Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __)
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
|X| Preliminary proxy statement
|_| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Audio Book Club, Inc.
(Name of Registrant as Specified in Its Charter)
Board of Directors of Audio Book Club, Inc.
(Name of Person(s) Filing Proxy Statement)
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:
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(4) Date filed:
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<PAGE>
Audio Book Club, Inc.
2295 Corporate Boulevard, N.W. - Suite 222
Boca Raton, Florida 33431
February 23, 1999
Dear Shareholders:
You are cordially invited to attend a Special Meeting of Shareholders of
Audio Book Club, Inc. (the "Company") which will be held on Friday, March 26,
1999 at 9:00 A.M. local time at the Company's offices located at 20 Community
Place, Morristown, New Jersey 07960.
The Notice of Special Meeting and Proxy Statement which follow describe the
business to be conducted at the meeting.
Your Board of Directors unanimously believes that (i) the approval of the
amendment to the Company's Articles of Incorporation to increase the authorized
common stock to 75,000,000 shares and (ii) the approval of Company's 1999 Stock
Incentive Plan are in the best interests of the Company and its shareholders
and, accordingly, recommends a vote "FOR" the foregoing proposals on the
enclosed proxy card.
Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted. After reading the enclosed Notice of
Special Meeting and Proxy Statement, may I urge you to complete, sign, date and
return the enclosed proxy card in the envelope provided. If the address on the
accompanying material is incorrect, please advise our Transfer Agent,
Continental Stock Transfer & Trust Company, in writing, at 2 Broadway, New York,
New York 10004.
Your vote is very important, and we will appreciate a prompt return of your
signed proxy card. We hope to see you at the meeting and appreciate your
continued support.
Sincerely yours,
Norton Herrick
Co-Chief Executive Officer
<PAGE>
AUDIO BOOK CLUB, INC.
2295 Corporate Boulevard, N.W., Suite 222
Boca Raton, Florida 33431
--------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FRIDAY, MARCH 26, 1999
--------------------
To the Shareholders of AUDIO BOOK CLUB, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting ("Special Meeting") of
Shareholders of Audio Book Club, Inc. (the "Company") will be held on Friday,
March 26, 1999, at 9:00 A.M. local time at the Company's offices located at 20
Community Place, Morristown, New Jersey 07960, for the following purposes:
1. To consider and vote on a proposal to approve an amendment to the
Company's Articles of Incorporation to increase the authorized common stock from
25,000,000 to 75,000,000 shares;
2. To consider and vote upon a proposal to approve the Company's 1999 Stock
Incentive Plan; and
3 To transact such other business as may properly come before the Special
Meeting or any adjournment or adjournments thereof.
Only shareholders of record at the close of business on February 10, 1999
are entitled to notice of and to vote at the Special Meeting or any adjournments
thereof.
By Order of the Board of Directors,
Norton Herrick
Co-Chief Executive Officer
February 23, 1999
<PAGE>
AUDIO BOOK CLUB, INC.
2295 Corporate Boulevard, N.W., Suite 222
Boca Raton, Florida 33431
---------------
PROXY STATEMENT
---------------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FRIDAY, MARCH 26, 1999
This proxy statement (the "Proxy Statement") is furnished in connection
with the solicitation of proxies by the Board of Directors of Audio Book Club,
Inc. (the "Company") for use at a Special Meeting of Shareholders (the "Special
Meeting") to be held on Friday, March 26, 1999, including any adjournment or
adjournments thereof, for the purposes set forth in the accompanying Notice of
Meeting.
Management intends to mail this proxy statement and the accompanying form
of proxy to shareholders on or about February 24, 1999.
Proxies in the accompanying form, duly executed and returned to the
management of the Company and not revoked, will be voted at the Special Meeting.
Any proxy given pursuant to such solicitation may be revoked by the shareholder
at any time prior to the voting of the proxy by a subsequently dated proxy, by
written notification to the Secretary of the Company, or by personally
withdrawing the proxy at the Special Meeting and voting in person.
The address and telephone number of the principal executive offices of the
Company are: 2295 Corporate Blvd., N.W., Suite 222, Boca Raton, Florida 33431,
Telephone No.: (561) 241-1426.
OUTSTANDING SHARES AND VOTING RIGHTS
Only shareholders of record at the close of business on February 10, 1999
(the "Record Date") are entitled to notice of and to vote at the Special
Meeting. As of the Record Date, there were issued and outstanding 7,078,920
shares of the Company's Common Stock, no par value per share (the "Common
Stock"). Each share of Common Stock entitles the holder to one vote on each
matter submitted to a vote at the Annual Meeting. Officers and directors of the
Company, who together maintain voting rights to approximately 52.3% of the
Company's voting securities, have indicated an intention to vote for the
Amendment of the Certificate of Incorporation to increase the Company's
authorized Common Stock and for the adoption of the Company's 1999 Stock
Incentive Plan. See "Voting Security Ownership of Certain Beneficial Owners and
Management."
<PAGE>
VOTING PROCEDURES AND PROXY INFORMATION
Approval of the Amendment to the Company's Articles of Incorporation to
increase its authorized common stock requires the affirmative vote of a majority
of the issued and outstanding shares of Common Stock as of the Record Date.
Approval of the adoption of the Company's 1999 Stock Incentive Plan requires the
affirmative vote of a majority of the shares of Common Stock present and voting
at the Special Meeting provided a quorum is present. A quorum is established if,
as of the Record Date, at least a majority of the outstanding shares of Common
Stock are present in person or represented by proxy at the Special Meeting. All
other matters at the meeting will be decided by the affirmative vote of a
majority of the shares of Common Stock present in person or represented by proxy
at the meeting and entitled to vote on the subject matter voting as a single
class, provided a quorum exists. Votes will be counted and certified by one or
more Inspectors of Election who are expected to be employees of Continental
Stock Transfer & Trust Company, the Company's transfer agent.
In accordance with Florida law, abstentions and "broker non-votes" (i.e.,
proxies from brokers or nominees indicating that such persons have not received
instructions from the beneficial owner or other persons entitled to vote shares
as to a matter with respect to which the brokers or nominees do not have
discretionary power to vote) will be treated as present for purposes of
determining the presence of a quorum. For purposes of determining approval of a
matter presented at the meeting, abstentions will be deemed present and entitled
to vote and will, therefore, have the same legal effect as a vote "against" a
matter presented at the meeting. Broker non-votes will be deemed not entitled to
vote on the subject matter as to which the non-vote is indicated. Abstentions
and broker non-votes will have no effect on the vote to approve the Company's
1999 Stock Incentive Plan but will have the same effect as a vote "against" the
proposed amendment to the Articles of Incorporation.
The enclosed proxies will be voted in accordance with the instructions
thereon. Unless otherwise stated, all shares represented by such proxy will be
voted as instructed. Proxies may be revoked as noted above.
The entire cost of soliciting proxies, including the costs of preparing,
assembling, printing and mailing this Proxy Statement, the proxy and any
additional soliciting material furnished to shareholders, will be borne by the
Company. Arrangements will be made with brokerage houses and other custodians,
nominees and fiduciaries to send proxies and proxy materials to the beneficial
owners of stock, and such persons may be reimbursed for their expenses by the
Company. Proxies may also be solicited by directors, officers or employees of
the Company in person or by telephone, telegram or other means. No additional
compensation will be paid to such individuals for these services.
VOTING SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of the Record Date,
relating to the beneficial ownership of shares of Common Stock by (i) each
person or entity who is known by the Company to own beneficially 5% or more of
the outstanding Common Stock, (ii) each of the Company's directors, (iii) each
of the Company's Co-Chief Executive Officers and other executive officers whose
combined salary and bonus exceeded $100,000 during the fiscal year ended
December 31, 1998, and (iv) all directors and executive officers of the Company
as a group:
- 2 -
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Number of Shares of Common Outstanding
Name and Address of Position with the Stock Common Stock
Beneficial Owner(1) Company Beneficially Owned(2) Beneficially Owned
- ------------------- ------- --------------------- ------------------
<S> <C> <C> <C>
Co-Chief Executive
Norton Herrick...................... Officer and Director 3,983,435(3) 39.5%
Executive Vice
President and
Howard Herrick...................... Director 3,941,100(4) 53.8
Co-Chief Executive
Michael Herrick..................... Officer and Director 250,000(5) 3.4
Carl Wolf........................... Director 95,000(6) 1.3
Executive Vice
President and Chief
John Levy........................... Financial Officer 11,000(7) *
Roy Abrams.......................... Director 5,000(8) *
President and
Jesse Faber......................... Director 10,000(9) *
7,318,615(3)(4)
All directors and executive (5)(6)
officers as a group (7 (7)(8)
persons)............................ (9) 54.6
</TABLE>
- ----------
* Less than 1%
(1) The address for each named individual or group is in care of Audio Book
Club, Inc., 2295 Corporate Boulevard, N.W., Suite 222, Boca Raton, Florida,
33431.
