<PAGE>
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 a-11(c) or Rule 14a-12
MediaBay, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined).
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total Fee Paid:
- --------------------------------------------------------------------------------
|_| Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
|_| Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE>
MediaBay, Inc.
20 Community Place
Morristown, New Jersey 07960
May 22, 2000
Dear Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders
of MediaBay, Inc. (the "Company") which will be held on Friday June 23, 2000 at
8:30 A.M. local time at The Headquarters Plaza Hotel, 3 Headquarters Plaza,
Morristown, New Jersey 07960.
The Notice of Annual Meeting and Proxy Statement which follow describe
the business to be conducted at the meeting.
Your Board of Directors unanimously believes that the election of the
nominees specified in the Proxy Statement as directors, the proposal to amend
the Company's Articles of Incorporation to increase the authorized common stock
to 150,000,000 shares and the proposal to approve the 2000 Stock Incentive Plan
is in the best interests of the Company and its shareholders and, accordingly,
recommends a vote "FOR" the election of the nominees and the 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 Annual 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
Chairman
<PAGE>
MEDIABAY, INC.
20 Community Place
Morristown, New Jersey 07960
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FRIDAY, JUNE 23, 2000
--------------------
To the Shareholders of MEDIABAY, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting ("Annual Meeting") of
Shareholders of MediaBay, Inc. (the "Company") will be held on Friday, June 23,
2000, at 8:30 A.M. local time at The Headquarters Plaza Hotel, 3 Headquarters
Plaza, Morristown, New Jersey 07960, for the following purposes:
1. To elect two Class III directors to hold office until the 2003
Annual Meeting of Shareholders and until their respective successors have been
duly elected and qualified;
2. To approve an amendment to the Company's Articles of Incorporation
to increase the authorized common stock from 75,000,000 to 150,000,000 shares
3. To approve the Company's 2000 Stock Incentive Plan; and
4. To transact such other business as may properly come before the
Annual Meeting or any adjournment or adjournments thereof.
Only shareholders of record at the close of business on May 19, 2000
are entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
By Order of the Board of Directors,
Norton Herrick
Chairman
May 22, 2000
<PAGE>
MEDIABAY, INC.
20 Community Place
Morristown, New Jersey 07960
--------------------
PROXY STATEMENT
--------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FRIDAY, JUNE 23, 2000
This proxy statement (the "Proxy Statement") is furnished in connection
with the solicitation of proxies by the Board of Directors of MediaBay, Inc.
(the "Company") for use at the Annual Meeting of Shareholders (the "Annual
Meeting") to be held on Friday, June 23, 2000, 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 May 22, 2000.
Proxies in the accompanying form, duly executed and returned to the
management of the Company and not revoked, will be voted at the Annual 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 Annual Meeting and voting in person.
The address and telephone number of the principal executive offices of
the Company are: 20 Community Place, Morristown, New Jersey 07960, Telephone
No.: (973) 539-9528.
OUTSTANDING SHARES AND VOTING RIGHTS
Only shareholders of record at the close of business on May 19, 2000
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting.
As of the Record Date, there were issued and outstanding 13,421,866 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. Messrs. Norton Herrick, Michael Herrick and
Howard Herrick, who together maintain voting rights to approximately 29.4% of
the Company's outstanding voting securities, have indicated an intention to vote
for the election of the nominees listed below as Class III directors and the
proposals to approve the amendment to the Company's Articles of Incorporation to
increase the authorized common stock to 150,000,000 shares and the Company's
2000 Stock Incentive Plan. See "Voting Security Ownership of Certain Beneficial
Owners and Management."
<PAGE>
VOTING PROCEDURES AND PROXY INFORMATION
The Class III directors will be elected by the affirmative vote of a
plurality of the shares of Common Stock present in person or represented by
proxy at the Annual Meeting voting as a single class, provided a quorum exists.
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 Annual Meeting. Approval of an 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. All other matters at the meeting, including, but not limited
to, the proposal to approve the Company's 2000 Stock Incentive Plan, 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. Messrs. Norton Herrick, Michael Herrick and Howard
Herrick who, in the aggregate, have the right to vote approximately 29.4% of the
Common Stock issued and outstanding at the Record Date have indicated their
intent to vote these shares in favor of the nominees for Class III directors and
Proposals I and II discussed below.
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 election of directors.
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.
ELECTION OF DIRECTORS
The Company's By-Laws provide that the Board of Directors of the
Company is divided into three classes (Class I, Class II and Class III). At each
Annual Meeting of Shareholders, directors constituting one class are elected for
a three-year term. At this year's Annual Meeting of Shareholders, two (2) Class
III directors will be elected to hold office for a term expiring at the Annual
Meeting of Shareholders to be held in 2003. It is the intention of the Board of
Directors to nominate Howard Herrick and Carl Wolf as Class III directors. Each
director will be elected to serve until a successor is elected and qualified or
until the director's earlier resignation or removal.
At this year's Annual Meeting of Shareholders, the proxies granted by
shareholders will be voted individually for the election, as directors of the
Company, of the persons listed below, unless a proxy specifies that it is not to
be voted in favor of a nominee for director. In the event either or both of the
nominees listed below shall be unable to serve, it is intended that the proxy
will be voted for such other nominees as are designated by the Board of
Directors. Each of the persons named below has indicated to the Board of
Directors that he will be available to serve.
-2-
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
ELECTION OF THE NOMINEES SPECIFIED BELOW.
The following information is with respect to the nominees for election
at this Annual Meeting of Shareholders:
CLASS III DIRECTORS
(To be Elected)
(New Term Expires in 2003)
Howard Herrick, 35, a co-founder of the Company, has been the Company's
Executive Vice President, Editorial Director and a director since its inception.
Since August 1993, Howard Herrick has been Vice President of the corporate
general partner of a limited partnership which is a principal shareholder of The
Walking Company. Since 1988, Mr. Herrick has been an officer of The Herrick
Company, Inc. and is currently its President. Mr. Herrick is also an officer of
the corporate general partners of numerous limited partnerships which acquire,
finance, manage and lease office, industrial and retail properties; and which
acquire, operate, manage, redevelop and sell residential rental properties. Mr.
