<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ____)
Filed by the Registrant /x/
Filed by Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
J2 COMMUNICATIONS
- --------------------------------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
PROXY MATERIALS
J2 COMMUNICATIONS
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 13, 2000
To the Shareholders of
J2 Communications:
Notice is hereby given that the 1999 annual meeting of shareholders of
J2 Communications, a California corporation (the "Company"), will be held at the
Doubletree Hotel at 10740 Wilshire Boulevard, Los Angeles, California on January
13, 2000, at 10:00 A.M. local time, for the following purposes:
1. To elect six (6) directors to serve on the Board of Directors
until the next annual meeting or until their successors are
elected and qualified;
2. To ratify the appointment of Arthur Andersen LLP as the
Company's independent auditors for fiscal 1999; and
3. To transact such other business as may properly come before
the meeting.
Shareholders of record as of the close of business on November 30, 1999
will be entitled to vote at the annual meeting. Shares should be represented as
fully as possible, since a majority is required to constitute a quorum.
Please mark, sign, date and mail the accompanying proxy in the enclosed
self-addressed, postage paid envelope, whether or not you expect to attend the
meeting in person. You may revoke your proxy at the meeting should you be
present and desire to vote your shares in person, and you may revoke your proxy
for any reason at any time prior to the voting thereof, either by written
revocation prior to the meeting or by appearing at the meeting and voting in
person. Your cooperation is respectfully solicited.
By Order of the Board of Directors,
/s/ JAMES P. JIMIRRO
-------------------------------------
James P. Jimirro
President and Chief Executive Officer
Los Angeles, California
December 10, 1999
<PAGE> 3
J2 COMMUNICATIONS
10850 WILSHIRE BOULEVARD
SUITE 1000
LOS ANGELES, CALIFORNIA 90024
(310) 474-5252
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 13, 2000
INTRODUCTION
The enclosed proxy is solicited on behalf of the Board of Directors of
J2 Communications (the "Company") in connection with its 2000 annual meeting of
shareholders to be held on January 13, 2000 at 10:00 A.M., local time, and any
adjournment thereof (the "Annual Meeting"), at the Doubletree Hotel, 10740
Wilshire Boulevard, Los Angeles, California 90024.
The cost of proxy solicitation will be borne by the Company. In addition
to the solicitation of proxies by the use of the mails, certain officers and
other regular employees of the Company may devote part of their time (but will
not be specifically compensated therefor) to solicitation by telegraph,
telephone or in person. Proxies may be revoked at any time prior to voting.
Revocation may be done prior to the meeting by written revocation sent to the
Secretary of the Company, J2 Communications, 10850 Wilshire Boulevard, Suite
1000, Los Angeles, California 90024, or it may be done personally upon oral or
written request at the Annual Meeting.
This proxy statement was first mailed or delivered to shareholders on or
about December 14, 1999.
RECORD DATE; VOTING SECURITIES OUTSTANDING
The close of business on November 30, 1999 is the record date for
determining the holders of the Company's common stock, no par value ("Common
Stock"), entitled to notice of and to vote at the Annual Meeting.
1
<PAGE> 4
As of October 31, 1999, the Company had outstanding voting securities
consisting of 1,234,718 shares of Common Stock held by approximately 1,500
registered and beneficial owners. Each holder of record of outstanding Common
Stock at the close of business on November 30, 1999 will be entitled to vote at
the Annual Meeting. Presence in person or by proxy of holders of a majority of
the outstanding shares of Common Stock will constitute a quorum at the Annual
Meeting. A broker non-vote is not counted in determining voting results. If a
shareholder, present in person or by proxy, abstains on any matter, the
shareholder's shares will not be voted on such matter. Thus, an abstention from
voting on a matter has the same legal effect as a vote "AGAINST" the matter.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The table below sets forth certain information as of November 15, 1999
with respect to the beneficial ownership of Common Stock by (i) each person
known to be the beneficial owner of more than five percent of the outstanding
shares of Common Stock; (ii) each director and nominee; (iii) the Chief
Executive Officer; and (iv) all executive officers and directors as a group.
Except as otherwise indicated, the Company believes that the beneficial owners
of the Common Stock listed below, based on information furnished by such owners,
have sole investment and voting power with respect to such shares, subject to
community property laws where applicable.
<TABLE>
<CAPTION>
No. of Percent of
Name and Address of Shares and Nature of Class
Beneficial Owner Beneficial Ownership(1)
- --------------------------- ----------------------- ----------
<S> <C> <C>
James P. Jimirro(2)(3) 325,336 26.35%
James Fellows (2)(4) 13,500 *
Bruce P. Vann (2)(5) 1,665 *
John De Simio (2)(6) 1,333 *
Gary Cowan _ *
Daniel S. Laikin(2)(7) 157,600 12.76%
All directors and executive 499,434 40.45%
officers as a group (6 persons)
</TABLE>
- -------------------------
* Less than 1 percent
2
<PAGE> 5
(1) Nature of beneficial ownership is direct unless otherwise indicated by
footnote. Beneficial ownership as shown on the table arises from sole voting and
investment power unless otherwise indicated by footnote.
(2) The address for each shareholder other than Daniel Laikin is 10850 Wilshire
Boulevard, Suite 1000, Los Angeles, California 90024. Mr. Laikin's address is 25
West 9th Street, Indianapolis, Indiana 46204
(3) Includes 116,669 stock options granted under the Company's Stock Option Plan
pursuant to Mr. Jimirro's 1999 Executive Employment Agreement.
(4) Includes 13,500 shares of Common Stock purchasable under the Company's Stock
Option Plan.
(5) Includes 1,665 shares of Common Stock purchasable under the Company's Stock
Option Plan.
(6) Includes 1,333 shares of Common Stock purchasable under the Company's Stock
Option Plan.
(7) Does not include 133,000 shares of Common Stock which may be attributed to
Mr. Laikin under Rule 13(d)3 of the Securities Exchange Act of 1934.
ITEM 1: ELECTION OF DIRECTORS
It is intended that the shares represented by the enclosed proxy will be voted,
unless votes are withheld in accordance with the instructions contained in the
proxy, for the election of the six (6) nominees for director named below. Each
director elected will hold office until the next annual election of directors or
until a successor is elected and qualified. In the event that any nominee for
director should become unavailable, which is not anticipated, the Board of
Directors in its discretion may designate substitute nominees, in which event
such shares will be voted for such substitute nominees.
Every shareholder voting for the election of directors may cumulate his or her
votes and give any candidate whose name has been placed in nomination prior to
the voting a number of votes equal to the number of directors to be elected six
(6) multiplied by the number of his or her shares, or may distribute his or her
votes among as many candidates so nominated as he or she chooses; no
shareholder, however, may cumulate votes for any candidate unless the candidate
has been nominated prior to the voting and at least one shareholder has given
notice at the meeting prior to the voting of his or her intention to cumulate
his or her votes. If any shareholder present at the Annual Meeting gives such
notice, all shareholders may cumulate their votes. The persons named in the
accompanying proxy may also cumulate votes in favor of one or more of the
nominees as they in their discretion determine. The nominees receiving the
highest number of votes, up to the number of directors to be elected, will be
elected as directors.
3
<PAGE> 6
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR EACH OF THE
NOMINEES NAMED BELOW.
INFORMATION CONCERNING NOMINEES
<TABLE>
<CAPTION>
Director
Name Age Since
- ---------------- --- --------
<S> <C> <C>
James P. Jimirro 62 1986
James Fellows 63 1986
Bruce P. Vann 43 1987
John De Simio 47 1998
Gary Cowan 64 Nominee
Daniel Laikin 37 Nominee
</TABLE>
JAMES P. JIMIRRO has been employed by the Company as President and Chief
Executive Officer since its inception. From 1980 to 1985 he was the president of
Walt Disney Telecommunications Company, which included serving as president of
Walt Disney Home Video, a producer and distributor of family home video
programming. While in this position, he also served as Corporate Executive Vice
President of Walt Disney Productions. In addition, from 1983 to 1985, Mr.
Jimirro served as the first president of The Disney Channel, a national cable
pay-television channel, which Mr. Jimirro conceived and implemented. Mr. Jimirro
continued in a consulting capacity for the Walt Disney Company through July of
1986. From 1973 to 1980 he served as Director of International Sales and then as
Executive Vice President of the Walt Disney Educational Media Company, a
subsidiary of the Walt Disney Company. Prior to 1973, Mr. Jimirro directed
international sales for CBS, Inc., and later for Viacom International. Mr.
Jimirro has also served, since January 1990, as a member of the Board of
Directors of Rentrak.
JAMES FELLOWS has been a member of the Board of Directors and the
President of the Central Education Network, Inc., a Chicago, Illinois
association of public television and educational associations, since 1983. From
1962 through 1982, Mr. Fellows worked in a variety of positions for the National
Association of Educational Broadcasters ("NAEB") in Washington, D.C., and became
its President and Chief Executive Officer in 1978. Mr. Fellows is a director of
numerous nonprofit corporations including the Hartford Gunn Institute, a
research and planning service for public telecommunications; the Maryland Public
Broadcasting Foundation, a corporate fund-raiser for public television; and the
American Center for Children and Media, a coalition of organizations committed
to improving media services for children and youth.