(2) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock beneficially owned by them. A person is deemed to be the
beneficial owner of securities that can be acquired by such person within
60 days of the Record Date upon the exercise of options, warrants or
convertible securities. Each beneficial owner's percentage ownership is
determined by assuming that options, warrants or convertible securities
that are held by such person (but not those held by any other person) and
which are exercisable within 60 days of the Record Date have been exercised
and converted.
(3) Includes (i) 8,200 shares of common stock held by Norton Herrick, (ii)
488,460 shares of common stock held by Howard Herrick, (iii) 488,460 shares
of common stock held by the M.E. Herrick Irrevocable Trust, of which
Michael Herrick is the sole beneficiary and Howard Herrick is the sole
trustee, (iv) 250,000 shares issuable upon exercise of options granted on
June 16, 1998 at an exercise price of $3.50 per share, (v) 750,000 shares
of common stock issuable upon exercise of options granted September 10,
1998 at an exercise price of $7.25 per share, (vi) 150,000 shares of common
stock issuable upon exercise of options granted to Evan Herrick on November
5, 1998 at an exercise price of $7.875 per share, (vii) 1,348,315 shares of
common stock issuable upon conversion of the Note at an initial conversion
price of $11.125 per share and (viii) 500,000 shares of common stock
issuable upon exercise of a warrant issued on December 31, 1998 at an
initial exercise price of $12.00 per share. Does not include 2,714,180
shares held by the Norton Herrick Irrevocable Trust of which
- 3 -
<PAGE>
Norton Herrick is the sole beneficiary and Howard Herrick is the sole
trustee. The Norton Herrick Irrevocable ABC Trust agreement provides that
Howard Herrick shall have sole voting and dispositive power over the shares
held by the trust. Howard Herrick has irrevocably granted to Norton Herrick
sole dispositive power with respect to the shares of common stock held by
Howard Herrick in his own behalf and on behalf of the M.E. Herrick
Irrevocable Trust. Evan Herrick has irrevocably granted to Norton Herrick
sole voting and dispositive power with respect to the shares of common
stock issuable upon exercise of the 150,000 options granted to Evan Herrick
on November 5, 1998.
(4) Includes (i) 2,714,180 shares held by the Norton Herrick Irrevocable ABC
Trust, (ii) 488,460 shares of common stock held by Howard Herrick, (iii)
488,460 shares of common stock held by the M.E. Herrick Irrevocable Trust,
(iv) 100,000 shares of common stock issuable upon exercise of options
granted on February 12, 1998 at an exercise price of $4.75 per share and
(v) 150,000 shares issuable upon exercise of options granted November 5,
1998 at an exercise price of $7.875 per share.
(5) Includes (i) 100,000 shares of common stock issuable upon exercise of
options granted on February 12, 1998 at an exercise price of $4.75 per
share and (ii) 150,000 shares issuable upon exercise of options granted
November 5, 1998 at an exercise price of $7.875 per share. Does not include
488,460 shares of common stock held by the M.E. Herrick Irrevocable Trust.
The M.E. Herrick Irrevocable Trust agreement provides that Howard Herrick
shall have sole voting and dispositive power over the shares held by the
M.E. Herrick Irrevocable Trust and Howard Herrick has granted to Norton
Herrick sole dispositive power over the shares held by the M.E. Herrick
Irrevocable Trust.
(6) Includes (i) 5,000 shares of Common Stock, (ii) 50,000 shares of common
stock issuable upon exercise of options granted March 18, 1998 at an
exercise price of $5.00 per share, (iii) 25,000 shares of common stock
issuable upon exercise of options purchased September 18, 1998 at an
exercise price of $5.00 per share, and (iv) 15,000 shares of common stock
issuable upon exercise of options granted on March 18, 1998 under our stock
option plan at an exercise price of $5.00 per share.
(7) Includes 10,000 shares of common stock issuable upon exercise of options
origianlly granted on June 16, 1998 that are exercisable at $3.50 per
share. Does not include (i) 20,000 shares of common stock issuable upon
exercise of options originally granted on June 16, 1998 that are
exercisable at $3.50 per share and (ii) 20,000 shares of common stock
issuable upon exercise of options granted June 16, 1998 that are
exercisable at $3.50 per share.
(8) Represents shares of common stock issuable upon exercise of options granted
on June 16, 1998 that are exercisable at $3.50 per share. Does not include
5,000 shares issuable upon exercise of options granted on June 16, 1998
that are exercisable at $3.50 per share.
(9) Represents shares of common stock issuable upon exercise of options granted
on June 16, 1998 that are exercisable at $3.50 per share.
- 4 -
<PAGE>
PROPOSAL I
AMENDMENT TO ARTICLES OF INCORPORATION
TO EFFECT AN INCREASE IN
AUTHORIZED SHARES OF COMMON STOCK
At the Annual Meeting, the stockholders will be asked to vote upon an
amendment to the Articles of Incorporation of the Company (the "Proposed
Amendment") to increase the number of authorized shares of Common Stock, no par
value per share, from 25,000,000 to 75,000,000 shares. Approval of this
amendment requires the affirmative vote of the holders of a majority of the
shares of Common Stock of the Company that are issued and outstanding as of the
Record Date. Officers and directors who are the owners of record of
approximately 52.3% of the issued and outstanding Common Stock have indicated
that they currently intend to vote the shares which they beneficially own in
favor of this amendment. See "Outstanding Shares and Voting Rights" and "Voting
Security Ownership of Certain Beneficial Owners and Management." The Proposed
Amendment would amend Article III of the Company's Articles of Incorporation.
The Proposed Amendment is set forth in full as Exhibit A to this Proxy
Statement.
The Board of Directors considers the Proposed Amendment advisable in order
to provide flexibility for future capital requirements. The development of the
Company to date has been financed to a considerable extent through the issuance
of its Common Stock or securities convertible into Common Stock and the Board of
Directors believes that it would be beneficial to the Company to be in a
position to make additional issuances of such Common Stock or convertible
securities if circumstances warrant such issuances. Approval by the stockholders
of the Proposed Amendment at the Special Meeting will avoid the need to call and
hold a special meeting for that purpose at a later date on a possible
accelerated timetable. The Board of Directors is empowered to authorize the
issuance of the additional shares at such time or times, to such persons and for
such consideration as the Board deems appropriate, without further shareholder
action. Although such additional shares could be used to dilute the share
ownership of persons seeking to obtain control of the Company, approval of the
Proposed Amendment is not being sought for that purpose.
None of the Company's Common Stock has any pre-emptive rights.
Recommendation
The Board of Directors believes that the Proposed Amendment is in the best
interest of the Company and recommends a vote "FOR" the Proposed Amendment.
PROPOSAL II
APPROVAL OF 1999 STOCK INCENTIVE PLAN
At the Special Meeting, the Company's shareholders will be asked to approve
the adoption of the Company's 1999 Stock Incentive Plan (the "1998 Plan").
On February 2, 1999, the Board of Directors adopted, subject to shareholder
approval, the 1999 Plan. The Board believes that, to enable the Company to
continue to attract and retain personnel of the highest caliber, provide
incentive for officers, directors, employees and other key persons and to
promote the well-being of the Company, it is in the best interest of the Company
and its shareholders to provide to officers, directors, employees, consultants
and other independent contractors who perform services for the Company, through
the granting of stock options, restricted stock, deferred stock or other stock
awards, the opportunity to participate in the value and/or appreciation in value
of the Company's Common Stock. The Board has found that the grant of options
under its 1997 Stock Option Plan has proven to be a valuable tool in attracting,
retaining and motivating key employees and consultants. Accordingly, the Board
believes that the 1999 Plan,
- 5 -
<PAGE>
which provides the Board greater flexibility with respect to certain terms under
which awards that may be granted, (a) will provide the Company with significant
means to attract and retain talented personnel, (b) will result in saving cash,
which otherwise would be required to maintain current employees and adequately
attract and reward personnel and others who perform services for the Company,
and (c) consequently, will prove beneficial to the Company's ability to be
competitive. There is only an insufficient amount of options available for
future grant under the Company's 1997 Stock Option Plan. The last sale price of
the Common Stock on February 22, 1999 was $_____.
To date, no options or stock awards have been granted under the 1999 Plan.
If the 1999 Plan is approved by the stockholders, options or stock awards may be
granted under the 1999 Plan, the timing, amounts and specific terms of which
cannot be determined at this time.