Herrick is the son of Norton Herrick, the Company's Chairman and a director of
the Company, and brother of Michael Herrick, Chief Executive Officer, President
and a director of the Company.
Carl Wolf, 56, has been a director of MediaBay since March 1998. Mr.
Wolf is the managing partner of the Lakota Investment Group. Mr. Wolf was
formerly Chairman of the Board, President and Chief Executive Officer of Alpine
Lace Brands, Inc.. Mr. Wolf founded Alpine Lace and its predecessors and had
been the Chief Executive Officer of each of them since the inception of Alpine
Lace in 1983. Mr. Wolf became a director of Alpine Lace shortly after its
incorporation in February 1986.
The following information is with respect to incumbent directors in
Class I and Class II of the Board of Directors who are not nominees for election
at this Annual Meeting of Shareholders:
CLASS I DIRECTORS
(Term Expires in 2001)
Norton Herrick, 61, a co-founder of the Company, has been Chairman
since the Company's inception. Mr. Herrick served as President of the Company
from its inception until January 1996 and was Chief Executive Officer from
January 1996 through January 2000. Mr. Herrick has been a private businessman
for over 30 years and through his wholly-owned affiliates, Mr. Herrick has
completed transactions, including building, managing and marketing primarily
real estate valued at an aggregate of approximately $2 billion. Mr. Herrick
serves on the advisory board of the Make-A-Wish Foundation, the advisory
committee of the National Multi Housing Council and the National Board of
Directors for People for the American Way. Mr. Herrick is the father of Michael
Herrick, Chief Executive Officer, President and a director of the Company, and
Howard Herrick, Executive Vice President and a director of the Company.
Jesse Faber, 45, has been President of Audio Book Club, Inc. since
January 2000 and a director since October 1997. Mr. Faber was the Company's
President from October 1996 through January 2000. From 1989 to October 1996, Mr.
Faber was Senior Vice President and Partner of AyerDirect, a direct response
advertising agency wholly-owned by McManus, Inc., one of the ten largest
advertising and marketing agencies in the world.
-3-
<PAGE>
CLASS II DIRECTORS
(Term Expires in 2002)
Michael Herrick, 33, co-founded the Company and has been Chief
Executive Officer and President since January 2000 and a director since the
Company's inception. Mr. Herrick has held various other offices with the Company
since its inception. Since August 1993, Michael Herrick has been an officer
(since January 1994, Vice President) of the corporate general partner of a
limited partnership which is a principal shareholder of The Walking Company, a
nationwide retailer of comfort and walking footwear and related apparel and
accessories. Mr. Herrick is a member of the Board of Directors of the Audio
Publisher's Association. Mr. Herrick is the son of Norton Herrick, Chairman of
the Company, and brother of Howard Herrick, Executive Vice President and a
director of the Company. Mr. Herrick received his B.A. degree from the
University of Michigan.
Roy Abrams, 56, has been a director of the Company since October 1997.
Since April 1993 and from 1986 through March 1990, Mr. Abrams has owned and
operated Abrams Direct Marketing, a marketing consulting firm.
Carl Amari, 36, has been the Company's President of Radio Operations
since the Company acquired its old time radio and classic video operations in
December 1998 and a director of the Company since September 1999. Since 1989,
Mr. Amari was the CEO and principal shareholder of Radio Spirits, Inc. Radio
Spirits is recognized as the largest company in the world specializing in the
syndication, sales and licensing of old time radio programming. He is also the
executive producer of a nationally syndicated version of "When Radio Was" which
airs on 450 affiliates, as well as for three other related syndicated radio
programs. Radio Spirits twice made Inc.'s list of the fastest growing privately
held companies. In connection with the Company's acquisition of Radio Spirits,
Inc. from Mr. Amari, Norton Herrick agreed to vote his shares to elect Mr. Amari
as a director.
The Company has agreed with L.H. Friend, Weinress, Frankson & Presson,
LLC who conducted its October 1997 initial public offering, to use its best
efforts to nominate and elect one director designated by the underwriters to
serve on the Company's Board of Directors. This agreement expires on October 22,
2000. To date, they have not exercised this right.
The following is information with respect to certain of the Company's
officers who are not directors or nominees for director:
John Levy, 44, has been an employee of the Company since November 1997
and has served Executive Vice President and Chief Financial Officer of the
Company since January 1998. Prior to joining the Company, Mr. Levy was Senior
Vice President of Tamarix Capital Corporation and had previously served as Chief
Financial Officer of both public and private entertainment and consumer goods
companies. During 1994, Mr. Levy served as Chief Financial Officer of the
Continuum Entertainment Group, Inc., a publicly-held record label which filed
for protection under Chapter 11 of the United States Bankruptcy Code in 1995
after Mr. Levy had left that company. Mr. Levy is a Certified Public Accountant
with nine years experience with the national public accounting firms of Ernst &
Young, Laventhol & Horwath and Grant Thornton.
Stephen McLaughlin, 33, has been Executive Vice President and Chief
Technology Officer of the Company since February 1999. Prior to joining the
Company, Mr. McLaughlin was Vice President, Information Technology for Preferred
Healthcare Staffing, Inc., a nurse-staffing division of Preferred Employers
Holdings, Inc. Mr. McLaughlin co-founded and was a director, Chief Operating
Officer and Chief Information Officer of NET Healthcare, Inc., from 1997 until
it was acquired by Preferred Employers Holdings in August 1998. In 1994, Mr.
McLaughlin founded FX Media, Inc., an Internet and multimedia development
company. As CEO of FX Media, he served as senior software engineer for all of
its projects. Mr. McLaughlin holds a degree in Computer Science and Engineering
from the Massachusetts Institute of Technology and conducted research at the MIT
Media lab.