4
<PAGE> 7
BRUCE P. VANN has been a principal of the law firm of Kelly Lytton Mintz
& Vann LLP since December 1995. From 1989 through December 1995 he was a partner
in the law firm of Keck Mahin & Cate and Meyer & Vann. Mr. Vann specializes in
corporate and securities matters. From January 1994 through December 1998, Mr.
Vann served, on a non-exclusive basis, as Senior Vice President, Business and
Legal Affairs, of Largo Entertainment, Inc., a subsidiary of The Victor Company
of Japan.
JOHN DE SIMIO has been in the entertainment side of the public relations
business since 1976. From 1988 to 1996, Mr. De Simio was a Senior Vice
President, Publicity/Promotion for Castle Rock Entertainment, where he oversaw
publicity and national promotional campaigns for their theatrical and television
productions. Before moving to Castle Rock, Mr. De Simio was National Publicity
Director of Twentieth Century Fox Film Corporation from 1985 to 1988. Mr. De
Simio is presently on a disability leave due to a visual impairment. Mr. De
Simio currently serves on the boards of Theatre LA and The Broadcast Film
Critics Association.
NEW NOMINEES
GARY COWAN Mr. Cowan, a certified public accountant, has served as Chief
Financial Officer for a broad range of companies, including U.S. Vacation
Resorts, Inc., the Coastland Corporation, and Superscope Inc. In addition, he
was Vice President, Financial Analysis and Review, for Dart Industries. From
1993 through 1997, Mr. Cowan served as Chief Financial Officer of the Company
and was a member of the Board of Directors. He is currently an independent
consultant in strategic financial planning and accounting. Mr. Cowan holds a
B.S. in accounting and an M.B.A. from U.C.L.A.
DANIEL LAIKIN Mr. Laikin currently serves as co-Chairman of Biltmore
Homes, Inc., an Indiana based home building and real estate development company.
He is also managing partner of Four Leaf Partners, LLC, a closely held
investment company, concentrating on the startup and financing of high tech and
Internet related companies. He is currently an advisor to the board of "Focus
Affiliates, Inc." (Nasdaq: FONE) and is on the advisory board of "iNetNow."
The Board of Directors held three formal meetings during the fiscal year
ending July 31, 1999, although the Board met informally on numerous occasions.
All directors attended the formal meetings. The Board of Directors of the
Company has standing Audit and Independent Committees.
The Audit Committee did not meet during the fiscal year ending July 31,
1999. This Committee is responsible for reviewing with the Company's financial
management and its independent auditors, the proposed audit program for each
fiscal year, the results of the audits and the adequacy of the Company's systems
of internal accounting control. The Committee recommends to the Board of
Directors the appointment of the independent auditors for each fiscal year.
Directors De Simio and Fellows are members of this Committee.
5
<PAGE> 8
The Independent Committee did not meet during the fiscal year ending
July 31, 1999. This Committee is responsible for implementing procedures to
comply with the Foreign Corrupt Practices Act and for review and approval of any
transactions between the Company and affiliates. Directors Vann and Fellows are
members of this Committee.
The Company does not have a nominating or compensation committee, or
committees performing similar functions.
INFORMATION REGARDING EXECUTIVE OFFICERS
All of the Company's executive officers are elected by, and serve at the
pleasure of, the Board of Directors and/or the President. Set forth below are
the names and offices held by each of the Company's executive officers, their
ages, and the date when each was first elected as an executive officer of the
Company. A brief account of the business experience of Andrew Weeraratne and
Duncan Murray are set forth below; the information regarding James P. Jimirro
has been set forth above.
<TABLE>
<CAPTION>
First
Name and Office Age Elected
-------------------------------------- --- -------
<S> <C> <C>
James P. Jimirro 62 1986
Chairman of the Board of Directors
President and Chief Executive Officer
Andrew Weeraratne
Chief Financial Officer 49 1999
Duncan Murray 53 1986
Vice President--Marketing
</TABLE>
- -------------------
ANDREW WEERARATNE joined the Company on February 22, 1999 as Chief
Financial Officer. He is a Certified Public Accountant, licensed in the State of
Florida (presently inactive) and has worked as Chief Financial Officer and
Controller for various entertainment companies over the last ten years. Prior to
that, he had his own CPA practice in Washington D.C. for six years.
DUNCAN MURRAY has been with the Company since July, 1986 as Vice
President of Marketing. Before that he worked with the Walt Disney Companies for
fourteen years in a variety of capacities including Vice President, Sales
Administration for The Disney Channel, and Director of Sales for Walt Disney
Telecommunications Company.
6
<PAGE> 9
COMPENSATION AND OTHER TRANSACTIONS WITH MANAGEMENT
SUMMARY COMPENSATION TABLE
EXECUTIVE COMPENSATION
The Summary Compensation Table below includes, for each of the fiscal
years ended July 31, 1999, 1998, and 1997 individual compensation for services
to the Company and its subsidiaries of the Chief Executive Officer (the "Named
Officer").
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
------------------------- ----------------------- -----------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Other Annual Restricted LTIP All Other
Principal Compensation Stock Options/ Payout Compensation
Position Year Salary ($) Bonus $ (4) $ (4) Award(s) SARS # ($)
--------- ---- ---------- -------------------------------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jimirro(2) 1999 $190,750 (2) (3) (3) 16,667/16,667 (3)
1998 $190,750 (2) (3) (3) 16,667/16,667 (3)
1997 $190,750 (2) (3) (3) 16,667/16,667 (3)
</TABLE>
- -----------------
(1) Does not include amounts of $18,887 in 1999, $12,000 in 1998 and $12,500
in 1997 to Jim Jimirro, who is entitled to be reimbursed for expenses
relating to entertainment, travel and living expenses when away from
home.
(2) Does not include $6,000 in 1999, $6,000 in 1998 and $7,000 in 1997, which
the Company paid for Mr. Jimirro's health plan. The Company also provides
Mr. Jimirro with a Company-owned vehicle for his use.
(3) Does not include SAR's granted to Mr. Jimirro pursuant to his employment
agreement. See the description of Mr. Jimirro's employment agreement
under "Employment Agreements and Stock Option Plans" below.
(4) Effective June 1, 1992, Mr. Jimirro reduced the amount of salary he
receives to $190,750. Mr. Jimirro does not expect to receive the unpaid
portion unless there is a change in the control of the Company as defined
by his Employment Agreement. The Company has not accrued any salary or
bonus for Mr. Jimirro in regard to the above for the fiscal years ended
July 31, 1996, 1997, 1998 or 1999.
7
<PAGE> 10
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is information on grants of stock options pursuant to the
1994 Stock Option Plan during the fiscal year ended July 31, 1999 to the Named
Officer.
<TABLE>
<CAPTION>
Potential Realized Value at Assigned
Annual Rates of Stock Price
Individual Grants in 1999 Appreciation for 7 year Option Term
------------------------- ------------------------------------
Percentage
of Total
Options/SARs Exercise
Options/ granted to or Base 5% 10%
SARS Employees in Price Per Expiration Stock Dollar Stock Dollar
Name Granted (#) Fiscal Year Share($) Date Price($) Gains Price($) Gains($)
- ------------- ----------- ------------ ---------- ---------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James Jimirro 16,667(1) 40.0 $1.94(2) 12-28-2005 $2.73 $13,167 $3.78 $30,667
16,667 100.0 $1.94 12-28-2005 $2.73 $13,167 $3.78 $30,667
</TABLE>
- ----------------
(1) Options/SARs granted are immediately exercisable.
(2) Options/SARs granted with an exercise price (or initial valuation in the
case of SARs) equal to the average of the high and low bid and asked price for
one share of Common Stock during the five (5) business days preceding the date
of grant, as quoted on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ").
8
<PAGE> 11
EMPLOYMENT AGREEMENTS AND STOCK OPTIONS
In October 1999, the Company entered into a new employment agreement
with James P. Jimirro, effective July 1, 1999 (the "1999 Agreement"). Under the
1999 Agreement, which has a term of seven years, Mr. Jimirro will receive a base
salary plus an incentive bonus following the end of each fiscal year during
which Mr. Jimirro is employed by the Company. Mr. Jimirro's base salary for the
first year will be $475,000 and will be adjusted annually by the greater of (i)
9% or (ii) 5% plus the percentage increase in the CPI Index. Effective June 1,
1999, Mr. Jimirro reduced the amount of salary he receives to $190,750. Mr.
Jimirro does not expect to receive the unpaid portion unless there is a change
in the control of the Company as defined by the agreement. The Company has
entered into a Contingent Note in the principal amount of $2,150,625, reflecting
the amount which has been conditionally waived. The Contingent Note matures only
upon a "change of control" (as defined below) of the Company.
Mr. Jimirro's bonus is to be an amount equal to 5% of the Company's
earnings in excess of $500,000 and up to $1 million; plus 6% of the next $1
million of earnings; plus 7% of the next $1 million of earnings; plus 8% of the
next $2 million of earnings; and plus 9% of the next $2 million of earnings. If
earnings exceed $7 million, then Mr. Jimirro shall, in addition to foregoing
compensation, be entitled to such additional incentive compensation as may be
determined by the Board based upon Mr. Jimirro's services and performance on
behalf of the Company and the profitability of the Company.
