Officers and Corporate
liability insurance which, the Company believes, should adequately cover
damages, if any, that may arise under the Complaints. 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, 1999, (i) Mark Gutterman, Daniel Harvey and Michael Miller each
untimely filed one report on Form 4, reporting one late transaction; (ii)
Jeffrey L. Schwartz and Andrew Stollman each untimely filed two reports on Form
4, reporting two late transactions; (iii) Jay Greenwald untimely filed three
reports on Form 4, reporting three late transactions; and (iv) Paul Novelly
untimely filed a Form 3 and Form 5. These 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, 1999. To the best of the
Company's knowledge, all other Forms 3, 4 and 5 required to be filed during the
fiscal year ended November 30, 1999 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, 1999, 1998 and 1997 for the
Chief Executive Officer and the Company's most highly compensated executive
officers of the Company (other than the Chief Executive Officer) whose cash
compensation for the fiscal year ended November 30, 1999 exceeded $100,000 (the
"Named Officers").
6
<PAGE> 9
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------- ---------------------- --------------------
(A) (B) (C) (D) (E) (F) (G) (I)
OTHER RESTRICTED (H) ALL
ANNUAL STOCK PLAN OTHER
SALARY BONUS COMPENSA- AWARDS OPTIONS PAYOUTS COMPENS-
NAME AND PRINCIPAL YEAR ($) ($) TION($) ($) (#) ($) ATION($)
OSITION----------- ---- -------- -------- --------- ---------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jeffrey L. 1999 $362,000 $100,000 0 0 0 0 0
Schwartz...........
Chief Executive 1998 $453,750 0 0 0 8,750(2) 0 0
Officer 1997 $412,500 $418,347 0 0 128,495 0 0
Jay Greenwald........ 1999 $362,000 $100,000 0 0 0 0 0
President and 1998 $453,750 0 0 0 8,750(2) 0 0
Chief Operating 1997 $412,500 $418,346 0 0 128,495 0 0
Officer
Andrew Stollman...... 1999 $266,000 $100,000 0 0 0 0 0
Executive Vice 1998 $302,500 0 0 0 8,750(2) 0 0
President and 96,260 0 0
Secretary 1997 $243,750 $418,346 0 0 0 0 0
Daniel Harvey (1).... 1999 $155,800 $ 20,000 0 0 0 0 0
Chief Financial 1998 $127,000 $ 50,000 0 0 7,729(3) 0 0
Officer 1997 $111,000 $ 25,000 0 0 0 0 0
</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 to purchase 25,000 shares pursuant to the Company's 1998 Option
Exchange.
(3) Represents shares underlying options issued in exchange for the surrender of
options to purchase 26,000 shares pursuant to the Company's 1998 Option
Exchange.
The following table sets forth certain information regarding options
exercisable during the fiscal year ended November 30, 1999 and the value of the
options held as of November 30, 1999 by the Named Officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
YEAR END (#) YEAR END(1)($)
------------------------------ ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Jeffrey L. Schwartz...... 8,750 $ 36,641
85,664 42,831 342,656 $171,324
Jay Greenwald............ 8,750 36,641
85,664 42,831 342,656 171,324
Andrew Stollman.......... 8,750 36,641
64,174 32,086 256,696 128,344
Daniel Harvey............ 7,585 145 31,763 608
</TABLE>
---------------
(1) The product of (x) the difference between $5.9375 (the closing price of the
Company's Common Stock at November 30, 1999, as reported by Nasdaq) and the
exercise price of the unexercised options, multiplied by (y) the number of
unexercised options.
7
<PAGE> 10
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, Greenwald and Stollman have agreed that each of
such individuals are entitled to receive compensation for their services
rendered of $400,000, $400,000 and $302,500 per annum, respectively, until such
time as written employment agreements between the Company and such individuals
have been executed. Notwithstanding the foregoing, Messrs. Schwartz, Greenwald
and Stollman voluntarily elected to receive compensation during the fiscal year
ended November 30, 1999 of $362,000, $362,000 and $266,000, respectively.