Robert Toro, 35, has been Senior Vice President of Finance of the
Company since July 1999 and an employee since April 1999. Prior to joining the
Company, Mr. Toro was Senior Vice President of AM Cosmetics Co. and had
previously served in senior financial positions in both public and private
entertainment and publishing companies. From 1992 through early 1997, Mr. Toro
served in various senior financial positions with Marvel
-4-
<PAGE>
Entertainment Group, Inc., a publicly traded youth entertainment company. Mr.
Toro is a Certified Public Accountant with six years of progressive experience
with the national public accounting firm of Arthur Andersen where he was
employed immediately prior to joining Marvel Entertainment Group.
Joanne Rypp Firstenberg, 49, has been Vice President and General
Counsel of the Company since April 2000. Ms. Rypp Firstenberg was a partner at
the law firm of Cane & Firstenberg LLP from March 1996 to February 2000. Ms.
Firstenberg was a partner in Hudson Capital LLC from 1996 to September 1999. Ms.
Firstenberg served as general counsel and a director of Midwest Disposal LLC
from 1996 to 1999. From 1995 to 1996, Ms. Firstenberg provided legal and
financial consulting services as a consultant and through Turtle Bay Inc.
During the fiscal year ended December 31, 1999, the Board of Directors
held one meeting. The meeting was attended by all of the directors, either in
person or by telephone. The Board also took action by unanimous written consent
in lieu of meetings.
The Company has established an Audit Committee which is responsible for
making recommendations concerning the engagement of independent public
accountants, reviewing the plans and results of the audit engagement with the
independent public accountants, approving professional services provided by the
independent public accountants and reviewing the adequacy of the Company's
internal accounting controls. The Audit Committee is currently comprised of
Messrs. Michael Herrick, Roy Abrams and Carl Wolf. The Company does not have a
compensation committee or a nominating committee.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the Company's officers,
directors, and persons who own more than 10% of a registered class of its equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers, directors, and greater than 10%
shareholders are required by Securities and Exchange Commission regulations to
furnish the Company with copies of all forms that they file pursuant to Section
16(a).
Based solely upon the Company's review of the copies of such forms that
the Company received, the Company believes that, during the year ended December
31, 1999, all filing requirements applicable to its officers, directors, and
greater than 10% shareholders were complied with, except for a Form 4 with
respect to one transaction in August 1999, which was inadvertently filed in an
untimely manner by Mr. Norton Herrick.
-5-
<PAGE>
EXECUTIVE COMPENSATION
Executive Compensation
The following table discloses for the fiscal years ended December 31, 1997,
1998 and 1999, compensation paid to Michael Herrick, the Company's Chief
Executive Officer and each other executive officer of the Company whose salary
together with any bonus was in excess of $100,000 during the fiscal year ended
December 31, 1999 (the "Named Executives").
<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------
Annual Compensation Long-Term Compensation Awards
------------------- -----------------------------
Securities Underlying
Name and Principal Position Year Salary Bonus Options/SAR's (#)
- --------------------------- ---- ------ ----- -----------------
<S> <C> <C> <C> <C>
Norton Herrick 1999 $100,000 $ -0- 775,000
Chairman 1998 100,000 -0- 1,000,000
1997 19,354 -0- -0-
Michael Herrick 1999 125,000 -0- -0-
Chief Executive Officer and 1998 125,000 -0- 250,000
President 1997 72,879 -0- -0-
Jesse Faber 1999 158,169 45,000 20,000
President of Audio Book 1998 140,000 35,000 50,000
Club, Inc. 1997 128,417 40,000 50,000
John Levy 1999 152,125 12,500 30,000
Executive Vice President and 1998 137,083 7,500 50,000
Chief Financial Officer 1997 19,125 -0-
Stephen McLaughlin 1999 131,250 -0- 158,000
Executive Vice President and 1998
Chief Technology Officer 1997
Howard Herrick 1999 125,000 -0- -0-
Executive Vice President 1998 125,000 -0- 250,000
1997 115,129 -0- -0-
</TABLE>
Norton Herrick served as the Company's Chief Executive Officer during
the years presented in the above table and Michael Herrick served as Co-Chief
Executive Officer from April 1998 through January 2000 and has served as Chief
Executive Officer and President since January 2000. Jesse Faber served as the
Company's President from October 1996 through January 2000 and is currently
President of Audio Book Club, Inc.
The 50,000 options reflected above for Mr. Faber were originally
granted in the fiscal year ended December 31, 1997, but their exercise price was
reduced during the fiscal year ended December 31, 1998 to the fair market value
of the underlying Common Stock at the time of repricing. The options reflected
in the above table do not include warrants issued to Norton Herrick in
connection with financing provided by Mr. Herrick. For more information about
these warrants, see "Certain Relationships and Related Transactions."
-6-
<PAGE>
Mr. McLaughlin joined the Company in February 1999.
The following table discloses options granted during the fiscal year ended
December 31, 1999 to the Named Executives:
Option/SAR Grants in Fiscal Year Ended December 31, 1999
<TABLE>
<CAPTION>
Number of % of Total
Shares Underlying Options Granted to Exercise Price
Name Options Granted Employees in Fiscal Year ($/share) Expiration Date
- ---- --------------- ------------------------ -------------- ---------------
<S> <C> <C> <C> <C>
Norton Herrick........ 775,000 63.6 $ 11.00 10/9/09
Michael Herrick....... -0- -0- -- --
Jesse Faber........... 10,000 .8 $ 8.00 10/31/04
10,000 .8 $ 12.00 10/31/05
John Levy............. 30,000(1) 2.5 $13.00 Five years from vesting(1)
Stephen McLaughlin.... 150,000(2) 12.3 $ 9.75 Five years from vesting(2)
8,000 .7 $ .10 2/15/04
Howard Herrick........ -0- -0- -- --
</TABLE>
- ----------------
(1) One third of the 30,000 options granted to Mr. Levy vest on November 10,
2000, and the balance will vest on November 10, 2001. All of the options are
exercisable for a period of five years commencing immediately upon the
applicable vesting period, subject to earlier termination if Mr. Levy is not
employed by us.