The following summary of the 1999 Plan does not purport to be complete, and
is subject to and qualified in its entirety by reference to the full text of the
1999 Plan, set forth as Exhibit "B" hereto.
Summary of the 1999 Plan
The 1999 Plan provides for the grant of any or all of the following types
of awards (collectively, "Awards"): (1) stock options, (ii) restricted stock,
(iii) deferred stock and (iv) other stock-based awards. Awards may be granted
singly, in combination, or in tandem, as determined by the administrators of the
1999 Plan. A total of 2,500,000 shares of Common Stock, subject to anti-dilution
adjustment as provided in the 1999 Plan, have been reserved for distribution
pursuant to the 1999 Plan. The maximum number of shares of Common Stock that may
be issued upon the grant of an Award to any employee of the Company on the last
day of any taxable year cannot exceed 1,500,000 shares during the term of the
1999 Plan.
The 1999 Plan can be administered by the Board of Directors (the "Board")
or a Compensation Committee (the "Committee") consisting of two or more
non-employee members of the Board of Directors appointed by the Board. The Board
or the Committee will determine, among other things, the persons to whom Awards
will be granted, the type of Awards to be granted, the number of shares subject
to each Award and the share price. The Board or the Committee will also
determine the term of each Award, the restrictions or limitations thereon, and
the manner in which each such Award may be exercised or, if applicable, the
extent and circumstances under which common stock and other amounts payable with
respect to an Award will be deferred. Unless sooner terminated, the 1999 Plan
will expire at the close of business on March 19, 2009.
Stock Options. The 1999 Plan provides for the grant of "incentive stock options"
("Incentive Stock Options"), as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), and for options not qualifying as
Incentive Stock Options ("Non-Qualified Stock Options"). The Board or the
Committee, as the case may be, shall determine those persons to whom stock
options may be granted.
Incentive Stock Options granted pursuant to the 1999 Plan are
nontransferable by the optionee during his lifetime. Options granted pursuant to
the 1999 Plan will expire if not exercised within 10 years of the grant (five
years in the case of Incentive Stock Options granted to an eligible employee
owning stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or a parent or subsidiary of the Company
immediately before the grant ("10% Stockholder")), and under certain
circumstances set forth in the 1998 Plan, may be exercised within three (3)
months following termination of employment (one year in the event of death,
retirement or disability of the optionee), unless the stock option agreement
provides for a shorter period. Options may be granted to optionees in such
amounts and at such prices as may be determined, from time to time, by the Board
or the Committee. The exercise price of an Incentive or Non-Qualified Stock
Option will not be less than the fair market value of the shares underlying the
option on the date the option is granted, provided, however, that the exercise
price of an Incentive Stock Option granted to a 10% Stockholder may not be less
than 110% of such fair market value.
- 6 -
<PAGE>
Under the 1999 Plan, the Company may not, in the aggregate, grant Incentive
Stock Options that are first exercisable by any optionee during any calendar
year (under all such plans of the optionee's employer corporation and its
"parent" and "subsidiary" corporations, as those terms are defined in Section
424 of the Code) to the extent that the aggregate fair market value of the
underlying stock (determined at the time the option is granted) exceeds
$100,000.
The 1999 Plan contains anti-dilution provisions authorizing appropriate
adjustments in certain circumstances. Shares of Common Stock subject to Awards
which expire without being exercised or which are cancelled as a result of the
cessation of employment are available for further grants. No shares of Common
Stock of the Company may be issued upon the exercise of any option granted under
the 1999 Plan until the full option price has been paid by the optionee. The
Board of Directors or the Committee may grant individual options under the 1999
Plan with more stringent provisions than those specified in the 1999 Plan.
Options become exercisable in such amounts, at such intervals and upon such
terms and conditions as the Board of Directors or the Committee provide. Stock
options granted under the 1999 Plan are exercisable until the earlier of (i) a
date set by the Board of Directors or Committee at the time of grant or (ii) the
close of business on the day before the tenth anniversary of the stock option's
date of grant (the day before the fifth anniversary in the case of an Incentive
Stock Option granted to a 10% Stockholder). The 1999 Plan will remain in effect
until all stock options are exercised or terminated. Notwithstanding the
foregoing, no options may be granted after March 19, 2009.
Restricted and Deferred Stock Awards. Under the 1999 Plan the Board or the
Committee may grant shares of restricted Common Stock either alone or in tandem
with other Awards. Restricted and Deferred Stock awards give the recipient the
right to receive a specified number of shares of Common Stock, subject to such
terms, conditions and restrictions as the Board or the Committee deem
appropriate. Restrictions may include limitations on the right to transfer the
stock until the expiration of a specified period of time and forfeiture of the
stock upon the occurrence of certain events such as the termination of
employment prior to expiration of a specified period of time. In addition, a
participant in the 1999 Plan who has received a Deferred Stock Award may
request, under certain conditions, the Board or the Committee to defer the
receipt of an award (or an installment of an award) for an additional specified
period or until the occurrence of a specified event.
Other Stock Based Awards. Other Stock-Based Awards, which may include
performance shares and shares valued by reference to the performance of the
Company or any parent or subsidiary of the Company, may be granted either alone
or in tandem with other Awards.
Certain Federal Income Tax Consequences of the 1999 Plan
The following is a brief summary of the Federal income tax aspects of
Awards made under the 1999 Plan based upon statutes, regulations and
interpretations in effect on the date hereof. This summary is not intended to be
exhaustive, and does not describe state or local tax consequences.
1. Incentive Stock Options. The optionee will recognize no taxable income
upon the grant or exercise of an Incentive Stock Option. Upon a disposition of
the shares after the later of two years from the date of grant and one year
after the transfer of the shares to the optionee, (i) the optionee will
recognize the difference, if any, between the amount realized and the exercise
price as long-term capital gain or long-term capital loss (as the case may be)
if the shares are capital assets in his or her hands; and (ii) the Company will
not qualify for any deduction in connection with the grant or exercise of the
options. The excess, if any, of the fair market value of the shares on the date
of exercise of an Incentive Stock Option over the exercise price will be treated
as an item of adjustment to the optionee for his or her taxable year in which
the exercise occurs and may result in an alternative minimum tax liability for
the optionee. In the case of a disposition of shares in the same taxable year as
the exercise where the amount realized on the disposition is less than the fair
market value of the shares on the date of exercise, there will be no adjustment
since the amount treated as an item of
- 7 -
<PAGE>
adjustment, for alternative minimum tax purposes, is limited to the excess of
the amount realized on such disposition over the exercise price which is the
same amount included in regular taxable income.
If Common Stock acquired upon the exercise of an Incentive Stock Option is
disposed of prior to the expiration of the holding periods described above, (i)
the optionee will recognize ordinary compensation income in the taxable year of
disposition in an amount equal to the excess, if any, of the lesser of the fair
market value of the shares on the date of exercise or the amount realized on the
disposition of the shares, over the exercise price paid for such shares; and
(ii) the Company will qualify for a deduction equal to any such amount
recognized, subject to the requirements that the compensation be reasonable and
not limited under Section 162(m) of the Code. The optionee will recognize the
excess, if any, of the amount realized over the fair market value of the shares
on the date of exercise, if the shares are capital assets in his or her hands,
as short-term or long-term capital gain, depending on the length of time that
the optionee held the shares, and the Company will not qualify for a deduction
with respect to such excess.
Subject to certain exceptions for disability or death, if an Incentive
Stock Option is exercised more than three months following the termination of
the optionee's employment, the option will generally be taxed as a Non-Qualified
Stock Option. See "Non-Qualified Stock Options."
2. Non-Qualified Stock Options. With respect to Non-Qualified Stock
Options, (i) upon grant of the option, the optionee will recognize no income;
(ii) upon exercise of the option (if the shares are not subject to a substantial
risk of forfeiture), the optionee will recognize ordinary compensation income in
an amount equal to the excess, if any, of the fair market value of the shares on
the date of exercise over the exercise price, and the Company will qualify for a
deduction in the same amount, subject to the requirements that the compensation
be reasonable and not limited under Section 162(m) of the Code; (iii) the
Company will be required to comply with applicable Federal income tax
withholding requirements with respect to the amount of ordinary compensation
income recognized by the optionee; and (iv) on a sale of the shares, the
optionee will recognize gain or loss equal to the difference, if any, between
the amount realized and the sum of the exercise price and the ordinary
compensation income recognized. Such gain or loss will be treated as short-term
or long-term capital gain or loss if the shares are capital assets in the
optionee's hands depending upon the length of time that the optionee held the
shares.