BOARD COMPENSATION
As a result of the Company's policy to compensate non-employee directors
for their services, the Company's Second Amended and Restated 1996 Stock Option
Plan (the "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 from
December 1, 1998 through November 3, 1999 consisted of Mark Gutterman and Murray
L. Skala. See "Certain Relationships and Related Transactions." On November 3,
1999, Mr. Gutterman resigned from the Company's Board of Directors and the
Committees thereof for which he was a member (including the Compensation
Committee). Mr. Gutterman's replacement on the Board and the Committees to which
he was a member was Lawrence Burstein.
8
<PAGE> 11
TOTAL SHAREHOLDER RETURNS
[LINE GRAPH]
<TABLE>
<CAPTION>
QUINTEL
COMMUNICATIONS,
INC. NASDAQ U.S. PEER GROUP
--------------- ----------- ----------
<S> <C> <C> <C>
05 Dec 95 100.00 100.00 100.00
Nov 96 152.50 121.65 169.46
Nov 97 115.00 151.53 140.53
Nov 98 31.88 185.84 131.93
Nov 99 118.76 319.97 150.85
</TABLE>
ANNUAL RETURN PERCENTAGE
<TABLE>
<CAPTION>
YEARS ENDED
---------------------------------------------
COMPANY NAME/ INDEX NOV 96 NOV 97 NOV 98 NOV 99
------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
QUINTEL COMMUNICATIONS, INC........................... 52.50 (24.59) (72.28) 272.52
NASDAQ U.S. INDEX..................................... 21.85 24.57 22.64 72.17
PEER GROUP (SIC 7389 -- Business Services Not
Elsewhere Classified................................ 69.46 (17.07) (6.12) 14.34
</TABLE>
INDEXED RETURNS
<TABLE>
<CAPTION>
BASE YEARS ENDED
PERIOD ---------------------------------------------
COMPANY NAME/ INDEX 05 DEC 95 NOV 96 NOV 97 NOV 98 NOV 99
------------------- --------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
QUINTEL COMMUNICATIONS, INC.............. 100 152.50 115.00 31.88 118.76
NASDAQ U.S. INDEX........................ 100 121.65 151.53 185.84 319.97
PEER GROUP (SIC 7389 -- Business Services
Not Elsewhere Classified............... 100 169.46 140.53 131.93 150.85
</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 $100.00 invested on December 5, 1995 in the Company's Common Stock, the
Nasdaq U.S. Companies Index and the SIC Code 7389 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 value
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.
10
<PAGE> 13
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 targets and objectives, considering
factors such as sales and earnings per share; Company position within the
industry in which it competes, including market share; overall economic climate;
individual contribution to the Company; and such other factors as the
Compensation Committee may deem appropriate. In determining recommendations for
any changes to Mr. Schwartz' compensation package, including the granting of any
bonuses, options or warrants, or salary adjustments, the Compensation Committee
will consider the foregoing factors.
Mr. Schwartz's compensation is no longer governed by the terms of a written
employment agreement, which expired in November 1998 (see "Employment
Agreements"). The Company and Mr. Schwartz agreed (and the Compensation
Committee approved) that his compensation for services rendered on the Company's
behalf would be $400,000 per annum. Nevertheless, Mr. Schwartz voluntarily
elected to receive compensation during the fiscal year ended November 30, 1999
of $362,000.
COMPENSATION COMMITTEE
Lawrence Burstein
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, 2000, 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
THIRD AMENDED AND RESTATED
1996 STOCK OPTION PLAN
(PROPOSAL NO. 3)
The Board of Directors has unanimously adopted, subject to stockholder
approval, a Third Amended and Restated 1996 Stock Option Plan (the "Third
Amended Plan"), which amends certain aspects of the Second Amended and Restated
1996 Stock Option Plan (the "Second Amended Plan"), which was adopted by the
Company's stockholders and directors on September 21, 1999. If approved by the
stockholders of the Company, the Third Amended Plan would increase the number of
shares of the Company's Common Stock available under the Second Amended Plan
from 2,850,000 shares to 4,850,000 shares. The Company believes the increase in
the number of shares underlying the options available for grant under the Third
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 on July 6, 2000, subject to stockholder approval.