(2) These options vested as to 25,000 shares on February 15, 1999 and 25,000
shares on February 15, 2000 and will vest as to 30,000 shares on February
15, 2001, 35,000 shares on February 15, 2002 and 35,000 shares on February
15, 2003. All of the options are exercisable for a period of five years
commencing immediately upon the applicable vesting period.
-7-
<PAGE>
The following table sets forth information concerning the number of
options owned by the Named Executives and the value of any in-the-money
unexercised options as of December 31, 1999. No options were exercised by the
Named Executives during fiscal 1999:
Aggregated Option Exercises
And Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options at Options at
December 31, 1999 December 31, 1999
--------------------------------- ---------------------------------
Executive Exercisable Unexercisable Exercisable Unexercisable
--------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Norton Herrick 1,775,000 -0- $6,520,313 $-0-
Michael Herrick 250,000 -0- 1,265,625 -0-
Jesse Faber 30,000 40,000 185,625 230,625
John Levy 20,000 60,000 153,750 230,625
Stephen McLaughlin 33,000 125,000 124,638 179,688
Howard Herrick 250,000 -0- 1,265,625 -0-
</TABLE>
- ------------
The year-end values for unexercised in-the-money options represent the
positive difference between the exercise price of such options and the fiscal
year end market value of the Common Stock. An option is "in-the-money" if the
fiscal year-end fair market value of the Common Stock exceeds the option
exercise price. The closing sale price of the Company's Common Stock on December
31, 1999 was $11.1875.
Employment Agreements
Effective as of October 22, 1999, the Company entered into a one-year
employment agreement with Norton Herrick which provides for an annual base
salary of $100,000 and such increases and bonuses as the Board of Directors may
determine from time to time. The employment agreement does not require that Mr.
Herrick devote any stated amount of time to the Company's business and
activities and contains noncompetition and nonsolicitation provisions for the
employment is terminated under circumstances described in the employment
entitled to receive severance pay equal to the greater of $600,000 or six times
the total compensation received by Mr. Herrick from the Company during the
twelve months prior to the date of termination. If the severance payment is
triggered, it is possible that the payments may be deemed "excess parachute
payments" under Section 280(g) of the Internal Revenue Code and, as a result,
the Company may not receive a tax deduction for those payments.
Effective October 22, 1997, the Company entered into three-year
employment agreements with each of Michael Herrick and Howard Herrick which
provide for an annual base salary of $125,000 and such increases and bonuses as
the Board of Directors may determine from time to time. The employment
agreements require each of Michael and Howard Herrick to devote substantially
all of his business time to the Company's business and affairs. The agreements
contain noncompetition and nonsolicitation provisions for the term of the
employment agreements and for two years thereafter. In the event of termination
of employment under circumstances described in the employment agreements,
including as a result of a change in control, the Company will be required to
provide severance pay equal to the greater of $375,000 or three times the total
compensation received from the Company during the twelve months prior to the
date of termination.
-8-
<PAGE>
On October 22, 1999, the Company entered into an employment agreement
with Jesse Faber which provides for an annual base salary of $165,000. The
agreement expires on October 31, 2000 and provides for a bonus of $55,000
payable if Mr. Faber is employed by the Company at the end of the term. Pursuant
to the agreement, the Company granted to Mr. Faber options to purchase 10,000
shares of the Common Stock at an exercise price of $12.00 per share. The options
vest on October 31, 2000, provided that Mr. Faber is employed by us on such
date.
The Company has entered into a two-year employment agreement with John
Levy which expires in November 2001. The agreement provides for an annual base
salary of $165,000, in the first year of the agreement and an annual base
compensation of $180,000 in the second year of the agreement. Mr. Levy's
agreement also provides for a minimum bonus of $15,000 in the first year of the
agreement and a minimum bonus of $17,500 in the second year of the agreement,
provided Mr. Levy is employed by the Company on each bonus date. Pursuant to the
agreement, the Company agreed to grant to Mr. Levy options to purchase 30,000
shares of Common Stock at an exercise price of $13.00 per share. Options for
10,000 shares vest at the end of the first year of the employment agreement and
options for 20,000 shares vest at the end of the second year of employment,
provided Mr. Levy is employed by the Company on the vesting dates. However, in
the event of a change in control, all options shall immediately vest and become
exercisable.
The Company entered into a two-year employment agreement with Stephen
McLaughlin, effective February 15,1999, which provides for an annual base salary
of $150,000, a performance-based bonus of $15,000 payable if Mr. McLaughlin is
employed by the Company at the end of the first year of the employment term,
$10,000 reimbursement for moving expenses and a $35,000 interest free loan.
Pursuant to the agreement, the Company granted to Mr. McLaughlin options to
purchase 158,000 shares of the Common Stock at a weighted average exercise price
of $9.25 per share. The options vest as follows: options for 33,000 shares
vested on February 15, 1999; options for 25,000 shares vested on February 15,
2000; options for 30,000 shares vest on February 15, 2001; and options for
35,000 shares vest on each of February 15, 2002 and February 15, 2003.
In December 1998, the Company entered into a three-year employment
agreement with Carl Amari. Pursuant to the agreement, Mr. Amari is entitled to
receive a base salary of $200,000 per year during the term of the agreement. The
agreement also provides that Mr. Amari shall also be appointed as a member of
the Company's Board of Directors for as long as he is employed by the Company.
Stock Plans
The Company's 1997 Stock Option Plan provides for the grant of stock
options to purchase up to 2,000,000 shares. As of the Record Date, options to
purchase an aggregate of 1,981,200 shares of its Common Stock have been granted
under the 1997 plan.
The Company's 1999 Stock Incentive Plan provides for the grant of any
or all of the following types of awards: (1) stock options, which may be either
incentive stock options or non-qualified stock options, (2) restricted stock,
(3) deferred stock and (4) other stock-based awards. A total of 2,500,000 shares
of Common Stock have been reserved for distribution pursuant to the 1999 plan.