The 1999 Agreement also provides that, on the date of each annual
meeting of shareholders during its term, Mr. Jimirro will be granted stock
options with respect to 25,000 shares of Common Stock and stock appreciation
rights ("SARs") with respect to 25,000 shares of Common Stock. The exercise
price of each option and the initial valuation of each SAR will be equal to the
fair market value of the Common Stock of the Company at the date of the grant.
The options and SARs will be immediately exercisable non-statutory stock
options, will have a term of seven years, and will be subject to all other terms
identical to those contained in the Company's 1991 Employee Stock Option
Incentive Plan (the "1991 Plan") which provisions were reincorporated into the
1994 Plan and will be reincorporated into the 1999 Plan discussed below. The
1991 Plan specifically provides for the grant of stock options and SARs to Mr.
Jimirro in accordance with his employment agreement. The 1999 Agreement provides
that if Mr. Jimirro's employment is terminated without cause, or is terminated
by Mr. Jimirro for cause or under certain other circumstances, including a
change in control of the Company (as defined below), then Mr. Jimirro generally
is entitled to receive all payments and other benefits which would be due under
the 1999 Agreement during its entire term, regardless whether such payments
would constitute an "excess parachute payment" under the Internal Revenue Code
of 1986, or any successor law applicable to payments of severance compensation
to Mr. Jimirro. To the extent Mr. Jimirro owes taxes as a result of such
payments, the amount payable to him will be "grossed up" to reflect such
payments. A "change in control" would be deemed to occur if (a) any person or
group becomes the direct or indirect owner of securities with 25% or more of the
combined voting
9
<PAGE> 12
power of the Company's then outstanding securities, (b) if there is a
significant change in the composition of the Board of Directors of the Company,
(c) upon the sale of all or substantially all of the assets of the Company, (d)
upon the merger of the Company with any other corporations if the shareholders
of the Company prior to the merger owned less than 75% of the voting stock of
the corporation surviving the merger or (e) in certain other events. The 1999
Agreement also provides Mr. Jimirro with certain registration rights pursuant to
which the Company will be required upon the request of Mr. Jimirro to register
the sale of shares of the Company's Common Stock owned by Mr. Jimirro under the
Securities Act of 1933. The 1999 Agreement is terminable by the Company only
"for cause" as defined therein.
COMPENSATION COMMITTEE, INTERLOCKS AND INSIDER PARTICIPATION IN
COMPENSATION DECISIONS
The Company does not have a Compensation Committee or similar Board
committee. The full Board of Directors did not deliberate on executive officer
compensation during the last fiscal year, although certain board members were
involved in deliberation regarding Mr. Jimirro's new employment agreement. See
"Board Compensation Committee Report on Executive Compensation" below.
BOARD COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
CHIEF EXECUTIVE OFFICER COMPENSATION
The Company's Board of Directors does not have a Compensation Committee
or Board committee performing a similar function. The compensation of Mr.
Jimirro as Chief Executive Officer ("CEO") is determined under the provisions of
Mr. Jimirro's employment agreement with the Company. In considering Mr.
Jimirro's new agreement, the Board met to determine its adequacy and the
agreement was approved by all the non-interested directors. See "Employment
Agreements" on page 13 above.
Generally, Mr. Jimirro's employment agreement is structured to correlate
his compensation with Company performance over its seven-year term. Mr. Jimirro
receives a base salary adjusted annually to offset inflation, as well as a
bonus. The bonus is based on a formula directly linking the amount paid to the
Company's net income. Mr. Jimirro is also eligible for any discretionary bonus,
which the board may grant in its discretion.
10
<PAGE> 13
COMPENSATION OF OTHER NAMED EXECUTIVE OFFICERS
The Board of Directors delegated to the CEO the authority to set the
compensation of the other executive officers. The current officers effected by
such policy are Andrew Weeraratne and Duncan Murray.
PERFORMANCE GRAPH
The following graph depicts the cumulative total return on the Company's Common
Stock compared to the cumulative total return for the Nasdaq Composite Index and
the Nasdaq Non-Financial Index. The graph assumes an investment of $100.00 on
July 31, 1994. Reinvestment of dividends is assumed in all cases.
<TABLE>
<CAPTION>
7/31/94 7/31/95 7/31/96 7/31/97 7/31/98 7/31/99
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
J2 Communications 100.00 106.25 112.50 100.00 78.12 591.67
Nasdaq Stock Market (US companies) 100.00 140.40 152.98 225.75 265.76 380.09
Nasdaq Stock Market (Non Financial) Index 100.00 144.12 152.74 221.72 258.33 381.15
</TABLE>
CERTAIN TRANSACTIONS
Bruce P. Vann and the law firm of Kelly Lytton Mintz & Vann LLP, of
which he is a partner, performed services as attorneys for the Company. For the
fiscal year ended July 31, 1999, Kelly Lytton Mintz & Vann LLP earned
approximately $7,000. Mr. Vann is a director of the Company and, as such, he (or
his law firm) may receive additional compensation for services rendered to the
Company. In July 1999, Mr. Vann exercised options to acquire 11,000 shares of
the Company's common stock and realized a sum of $203,825 with respect thereto.
11
<PAGE> 14
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Under the securities laws of the United States, the Company's directors,
its executive officers, and any persons holding more than ten percent of the
Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Securities and Exchange Commission. Specific due dates for these reports have
been established and the Company is required to disclose in this Proxy Statement
any failure to file by these dates during fiscal 1999. All of these filing
requirements were satisfied during fiscal 1999, other than filings relating to
automatic stock option grants which have not been formally issued or documented.
In making these disclosures, the Company has relied solely on the written
representations of its directors and executive officers and copies of the
reports that they have filed with the Commission. With respect to any forms
which are necessary as a result of stock option grants, the Company and its
officers and directors will file these reports as soon as practicable.
ITEM NO. 2: APPROVAL OF THE 1999 STOCK OPTION, DEFERRED STOCK AND RESTRICTED
STOCK PLAN
In October 1999, the Board of Directors adopted the 1999 Stock Option,
Deferred Stock and Restricted Stock Plan (the "1999 Stock Plan"), subject to
shareholder approval at this Annual Meeting. A copy of the 1999 Stock Plan is
attached as Exhibit "A" to this proxy statement. If the 1999 Stock Plan is
approved by the Company's shareholders, all outstanding awards under the prior
plans will be converted into equivalent awards under the 1999 Stock Plan. Such
awards will continue to have the same terms, conditions and exercise prices as
they had under the prior plans.
A description of the 1999 Stock Plan follows; this description is
qualified in its entirety by the terms of the 1999 Stock Plan set forth in
Exhibit "A" to this proxy statement.
The 1999 Stock Plan increases the aggregate number of shares available
for the grant of options to an amount equal to 20% of then current outstanding
shares of Common Stock of the Company, such figure to be adjusted as and when
the Company increases its outstanding shares of Common Stock. The initial number
of shares shall be approximately 246,944. The 1999 Stock Plan provides for the
grant of qualified incentive stock options ("ISOs") that meet the requirements
of Section 422 of the Code, stock options not so qualified ("NQSOs"), deferred
stock and restricted stock awards ("Grants"). The 1999 Stock Plan is
administered by a committee of directors appointed by the Board of Directors
(the "Committee"). ISOs may be granted to the officers and key employees of the
Company or any of its subsidiaries. The exercise price for any ISO granted under
the 1999 Stock Plan may not be less than 100% (or 110% in the case of ISOs
granted to an employee who is deemed to own in excess of 10.0% of the
outstanding Common Stock) of the fair market value of the shares of Common Stock
at the time the option is granted. The exercise price for any NQSO granted under
the 1999 Stock Plan may not be less than 85.0% of the fair market value of the
shares of Common Stock at the time the option is granted. The purpose of the
1999 Stock Plan is to provide a means of
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performance-based compensation in order to attract and retain qualified
personnel and to provide an incentive to those whose job performance affects the
Company.
The number of shares reserved for issuance under the 1999 Stock Plan is
subject to anti-dilution provisions for stock splits, stock dividends and
similar events. If an option granted under the 1999 Stock Plan expires or
terminates, or a Grant is forfeited, the shares subject to any unexercised
portion of such option or Grant will again become available for the issuance of
further options or Grants under the 1999 Stock Plan.
Under the 1999 Stock Plan, the Company may make loans available to stock
option holders, subject to the Committee's approval, in connection with the
exercise of stock options granted under the 1999 Stock Plan. If shares of Common
Stock are pledged as collateral for such indebtedness, such shares may be
returned to the Company in satisfaction of such indebtedness. If so returned,
such shares shall again be available for issuance in connection with future
stock options and Grants under the 1999 Stock Plan.
Unless previously terminated by the Board of Directors, no options or
Grants may be granted under the 1999 Stock Plan after October 14, 2009.
Options granted under the 1999 Stock Plan will become exercisable
according to the terms of the grant made by the Committee. Grants will be
subject to the terms and restrictions of the award made by the Committee. The
Committee has discretionary authority to select participants from among eligible
persons and to determine at the time an option or Grant is granted and in the
case of options, whether it is intended to be an ISO or a NQSO, and when and in
what increments shares covered by the option may be purchased. Under current
law, ISOs may not be granted to any individual who is not also an officer or
employee of the Company or any subsidiary.