The Third Amended Plan is summarized below. The full text of the Third
Amended Plan is set forth in Appendix B to this Proxy Statement, and the
following discussion is qualified by reference thereto.
Administration and Eligibility
The Third 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 Second
Amended Plan is 2,850,000 shares, which the Company proposes to expand to
4,850,000 shares under the Third Amended Plan. Under the Third Amended Plan, the
Company may grant incentive stock options or options not intended to qualify as
incentive stock options (together, the "Options").
The Third 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 Third 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 Third 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 Third Amended
12
<PAGE> 15
Plan shall be employees (including officers), consultants or advisors of either
the Company or any subsidiary corporation of the Company. Employees shall be
entitled to receive Incentive Stock Options and Nonstatutory Stock Options.
Consultants and advisors shall be entitled only to receive Nonstatutory Stock
Options. The Board or the Committee, in their sole discretion, but subject to
the provisions of the Third Amended Plan, will 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 Third 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 Third
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 Third 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 Third Amended Plan will 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 will 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 will be the "fair market value" (as defined
pursuant to the Third 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 Third Amended Plan are 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 will vest entirely on the date granted and will be exercisable for a
period of ten (10) years. All other Nonstatutory Stock Options granted under the
Third 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 will be terminated either voluntarily by the employee or for cause, then
such employee's Options will immediately expire. If such employment or services
will 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 will be deemed to be termination of such individual's employment other
than voluntarily or for cause.
If the holder of any Options under the Third 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.
13
<PAGE> 16
If the holder of any Options under the Third Amended Plan ceases employment
because of permanent and total disability (within the meaning of Section
22(e)(3) of the Code) while employed by the Company or a subsidiary of the
Company, then such Options may be exercised at any time within one (1) year
after his termination of employment due to such disability.
If the services of a director who is not an employee of the Company will be
terminated by the Company for cause, then his Options will immediately expire.
If such services terminate for any other reason (including the death or
disability of a director who is not an employee of the Company), he resigns as a
director of the Company or his term expires, 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 Third 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 Third 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 presently 23 employees and three (3) directors who are not
employees of the Company who are eligible for participation in the Third Amended
Plan. The Company cannot presently approximate the number of consultants and/or
advisors who will be eligible to receive Options under the Third 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 the
like, an appropriate adjustment will be made by the Board or Committee in the
aggregate number of shares available under the Third Amended Plan and in the
number of shares and option price per share subject to outstanding Options.
If the Company is reorganized, consolidated or merged with or into another
corporation, or if all or substantially all of the assets of the Company are
sold or exchanged, the holder of an Option (an "Optionee") will 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 will 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 will have the discretionary power to take any
action necessary or appropriate to prevent any Incentive Stock Option granted
pursuant to the Third 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 THIRD AMENDED PLAN
The Third Amended Plan will 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 Third Amended
Plan.
The Third 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 Third Amended Plan, terminate the Third Amended Plan, or from time to
time make such modifications or amendments to the Third 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.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the federal income tax treatment of Incentive
Stock Options and Nonstatutory 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 Third 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 exceed 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.
Nonstatutory Stock Options. No taxable income is recognized by the
optionee upon the grant of a Nonstatutory Option. The Optionee must recognize as
ordinary income in the year in which the option is exercised the amount by which
the fair market value of the purchased shares on the date of exercise exceeds
the option price. However, special rules may apply to options held by persons
required to file reports under
15
<PAGE> 18
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 Third 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 Third
Amended Plan. The following table, however, sets forth the benefits (losses)
that would have been received in 1999 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 Third Amended Plan had
been in effect during 1999.
<TABLE>
<CAPTION>
THE THIRD 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 (3 Persons)(2).........
January 1, 1999........................................... $ 1.875 per share(3) 18,750
April 1, 1999............................................. $ 0.875 per share(3) 18,750
July 1, 1999.............................................. $ 1.50 per share(3) 18,750
October 1, 1999........................................... $1.8125 per share(3) 18,750
Non-Executive Officer Employee Group........................ * *
</TABLE>
---------------
* The Third 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 Third Amended Plan, options
to purchase 6,250 shares of Common Stock on the first day of each calendar
quarter the Third Amended Plan is in effect. Grants of Options under the
Third 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 Third Amended Plan.