As of the Record Date, options to purchase an aggregate of 2,120,850 shares of
Common Stock have been granted under the 1999 plan.
Of the options granted under the Company's plans, options to purchase
3,320,000 shares of Common Stock have been granted to the Company's officers and
directors as follows: Norton Herrick -- 2,075,000 shares; Michael Herrick --
550,000 shares; Howard Herrick -- 400,000 shares; John F. Levy -- 80,000 shares;
Jesse Faber -- 70,000 shares; Robert Toro -- 60,000 shares; Roy Abrams -- 10,000
shares; Carl Amari - 50,000 shares; and Stephen McLaughlin - 25,000 shares.
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<PAGE>
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 according to Schedules 13G and 13D filed
with the SEC, (ii) each of the Company's directors and nominees for director,
(iii) each of the Named Executives, and (iv) all directors and executive
officers of the Company as a group:
<TABLE>
<CAPTION>
Number of Shares Percentage of Outstanding
of Common Stock Common Stock
Name of Beneficial Owner(1) Beneficially Owned(2) Beneficially Owned
- --------------------------- --------------------- ------------------
<S> <C> <C>
Norton Herrick............................... 3,881,431(3) 23.1%
Howard Herrick............................... 3,852,640(4) 27.9
Michael Herrick.............................. 1,038,460(5) 7.4
Quantum Partners LDC......................... 750,000 5.6
Kaya Flamboya
Willemsted, Curaco
Netherlands, Antilles
President and Fellows of Harvard College..... 700,000 5.2
C/o Harvard Management Company, Inc.
600 Atlantic Avenue
Boston, Massachusetts 02210
Carl Amari................................... 497,875(6) 3.7
Carl Wolf.................................... 102,500(7) *
Stephen M. McLaughlin........................ 58,300(8) *
John Levy.................................... 41,000(9) *
Jesse Faber.................................. 30,000(10) *
Roy Abrams................................... 10,000(11) *
All directors and executive officers as a group
([11] persons)............................... 9,023,996 49.9
</TABLE>
- ------------
* Less than 1%
(1) Unless otherwise indicated, the address of each beneficial owner is care
of MediaBay, Inc., 20 Community Place, Morristown, New Jersey 07960.
(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.
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<PAGE>
(3) Represents (a) 8,200 shares of Common Stock held by Norton Herrick, (b)
488,460 shares of Common Stock held by Howard Herrick, (c) 2,075,000
shares of Common Stock issuable upon exercise of options, (d) 150,000
shares of Common Stock issuable upon exercise of options granted to Evan
Herrick, (e) 910,221 shares of Common Stock issuable upon exercise of
warrants issued on December 31, 1998 or under a December 1998 letter
agreement and (f) 249,550 shares issuable upon conversion of a
convertible promissory note, based on an $11.125 conversion price. Does
not include (i) 2,964,180 shares held by the Norton Herrick Irrevocable
ABC Trust, (ii) 64,779 shares which may become issuable to Mr. Herrick
upon exercise of warrants which may be required to issue to Mr. Herrick
and (i) additional shares if the promissory note is converted at a
conversion price less than $11.125 per share. 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
options held by Evan Herrick. See "Certain Relationships and Related
Transactions."
(4) Represents (a) 2,964,180 shares held by the Norton Herrick Irrevocable
ABC Trust, (b) 488,460 shares of Common Stock held by Howard Herrick, and
(c) 400,000 shares of Common Stock issuable upon exercise of options.
Howard Herrick is the sole trustee and Norton Herrick is the sole
beneficiary of the Norton Herrick Irrevocable ABC Trust. The 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.
(5) Represents 488,460 shares and 550,000 shares of Common Stock issuable
upon exercise of options.
(6) Represents 395,125 shares of Common Stock and options to purchase 102,750
shares of Common Stock held by Mr. Amari. Does not include options to
purchase 100,000 shares of Common Stock held in escrow subject to release
to Mr. Amari if specific earnings performance targets are met by the
Company's old time radio and classic video operations acquired from Mr.
Amari.
(7) Includes 5,000 shares of Common Stock and 97,500 shares of Common Stock
issuable upon exercise of options.
(8) Represents 300 shares and 58,000 shares of Common Stock issuable upon
exercise of options. Does not include 125,000 shares of Common Stock
issuable upon exercise of options.
(9) Represents 1,000 shares of Common Stock and 40,000 shares of Common Stock
issuable upon exercise of options. Does not include 40,000 shares
issuable upon exercise of options.
(10) Represents shares of Common Stock issuable upon exercise of options. Does
not include 40,000 shares of Common Stock issuable upon exercise of
options.
(11) Represents shares of Common Stock issuable upon exercise of options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Companies wholly-owned by Norton Herrick, the Company's Chairman, have
in the past provided accounting, administrative and general office services to
the Company and obtained insurance coverage for it at cost since the Company's
inception. The Company paid these entities $73,000 and $90,000 for these
services during the years ended December 31, 1998 and 1999. In addition, a
company wholly-owned by Norton Herrick provides the Company access to a
corporate airplane. The Company generally pays the fuel, fees and other costs
related to its use of the airplane directly to the service providers. For use of
this airplane, the Company paid rental fees of less than $25,000 in each of 1998
and 1999 to Mr. Herrick's affiliate. The Company anticipates obtaining similar
services
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<PAGE>
from time to time from companies affiliated with Norton Herrick, and the Company
will reimburse their costs in providing the services to it.
On March 18, 1998, the Company sold to Carl Wolf, one of the Company's
directors, a five-year option to purchase 50,000 shares of its Common Stock at
an exercise price of $5.00 per share, the market value on the purchase date. The
purchase price of the option was $50,000. The Company also granted to Mr. Wolf
the right to acquire a second five-year option to purchase 25,000 shares at an
exercise price of $5.00 per share for $25,000. Mr. Wolf exercised this right and
purchased the additional option in September 1998.