3. Stock Awards. Unless a participant otherwise elects to be taxed upon
receipt of shares of restricted or deferred stock under the 1999 Plan, the
participant must include in his or her taxable income the difference between the
fair market value of the shares and the amount paid, if any, for the shares, as
of the first date the participant's interest in the shares is no longer subject
to a substantial risk of forfeiture or such shares become transferrable. A
participant's rights in stock awarded under the 1999 Plan are subject to a
substantial risk of forfeiture if the rights to full enjoyment of the shares are
conditioned, directly or indirectly, upon the future performance of substantial
services by the participant. Where shares of stock received under the 1999 Plan
are subject to a substantial risk of forfeiture, the participant can elect to
report the difference between the fair market value of the shares on the date of
receipt and the amount paid, if any, for the stock as ordinary income in the
year of receipt. To be effective, the election must be filed with the Internal
Revenue Service within 30 days after the date the shares are transferred to the
participant. The Company is entitled to a Federal income tax deduction equal in
amount to the amount includable as compensation in the gross income of the
participant, subject to the requirements that the compensation be reasonable and
not limited under Section 162(m) of the Code. The amount of taxable gain arising
from a participant's sale of shares of restricted stock acquired pursuant to the
1999 Plan is equal to the excess of the amount realized on such sale over the
sum of the amount paid, if any, for the stock and the compensation element
included by the participant in taxable income.
4. Other Tax Matters. If unmatured installments of Awards are accelerated
as a result of a Change of Control (as defined in the 1999 Plan), any amounts
received from the exercise by a participant of a stock option, the lapse of
restrictions on restricted stock or the deemed satisfaction of conditions of
performance-based awards may be included in determining whether or not a
participant has received an "excess parachute payment" under Section 280G of the
Code, which could result in (i) the imposition of a 20% Federal excise tax (in
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addition to Federal income tax) payable by the participant on certain payments
of Common Stock or cash resulting from such exercise or deemed satisfaction of
conditions of performance awards from such exercise or deemed satisfaction of
conditions of performance awards or, in the case of restricted stock, on all or
a portion of the fair market value of the shares on the date the restrictions
lapse and (ii) the loss by the Company of a compensation deduction.
OTHER INFORMATION
The Board of Directors is aware of no other matters, except for those
incident to the conduct of the Special Meeting, that are to be presented to
shareholders for formal action at the Annual Meeting. If, however, any other
matters properly come before the Special Meeting or any adjournments thereof, it
is the intention of the persons named in the proxy to vote the proxy in
accordance with their judgment.
By order of the Board
of Directors,
Norton Herrick
Co-Chief Executive Officer
February 23, 1999
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EXHIBIT A
FORM OF AMENDMENT OF THE
ARTICLES OF INCORPORATION
TO INCREASE THE AUTHORIZED SHARES OF
CAPITAL STOCK, TO 80,000,000 SHARES, OF WHICH
75,000,000 SHARES WILL BE COMMON STOCK AND
5,000,000 SHARES WILL BE PREFERRED STOCK
FIRST: That first paragraph of Article III of the Restated Articles of
Incorporation of the Corporation has been amended as follows by striking the
whole of said paragraph of Article III thereof as it now exists and inserting in
lieu and instead thereof a new first paragraph of Article III reading in its
entirety as follows:
"The total number of shares of all classes of capital
stock which the Corporation shall have authority to issue is
Eighty Million (80,000,000) shares, no par value per share,
of which Seventy-Five Million (75,000,0000) shall be Common
Stock and Five Million (5,000,000) shall be Preferred
Stock."
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EXHIBIT B
AUDIO BOOK CLUB, INC.
1999 Stock Incentive Plan
Section 1. Purposes; Definitions.
The purpose of this Plan is to enable the Company to offer to its employees
and to employees of its Subsidiaries and Parent, if any, and other persons who
are expected to contribute to the success of the Company, long term
performance-based stock and/or other equity interests in the Company, thereby
enhancing their ability to attract, retain and reward such key employees or
other persons, and to increase the mutuality of interest between those employees
or other persons and the stockholders of the Company.
For purposes of this Plan, the following terms shall be defined as set
forth below:
(a) "Board" means the Board of Directors of Audio Book Club, Inc.
(b) "Cause" shall have the meaning ascribed thereto in Section 5(b)(ix)
below.
(c) "Change of Control" shall have the meaning ascribed thereto in Section
9 below.
(d) "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.
(e) "Committee" means the Stock Incentive Committee of the Board or any
other committee of the Board which the Board may designate.
(f) "Company" means Audio Book Club, Inc., a corporation organized under
the laws of the State of Florida.
(g) "Deferred Stock" means Stock to be received, under an award made
pursuant to Section 7 below, at the end of a specified deferral
period.
(h) "Disability" means disability as determined under procedures
established by the Board or the Committee for purposes of this Plan.
(i) "Early Retirement" means retirement from active employment with the
Company or any Parent or Subsidiary prior to age 65, with the approval
of the Board or the Committee, for purposes of one or more award(s)
under this Plan.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as amended,
as in effect from time to time.
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(k) "Fair Market Value" of a share of Stock means, as of any given date:
(i) if the Stock is listed on a national securities exchange or quoted
on the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ"), the last sale price of a share of Stock
on such day, as reported by such exchange or NASDAQ, or on a composite
tape reflecting transactions on such exchange or by NASDAQ, as the
case may be; (ii) if the Stock is not listed on a national securities
exchange or quoted on the NASDAQ, but is traded in the
over-the-counter market, the average of the high bid and asked prices
for a share of Stock on such day as reported by the National Quotation
Bureau, Inc.; and (iii) if the fair market value of a share of Stock
cannot be determined pursuant to clause (i) or (ii) above, such price
as the Board of Directors or the Committee, as the case may be, shall
determine, which determination shall be conclusive as to the Fair
Market Value of the Stock.
(l) "Incentive Stock Option" means any Stock Option which is intended to
be and is designated as an "incentive stock option" within the meaning
of Section 422 of the Code, or any successor thereto.
(m) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(n) "Normal Retirement" means retirement from active employment with the
Company or any Subsidiary on or after age 65.
(o) "Other Stock-Based Award" means an award under Section 8 below that is
valued in whole or in part by reference to, or is otherwise based
upon, Stock.
(p) "Parent" means any present or future parent of the Company, as such
term is defined in Section 424(e) of the Code, or any successor
thereto.
(q) "Performance Objectives" means performance objectives adopted by the
Board or the Committee, as the case may be, pursuant to the Plan for
employees who have received awards under the Plan. With respect to any
award to an employee who is, or is determined by the Board or the
Committee, as the case may be, to be likely to become a "covered
employee" within the meaning of Section 162(m) of the Code, the
Performance Objectives shall be limited to specified levels of growth
in or peer company comparisons based upon (i) appreciation in the
price of Stock plus reinvested dividends over a specified period of
time, (ii) return on assets or (iii) book value per share, as the
Committee may determine, and the attainment of such Performance
Objectives shall not be deemed to have occurred until certified by the
Board, or the, Committee, as the case may be. Except in the case of a
covered employee, if the Board or the Committee, as the case may be,
determines that a change in business, operations, corporate structure
or capital structure of the Company, or the manner in which it
conducts it business, or other events or
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circumstances under the Performance Objectives to be unsuitable, the
Committee may modify such Performance Objectives or the related
minimum acceptable level of achievement, in whole or in part, as the
Board or the Committee, as the case may be, deems appropriate.
(r) "Plan" means this Audio Book Club, Inc. 1999 Stock Incentive Plan, as
hereinafter amended from time to time.
(s) "Restricted Stock" means Stock, received under an award made pursuant
to Section 6 below, that is subject to restrictions imposed pursuant
to said Section 6.
(t) "Retirement" means Normal Retirement or Early Retirement.
(u) "Rule 16b-3" means Rule 16b-3 of the General Rules and Regulations
under the Exchange Act, as in effect from time to time, and any
successor thereto.
(v) "Section 162(m)" means Section 162(m) of the Code, as in effect from
time to time, and any successor thereto.
(w) "Securities Act" means the Securities Act of 1933, as amended, as in
effect from time to time.
(x) "Stock" means the Common Stock of the Company, no par value per share.
(y) "Stock Option" or "Option" means any option to purchase shares of
Stock which is granted pursuant to the Plan.
(z) "Subsidiary" means any present or future (A) subsidiary corporation of
the Company, as such term is defined in Section 424(f) of the Code, or
any successor thereto, or (B) unincorporated business entity in which
the Company owns, directly or indirectly, 50% or more of the voting
rights, capital or profits.
Section 2. Administration.
The Plan shall be administered by the Board, or at its discretion, the
Committee, the membership of which shall consist solely of two or more members
of the Board, each of whom shall serve at the pleasure of the Board and shall be
a "Non-Employee Director," as defined in Rule 16b-3, and an "outside director,"
as defined in Section 162(m) of the Code, and shall be at all times constituted
so as not to adversely affect the compliance of the Plan with the requirements
of Rule 16b-3 or with the requirements of any other applicable law, rule or
regulation.
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The Board or the Committee, as the case may be, shall have the authority to
grant, pursuant to the terms of the Plan, to officers and other employees or
other persons eligible under Section 4 below: (i) Stock Options, (ii) Restricted
Stock, (iii) Deferred Stock, and/or (iv) Other Stock-Based Awards.