The exercise price of any option granted under the 1999 Stock Plan is
payable in full (i) in cash, (ii) by surrender of shares of the Company's Common
Stock already owned by the option holder having a market value equal to the
aggregate exercise price of all shares to be purchased including, in the case of
the exercise of NQSOs, restricted stock subject to a Grant under the 1999 Stock
Plan, (iii) by cancellation of indebtedness owed by the Company to the
optionholder, (iv) by a full recourse promissory note executed by the
optionholder or (v) by any combination of the foregoing. The terms of any
promissory note may be changed from time to time by the Board of Directors to
comply with applicable Internal Revenue Service or Securities and Exchange
Commission regulations or other relevant pronouncements.
The Board of Directors may from time to time revise or amend the 1999
Stock Plan and may suspend or discontinue it at any time. However, no such
revision or amendment may impair the rights of any participant under any
outstanding option or Grant without such participant's consent or may, without
shareholder approval, increase the number of shares subject to the 1999 Stock
Plan or decrease the exercise price of a stock option to less than 100% of fair
market value on the date of grant (with the exception of adjustments resulting
from changes in capitalization), materially modify the class of participants
eligible to receive
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options or Grants under the 1999 Stock Plan, materially increase the benefits
accruing to participants under the 1999 Stock Plan or extend the maximum option
term under the 1999 Stock Plan.
Approval of the 1999 Stock Plan will require the affirmative vote of at
least a majority of the shares of Common Stock entitled to vote and represented
at this Annual Meeting in person or by proxy, provided a quorum is present.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 2 TO BE IN THE BEST
INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND
RECOMMENDS A VOTE "FOR" APPROVAL THEREOF
ITEM 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The firm of Arthur Andersen LLP, Certified Public Accountants, served as
the Company's independent auditors for fiscal 1999, and the Board of Directors
has selected Arthur Andersen LLP as the Company's independent auditors for the
fiscal year ending July 31, 2000. This selection will be presented to the
shareholders for their approval at the Annual Meeting. If the shareholders do
not approve this selection, the Board of Directors will reconsider its choice.
Representatives of Arthur Andersen LLP will not be present at the Annual
Meeting.
Approval of Arthur Andersen, LLP will require the affirmative vote of at
least a majority of the shares of Common Stock entitled to vote and represented
at this Annual Meeting in person or by proxy, provided a quorum is present.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE
FOR RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS
THE COMPANY'S INDEPENDENT AUDITORS FOR FISCAL 2000
OTHER MATTERS
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be included in the Company's proxy
statement and form of proxy relating to, and to be presented at, the Annual
Meeting of Shareholders of the Company to be held in 2000 must be received by
the Company on or before August 13, 2000.
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VOTING PROXIES
The enclosed proxy card confers authority to vote, in accordance with
the instructions contained in the proxy, with respect to the election of the
nominees for director specified in this Proxy Statement, "FOR" the approval of
the 1999 Stock Option, Deferred Stock and Restricted Stock Plan, and the
ratification and approval of Arthur Andersen LLP as the Company's independent
auditors. The proxy will be voted in accordance with the choices indicated
thereon. If no specifications are made, proxies will be voted "FOR" all nominees
for director, "FOR" the approval of the 1999 Stock Option, Deferred Stock and
Restricted Stock Plan, and "FOR" the ratification of Arthur Andersen LLP as the
Company's independent auditors.
ANNUAL REPORT
UPON WRITTEN REQUEST OF ANY PERSON ENTITLED TO VOTE AT THE ANNUAL
MEETING, ADDRESSED TO J2 COMMUNICATIONS, ATTENTION: DUNCAN MURRAY, 10850
WILSHIRE BLVD., SUITE 1000, LOS ANGELES, CALIFORNIA 90024, THE COMPANY WILL
PROVIDE WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED JULY 31, 1999, INCLUDING THE FINANCIAL STATEMENTS AND THE SCHEDULES
THERETO, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO THE
SECURITIES EXCHANGE ACT OF 1934.
OTHER BUSINESS
The Board of Directors knows of no business other than that set forth
above to be transacted at the meeting, but if other matters requiring a vote of
the shareholders arise, the persons designated as proxies will vote the shares
of Common Stock represented by the proxies in accordance with their judgment on
such matters. If a shareholder specifies a different choice on the proxy, his or
her shares of Common Stock will be voted in accordance with the specification so
made.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WE URGE YOU TO FILL
IN, SIGN AND RETURN THE ACCOMPANYING FORM OF PROXY IN THE PREPAID ENVELOPE
PROVIDED, NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE.
By Order of the Board of Directors,
/s/ CORA V. ASUNCION
---------------------------
CORA V. ASUNCION
Secretary
Los Angeles, California
December 10, 1999
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EXHIBIT A
J2 COMMUNICATIONS
AMENDED AND RESTATED
1999 STOCK OPTION, DEFERRED STOCK
AND
RESTRICTED STOCK PLAN
SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS
1.1 This plan is intended to implement and govern the 1999 Stock Option,
Deferred Stock and Restricted Stock Plan (the "Plan") of Team Communications
Group, Inc., a California corporation (the "Company"). The Plan was adopted by
the Board of Directors as of October 14, 1999 subject to the approval of the
Company's shareholders. The purpose of the Plan is to enable the Company and its
Subsidiaries to obtain and retain competent personnel who will contribute to the
Company's success by their ability, ingenuity and industry, and to provide
incentives to such personnel and members that are linked directly to increases
in shareholder value, and will therefore, inure to the benefit of all
shareholders of the Company.
1.2 For purposes of the Plan, the following terms shall be defined as
set forth below:
(a) "Administrator" means the Board, or if the Board does not
administer the Plan, the Committee in accordance with Section 2.
(b) "Award" means any award of Deferred Stock, Restricted Stock,
or Stock Option.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor thereto.
(e) "Committee" means the Compensation Committee of the Board, or
any other Committee the Board may subsequently appoint to administer the Plan.
If at any time the Board shall administer the Plan, then the functions of the
Board specified in the Plan shall be exercised by the Committee.
(f) "Company" means J2 Communications, a corporation organized
under the laws of the State of California (or any successor corporation).
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(g) "Covered Security" means any security listed under Subsection
(b) of Section 18 of the Securities Act of 1933, as amended, or defined as such
pursuant to the Rules and Regulations of the SEC.
(h) "Deferred Stock" means an award made pursuant to Section 7
below of the right to receive Stock at the end of a specified deferral period.
(i) "Disability" means permanent and total disability as
determined under the Company's disability program or policy.
(j) "Effective Date" shall mean the date provided pursuant to
Section 18.
(k) "Eligible Employee" means an employee, officer, director,
consultant or advisor of the Company, any Subsidiary or Parent Corporation
eligible to participate in the Plan pursuant to Section 4;
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any given date, with respect
to any Awards granted hereunder, at the discretion of the Administrator and
subject to such limitations as the Administrator may impose, (A) the closing
sale price of the Stock on such date as reported in the Western Edition of the
Wall Street Journal Composite Tape, or (B) the average of the closing price of
the Stock on each day on which the Stock was traded over a period of up to
twenty trading days immediately prior to such date, or (C) if the Stock is not
publicly traded, the fair market value of the Stock as otherwise determined by
the Administrator in the good faith exercise of its discretion.
(n) "Incentive Stock Option" means any Stock Option intended to
be designated as an "Incentive Stock Option" within the meaning of Section 422
of the Code.
(o) "Non-Qualified Stock Option" means any Stock Option that is
not an Incentive Stock Option, including any Stock Option that provides (as of
the time such option is granted) that it will not be treated as an Incentive
Stock Option.
(p) "Parent Corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company, if each
of the corporations other than the Company owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the other
corporations in the chain.
(q) "Participant" means any Eligible Employee selected by the
Administrator pursuant to the Administrator's authority in Section 2 below, to
receive grants of Stock Options or Awards or any combination of the foregoing.
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(r) "Restricted Period" means the period set by the Administrator
as it pertains to Deferred Stock or Restricted Stock Awards pursuant to Section
7.
(s) "Restricted Stock" means an award of shares of Stock granted
pursuant to Section 7 subject to restrictions that will lapse with the passage
of time or upon the attainment of performance objectives.
(t) "Stock" means the Common Stock, no par value per share, of
the Company.
(u) "SEC" means the Securities and Exchange Commission.
(v) "Stock Appreciation Rights" ("SAR") means a stock
appreciation right granted alone or in tandem with a Stock Option pursuant to
Article 6.
(w) "Stock Option" means an option to purchase shares of Stock
granted pursuant to Section 5; and with respect to SARs, also includes options
to purchase shares of Stock granted pursuant to Other Plans.
(x) "Subsidiary" means any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company, if each of the
corporations (other than the last corporation) in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
SECTION 2. ADMINISTRATION
2.1 The Plan shall be administered by the Board or by a Committee
appointed by the Board, which shall serve at the pleasure of the Board;
provided, however, that if the Committee does not consist solely of
"Non-Employee Directors," as defined in Rule 16b-3 as promulgated by the SEC
under the Exchange Act, as such Rule may be amended from time to time, or any
successor definition adopted by the Commission, then the Plan shall be
administered, and each grant shall be approved, by the Board.