In December 1998, the Company acquired Radio Spirits, Inc. from Carl
Amari, who subsequently became one of its directors, as described under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Recent Acquisitions and Financings."
In December 1998, the Company obtained a portion of the financing for
its acquisitions of Columbia House's Audiobook Club and its old time radio and
classic video operations from Norton Herrick by issuing him a $15.0 million
principal amount 9% convertible subordinated promissory note due December 31,
2004. In January 1999, the Company repaid $1.0 million of the note. In August
1999, Mr. Herrick sold $5.0 million principal amount of the note to a third
party. Interest on this note is payable monthly. The note was initially
convertible, in whole or in part, at the holder's option, into shares of the
Company's Common Stock at $11.125 per share. As additional consideration for the
bridge loan, the Company issued to Mr. Herrick five-year warrants to purchase
500,000 shares of the Company's Common Stock at an exercise price of $12.00 per
share, subject to adjustment. Because the bridge loan was not refinanced, repaid
or replaced by September 30, 1999, (1) the interest rate of the note increased
to 11%, (2) the conversion price of the note was adjusted to the lesser of
$11.125 per share and the average closing bid price of the Company's Common
Stock for the five trading days prior to conversion and (3) the exercise price
of the warrants was adjusted to $8.41. The additional 2% interest on the note
through December 31, 1999 is being added to the principal amount of the note and
is due on the maturity of the note, and the additional 2% interest commencing
January 1, 2000 is payable monthly. The note is subordinated to the Company's
obligations under its credit facility with Fleet and ING and is secured by a
second lien security interest on assets of its old time radio and classic video
operations. The terms of Mr. Herrick's loan to the Company were approved by the
independent members of the Company's Board of Directors. The Company also
received a fairness opinion in connection with this loan.
In December 1998, the Company also agreed that if the note is
refinanced, repaid or replaced by anyone other than Norton Herrick or a family
member or affiliate of Mr. Herrick, the Company will issue to Mr. Herrick
warrants to purchase an additional 350,000 shares of its Common Stock on the
same terms as those issued to him in December 1998. In September 1999, the
Company issued to Mr. Herrick warrants to purchase 140,000 shares of its Common
Stock at a price of $8.41 per share.
From December 1999 through February 2000, Norton Herrick sold
$6,223,750 principal amount of the note issued to him in December 1998 to two
third parties. Under the December 1998 agreement, the Company issued to Mr.
Herrick warrants to purchase 145,221 shares of its Common Stock at an exercise
price of $8.41 per share on terms which were identical to the warrants issued to
Mr. Herrick in December 1998. If the remaining $2,776,250 owed to Mr. Herrick
under the note is refinanced, repaid or replaced, under the December 1998
agreement the Company will issue to Mr. Herrick warrants to purchase 64,779
shares of its Common Stock at an exercise price of $8.41 per share on terms
which are identical to the warrants issued to Mr. Herrick in December 1998.
In June 1999, the Company obtained a portion of the financing for its
acquisition of the business of Doubleday Direct's Audiobooks Direct club through
a $4.4 million loan from Norton Herrick. In connection with this loan, the
Company agreed, subject to shareholder approval, that it would issue to Mr.
Herrick warrants to purchase 125,000 shares of its Common Stock at an exercise
price of $8.41 per share and on the same terms as the warrants issued to him in
December 1998. This loan was intended to be a bridge financing and was repaid in
full in July 1999. Shareholder approval was obtained in September 1999, and the
Company issued the warrants to Mr. Herrick.
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<PAGE>
In December 1999 and January 2000, Evan Herrick, loaned the Company
$3.0 million for which he received $3.0 million principal amount 9% convertible
promissory notes due December 31, 2004. The notes are convertible into shares of
its Common Stock at $4.00 per share. Evan Herrick is Norton Herrick's son and
Michael Herrick's and Howard Herrick's brother.
The Company leases office space in New Jersey and Florida from
affiliates of Norton Herrick and other facilities in Illinois from an affiliate
of Carl Amari.
Companies affiliated with Norton Herrick may continue to provide
accounting and general and administrative services to the Company at cost,
provide it with access to a corporate airplane at cost and obtain insurance
coverage for it at cost. It is the Company's policy that each transaction
between the Company and its officers, directors and 5% or greater shareholders
will be on terms no less favorable than could be obtained from independent third
parties.
PROPOSAL I
AMENDMENT TO ARTICLES OF INCORPORATION
TO EFFECT AN INCREASE IN
AUTHORIZED SHARES OF COMMON STOCK
At the Annual Meeting, the shareholders 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 75,000,000 to 150,000,000 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. 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 potential acquisitions and future capital
requirements. The Company intends to seek to continue to expand its operations
through acquisitions and may determine to issue equity securities as all or a
portion of the purchase price of the acquisition. Although the Company
continuously evaluates potential acquisition candidates, the Company does not
have any plans, commitments or understandings with respect to any acquisitions.
Approval by the shareholders of the Proposed Amendment at the Annual 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 additional shares of Common Stock that would be available for
issuance if the proposed amendment is approved could be issued for any proper
corporate purpose by the Board at any time without further shareholder approval,
subject to applicable law and the rules of The Nasdaq Stock Market Inc.
("Nasdaq") that apply to the Company as a result of the quotation of its Common
Stock on the Nasdaq National Market so long as the Common is so quoted. 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. Except as described
above, further authorization from the Company's shareholders will not be
solicited prior to the issuance of Common Stock. 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. Shareholders will not have preemptive rights to subscribe for shares of
Common Stock, unless the Company grants such rights at the time of issue.
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.
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<PAGE>
PROPOSAL II
APPROVAL OF 2000 STOCK INCENTIVE PLAN
At the Annual Meeting, the Company's shareholders will be asked to
approve the adoption of the Company's 2000 Stock Incentive Plan (the "2000
Plan").