(2) The information provided represents the benefits (losses) that would have
been received in 1999 as if the Third Amended Plan had been in effect during
1999.
(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 Third Amended Plan been in effect during 1999.
16
<PAGE> 19
AUTHORIZATION TO CHANGE THE NAME OF
THE COMPANY FROM QUINTEL COMMUNICATIONS, INC. TO D2B, INC.
(PROPOSAL NO. 4)
Management has informed the Board of Directors that central to the
Company's growth strategy is the shifting of its operations from the
telecommunications industry to the e-commerce industry. Consistent therewith,
management has recommended to the Board of Directors that the Company change its
name from Quintel Communications, Inc. to D2B, Inc. Accordingly, the Board of
Directors, on July 6, 2000, unanimously adopted a resolution, subject to
shareholder approval, authorizing the amendment of the Company's Certificate of
Incorporation to change the name of the Company to D2B, Inc.
BOARD RECOMMENDATION
The Board of Directors believes that the approval of the foregoing four
proposals is in the best interests of the Company and its stockholders and
therefore recommends that the stockholders vote FOR such proposals.
2001 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 2001 Annual
Meeting of Stockholders must be received by the Company at its executive offices
in Pearl River, New York not later than May 15, 2001 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
, 2000
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. STOCKHOLDERS WHO ATTEND
THE ANNUAL MEETING MAY VOTE THEIR SHARES PERSONALLY, EVEN THOUGH THEY HAVE SENT
IN THEIR PROXIES.
17
<PAGE> 20
APPENDIX A
AUDIT COMMITTEE CHARTER
ARTICLE I. PURPOSE
The purpose of the Audit Committee (the "Committee") is to provide
assistance to the Board of Directors (the "Board") in fulfilling its oversight
responsibilities. The Committee's primary responsibilities are to serve as an
independent and objective party to:
- Oversee and review the Corporation's auditing, accounting, and financial
reporting processes;
- Monitor and review that management has established and maintained
processes to assure that an adequate system of internal control is
functioning within the Corporation regarding accounting, finance, legal
compliance and ethics;
- Review and evaluate the Corporation's outside auditors; and
- Provide for an open avenue of communication among the outside auditors,
financial and senior management, and the Board.
Consistent with these responsibilities, the Committee should encourage
continuous improvement of, and should require adherence to, the Corporation's
policies, procedures, and practices at all levels of corporate activity. The
Committee will fulfill these responsibilities primarily by carrying out the
activities enumerated in Article IV of this Charter
ARTICLE II. RELATIONSHIP WITH OUTSIDE AUDITORS
The Corporation's outside auditor is ultimately responsible to the Board
and the Committee. Subject to an affirming vote of a plurality of stockholders,
the Board has the ultimate authority and responsibility to select, evaluate, and
replace the outside auditors.
Management is responsible for preparing the Corporation's financial
statements. The Corporation's outside auditors are responsible for auditing the
financial statements. The activities of the Committee are in no way designed to
supercede or alter these traditional responsibilities.
ARTICLE III. COMPOSITION
(a) The Committee shall consist of no fewer than three (3) directors.
(b) Each member of the Committee must be an "independent director" within
the meaning of Nasdaq Marketplace Rule 4200(a)(14). In particular, the
Board shall determine that no member of the Committee has any
relationship, which, in its opinion, would interfere with the exercise
of independent judgment in carrying out the responsibilities of a
director or a member of the Committee. Notwithstanding the foregoing,
one director who is not an independent director and is not a current
employee or an immediate family member of a current employee, may serve
on the Committee if the Board, under exceptional and limited
circumstances, determines that his membership on the Committee is
required by the best interests of the Company and its stockholders and
the Board discloses in the next annual proxy statement subsequent to
such determination, the nature of the relationship by which such
director fails to be an independent director and the reasons for its
determination.
(c) Each member of the Committee must be able to read and understand
fundamental financial statements, including balance sheet, income
statement and cash flow statement, or become able to do so within a
reasonable period of time after appointment to the Committee.