2.2 The Administrator shall have the power and authority to grant to
Eligible Employees, pursuant to the terms of the Plan: (A) Stock Options, (B)
Deferred Stock, (C) Restricted Stock, (D) Stock Appreciation Rights, or (E) any
combination of the foregoing.
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In particular, the Administrator shall have the authority:
(a) to select those employees of the Company or any
Subsidiary or Parent Corporation who are Eligible
Employees;
(b) to determine whether and to what extent Stock Options,
Deferred Stock, Restricted Stock or a combination of the
foregoing, are to be granted to Eligible Employees of the
Company or any Subsidiary hereunder;
(c) to determine the number of shares of Stock to be covered
by each such Award;
(d) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any such Award including,
but not limited to, (x) the restricted period applicable
to Deferred Stock or Restricted Stock Awards, (y) the
date or dates on which restrictions applicable to such
Deferred Stock or Restricted Stock shall lapse during
such period, and (z) when and in what increments shares
covered by Stock Options may be purchased; and
(e) to determine the terms and conditions, not inconsistent
with the terms of the Plan, which shall govern all
written instruments evidencing the Stock Options,
Deferred Stock, Restricted Stock or any combination of
the foregoing.
2.3 The Administrator shall have the authority, in its discretion, to
adopt, alter and repeal such administrative rules, guidelines and practices
governing the Plan as it shall from time to time deem advisable; to interpret
the terms and provisions of the Plan and any Award issued under the Plan (and
any agreements relating thereto); and to otherwise supervise the administration
of the Plan.
2.4 All decisions made by the Administrator pursuant to the provisions
of the Plan shall be final and binding on all persons, including the Company,
any Subsidiaries, Parent Corporation and the Participants.
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SECTION 3. STOCK SUBJECT TO PLAN
3.1 The total number of shares of Stock reserved and available for
issuance under the Plan shall be an amount equal to 20% of the current
outstanding shares of Common Stock of the Company on the date hereof, such
figure to be adjusted as and when the Company increases its outstanding shares
of Common Stock. The initial number of shares shall be approximately 246,944
shares. Such shares shall consist of authorized but unissued shares. Except in
the event that the Stock is a Covered Security, at no time shall the total
number of shares issuable upon exercise of all outstanding options and the total
number of shares provided for under any stock bonus plan of the issuer exceed
the applicable percentage as calculated in accordance with the conditions and
exclusions of Section 260.140.45 of the California Corporate Securities Rules,
or any successor thereto, based on the shares of the issuer which are
outstanding at the time the calculation is made.
3.2 To the extent that (i) a Stock Option expires or is otherwise
terminated without being exercised or (ii) any shares of Stock subject to any
Deferred Stock or Restricted Stock Award granted hereunder are forfeited, such
shares shall again be available for issuance in connection with future Awards
under the Plan. If any shares of Stock have been pledged as collateral for
indebtedness incurred by a Participant in connection with the exercise of a
Stock Option and such shares are returned to the Company in satisfaction of such
indebtedness, such shares shall again be available for issuance in connection
with future Awards under the Plan.
3.3 In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Stock, a substitution or adjustment may be made in (i) the
aggregate number of shares reserved for issuance under the Plan, and (ii) the
kind, number and option price of shares subject to outstanding Stock Options
granted under the Plan as may be determined by the Administrator, in its sole
discretion. Such other substitutions or adjustments shall be made as may be
determined by the Administrator, in its sole discretion; provided, however, that
with respect to Incentive Stock Options, such adjustment shall be made in
accordance with Section 424 of the Code.
SECTION 4. ELIGIBILITY
Officers and other key employees, directors and consultants and advisors of the
Company, any Subsidiary or Parent Corporation who are responsible for or
contribute to the management, growth and/or profitability of the business of the
Company, shall be eligible to be granted Non-Qualified Stock Options and
Deferred Stock or Restricted Stock Awards hereunder. Officers and other key
employees of the Company, any Subsidiary or Parent Corporation shall also be
eligible to be granted Incentive Stock Options hereunder. The Participants under
the Plan shall be selected from time to time by the Administrator, in its sole
discretion, from among the Eligible Employees recommended by the senior
management of the Company, and the Administrator shall determine, in its sole
discretion, the number of shares covered by each Award.
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SECTION 5. STOCK OPTIONS FOR ELIGIBLE EMPLOYEES
5.1 Stock Options may be granted to Eligible Employees alone or in
addition to other Awards granted under the Plan. Any Stock Option granted under
the Plan shall be in such form as the Administrator may from time to time
approve, and the provisions of Stock Option awards need not be the same with
respect to each optionee. Recipients of Stock Options shall enter into a stock
option agreement with the Company, in such form as the Administrator shall
determine, which agreement shall set forth, among other things, the exercise
price, the term, and provisions regarding exercisability of the option granted
thereunder.
The Stock Options granted under the Plan to Eligible Employees may be of two
types: (x) Incentive Stock Options and (y) Non-Qualified Stock Options.
5.2 The Administrator shall have the authority under this Section 5 to
grant any optionee Incentive Stock Options, Non-Qualified Stock Options, or both
types of options; provided, however, that Incentive Stock Options may not be
granted to any individual who is not an employee of the Company, its
Subsidiaries or Parent Corporation. To the extent that any Stock Option does not
qualify as an Incentive Stock Option, it shall constitute a separate
Non-Qualified Stock Option. More than one option may be granted to the same
optionee and be outstanding concurrently hereunder.
5.3 Stock Options granted under the Plan shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Administrator
shall deem desirable:
(a) Option Price. The option price per share of Stock purchasable
under an Incentive Stock Option shall be determined by the Administrator in its
sole discretion at the time of grant but shall be not less than 100% of the Fair
Market Value of the Stock on such date, and shall not, in any event, be less
than the par value of the Stock. The option price per share of Stock purchasable
under a Non-Qualified Stock Option may not be less than 85% of such Fair Market
Value. If an employee owns or is deemed to own (by reason of the attribution
rules applicable under Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Company or any Parent Corporation or
Subsidiary and an Incentive Stock Option is granted to such employee, the option
price of such Incentive Stock Option (to the extent required by the Code at the
time of grant) shall be no less than 110% of the Fair Market Value of the Stock
on the date such Incentive Stock Option is granted.
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(b) Option Term. The term of each Stock Option shall be fixed by
the Administrator, but no Stock Option shall be exercisable more than ten years
after the date such Stock Option is granted; provided, however, that if an
employee owns or is deemed to own (by reason of the attribution rules of Section
424(d) of the Code) more than 10% of the combined voting power of all classes of
stock of the Company or any Parent Corporation or Subsidiary and an Incentive
Stock Option is granted to such employee, the term of such Incentive Stock
Option (to the extent required by the Code at the time of grant) shall be no
more than five years from the date of grant.
(c) Exercisability. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be determined by
the Administrator at or after grant; provided, however, that, except as provided
herein or unless otherwise determined by the Administrator at or after grant,
Stock Options shall be exercisable one year following the date of grant of the
option, but in no case, less than six (6) months following the date of the grant
of the option. To the extent not exercised, installments shall accumulate and be
exercisable in whole or in part at any time after becoming exercisable but not
later than the date the Stock Option expires. The Administrator may provide, in
its discretion, that any Stock Option shall be exercisable only in installments,
and the Administrator may waive such installment exercise provisions at any time
in whole or in part based on such factors as the Administrator may determine in
its sole discretion.
(d) Method of Exercise. Subject to Section 5(c) above, 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 to be purchased, accompanied by payment in full of the purchase
price in cash or its equivalent, as determined by the Administrator. As
determined by the Administrator, in its sole discretion, payment in whole or in
part may also be made (A) in the form of unrestricted Stock (if held for at
least six [6] months) already owned by the optionee, or (B) by cancellation of
any indebtedness owed by the Company to the optionee, (C) by a full recourse
promissory note executed by the optionee, (D) in the event that a registration
statement on Form S-8 has been filed with the SEC registering the Stock
underlying the options, by arrangement with a broker which is acceptable to the
Administrator where payment of the option price is made pursuant to an
irrevocable direction to the broker to deliver all or part of the proceeds from
the sale of the shares underlying the option to the Company, or (E) by any
combination of the foregoing; provided, however, that in the case of an
Incentive Stock Option, the right to make payment in the form of already owned
shares may be authorized only at the time of grant. Any payment in the form of
Stock already owned by the optionee may be effected by use of an attestation
form approved by the Administrator. An optionee shall generally have the rights
to dividends and other rights of a shareholder with respect to shares subject to
the option only after the optionee has given written notice of exercise, has
paid in full for such shares, and, if requested, has given the representation
described in paragraph (a) of Section 11.
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5.4 The Administrator may require the voluntary surrender of all or a
portion of any Stock Option granted under the Plan as a condition precedent to a
grant of a new Stock Option. Subject to the provisions of the Plan, such new
Stock Option shall be exercisable at the price, during such period and on such
other terms and conditions as are specified by the Administrator at the time the
new Stock Option is granted; provided, however, that should the Administrator so
require, the number of shares subject to such new Stock Option shall not be
greater than the number of shares subject to the surrendered Stock Option. Upon
their surrender, the Stock Options shall be canceled and the shares previously
subject to such canceled Stock Options shall again be available for grants of
Stock Options and other Awards hereunder.