On May __, 2000, the Board of Directors adopted, subject to shareholder
approval, the 2000 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 and 1999 Stock Incentive Plan has proven to be
a valuable tool in attracting, retaining and motivating key employees and
consultants. Accordingly, the Board believes that the 2000 Plan, 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 and stock awards available for
future grant under the Company's 1997 Stock Option Plan and 1999 Stock Incentive
Plan. The last sale price of the Common Stock on May 19, 2000 was $_______.
To date, no options or stock awards have been granted under the 2000
Plan. If the 2000 Plan is approved by the shareholders, options or stock awards
may be granted under the 2000 Plan, the timing, amounts and specific terms of
which cannot be determined at this time.
The following summary of the 2000 Plan does not purport to be complete,
and is subject to and qualified in its entirety by reference to the full text of
the 2000 Plan, set forth as Exhibit B to this Proxy Statement.
Summary of the 2000 Plan
The 2000 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 2000 Plan. A total of 3,500,000 shares of Common Stock,
subject to anti-dilution adjustment as provided in the 2000 Plan, have been
reserved for distribution pursuant to the 2000 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
2,500,000 shares during the term of the 2000 Plan.
The 2000 Plan can be administered by the Board of Directors (the
"Board") or a 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 2000 Plan will expire
at the close of business on June 22, 2010.
Stock Options. The 2000 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
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<PAGE>
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 2000 Plan are
nontransferable by the optionee during his lifetime. Options granted pursuant to
the 2000 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% Shareholder")), and under certain
circumstances set forth in the 2000 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% Shareholder may not be less
than 110% of such fair market value.
Under the 2000 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 2000 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 2000 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 2000
Plan with more stringent provisions than those specified in the 2000 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 2000 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% Shareholder). The 2000 Plan will remain
in effect until all stock options are exercised or terminated. Notwithstanding
the foregoing, no options may be granted after June 22, 2010.
Restricted and Deferred Stock Awards. Under the 2000 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 2000 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.
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<PAGE>
Certain Federal Income Tax Consequences of the 2000 Plan
The following is a brief summary of the Federal income tax aspects of
Awards made under the 2000 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
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 2000 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 2000 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
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services by the participant. Where shares of stock received under the 2000 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
2000 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 2000 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 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.
Recommendation
The Board of Directors and management believe that adoption of
the Company's 2000 Stock Incentive Plan is advisable and recommends a vote "FOR"
the proposal.
INDEPENDENT AUDITORS
Deloitte & Touche LLP reported on the financial statements of
the Company for the fiscal year ended December 31, 1999. It is currently
anticipated that Deloitte & Touche LLP will examine and report on the financial
statements of the Company for the year ending December 31, 2000. A
representative of Deloitte & Touche LLP is [not] expected to be present at the
Annual Meeting.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Shareholders who wish to present proposals appropriate for
consideration at the Company's Annual Meeting of Shareholders to be held in the
year 2001 must (i) submit the proposal in proper form to the Company at its
address set forth on the first page of this Proxy Statement not later than
January 22, 2001 and (ii) must satisfy the conditions established by the
Securities and Exchange Commission and the Company's By-laws for shareholder
proposals in order for the proposition to be considered for inclusion in the
Company's proxy statement and form of proxy relating to such annual meeting. Any
such proposals, as well as any questions related thereto, should be directed to
the Secretary of the Company.
After the 2001 deadline, a shareholder may present a proposal at the
Company's 2001 Annual Meeting if it is submitted to the Company's Secretary at
the address set forth above no later than April 7, 2001. If timely submitted,
the shareholder may present the proposal at the 2001 Annual Meeting but the
Company is not obligated to present the matter in its proxy statement.
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OTHER INFORMATION
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE YEAR ENDED
DECEMBER 31, 1999 IS BEING FURNISHED HEREWITH TO EACH SHAREHOLDER OF RECORD AS
OF THE CLOSE OF BUSINESS ON MAY 19, 2000.
The Board of Directors is aware of no other matters, except
for those incident to the conduct of the Annual Meeting, that are to be
presented to shareholders for formal action at the Annual Meeting. If, however,
any other matters properly come before the Annual 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
Chairman
May 22, 2000
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EXHIBIT A
FORM OF AMENDMENT OF THE
ARTICLES OF INCORPORATION
TO INCREASE THE AUTHORIZED SHARES OF
CAPITAL STOCK, TO 155,000,000 SHARES, OF WHICH
150,000,000 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 One Hundred
Fifty-Five Million (155,000,000) shares, no par value per share, of
which One Hundred Fifty Million (150,000,0000) shall be Common Stock
and Five Million (5,000,000) shall be Preferred Stock."
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EXHIBIT B
MEDIABAY, INC.
2000 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 shareholders 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 MediaBay, 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 MediaBay, 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.
(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.
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(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) "Lock-Up Period" means the period commencing on the date a registration
statement relating to an underwritten public offering is filed with the
Securities and Exchange Commission and ending on the date agreed to by the
underwriter of such offering and the Company, but in no event later than
120 days following the date such registration statement is declared
effective by the SEC.
(n) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(o) "Normal Retirement" means retirement from active employment with the
Company or any Subsidiary on or after age 65.
(p) "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.
(q) "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.
(r) "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 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.
(s) "Plan" means this MediaBay, Inc. 2000 Stock Incentive Plan, as hereinafter
amended from time to time.
(t) "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.
(u) "Retirement" means Normal Retirement or Early Retirement.
(v) "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.
(w) "Section 162(m)" means Section 162(m) of the Code, as in effect from time
to time, and any successor thereto.
(x) "Securities Act" means the Securities Act of 1933, as amended, as in effect
from time to time.
(y) "Stock" means the Common Stock of the Company, no par value per share.
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(z) "Stock Option" or "Option" means any option to purchase shares of Stock
which is granted pursuant to the Plan.
(aa) "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.