(d) At least one member of the Committee must have past employment
experience in finance or accounting, requisite professional
certification in accounting, or any other comparable experience or
A-1
<PAGE> 21
background which results in financial sophistication, including being
or having been a chief executive officer, chief financial officer or
other senior officer with financial oversight responsibilities.
(e) The Board may designate one of the members of the Committee to be its
chairman; if the Board does not do so, the Committee may designate one
of its members to be its chairman.
(f) Notwithstanding the foregoing, the Committee shall not be required to
comply with clauses (a) through (e) of this Article III until such time
as it is required to do so pursuant to federal or state law or in
accordance with the Nasdaq Marketplace Rules (or the rules of the
exchange upon which the Company's securities are then traded).
ARTICLE IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Committee shall:
Documents/Reports Review
1. Review and reassess, at least annually, the adequacy of this Charter,
and to make recommendations to the Board, as conditions dictate, to update this
Charter.
2. Review with management and the independent accountants the Corporation's
annual financial statements, including a discussion with the independent
accountants of the matters required to be discussed by Statement of Auditing
Standards No. 61 ("SAS No. 61").
3. Review with management and the independent accountants the Corporation's
Quarterly Report on Form 10-Q prior to its filing or prior to the release of
earnings, including a discussion with the independent accountants of the matters
to be discussed by SAS No. 61. The Chairperson of the Committee may represent
the entire Committee for purposes of this review.
Independent Accountants
4. Review the performance of the independent accountants and make
recommendations to the Board regarding the appointment or termination of the
independent accountants. The independent accountants are ultimately accountable
to the Committee and the entire Board for such accountants' review of the
financial statements and controls of the Corporation. On an annual basis, the
Committee should review and discuss with the accountants all significant
relationships the accountants have with the Corporation to determine the
accountants' independence.
5. Oversee independence of the accountants by:
- receiving from the accountants, on a periodic basis, a formal
written statement delineating all relationships between the
accountants and the Corporation consistent with Independence
Standards Board Standard 1 ("ISB No. 1");
- reviewing, and actively discussing with the Board, if necessary, and
the accountants, on a periodic basis, any disclosed relationships or
services between the accountants and the Corporation or any other
disclosed relationships or services that may impact the objectivity
and independence of the accountants; and
- recommending, if necessary, that the Board take certain action to
satisfy itself of the auditor's independence.
6. Based on the review and discussions referred to in Section 2 and 5 of
this Article IV, shall determine whether to recommend to the Board that the
Corporation's audited financial statements be included in the Corporation's
Annual Report on Form 10-K for the last fiscal year for filing with the
Securities and Exchange Commission.
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<PAGE> 22
Financial Reporting Process
7. In conjunction with the independent accountants, review the integrity of
the Corporation's financial reporting processes, both internal and external.
8. Consider and approve, if appropriate, major changes to the Corporation's
auditing and accounting principles and practices as suggested by the independent
accountants or management.
9. Establish regular systems of reporting to the Committee by each of
management and the independent accountants regarding any significant judgments
made in management's preparation of the financial statements and any significant
difficulties encountered during the course of the pre-issuance review or audit,
including any restrictions on the scope of the work or access to required
information.
10. Review any significant disagreement among management and the
independent accountants in connection with the preparation of the financial
statements.
Legal Compliance/General
11. Review with the Corporation's counsel, any legal matter that could have
a significant impact on the Corporation's financial statements.
12. Report through its Chairperson to the Board following meetings of the
Committee.
13. Maintain minutes or other records of meetings and activities of the
Committee.
ARTICLE V. MISCELLANEOUS
The Committee may perform any other activities consistent with this
charter, the corporation's charter and bylaws, and governing law as the
committee or the Board deems necessary or appropriate.
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<PAGE> 23
APPENDIX B
QUINTEL COMMUNICATIONS, INC.
THIRD AMENDED AND RESTATED 1996 STOCK OPTION PLAN
1. Purpose of the Plan. The Quintel Communications, Inc. Third Amended and
Restated 1996 Stock Option Plan (the "Third 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 Third 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 Third 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 Third 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 Third Amended Plan,
except as otherwise provided by law.