5.5 Loans. The Company may make loans available to Stock Option holders
in connection with the exercise of outstanding options granted under the Plan,
as the Administrator, in its discretion, may determine. Such loans shall (i) be
evidenced by full recourse promissory notes entered into by the Stock Option
holders in favor of the Company, (ii) be subject to the terms and conditions set
forth in this Section 5(e) and such other terms and conditions, not inconsistent
with the Plan, as the Administrator shall determine, (iii) bear interest, if
any, at such rate as the Administrator shall determine and (iv) be subject to
Board approval. In no event may the principal amount of any such loan exceed the
sum of (x) the exercise price less the par value of the shares of Stock covered
by the option, or portion thereof, exercised by the holder and (y) any Federal,
state, and local income tax attributable to such exercise. The initial term of
the loan, the schedule of payments of principal and interest under the loan and
the conditions upon which the loan will become payable in the event of the
holder's termination of employment shall be determined by the Administrator;
provided, however, that the term of the loan, including extensions, shall not
exceed seven years. Unless the Administrator determines otherwise, when a loan
is made, shares of Common Stock having a Fair Market Value at least equal to the
principal amount of the loan shall be pledged by the holder to the Company as
security for payment of the unpaid balance of the loan, and such pledge shall be
evidenced by a pledge agreement, the terms of which shall be determined by the
Administrator, in its discretion; provided, however, that each loan shall comply
with all applicable laws, regulations and rules of the Board of Governors of the
Federal Reserve System and any other governmental agency having jurisdiction,
and provided further that in the case of a loan to an Eligible Employee who is
not an officer, director or employee of the Company, the loan shall be secured
by adequate collateral other than the shares of Stock acquired.
5.6 Limits on Transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee.
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5.7 Termination by Death. If an optionee's employment with the Company,
any Subsidiary or Parent Corporation terminates by reason of death, the Stock
Option may thereafter be immediately exercised, to the extent then exercisable
(or on such accelerated basis as the Administrator shall deter mine at or after
grant), by the legal representative of the estate or by the legatee of the
optionee under the will of the optionee, for a period of twelve months (or such
shorter period as the Administrator shall specify at grant, but in no event less
than six months) from the date of such death.
5.8 Termination by Reason of Disability. If an optionee's employment
with the Company, any Subsidiary or Parent Corporation terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be exercised,
to the extent it was exercisable at the time of such termination (or on such
accelerated basis as the Administrator shall determine at the time of grant),
for a period of twelve months (or such shorter period as the Administrator shall
specify at grant, but in no event less than six months) from the date of such
termination of employment. In the event of a termination of employment by reason
of Disability, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422 of the Code, such
Stock Option shall thereafter be treated as a Non-Qualified Stock Option.
5.9 Other Termination. Except as otherwise provided in this paragraph or
otherwise determined by the Administrator, if an optionee's employment with the
Company, any Subsidiary or Parent Corporation terminates for any reason other
than death or Disability, any accrued Stock Option may be exercised until the
earlier to occur of (i) three months from the date of such termination or (ii)
the expiration of the stated term of such Stock Option; provided, however, that
if the expiration of the stated term of such Stock Option is less than 30 days
from the date of termination, then such Stock Option shall expire 30 days from
the date of termination.
5.10 Annual Limit on Incentive Stock Options. To the extent that the
aggregate Fair Market Value (determined as of the date the Incentive Stock
Option is granted) of the shares of Stock with respect to which Incentive Stock
Options granted to an optionee under this Plan and all other option plans of the
Company, its Parent Corporation and any Subsidiary become exercisable for the
first time by the optionee during any calendar year exceeds $100,000, such Stock
Options shall be treated as Non-Qualified Stock Options.
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SECTION 6. STOCK APPRECIATION RIGHTS
6.1 General. The Administrator shall have the authority to grant SAR's
in tandem with Stock Options granted under this plan or under any of the Other
Plans (the "Related SAR Option") with respect to all or some of the shares of
Stock covered by the Related SAR Option. SARs granted in tandem with Related SAR
Options may be granted either at the time of grant of the Related SAR Option or
at any time thereafter during the term of the Related SAR Option. The
Administrator shall also have the authority to grant SARs without relation to
any Stock Option granted under this Plan or under any of the Other Plans. Each
SAR shall be granted on such terms and conditions not inconsistent with the Plan
as the Administrator may determine. The provisions of the various SAR awards
need not be the same with respect to each Grantee.
6.2 Terms and Conditions of SARs. Each SAR granted pursuant to the Plan
shall be evidenced by a written SAR agreement between the Company and the
Grantee, which agreement shall comply with and be subject to the following terms
and conditions:
(a) Number of SARs. Each SAR agreement shall state the number of
SARs granted pursuant to the agreement.
(b) Initial Valuations. Each SAR agreement shall provide that
each SAR granted in tandem with a Related Stock Option is valued at the Exercise
Price of the Related SAR Option and that each SAR granted without relation to a
Stock Option is valued at the average of the high and low bid and asked price
for one share of Common Stock during the five (5) business days preceding the
date of grant Stock as quoted on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ").
(c) Term and Exercise of SARs.
(i) Each SAR granted otherwise than in tandem with a Stock
Option shall be exercisable as determined by the Administrator, but in no event
after ten years from the Date of Grant. Each other SAR shall be exercisable only
if, and to the extent that, the Related SAR Option is exercisable and has not
yet terminated or expired, and in the case of a SAR granted in respect of an
Incentive Stock Option, only when the Fair Market Value per share of the Stock
exceeds the Exercise Price of the Related SAR Option; and upon the exercise of a
SAR, the Related SAR Option shall cease to be exercisable to the extent of the
shares of Stock with respect to which such SAR is exercised, but shall be
considered to have been exercised to that extent for purposes of determining the
number of shares available for the grant of further Rights pursuant to the Plan.
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Upon the exercise or termination of a Related SAR Option, the SAR granted in
tandem with such Related SAR Option shall terminate to the extent of the shares
of Stock with respect to which the Related SAR Option was exercised or
terminated.
(ii) To exercise a SAR granted in tandem with a Related SAR
Option, the Grantee shall: (A) give written notice thereof to the Company
specifying the number of shares of Stock with respect to which the SAR is being
exercised and the percentage of the total amount the Grantee is entitled to
receive which the Grantee elects to receive in cash or shares of Stock with
respect to the exercise of the SAR; and (B) if requested by the Administrator,
deliver the Related SAR Option agreement to the Secretary of the Company, who
shall endorse thereon a notation of such exercise and return the Related SAR
Option agreement to the Grantee. To exercise a SAR granted without relation to a
Stock Option, the Grantee is entitled to receive which the Grantee elects to
receive in cash or shares of Stock with respect to the exercise of the SAR. The
date of exercise of a SAR which is validly exercised shall be deemed to be the
date on which there shall have been delivered to the Company the appropriate
aforesaid instruments.
(iii) Upon the exercise of a SAR, the holder thereof,
subject to Section 6.2(c)(vi), shall be entitled at the holder's election to
receive either:
(A) a number of shares of Stock equal to the quotient
computed by dividing the Spread (as defined in Section 6.2(c)(iv) by the Fair
Market Value per share of Stock on the date of exercise of the SAR; provided,
however, that in lieu of fractional shares, the Company shall pay in cash or
cash equivalent an amount equal to the same fraction of the Fair Market Value
per share of Stock on the date of exercise of the SAR; or
(B) an amount of money payable in cash or cash
equivalent equal to the Spread; or
(C) a combination of an amount payable in cash or cash
equivalent and a number of shares of Stock calculated as provided in Section
6.2(c)(iii)(A) (after reducing the Spread by such dollar amount); plus any
amounts payable in lieu of any fractional shares as provided above.
(iv) The term "Spread" as used in Section 6.2(c) shall mean
an amount equal to the product computed by multiplying: (A) the excess of (x)
the Fair Market Value per share of Stock on the date the SAR is exercised, over
either (y) in the case of an SAR in tandem with a Related SAR Option, the
Exercise Price per share of the Related SAR Option, or (z) in the case of an SAR
not granted in tandem with a Stock Option, the Initial Valuation of the SAR; by
(B) the number of shares with respect to which such SAR is being exercised.
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(v) Notwithstanding the provisions of this Section 6.2, and
while the SAR agreement may provide for longer vesting periods, no SAR may be
exercised during the first six months following its Date of Grant, and, with
respect to SARs granted in tandem with a Related SAR Option, neither the SAR nor
the Related SAR Option may be exercised during the first six months following
the Date of Grant of the SAR, unless, in either case, prior to the expiration of
such six month period, the holder of the SAR ceases to be an employee of the
Company or any Parent or Subsidiary by reason of such holder's Special
Terminating Event.
(vi) Notwithstanding the provisions of this Section 6.2 or
the related SAR agreement to the contrary, any Grantee who at the date of the
exercise of the SAR or any portion thereof is an officer or Director of the
Company within the meaning of Section 16(b) of the Exchange Act (a "Section
16(b) Person"), may only make a Cash Election (as defined below) and related
exercise during the period beginning on the third business day following the
date of release for publication of the quarterly and annual summary statements
of sales and earnings of the Company and ending on the twelfth business day
following such date (the "Window Period"); provided, however, that this Section
6.2(c)(vi) shall not be applicable to any Section 16(b) Person at any time
subsequent to his or her Special Terminating Event.