For purposes of illustration and not of limitation, the Board or the
Committee, as the case may be, shall have the authority (subject to the express
provisions of this Plan):
(i) to select the officers and other employees of the Company or any
Parent or Subsidiary and other persons to whom Stock Options,
Restricted Stock, Deferred Stock and/or Other Stock-Based Awards
may be from time to time granted hereunder;
(ii) to determine the Incentive Stock Options, Non-Qualified Stock
Options, Restricted Stock, Deferred Stock and/or Other
Stock-Based Awards, or any combination thereof, if any, to be
granted hereunder to one or more eligible persons;
(iii) to determine the number of shares of Stock to be covered by each
award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder (including, but
not limited to, share price, any restrictions or limitations, and
any vesting acceleration, exercisability and/or forfeiture
provisions);
(v) to determine the terms and conditions under which awards granted
hereunder are to operate on a tandem basis and/or in conjunction
with or apart from other awards made by the Company or any Parent
or Subsidiary outside of this Plan; and
(vi) to determine the extent and circumstances under which Stock and
other amounts payable with respect to an award hereunder shall be
deferred.
Subject to Section 10 hereof, The Board or the Committee, as the case may
be, shall have the authority to (i) adopt, alter and repeal such administrative
rules, guidelines and practices governing this Plan as it shall, from time to
time, deem advisable, (ii) interpret the terms and provisions of this Plan and
any award issued under this Plan (and to determine the form and substance of all
agreements relating thereto), and (iii) to otherwise supervise the
administration of the Plan.
Subject to the express provisions of the Plan, all decisions made by the
Board or the Committee, as the case may be, pursuant to the provisions of the
Plan shall be made in the Board or the Committee's sole and absolute discretion
and shall be final and binding upon all persons, including the Company, its
Parent and Subsidiaries and the Plan participants.
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Section 3. Stock Subject to Plan.
The total number of shares of Stock reserved and available for distribution
under this Plan shall be 2,500,000 shares. Such shares may consist, in whole or
in part, of authorized and unissued shares or treasury shares.
If any shares of Stock that have been optioned cease to be subject to a
Stock Option for any reason, or if any shares of Stock that are subject to any
Restricted Stock award, Deferred Stock award or Other Stock-Based Award are
forfeited or any such award otherwise terminates without the issuance of such
shares, such shares shall again be available for distribution under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, extraordinary distribution with
respect to the Stock or other change in corporate structure affecting the Stock,
such substitutions or adjustments shall be made in the (A) aggregate number and
kind of shares reserved for issuance under this Plan, (B) number, kind and
exercise price of shares of Stock subject to outstanding Options granted under
this Plan, and (C) number, kind, purchase price and/or appreciation base of
shares of Stock subject to other outstanding awards granted under this Plan, as
may be determined to be appropriate by the Board or the Committee, as the case
may be, in its sole discretion, in order to prevent dilution or enlargement of
rights; provided, however, that the number of shares subject to any award shall
always be a whole number. Such adjusted exercise price shall also be used to
determine the amount which is payable to the optionee upon the exercise by the
Board or the Committee, as the case may be, of the alternative settlement right
which is set forth in Section 5(b)(xi) below.
Subject to the provisions of the immediately preceding paragraph, the
maximum numbers of shares subject to Options, Restricted Stock awards, Deferred
Stock awards, and other Stock-Based awards to any employee who is employed by
the Company or any Parent or Subsidiary on the last day of any taxable year of
the Company, shall be 1,500,000 shares during the term of the Plan.
Section 4. Eligibility.
Officers and other employees of the Company or any Parent or Subsidiary
(but excluding any person whose eligibility would adversely affect the
compliance of the Plan with the requirements of Rule 16b-3) who are at the time
of the grant of an award under this Plan employed by the Company or any Parent
or Subsidiary and who are responsible for or contribute to the management,
growth and/or profitability of the business of the Company or any Parent or
Subsidiary, are eligible to be granted Options and awards under this Plan. In
addition, Non-Qualified Stock Options and other awards may be granted under the
Plan to any person, including, but not limited to, independent agents,
consultants and attorneys who the Board or the Committee, as the case may be,
believes has contributed or will contribute to the success of the Company or any
Parent or Subsidiary. Eligibility under the Plan shall be determined by the
Board or the Committee, as the case may be.
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Subject to the adjustments permitted by Section 3 of this Plan, the maximum
number of shares of Stock that can be earned by, or for which Options can be
granted to, any one individual over any consecutive two-year period commencing
on the effective date of this Plan is 1,500,000 shares. Subject to such maximum
number of shares of Stock, the amount, if any, that may be earned by a
participant receiving such grant or grants may vary in accordance with the level
of achievement of the performance goal or goals established by the Board or the
Committee, as the case may be. The Board or the Committee, as the case may be,
may, in its sole discretion, include additional conditions and restrictions in
the agreement entered into in connection with such awards under this Plan.
Section 5. Stock Options.
(a) Grant and Exercise. Stock Options granted under this Plan may be of
two types: (i) Incentive Stock Options and (ii) Non-Qualified Stock
Options. Any Stock Option granted under this Plan shall contain such
terms as the Board or the Committee, as the case may be, may from time
to time approve. The Board or the Committee, as the case may be, shall
have the authority to grant to any optionee Incentive Stock Options,
Non-Qualified Stock Options, or both types of Stock Options, and they
may be granted alone or in addition to other awards granted under this
Plan. To the extent that any Stock Option is not designated as an
Incentive Stock Option or does not qualify as an Incentive Stock
Option, it shall constitute a Non-Qualified Stock Option. The grant of
an Option shall be deemed to have occurred on the date on which the
Board or the Committee, as the case may be, by resolution, designates
an individual as a grantee thereof, and determines the number of
shares of Stock subject to, and the terms and conditions of, said
Option.
Anything in this Plan to the contrary notwithstanding, no term of this
Plan relating to Incentive Stock Options or any agreement providing
for Incentive Stock Options shall be interpreted, amended or altered,
nor shall any discretion or authority granted under the Plan be
exercised, so as to disqualify this Plan under Section 422 of the
Code, or, without the consent of the Optionee(s) affected, to
disqualify any Incentive Stock Option under Section 422.
(b) Terms and Conditions. Stock Options granted under this Plan shall be
subject to the following terms and conditions:
(i) Option Price. The option price per share of Stock purchasable
under a Stock Option shall be determined by the Board or the
Committee, as the case may be, at the time of grant but as to
Incentive Stock Options shall be not less than 100% (110% in the
case of an Incentive Stock Option granted to an optionee ("10%
Stockholder") who, at the time of grant, owns Stock possessing
more than 10% of the total combined voting power of all classes
of stock of the Company or its Parent, if any, or its
Subsidiaries) of the Fair Market Value of the Stock at the
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time of grant. The option price for Non-Qualified Stock Options
shall be determined by the Board or the Committee, as the case
may be, at the time of grant, subject to the Florida Business
Corporation Act.
(ii) Option Term. The term of each Stock Option shall be fixed by the
Board or the Committee, as the case may be, but no Incentive
Stock Option shall be exercisable more than ten years (five
years, in the case of an Incentive Stock Option granted to a 10%
Stockholder) after the date on which the Option is granted.
(iii) Exercisability. Stock Options shall be exercisable at such time
or times and subject to such terms and conditions as shall be
determined by the Board or the Committee, as the case may be, at
the time of grant. If the Board or the Committee, as the case may
be, provides, in its discretion, that any Stock Option is
exercisable only in installments, the Board or the Committee, as
the case may be, may waive such installment exercise provisions
at any time at or after the time of grant in whole or in part,
based upon such factors as the Board or the Committee, as the
case may be, shall determine.
(iv) Method of Exercise. Subject to whatever installment, exercise and
waiting period provisions are applicable in a particular case,
Stock Options may be exercised in whole or in part at any time
during the option period by giving written notice of exercise to
the Company specifying the number of shares of Stock to be
purchased. Such notice shall be accompanied by payment in full of
the purchase price which shall be in cash unless otherwise
provided in this clause (iv) or in Section 5(b)(xi) below or,
unless otherwise provided in the Stock Option agreement referred
to in Section 5(b)(xii) below, in whole shares of Stock which are
already owned by the holder of the Option or unless otherwise
provided in the Stock Option agreement referred to in Section
5(b)(xii) below, partly in cash and partly in such Stock. Cash
payments shall be made by wire transfer, certified or bank check
or personal check, in each case payable to the order of the
Company; provided, however, that the Company shall not be
required to deliver certificates for shares of Stock with respect
to which an Option is exercised until the Company has confirmed
the receipt of good and available funds in payment of the
purchase price thereof. Payments in the form of Stock (which
shall be valued at the Fair Market Value of a share of Stock on
the date of exercise) shall be made by delivery of stock
certificates in negotiable form which are effective to transfer
good and valid title thereto to the Company, free of any liens or
encumbrances. In addition to the foregoing, payment of the
exercise price may be made by delivery to the Company by the
optionee of an executed exercise form, together with irrevocable
instructions to a
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broker-dealer to sell or margin a sufficient portion of the
shares covered by the option and deliver the sale or margin loan
proceeds directly to the Company. Except as otherwise expressly
provided in this Plan or in the Stock Option agreement referred
to in Section 5(b)(xii) below, no Option which is granted to a
person who is at the time of grant an employee of the Company or
a Subsidiary or Parent of the Company may be exercised at any
time unless the holder thereof is then an employee of the Company
or of a Parent or a Subsidiary. The holder of an Option shall
have none of the rights of a shareholder with respect to the
shares subject to the Option until the optionee has given written
notice of exercise, has paid in full for those shares of Stock
and, if requested by the Board or Committee, as the case may be,
has given the representation described in Section 12(a) below.