3. Shares Subject to the Third Amended Plan. The stock subject to grant
under the Third 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 Third Amended Plan. The maximum number of shares of Common Stock which
may be issued pursuant to Options granted under the Third Amended Plan shall not
exceed Four Million Eight Hundred Fifty Thousand (4,850,000) shares, subject to
adjustment in accordance with the provisions of Section 13 hereof. The Company
shall at all times while the Third 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 Third Amended Plan. In the event any
Option granted under the Third 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 Third Amended Plan.
4. Stock Option Agreement. Each Option granted under the Third 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 Third 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 Third Amended Plan, shall
determine the employees, consultants or advisors to whom Options shall be
granted and the number of shares to be covered
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<PAGE> 24
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
Third 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 Third 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 Third 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 Third 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 Third 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 424(d) of the Code shall apply.
(f) For purposes of the Third 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> 25
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 Third 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 Third 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 Third 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 Third 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 Third 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
Third 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 Third 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
Third 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 Third 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
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<PAGE> 26
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 Third 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 re-employment 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 Third 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 Third 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.
(b) An Option granted under the Third 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
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<PAGE> 27
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 Third 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 the like, an appropriate adjustment shall be made by the
Board or Committee in the aggregate number of shares available under the
Third 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
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 may deem applicable. The Company shall use reasonable efforts to
obtain such listing, qualifications and compliance.
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<PAGE> 28
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. The Third Amended Plan was
adopted by the Board of Directors on July 6, 2000 and approved by the
affirmative vote of a majority of the outstanding shares of capital stock of the
Company on September 12, 2000.
16. Termination, Modification and Amendment.
(a) The Third Amended Plan (but not Options previously granted under
the Third 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 shareholders of the Company, or sooner as
hereinafter provided, and no Option shall be granted after termination of
the Third Amended Plan.
(b) The Third 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 Third
Amended Plan, or from time to time make such modifications or amendments to
the Third 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.
(d) No termination, modification or amendment of the Third 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 Third 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 Third 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 Third Amended Plan or
any rights granted thereunder and against all amounts paid by them in settlement
thereof or paid by them in satisfaction of a judgment of any such action, suit
or proceeding, except a judgment based upon a finding of bad faith. Upon the
institution of any such action, suit or proceeding, the member or members of the
Board of Directors or the Committee, as the case may be, shall notify the
Company in writing, giving the Company an opportunity at its own cost to defend
the same before such member or members undertake to defend the same on their own
behalf.
20. Definitions. For purposes of the Third Amended Plan, the terms "parent
corporation" and "subsidiary corporation" shall have the same meanings as set
forth in Sections 424(e) and 424(f) of the Code, respectively, and the masculine
shall include the feminine and the neuter as the context requires.
21. Governing Law. The Third Amended Plan shall be governed by, and all
questions arising hereunder shall be determined in accordance with, the law of
the State of New York.
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<PAGE> 29
Proxy for Annual Meeting of Shareholders to be held September 12, 2000
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 July 27, 2000, at the Annual Meeting of
Shareholders of the Company to be held on September 12, 2000 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.
(Continued and to be signed on the reverse side.)
<PAGE> 30
[X] Please mark
your votes as this example
1. Election of For Against Nominees are:
Directors [ ] [ ] Jeffrey L. Schwartz, Jay
Greenwald, Andrew Stollman,
Murray L. Skala, Edwin A.
Levy and Lawrence Burstein
For Against Abstain
2. Approval of appointment of PricewaterhouseCoopers [ ] [ ] [ ]
LLP as the Company's auditors.
3. Approval of the Company's Third Amended and [ ] [ ] [ ]
Restated 1996 Stock Option Plan as to which
options may be granted to the Company's
employees and others for 4,850,000 shares.
4. Approval to amend the Company's Certificate [ ] [ ] [ ]
of Incorporation, changing the name of
the Company from Quintel Communications,
Inc. to D2B, Inc.
5. 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.
(Instruction: to withhold authority to vote
fore any individual nominee, write that
nominee, write that nominee's name in the
space provided below.)
------------------------------------------------
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 names are printed here. Executors,
administrators, trustees and other persons signing in a representative capacity
should give full title.