(vii) Notwithstanding the provisions of Section 6.2(c)(iii),
the Administrator shall have sole discretion to consent to or disapprove a
Participant's election to receive an amount of money payable in cash or cash
equivalent in whole or in part ("Cash Election") upon the exercise of a SAR.
Such consent or disapproval may be given at any time after the election to which
it relates. If the Administrator shall disapprove a Cash Election, the exercise
of the SAR with respect to which the Cash Election was made shall be of no
effect, but without prejudice to the right of the holder to exercise such SAR in
the future in accordance with its terms.
(viii) A SAR may be granted to a Grantee irrespective of
whether such Grantee is being granted or has been granted a LSAR.
(ix) Notwithstanding the foregoing, in the case of a SAR
granted in tandem with an Incentive Stock Option, the holder may not receive an
amount in excess of such amount as will enable the Stock Option to qualify as an
Incentive Stock Option.
(d) Securities Laws. The Company intends that this Section 6.2
shall comply with the requirements of Rule 16b-3 and any future rules
promulgated in substitution therefor (the "Rule") under the Exchange Act, during
the term of the Plan. Should any provision of Section 6.2 not be necessary to
comply with the requirements of the Rule or should any additional provisions be
necessary for Section 6.2 to comply with the requirements of the Rule, the Board
may amend the Plan to add or to modify the provisions of the Plan accordingly.
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(e) Limitation on Amounts Payable. Notwithstanding Section
6.2(c)(iii), the Administrator may place a limitation on the amount payable in
cash, Stock or both upon exercise of a SAR. Any such limitation must be
determined as of the Date of Grant and noted on the instrument evidencing the
Participant's SAR grant hereunder.
SECTION 7. DEFERRED STOCK AND RESTRICTED STOCK
7.1 General. Deferred Stock and Restricted Stock awards may be issued to
Eligible Employees either alone or in addition to other Awards granted under the
Plan. The Administrator shall determine the Eligible Employees, and the time or
times at which, grants of Deferred Stock or Restricted Stock awards shall be
made; the number of shares to be awarded; the price, if any, to be paid by the
recipient of Deferred Stock or Restricted Stock awards; the Restricted Period
(as defined in paragraph 7.3 hereof) applicable to Deferred Stock or Restricted
Stock awards; the performance objectives applicable to Deferred Stock or
Restricted Stock awards; the date or dates on which restrictions applicable to
such Deferred Stock or Restricted Stock awards shall lapse during such
Restricted Period; and all other conditions of the Deferred Stock or Restricted
Stock awards. The Administrator may also condition the grant of Deferred Stock
or Restricted Stock awards upon the exercise of Stock Options, or upon such
other criteria as the Administrator may determine, in its sole discretion. The
provisions of Deferred Stock or Restricted Stock awards need not be the same
with respect to each recipient.
7.2 Awards and Certificates. The prospective recipient of a Deferred
Stock or Restricted Stock award shall not have any rights with respect to such
Award, unless and until such recipient has executed an agreement evidencing the
Award (a "Deferred Stock Award Agreement" or Restricted Stock Award Agreement"
as appropriate) and has delivered a fully executed copy thereof to the Company,
within a period of sixty days (or such other period as the Administrator may
specify) after the Award date.
Except as provided below in this Section 7.2, (i) each
Participant who is awarded Restricted Stock shall be issued a stock certificate
in respect of such shares of Restricted Stock; and (ii) such certificate shall
be registered in the name of the Participant, and shall bear an appropriate
legend referring to the terms, conditions, and restrictions applicable to such
Award, substantially in the following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions
(including forfeiture) of the J2 Communications, 1999 Stock
Option, Deferred Stock and Restricted Stock Plan and a Restricted
Stock Award Agreement entered into between the registered owner
and J2 Communications. Copies of such Plan and Agreement are on
file in the offices of J2 Communications."
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The Company shall require that the stock certificates evidencing
such shares be held in the custody of the Company until the restrictions thereon
shall have lapsed, and that, as a condition of any Restricted Stock award, the
Participant shall have delivered a stock power, endorsed in blank, relating to
the Stock covered by such Award.
With respect to Deferred Stock awards, at the expiration of the
Restricted Period, stock certificates in respect of such shares of Deferred
Stock 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.
7.3 Restriction and Conditions. The Deferred Stock or Restricted Stock
awards granted pursuant to this Section 7 shall be subject to the following
restrictions and conditions:
(a) Subject to the provisions of the Plan and the Deferred Stock
or Restricted Stock Award Agreements, during such period as may be set by the
Administrator commencing on the grant date (the "Restricted Period"), the
Participant shall not be permitted to sell, transfer, pledge or assign shares of
Deferred Stock or Restricted Stock awarded under the Plan. Within these limits,
the Administrator may, in its sole discretion, provide for the lapse of such
restrictions in installments and may accelerate or waive such restrictions in
whole or in part based on such factors and such circumstances as the
Administrator may determine, in its sole discretion, including, but not limited
to, the attainment of certain performance related goals, the Participant's
termination, death or Disability or the occurrence of a "Change of Control" as
defined in Section 10 below.
(b) Except as provided in paragraph 7.3(a) of this Section 7, the
Participant shall have, with respect to the shares of Restricted Stock, all of
the rights of a shareholder of the Company, including the right to vote the
shares, and the right to receive any dividends thereon during the Restricted
Period. With respect to Deferred Stock awards, the Participant shall generally
not have the rights of a shareholder of the Company, including the right to vote
the shares during the Restricted Period; provided, however, that dividends
declared during the Restricted Period with respect to the number of shares
covered by a Deferred Stock award shall be paid to the Participant. Certificates
for shares of unrestricted Stock shall be delivered to the Participant promptly
after, and only after, the Restricted Period shall expire without forfeiture in
respect of such shares of Deferred Stock or Restricted Stock, except as the
Administrator, in its sole discretion, shall otherwise determine.
(c) Subject to the provisions of the Deferred Stock or Restricted
Stock Award Agreement and this Section 7, upon termination of employment for any
reason during the Restricted Period, all shares subject to any restriction as of
the date of such termination shall be forfeited by the Participant, and the
Participant shall only receive the amount, if any, paid by the Participant for
such Deferred Stock or Restricted Stock, plus simple interest on such amount at
the rate of 8% per year.
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SECTION 8. AMENDMENT AND TERMINATION
8.1 The Board may amend, alter or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made that would impair the
rights of the Participant under any Award theretofore granted without such
Participant's consent, or that without the approval of the shareholders (as
described below) would:
(a) except as provided in Section 3, increase the total number of
shares of Stock reserved for the purpose of the Plan;
(b) change the employees or class of employees eligible to
participate in the Plan;
(c) extend the maximum option period under Section 5 of the Plan.
8.2 Notwithstanding the foregoing, shareholder approval under this
Section 8 shall only be required at such time and under such circumstances as
shareholder approval would be required under applicable laws, regulations and
exchange requirements.
8.3 The Administrator may amend the terms of any Award theretofore
granted, prospectively or retroactively, but, subject to Section 3, no such
amendment shall impair the rights of any holder without his or her consent.
SECTION 9. UNFUNDED STATUS OF PLAN
The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any payments not yet made to a Participant or
optionee by the Company, nothing contained herein shall give any such
Participant or optionee any rights that are greater than those of a general
creditor of the Company.
SECTION 10. CHANGE OF CONTROL
The following acceleration and valuation provisions shall apply in the
event of a "Change of Control", as defined in paragraph 10.2 of this Section 10:
10.1 In the event of a "Change of Control," unless otherwise determined
by the Administrator or the Board in writing at or after grant (including under
any individual agreement), but prior to the occurrence of such Change of
Control;
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(a) any Stock Options awarded under the Plan not previously
exercisable and vested shall become fully exercisable and vested;
(b) the restrictions applicable to any Restricted Stock or
Deferred Stock awards under the Plan shall lapse, and such shares and Awards
shall be deemed fully vested; and
(c) the value of all outstanding Stock Options, Restricted Stock
and Deferred Stock awards shall, to the extent determined by the Administrator
at or after grant, be cashed out by a payment of cash or other property, as the
Administrator may determine, on the basis of the "Change of Control Price" (as
defined in paragraph 10.3 of this Section 10) as of the date the Change of
Control occurs or such other date as the Administrator may determine prior to
the Change of Control.