(v) Transferability; Exercisability. No Stock Option shall be
transferable by the optionee other than by will or by the laws of
descent and distribution or pursuant to a qualified domestic
relations order except as may be otherwise provided with respect
to a Non-Qualified Option pursuant to the specific provisions of
the Stock Option agreement pursuant to which it was issued as
referred to in Section 5(b)(xii) below. Except as otherwise
provided in the Stock Option agreement relating to a
Non-Qualified Stock Option, all Stock Options shall be
exercisable, during the optionee's lifetime, only by the optionee
or his or her guardian or legal representative.
(vi) Termination by Reason of Death. Subject to Section 5(b)(x) below,
if an optionee's employment by the Company or any Parent or
Subsidiary terminates by reason of death, any Stock Option held
by such optionee may thereafter be exercised, to the extent then
exercisable or on such accelerated basis as the Board or
Committee, as the case may be, may determine at or after the time
of grant, for a period of one year (or such other period as the
Board or the Committee, as the case may be, may specify at or
after the time of grant) from the date of death or until the
expiration of the stated term of such Stock Option, whichever
period is the shorter.
(vii) Termination by Reason of Disability. Subject to Section 5(b)(x)
below, if an optionee's employment by the Company or any
Subsidiary terminates by reason of Disability, any Stock Option
held by such optionee may thereafter be exercised by the
optionee, to the extent it was exercisable at the time of
termination or on such accelerated basis as the Board or the
Committee, as the case may be, may determine at or after the time
of grant, for a period of one year (or such other period as the
Board or the Committee, as the case may be, may specify at or
after the time of grant) from the date of such termination of
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employment or until the expiration of the stated term of such
Stock Option, whichever period is the shorter; provided, however,
that if the optionee dies within such one year period (or such
other period as the Board or the Committee, as the case may be,
shall specify at or after the time of grant), any unexercised
Stock Option held by such optionee shall thereafter be
exercisable to the extent to which it was exercisable at the time
of death for a period of one year from the date of death or until
the expiration of the stated term of such Stock Option, whichever
period is the shorter.
(viii) Termination by Reason of Retirement. Subject to Section 5(b)(x)
below, if an optionee's employment by the Company or any Parent
or Subsidiary terminates by reason of Normal Retirement, any
Stock Option held by such optionee may thereafter be exercised by
the optionee, to the extent it was exercisable at the time of
termination or on such accelerated basis as the Board or the
Committee, as the case may be, may determine at or after the time
of grant, for a period of three months (or such other period as
the Board or the Committee, as the case may be, may specify at or
after the time of grant) from the date of such termination of
employment or the expiration of the stated terms of such Stock
Option, whichever period is the shorter; provided, however, that
if the optionee dies within such three-month period (or such
other period as the Board or the Committee, as the case may be,
shall specify at or after the time of grant), any unexercised
Stock Option held by such optionee shall thereafter be
exercisable to the extent to which it was exercisable at the time
of death for a period of one year from the date of death or until
the expiration of the stated terms of such Stock Option,
whichever period is the shorter. If an optionee's employment with
the Company or any Parent or Subsidiary terminates by reason of
Early Retirement, the Stock Option shall thereupon terminate;
provided, however, that if the Board or the Committee, as the
case may be, so approves at the time of Early Retirement, any
Stock Option held by the optionee may thereafter be exercised by
the optionee as provided above in connection with termination of
employment by reason of Normal Retirement.
(ix) Other Termination. Subject to the provisions of Section 12(g)
below and unless otherwise determined by the Committee at or
after the time of grant, if an optionee's employment by the
Company or any Parent or Subsidiary terminates for any reason
other than death, Disability or Retirement, the Stock Option
shall thereupon automatically terminate, except that if the
optionee is involuntarily terminated by the Company or any Parent
or a Subsidiary without Cause (as hereinafter defined), such
Stock Option may be exercised for a period of three months (or
such other period as the Board or the Committee, as the case may
be,
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shall specify at or after the time of grant) from the date of
such termination or until the expiration of the stated terms of
such Stock Option, whichever period is the shorter. For purposes
of this Plan, "Cause" shall mean (1) the conviction of the
optionee of a felony under Federal law or the law of the state in
which such action occurred, (2) dishonesty by the optionee in the
course of fulfilling his or her employment duties, or (3) the
willful and deliberate failure on the part of the optionee to
perform his or her employment duties in any material respect. In
addition, with respect to an option granted to an employee of the
Company, a Parent or a Subsidiary, for purposes of this Plan,
"Cause" shall also include any definition of "Cause" contained in
any employment agreement between the optionee and the Company,
Parent or Subsidiary, as the case may be.
(x) Additional Incentive Stock Option Limitation. In the case of an
Incentive Stock Option, the aggregate Fair Market Value of Stock
(determined at the time of grant of the Option) with respect to
which Incentive Stock Options are exercisable for the first time
by an optionee during any calendar year (under all such plans of
optionee's employer corporation and its Parent, if any, and
Subsidiaries) shall not exceed $100,000.
(xi) Alternative Settlement of Option. Upon the receipt of written
notice of exercise or if provided for with respect to a Stock
Option pursuant to the specific provisions of the Stock Option
Agreement pursuant to which it was issued and referred to in
Section 5(b)(xii) below (unless otherwise provided with respect
to a Stock Option pursuant to the specific provisions of the
Stock Option Agreement pursuant to which it was issued and
referred to in Section 5(b)(xii) below), the Board or the
Committee, as the case may be, may elect to settle all or part of
any Stock Option by paying to the optionees an amount, in cash or
Stock (valued at Fair Market Value on the date of exercise),
equal to the excess of the Fair Market Value of one share of
Stock, on the date of exercise over the Option exercise price,
multiplied by the number of shares of Stock with respect to which
the optionee proposes to exercise the Option. Any such
settlements which relate to Options which are held by optionees
who are subject to Section 16(b) of the Exchange Act shall comply
with any "window period" provisions of Rule 16b-3, to the extent
applicable, and with such other conditions as the Board or
Committee may impose. No such discretion may be exercised unless
the Stock Option agreement permits the payment of the purchase
price in that manner.
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(xii) Stock Option Agreement. Each grant of a Stock Option shall be
confirmed by, and shall be subject to the terms of, an agreement
executed by the Company and the participant.
Section 6. Restricted Stock.
(a) Grant and Exercise. Shares of Restricted Stock may be issued either
alone or in addition to or in tandem with other awards granted under
this Plan. The Board or the Committee, as the case may be, shall
determine the eligible persons to whom, and the time or times at
which, grants of Restricted Stock will be made, the number of shares
to be awarded, the price (if any) to be paid by the recipient, the
time or times within which such awards may be subject to forfeiture
(the "Restriction Period"), the vesting schedule and rights to
acceleration thereof, and all other terms and conditions of the
awards. The Board or the Committee, as the case may be, may condition
the grant of Restricted Stock upon the attainment of specified
Performance Objectives or such other factors as the Board or the
Committee, as the case may be, may determine.
(b) Terms and Conditions. Each Restricted Stock award shall be subject to
the following terms and conditions:
(i) Restricted Stock, when issued, will be represented by a stock
certificate or certificates registered in the name of the holder
to whom such Restricted Stock shall have been awarded. During the
Restriction Period, certificates representing the Restricted
Stock and any securities constituting Retained Distributions (as
defined below) shall bear a restrictive legend to the effect that
ownership of the Restricted Stock (and such Retained
Distributions), and the enjoyment of all rights appurtenant
thereto, are subject to the restrictions, terms and conditions
provided in this Plan and the Restricted Stock agreement referred
to in Section 6(b)(iv) below. Such certificates shall be
deposited by the holder with the Company, together with stock
powers or other instruments of assignment, endorsed in blank,
which will permit transfer to the Company of all or any portion
of the Restricted Stock and any securities constituting Retained
Distributions that shall be forfeited or that shall not become
vested in accordance with this Plan and the applicable Restricted
Stock agreement.