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 11 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) 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 3,500,000 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, (C) number, kind, purchase price and/or appreciation base of shares
of Stock subject to other outstanding awards granted under this Plan and (D) the
maximum number 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, as may be determined to be appropriate by the Board or the
Committee, as the case may be, in its sole and absolute 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 2,500,000 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 operation,
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, in its sole and absolute discretion.
Subject to the maximum number of shares of Stock permitted by Section
3 of this Plan, 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 and absolute discretion, include additional conditions and
restrictions in the agreement entered into in connection with such awards under
this Plan. The grant of an Option or other award under this Plan, and any
determination made in connection therewith, shall be made on a case by case
basis and can differ among optionees and grantees. The grant of an Option or
other award is a privilege and not a right and the determination of the Board or
the Committee, as the case may be, can be applied on a non-uniform
(discretionary) basis.
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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%
Shareholder") 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 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.
(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%
Shareholder) 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 sole and absolute 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 (a) in cash unless otherwise
provided in this clause (iv) or in Section 5(b)(xi) below or (b)
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
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Option or 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.
Unless otherwise provided in the Stock Option Agreement referred
to in Section 5(b)(xii) below, certificates for shares of Stock
may be delivered as payment or partial payment upon exercise of a
Stock Option only if (a) the certificates representing the Stock
has been held by the optionee at least six (6) consecutive months
prior to exercise and (b) such delivery would not, in the
Company's sole and absolute discretion be deemed to result in a
financial charge to the Company. 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 broker-dealer to sell or
margin a sufficient portion of the shares covered by the Option
so as to cover the exercise price 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 13(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 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)(ix)
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)(ix)
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
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
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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)(ix) 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 13(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, 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, or (2) the 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, the Board or the Committee, as the case
may be, may, except as otherwise provided in the Stock Option
Agreement, 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
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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.
(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 equivalent distributions as
the Board may in its sole and absolute 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 and absolute 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
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<PAGE>
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.
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 13(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.
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<PAGE>
(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 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.
(ii) The recipient of an Other Stock-Based Award may be entitled to
receive, currently or on a deferred basis, as provided in the
agreement referred to in Section 8(b)(v), 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.
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<PAGE>
(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:
(i) the tenth day after 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 completion of a tender or exchange offer subject to Section
14(d)(1) of the Exchange Act for any class of the Company's
capital stock by any individual, firm, corporation or other
entity or of any group (as defined in Section 13(d)(3) of the
Exchange Act); or
(iii) the completion of (A) a merger or other business combination of
the Company with or into another corporation pursuant to which
the shareholders of the Company immediately before such
termination do not own, immediately after the transaction, more
than 50% of the voting power of the corporation that survives or
(B) a sale, exchange or other disposition of all or
substantially all of the assets of the Company; or
(iv) 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 (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) is acquired (I) 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 (II) 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 immediately prior
to the Change of Control (provided that the Change of Control
occurs), 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. Lock-Up Agreement
Except as otherwise provided in respect of any Stock Option, Restricted
Stock, Deferred Stock or Other Stock-Based Award pursuant to the specific
provisions of the Stock Option, Restricted Stock, Deferred Stock or Other
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<PAGE>
Stock-Based Award agreement pursuant to which it was issued as referred to in
Section 5(b)(xii), 6(b)(iv), 7(b)(vii) or 8(b)(v) above, in the event of a
public offering of the Company's securities, during the Lock-Up Period, the
holder of such of the Stock Option, Restricted Stock, Deferred Stock or Other
Stock-Based Award will not sell, contract to sell, sell or grant any option,
right warrant or contract to sell, pledge, hypothecate or otherwise transfer or
dispose of any of the shares of Stock covered by such Stock Option, Restricted
Stock, Deferred Stock or Other Stock-Based Award.
Section 11. 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 2 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 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 12. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not 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 of a creditor of
the Company.
Section 13. 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.
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<PAGE>
(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, 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). All participants
consent and agree to be subject to jurisdiction of the federal and
state courts for Palm Beach County, Florida. In the event any party
commences an action arising out of or related to this Plan or any
agreement under which the Stock Option or other award is granted and a
defendant in the action prevails, the prevailing defendant party in
the action shall be entitled to an award of all costs and reasonable
attorney's fees.
(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, 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.
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<PAGE>
(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 shall have 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.
(m) The grant of an Option or other award under this Plan and any
determination made in connection therewith, shall be made on a case by
case basis and can differ among optionees and grantees. The grant of
Option or other award is a privilege and not a right and the
determination of the Board or the Committee, as the case may be, can
be applied on a non-uniform (discretionary) basis.
(n) If a conflict arises among the terms of this Plan and a Stock Option
Agreement or an agreement referred to in Section 6(b)(iv), 7(b)(vii)
or 8(b)(v) relating to another award made under this Plan, the terms
of the Stock Option Agreement or the agreement relating to such other
award shall govern.
Section 14. Effective Date of Plan.
The Plan shall be effective as of the date of the approval and adoption
thereof at a meeting of the shareholders of the Company.
Section 15. Term of Plan.
This Plan shall terminate at the close of business of the day immediately
preceding 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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<PAGE>
MEDIABAY, INC.
20 Community Place
Morristown, New Jersey 07960
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 23, 2000
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 MediaBay, Inc. (the "Company") on Friday, June 23, 2000, at The
Headquarters Plaza Hotel, 3 Headquarters Plaza, 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. ELECTION OF CLASS III DIRECTORS:
|_| FOR all nominees listed below |_| WITHHOLD AUTHORITY
(except as marked to the contrary below). to vote for all
nominees listed below.
Howard Herrick and Carl Wolf
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space below.)
________________________________________________________________________________
(Continued and to be signed on reverse side)
2. Approval of an amendment to the Company's Articles of Incorporation to
increase the authorized common stock from 75,000 to 150,000,000 shares.
|_| FOR |_| AGAINST |_| ABSTAIN
3. Approval of the Company's 2000 Stock Incentive Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
4. 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 THOSE NOMINEES AND THE
PROPOSALS LISTED ABOVE.
DATED: ________________________________, 2000
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
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