10.2 For purposes of paragraph 10.1 of this Section 10, a "Change of
Control" shall be deemed to have occurred if:
(a) any "person," as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than the Company; any trustee or other
fiduciary holding securities under an employee benefit plan of the Company; or
any company owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of the Stock of the
Company) is or becomes after the Effective Date the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company (not including in the securities beneficially owned by
such person or any securities acquired directly from the Company or its
affiliates) representing 50% or more of the combined voting power of the
Company's then outstanding securities; or
(b) during any period of two consecutive years (not including any
period prior to the Effective Date), individuals who at the beginning of such
period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clause (a), (c) or (d) of this Section 10.2)
whose election by the Board or nomination for election by the Company's
shareholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority thereof; or
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(c) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (A) a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the Company, at
least 75% of the combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation or (B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person
acquires more than 50% of the combined voting power of the Company's then
outstanding securities; or
(d) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
10.3 For purposes of this Section 10, "Change of Control Price" means
the higher of (i) the highest price per share paid or offered in any transaction
related to a Change of Control of the Company or (ii) the highest price per
share paid in any transaction reported on the exchange or national market system
on which the Stock is listed, at any time during the preceding sixty day period
as determined by the Administrator, except that, in the case of Incentive Stock
Options, such price shall be based only on transactions reported for the date on
which the Administrator decides to cash out such options.
SECTION 11. GENERAL PROVISIONS
11.1 The Administrator may require each person purchasing shares
pursuant to a Stock Option to represent to and agree with the Company in writing
that such person is acquiring the shares without a view to distribution thereof.
The certificates for such shares may include any legend which the Administrator
deems appropriate to reflect any restrictions on transfer. All certificates for
shares of Stock delivered under the Plan shall be subject to such stock transfer
orders and other restrictions as the Administrator may deem advisable under the
rules, regulations, and other requirements of the Commission, any stock exchange
upon which the Stock is then listed, and any applicable Federal or state
securities law, and the Administrator may cause a legend or legends to be placed
on any such certificates to make appropriate reference to such restrictions.
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11.2 Nothing contained in the Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to shareholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases.
11.3 Each Participant shall, no later than the date as of which the
value of an Award first becomes includable in the gross income of the
Participant for Federal income tax purposes, pay to the Company, or make
arrangements satisfactory to the Administrator regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to the Award. The obligations of the Company under the Plan shall be
conditional on the making of such payments or arrangements, and the Company
(and, where applicable, its Subsidiaries) 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.
11.4 No member of the Board or the Administrator, nor any officer or
employee of the Company acting on behalf of the Board or the Administrator,
shall be personally liable for any action, determination, or interpretation
taken or made in good faith with respect to the Plan, and all members of the
Board or the Administrator and each and any officer or employee of the Company
acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any such action,
determination or interpretation.
11.5 This Plan is purely voluntary on the part of the Company, and while
the Company hopes to continue it indefinitely, the continuance of the Plan shall
not be deemed to constitute a contract between the Company and any employee, or
to be consideration for or a condition of the employment of any employee.
Nothing contained in the Plan shall be deemed to give any employee the right to
be retained in the employ of the Company, its Subsidiaries, or its Parent
Corporation to interfere with the right of the Company, or its Subsidiaries to
discharge or retire any employee thereof at any time. No employee shall have any
right to, or interest in, Stock Options, Restricted Stock, or Deferred Stock,
authorized hereunder prior to the grant of such a Stock Option or other award
described herein to such employee, and upon such grant he or she shall have only
such rights and interests as are expressly provided herein, subject, however, to
all applicable provisions of the Company's Articles of Incorporation, as the
same may be amended from time to time.
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SECTION 12. GRANTS TO DIRECTORS
There shall be granted to James P. Jimirro, following each fiscal year
of the Company ending after December 1, 1990, and on or prior to December 1,
1997, on the earlier of the date of the Annual Meeting of Stockholders or 150
days following the end of the Company's fiscal year, Non-Statutory Stock Options
to purchase 25,000 shares of Stock and SARs relating to an additional 25,000
shares of Stock, each of the following terms and conditions: all Non-Statutory
Stock Options and SARs (A) shall be immediately exercisable; (B) shall expire to
the extent not exercised prior to the close of business on the day seven years
from the date of grant; and (C) may be exercised as to the whole or any part, by
written notice to the Company, stating the number of shares with respect to
which the option is being exercised and specifying a date not less than ten nor
more than twenty days after the date of such notice, as the date on which the
Stock will be taken up and payment, if any, made therefor at the principle
office of the Company. Notwithstanding the foregoing, Mr. Jimirro shall not be
entitled to receive any Rights pursuant to this Section 12 until the grant of
Rights pursuant to the Plan has been qualified and registered under all
applicable state and federal securities laws, or if his employment with the
Company has been terminated pursuant to the Employment Agreement between him and
the Company dated July 1, 1999, or any amendment thereto for cause (as defined
therein) or due to his death or disability.
SECTION 13. SPECIFIC PERFORMANCE
The Stock Options granted under this Plan and the Shares issued pursuant
to the exercise of such Stock Options cannot be readily purchased or sold in the
open market, and, for that reason among others, the Company and its shareholders
will be irreparably damaged in the event that this Plan is not specifically
enforced. In the event of any controversy concerning the right or obligation to
purchase or sell any such Option or Optioned Stock, such right or obligation
shall be enforceable in a court of equity by a decree of a specific performance.
Such remedy shall, however, be cumulative and not exclusive, and shall be in
addition to any other remedy which the parties may have.
SECTION 14. INVALID PROVISION
In the event that any provision of this Plan is found to be invalid or
otherwise unenforceable under any applicable law, such invalidity or
unenforceability shall not be construed as rendering any other provisions
contained herein invalid or unenforceable, and all such other provisions shall
be given full force and effect to the same extent as though the invalid
unenforceable provision was not contained herein.
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SECTION 15. APPLICABLE LAW
This Plan shall be governed by and construed in accordance with the laws
of the State of California.
SECTION 16. SUCCESSORS AND ASSIGNS
This Plan shall be binding on and inure to the benefit of the Company
and the employees to whom an Option is granted hereunder, and such employees'
heirs, executors, administrators, legatees, personal representatives, assignees
and transferees.
SECTION 17. AUTHORIZATION TO ISSUE OPTIONS AND SHAREHOLDER APPROVAL
Unless in the judgment of counsel to the Company such permit is not
necessary with respect to particular grants, Stock Options granted under the
Plan shall be conditioned upon the Company obtaining any required permit from
the California Department of Corporations and/or other appropriate governmental
agencies, free of any conditions not acceptable to the Board, authorizing the
Company to grant such Stock Options, provided, however, such condition shall
lapse as of the effective date of issuance of such permit(s) in a form to which
the Company does not object within sixty (60) days. The grant of Stock Options
under the Plan also is conditioned on approval of the Plan by the vote or
consent of the holders of a majority of the outstanding shares of the Company's
Common Stock and no Stock Option granted hereunder shall be effective or
exercisable unless and until the Plan has been so approved within 12 months of
the adoption of the Plan.
SECTION 18. ANNUAL REPORT
Except at such time as the Stock becomes a Covered Security, if any
consultants or directors are issued Stock Options under this Plan, the Company
shall furnish such consultants or directors with financial statements at least
annually.
SECTION 19. EFFECTIVE DATE OF PLAN
The Plan became effective (the "Effective Date") on ________, 2000.
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SECTION 20. TERM OF PLAN
No Stock Option, Deferred Stock, SAR or Restricted Stock award shall be
granted pursuant to the Plan on or after the tenth anniversary of the Effective
Date, but Awards theretofore granted may extend beyond that date.
IN WITNESS WHEREOF, pursuant to the due authorization and adoption of
this Plan by the Board on the day and year first above written, the Company has
caused this Plan to be duly executed by its duly authorized officers.
J2 Communications
By: /s/ JAMES P. JIMIRRO
-------------------------
Name: JAMES P. JIMIRRO
Title: President and Chief Executive Officer
<PAGE> 39
J2 COMMUNICATIONS
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
JANUARY 13, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Deborah Dettling and Duncan Murray, and each
of them, with full power of substitution, as proxies to represent the
undersigned and to vote all of the shares of Common Stock the undersigned is
entitled to vote at the 2000 Annual Meeting of Shareholders of J2 Communications
(the "Company") to be held at the Doubletree Hotel, 10740 Wilshire Boulevard,
Los Angeles, California 90024, on Thursday, January 13, 2000 at 10:00 A.M.
(local time), and at any adjournment, postponement or continuation thereof, as
follows:
1. Election of six Directors.
[ ] FOR all nominees listed below (EXCEPT as marked to the contrary below)
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
strike a line through such nominee's name in the following list:
James P. Jimirro, James Fellows, Bruce P. Vann, John De Simio, Gary Cowan
and Daniel Laikin.
[ ] WITHHOLD AUTHORITY to vote for ALL nominees listed above.
2. Approval of the Company's 1999 Stock Option, Deferred Stock and Restricted
Stock Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Ratification of Arthur Anderson LLP as the Company's independent auditors
for fiscal 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, or any other matters properly coming before the
meeting and any adjournment, postponement or continuation thereof.
<PAGE> 40
This proxy will be voted as directed. If this proxy card is properly signed
and returned but no directions are specified, this proxy will be voted FOR the
election of directors so as to elect the maximum number of the Board of
Directors' nominees that may be elected by cumulative voting, FOR Proposal 2 and
FOR Proposal 3. This proxy card, if properly executed and delivered in a timely
manner, will revoke all prior proxies.
Dated , 199
------------------------
Signature
------------------------
Signature
Please sign EXACTLY as
name or names appear
hereon. When signing as
attorney, executor,
trustee, administrator
or guardian, please give
your full title. 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.
PLEASE COMPLETE, DATE, SIGN AND MAIL PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE.