(ii) Restricted Stock shall constitute issued and outstanding shares
of Common Stock for all corporate purposes, and the issuance
thereof shall be made for at least the minimum consideration (if
necessary) to permit the shares of Restricted Stock to be deemed
to be fully paid and nonassessable. The holder will have the
right to vote such Restricted Stock, to receive and retain all
regular cash dividends and other cash
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equivalent distributions as the Board may in its sole discretion
designate, pay or distribute on such Restricted Stock and to
exercise all other rights, powers and privileges of a holder of
Stock with respect to such Restricted Stock, with the exceptions
that (A) the holder will not be entitled to delivery of the stock
certificate or certificates representing such Restricted Stock
until the Restriction Period shall have expired and unless all
other vesting requirements with respect thereto shall have been
fulfilled; (B) the Company will retain custody of the stock
certificate or certificates representing the Restricted Stock
during the Restriction Period; (C) other than regular cash
dividends and other cash equivalent distribution as the Board may
in its sole discretion designate, pay or distribute, the Company
will retain custody of all distributions ("Retained
Distributions") made or declared with respect to the Restricted
Stock (and such Retained Distributions will be subject to the
same restrictions, terms and conditions as are applicable to the
Restricted Stock) until such time, if ever, as the Restricted
Stock with respect to which such Retained Distributions shall
have been made, paid or declared shall have become vested and
with respect to which the Restriction Period shall have expired;
(D) the holder may not sell, assign, transfer, pledge, exchange,
encumber or dispose of the Restricted Stock or any Retained
Distributions during the Restriction Period; and (E) a breach of
any of the restrictions, terms or conditions contained in this
Plan or the Restricted Stock agreement referred to in Section
6(b)(iv) below, or otherwise established by the Committee with
respect to any Restricted Stock and Retained Distributions will
cause a forfeiture of such Restricted Stock and any Retained
Distributions with respect thereto.
(iii) Upon the expiration of the Restriction Period with respect to
each award of Restricted Stock and the satisfaction of any other
applicable restrictions, terms and conditions (A) all or part of
such Restricted Stock shall become vested in accordance with the
terms of the Restricted Stock agreement referred to in Section
6(b)(iv) below, and (B) any Retained Distributions with respect
to such Restricted Stock shall become vested to the extent that
the Restricted Stock related thereto shall have become vested.
Any such Restricted Stock and Retained Distributions that do not
vest shall be forfeited to the Company and the holder shall not
thereafter have any rights with respect to such Restricted Stock
and Retained Distributions that shall have been so forfeited.
(iv) Each Restricted Stock award shall be confirmed by, and shall be
subject to the terms of, an agreement executed by the Company and
the participant.
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Section 7. Deferred Stock.
(a) Grant and Exercise. Deferred Stock may be awarded either alone or in
addition to or in tandem with other awards granted under the Plan. The
Board or the Committee, as the case may be, shall determine the
eligible persons to whom and the time or times at which Deferred Stock
shall be awarded, the number of shares of Deferred Stock to be awarded
to any person, the duration of the period (the "Deferral Period")
during which, and the conditions under which, receipt of the Deferred
Stock will be deferred, and all the other terms and conditions of the
awards. The Board or the Committee, as the case may be, may condition
the grant of the Deferred Stock upon the attainment of specified
Performance Objectives or such other factors or criteria as the Board
or the Committee, as the case may be, shall determine.
(b) Terms and Conditions. Each Deferred Stock award shall be subject to
the following terms and conditions:
(i) Subject to the provisions of this Plan and Deferred Stock
agreement referred to in Section 7(b)(vii) below, Deferred Stock
awards may not be sold, assigned, transferred, pledged or
otherwise encumbered during the Deferral Period. At the
expiration of the Deferral Period (or the Additional Deferral
Period referred to in Section 7(b)(vi) below, where applicable),
share certificates shall be delivered to the participant, or his
legal representative, in a number equal to the shares of Stock
covered by the Deferred Stock award.
(ii) As determined by the Committee at the time of award, amounts
equal to any dividends declared during the Deferral Period (or
the Additional Deferral Period referred to in Section 7(b)(vi)
below, where applicable) with respect to the number of shares
covered by a Deferred Stock award may be paid to the participant
currently or deferred and deemed to be reinvested in additional
Deferred Stock.
(iii) Subject to the provisions of the Deferred Stock agreement
referred to in Section 7(b)(vii) below and this Section 7 and
Section 12(g) below, upon termination of participant's employment
with the Company or any Subsidiary for any reason during the
Deferral Period (or the Additional Deferral Period referred to in
Section 7(b)(vi) below, where applicable) for a given award, the
Deferred Stock in question will vest or be forfeited in
accordance with the terms and conditions established by the Board
or the Committee, as the case may be, at the time of grant.
(iv) The Board or the Committee, as the case may be, may, after grant,
accelerate the vesting of all or any part of any Deferred Stock
award
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and/or waive the deferral limitations for all or any part of a
Deferred Stock award.
(v) In the event of hardship or other special circumstances of a
participant whose employment with the Company or any Parent or
Subsidiary is involuntarily terminated (other than for Cause),
the Board or the Committee, as the case may be, may waive in
whole or in part any or all of the remaining deferral limitations
imposed hereunder or pursuant to the Deferred Stock agreement
referred to in Section 7(b)(vii) below with respect to any or all
of the participant's Deferred Stock.
(vi) A participant may request to, and the Board or the Committee, as
the case may be, may at any time, defer the receipt of an award
(or an installment of an award) for an additional specified
period or until a specified period or until a specified event
(the "Additional deferral Period"). Subject to any exceptions
adopted by the Board or the Committee, as the case may be, such
request must be made at least one year prior to expiration of the
Deferral Period for such Deferred Stock award (or such
installment).
(vii) Each Deferred Stock award shall be confirmed by, and shall be
subject to the terms of, an agreement executed by the Company and
the participant.
Section 8. Other Stock-Based Awards.
(a) Grant and Exercise. Other Stock-Based Awards, which may include
performance shares and shares valued by reference to the performance
of the Company or any Subsidiary, may be granted either alone or in
addition to or in tandem with Stock Options, Restricted Stock or
Deferred Stock. The Board or the Committee, as the case may be, shall
determine the eligible persons to whom, and the time or times at
which, such awards shall be made, the number of shares of Stock to be
awarded pursuant to such awards, and all other terms and conditions of
the awards. The Board or the Committee, as the case may be, may also
provide for the grant of Stock under such awards upon the attainment
of specified Performance Objectives and/or completion of a specified
performance period.
(b) Terms and Conditions. Each Other Stock-Based Award shall be subject to
the following terms and conditions:
(i) Shares of Stock subject to an Other Stock-Based Award may not be
sold, assigned, transferred, pledged or otherwise encumbered
prior to the date on which the shares are issued, or, if later,
the date on which any applicable restriction or period of
deferral lapses.
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(ii) The recipient of Other Stock-Based Award shall be entitled to
receive, currently or on a deferred basis, dividends or dividend
equivalents with respect to the number of shares covered by the
award, as determined by the Board or the Committee, as the case
may be, at the time of the award. The Board or the Committee, as
the case may be, may provide that such amounts (if any) shall be
deemed to have been reinvested in additional Stock.
(iii) Any Other Stock-Based Award and any Stock covered by any Other
Stock-Based Award shall vest or be forfeited to the extent so
provided in the award agreement referred to in Section 8(b)(v)
below, as determined by the Board or the Committee, as the case
may be.
(iv) In the event of the participant's Retirement, Disability or
death, or in case of special circumstances, the Board or the
Committee, as the case may be, may waive in whole or in part any
or all of the limitations imposed hereunder (if any) with respect
to any or all of an Other Stock-Based Award.
(v) Each Other Stock-Based Award shall be confirmed by, and shall be
subject to the terms of, an agreement executed by the Company and
by the participant.
Section 9. Change of Control Provisions.
(a) A "Change of Control" shall be deemed to have occurred on the tenth day
after:
(i) any individual, entity or group (as defined in Section 13(d)(3)
of the Exchange Act), other than Norton Herrick and his family
members and affiliates, becomes, directly or indirectly, the
beneficial owner (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of more than 50% of the then outstanding
shares of the Company's capital stock entitled to vote generally
in the election of directors of the Company; or
(ii) the commencement of, or the first public announcement of the
intention of any individual, firm, corporation or other entity or
of any group (as defined in Section 13(d)(3) of the Exchange Act)
to commence, a tender or exchange offer subject to Section
14(d)(1) of the Exchange Act for any class of the Company's
capital stock; or
(iii) the stockholders of the Company approve (A) a definitive
agreement for the merger or other business combination of the
Company with or into another corporation pursuant to which the
stockholders of the Company
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do not own, immediately after the transaction, more than 50% of
the voting power of the corporation that survives, or (B) a
definitive agreement for the sale, exchange or other disposition
of all or substantially all of the assets of the Company, or (C)
any plan or proposal for the liquidation or dissolution of the
Company; provided, however, that a "Change of Control" shall not
be deemed to have taken place if beneficial ownership is acquired
(A) directly from the Company, other than an acquisition by
virtue of the exercise or conversion of another security unless
the security so converted or exercised was itself acquired
directly from the Company, or (B) by, or a tender or exchange
offer is commenced or announced by, the Company, any
profit-sharing, employee ownership or other employee benefit plan
sponsored or maintained by the Company; or any trustee of or
fiduciary with respect to any such plan when acting in such
capacity.
(b) In the event of a "Change of Control" as defined in Section 9(a)
above, awards granted under this Plan shall be subject to the
following provisions, unless the provisions of this Section 9 are
suspended or terminated by the Board prior to the occurrence of such a
"Change of Control" and, except with respect to any Stock Option
pursuant to the specific provisions of the Stock Option Agreement
pursuant to which it was issued as referred to in Section 5(b)(xii)
above:
(i) all outstanding Stock Options which have been outstanding for at
least one year shall become exercisable in full, whether or not
otherwise exercisable at such time, and any such Stock Option
shall remain exercisable in full thereafter until it expires
pursuant to its terms; and
(ii) all restrictions and deferral limitations contained in Restricted
Stock awards, Deferred Stock awards and Other Stock-Based Awards
granted under the Plan shall lapse.
Section 10. Amendments and Termination.
The Board may at any time, and from time to time, amend any of the
provisions of this Plan, and may at any time suspend or terminate the Plan;
provided, however, that no such amendment shall be effective unless and until it
has been duly approved by the holders of the outstanding shares of Stock if the
failure to obtain such approval would adversely affect the compliance of the
Plan with the requirements of Rule 16b-3, Section 162(m) or any other applicable
law, rule or regulation. The Board or the Committee, as the case may be, may
amend the terms of any Stock Option or other award theretofore granted under the
Plan; provided, however, that subject to Section 3 above, no such amendment may
be made by the Board or the Committee, as the case may be, which in any material
respect impairs the rights of the optionee or participant without the optionee's
or participant's consent, except for such
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amendments which are made to cause this Plan to qualify for the exemption
provided by Rule 16b-3 or to be in compliance with the provisions of Section
162(m).
Section 11. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those creditor of
the Company.
Section 12. General Provisions.
(a) The Board or the Committee, as the case may be, may require each
person acquiring shares of Stock Option or other award under this Plan
to represent to and agree with the Company in writing that the
optionee or participant is acquiring the shares for investment without
a view towards the distribution thereof.
All certificates for shares of Stock delivered under this Plan shall
be subject to such stop transfer orders and other restrictions as the
Board or the Committee, as the case may be, may deem to be advisable
in order to assure compliance with the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock
exchange or association upon which the Stock is then listed or quoted,
any applicable Federal or state securities law, and any applicable
corporate law, and the Board or the Committee, as the case may be, may
cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.
(b) Nothing contained in the Plan shall prevent the Board from adopting
such other or additional incentive arrangements as it may deem
desirable, including, but not limited to, the granting of stock
options and the awarding of stock and cash otherwise than under this
Plan; and such arrangements may be either generally applicable or
applicable only in specific cases.
(c) Nothing contained in this Plan or in any award hereunder shall be
deemed to confer upon any employee of the Company or any Parent or
Subsidiary any right to continued employment with the Company or any
Parent or Subsidiary, nor shall it interfere in any way with the right
of the Company or any Parent or Subsidiary to terminate the employment
of any of its employees at any time.
(d) No later than the date as of which an amount first becomes includable
in the gross income of the participant for Federal income tax purposes
with respect to any Option or other award under this Plan, the
participant shall pay to the Company, or make arrangements
satisfactory to the Board or the Committee,
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as the case may be, regarding the payment of, any Federal, state and
local taxes of any kind required by law to be withheld or paid with
respect to such amount. If permitted by the Board or the Committee, as
the case may be, tax withholding or payment obligations may be settled
with Stock, including Stock that is part of the award that gives rise
to the withholding requirement. The obligations of the Company under
this Plan shall be conditional upon such payment or arrangements, and
the Company and any Subsidiary shall, to the extent permitted by law,
have the right to deduct any such taxes from any payment of any kind
otherwise due to the participant from the Company or any Parent or
Subsidiary.
(e) This Plan and all awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of
Florida (without regard to choice of law provisions).
(f) Any Stock Option granted or other award made under this Plan shall not
be deemed compensation for purposes of computing benefits under any
retirement plan of the Company or any Parent or Subsidiary and shall
not affect any benefits under any other benefit plan now or
subsequently in effect under which the availability or amount of
benefits is related to the level of compensation (unless required by
specific reference in any such other plan to awards under this Plan).
(g) A leave of absence, unless otherwise determined by the Committee prior
to the commencement thereof, shall not be considered a termination of
employment. Any Stock Option granted or awards made under this Plan
shall not be affected by any change of employment, so long as the
holder continues to be an employee of the Company or any Parent or
Subsidiary.
(h) Except as otherwise expressly provided in this Plan, no right or
benefit under this Plan may be alienated, sold, assigned,
hypothecated, pledged, exchanged, transferred, encumbranced or
charged, and any attempt to alienate, sell, assign, hypothecate,
pledge, exchange, transfer, encumber or charge the same shall be void.
No right or benefit hereunder shall in any manner be subject to the
debts, contracts or liabilities of the person entitled to such
benefit.
(i) The obligations of the Company with respect to all Stock Options and
awards under this Plan shall be subject to (A) all applicable laws,
rules and regulations, and such approvals by any governmental agencies
as may be required, including, without limitation, the effectiveness
of a registration statement under the Securities Act, and (B) the
rules and regulations of any securities exchange or association on
which the Stock may be listed or quoted.
(j) It is the intention of the Company that this Plan complies with the
requirements of Rule 16b-3, Section 162(m) and all other applicable
laws,
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rules and regulations, and any ambiguities or inconsistencies in the
construction of any of the provisions of this Plan shall be
interpreted to give effect to such intention. If any of the terms or
provisions of this Plan conflict with the requirements of Rule 16b-3,
or with the requirements of Section 162(m) or any other applicable
law, rule or regulation, and with respect to Incentive Stock Options
under Section 422 of the Code, then such terms or provisions shall be
deemed inoperative to the extent they so conflict. With respect to
Incentive Stock Options, if this Plan does not contain any provision
required to be included herein under Section 422 of the Code, such
provision shall be deemed to be incorporated herein with the same
force and effect as if such provision had been set out at length
herein.
(k) The Board or the Committee, as the case may be, may terminate any
Stock Option or other award made under this Plan if a written
agreement relating thereto is not executed and returned to the Company
within 30 days after such agreement has been delivered to the optionee
or participant for his or her execution.
(l) The grant of awards pursuant to this Plan shall not in any way effect
the right or power of the Company to make reclassifications,
reorganizations or other changes of or to its capital or business
structure or to merge, consolidate, liquidate, sell or otherwise
dispose of all or any part of its business or assets.
Section 13. Effective Date of Plan.
The Plan shall be effective as of the date of the approval and adoption
thereof at a meeting of the stockholders of the Company.
Section 14. Term of Plan.
This Plan shall terminate on the tenth anniversary of its effective date,
and no Stock Option, Restricted Stock Award, Deferred Stock award or Other
Stock-Based Award shall be granted pursuant to this Plan after said date. Awards
granted on or prior to such date may extend beyond that date.
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AUDIO BOOK CLUB, INC.
2295 Corporate Boulevard, N.W., Suite 222
Boca Raton, Florida 33431
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD MARCH 26, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints NORTON HERRICK and MICHAEL HERRICK and each
of them, Proxies, with full power of substitution in each of them, in the name,
place and stead of the undersigned, to vote at the Annual Meeting of
Shareholders of Audio Book Club, Inc. (the "Company") on Friday, March 26, 1999,
at 20 Community Place, Morristown, New Jersey 07960 or at any adjournment or
adjournments thereof, according to the number of votes that the undersigned
would be entitled to vote if personally present, upon the following matters:
1. Amendment of Articles of Incorporation to increase authorized common stock
to 75,000,000 shares.
|_| FOR |_| AGAINST |_| ABSTAIN
2. Approval of the Company's 1999 Stock Incentive Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ABOVE. IF NO
INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR THE PROPOSALS LISTED ABOVE.
DATED: ________________________________, 1999
Please sign exactly as name appears
hereon. When shares are held by joint
tenants, both should sign. When signing
as attorney, executor, administrator,
trustee or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by President
or other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
-----------------------------------------
Signature
-----------------------------------------
Signature if held jointly
Please mark, sign, date and return this proxy card using the enclosed envelope.
