PROXY STATEMENT PURSUANT TO
SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2)).
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
BIG ENTERTAINMENT, INC.
-----------------------------------------------
(Name of Registrant as Specified In Its Charter)
REGISTRANT
-----------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] 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:
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2) Aggregate number of securities to which transaction applies:
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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.)
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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.
<PAGE>
1) Amount Previously Paid:
.....................................................
2) Form, Schedule or Registration Statement No.:
.....................................................
3) Filing Party:
.....................................................
4) Date Filed:
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<PAGE>
BIG ENTERTAINMENT, INC.
2255 GLADES ROAD, SUITE 237 WEST
BOCA RATON, FLORIDA 33431
----------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AUGUST 23, 1996
-----------------------------------------------------
To the Shareholders of Big Entertainment, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Annual Meeting") of Big Entertainment, Inc., a Florida corporation (the
"Company"), will be held on Friday, August 23, 1996, at 2:00 p.m., at 2255
Glades Road, Suite 228, Boca Raton, Florida 33431, for the following purposes,
all of which are set forth more completely in the accompanying proxy statement:
1. To elect nine directors of Directors of the Company
for the ensuing year;
2. To consider and vote upon a proposal to approve an
amendment to the Company's Articles of Incorporation
to increase the number of shares of the Company's
authorized Common Stock from 11,000,000 to 25,000,000;
3. To consider and vote upon a proposal to approve an amendment to
the Company's 1993 Stock Option Plan to increase the number of
shares of the Company's Common Stock reserved for issuance
thereunder from an aggregate of 350,000 shares to an aggregate of
1,000,000 shares;
4. To consider and vote upon a proposal to ratify the
selection of Arthur Andersen LLP as the Company's
independent public accountants for the year ending
December 31, 1996; and
5. To transact such other business as may properly come
before the Annual Meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on July 8, 1996,
as the record date for the determination of shareholders entitled to notice of,
and to vote at, the Annual Meeting. A form of proxy and a copy of the Company's
Annual Report to Shareholders for the year ended December 31, 1995, are
enclosed.
BY ORDER OF THE BOARD OF DIRECTORS
Laurie S. Silvers, Secretary
Boca Raton, Florida
July 15, 1996
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR
NOT YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE SIGN AND DATE
THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH DOES NOT
REQUIRE POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
BIG ENTERTAINMENT, INC.
2255 GLADES ROAD, SUITE 237 WEST
BOCA RATON, FLORIDA 33431
----------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
AUGUST 23, 1996
----------------------------
The enclosed proxy is solicited by the Board of Directors of Big
Entertainment, Inc., a Florida corporation (the "Company"), for use at the
Annual Meeting of Shareholders to be held on August 23, 1996, beginning at 2:00
p.m., at 2255 Glades Road, Suite 228, Boca Raton, Florida 33431, and at any
adjournments or postponements thereof (the "Annual Meeting"). The approximate
date on which this Proxy Statement and the enclosed proxy are being mailed to
shareholders is July 15, 1996. The form of proxy provides a space for you to
withhold your vote for any proposal. You are urged to indicate your vote on each
matter in the space provided. Proxies will be voted as marked. If no space is
marked, proxies will be voted by the persons therein named at the meeting: (i)
for the election of the directors recommended by the Company; (ii) in favor of
the proposal to approve the amendment to the Company's Articles of
Incorporation; (iii) in favor of the proposal to approve the amendment to the
Company's 1993 Stock Option Plan (the "1993 Plan"); (iv) in favor of the
proposal to ratify the selection of Arthur Andersen LLP as the Company's
independent public accountants for the year ending on December 31, 1996; and (v)
in their discretion, upon such other business as may properly come before the
meeting. Whether or not you plan to attend the meeting, please fill in, sign and
return your proxy card in the enclosed envelope, which requires no postage if
mailed in the United States.
The cost of the Board of Directors' proxy solicitation will be borne by
the Company. In addition to solicitation by mail, directors, officers and
employees of the Company may solicit proxies personally and by telephone, all
without extra compensation.
At the record date for the Annual Meeting, the close of business on July
8, 1996 (the "Record Date"), the Company had outstanding 6,085,725 shares of
common stock, $.01 par value per share (the "Common Stock"), and 192,000 shares
of Series A Variable Rate Convertible Preferred Stock, $.01 par value per share
(the "Series A Preferred Stock") (the Common Stock and the Series A Preferred
Stock are hereinafter collectively referred to as the "Shares"). Each Share
entitles the holder thereof to one vote on each matter submitted to a vote of
shareholders and the Shares vote together as a single class. Only holders of the
Shares on the Record Date, are entitled to notice of, and to vote at, the Annual
Meeting. The attendance, in person or by proxy, of the holders of a majority of
the outstanding Shares entitled to vote at the Annual Meeting is necessary to
constitute a quorum. If less than a majority of the outstanding Shares entitled
to vote are represented at the Annual Meeting, a majority of the Shares so
represented may adjourn the Annual Meeting to another date, time or place, and
notice need not be given of the new date, time or place if the new date, time or
place is announced at the Annual Meeting before any adjournment is taken.
Directors will be elected by a plurality of the votes cast, either in person or
by proxy, at the Annual Meeting. The approval of the proposals covered by this
Proxy Statement, other than the election of directors, will require an
affirmative vote of the holders of a majority of the Shares voting in person or
by proxy at the Annual Meeting.
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Prior to the Annual Meeting, the Company will select one or more
inspectors of election for the meeting. Such inspector(s) shall determine the
number of Shares represented at the meeting, the existence of a quorum and the
validity and effect of proxies, and shall receive, count and tabulate ballots
and votes and determine the results thereof. Abstentions will be considered as
Shares present and entitled to vote at the Annual Meeting and will be counted as
votes cast at the Annual Meeting, but will not be counted as votes cast for or
against any given matter.
A broker or nominee holding Shares registered in its name, or in the name
of its nominee, which are beneficially owned by another person and for which it
has not received instructions as to voting from the beneficial owner, may have
discretion to vote the beneficial owner's Shares with respect to the election of
directors and other matters addressed at the Annual Meeting. Any such Shares
which are not represented at the Annual Meeting either in person or by proxy
will not be considered to have cast votes on any matters addressed at the Annual
Meeting.
A SHAREHOLDER WHO SUBMITS A PROXY ON THE ACCOMPANYING FORM HAS THE POWER
TO REVOKE IT AT ANY TIME PRIOR TO ITS USE BY DELIVERING A WRITTEN NOTICE TO THE
SECRETARY OF THE COMPANY, BY EXECUTING A LATER- DATED PROXY OR BY ATTENDING THE
ANNUAL MEETING AND VOTING IN PERSON. UNLESS AUTHORITY IS WITHHELD, PROXIES THAT
ARE PROPERLY EXECUTED WILL BE VOTED FOR THE PURPOSES SET FORTH THEREON.
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<PAGE>
BENEFICIAL SECURITY OWNERSHIP
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of the Record Date, by (i)
each of the shareholders of the Company who owns more than 5% of the outstanding
shares of Common Stock, (ii) each director and nominee for director of the
Company, (iii) each of the Named Executive Officers (as hereinafter defined) and
(iv) all directors, director nominees and executive officers of the Company as a
group. Except as otherwise indicated, the Company believes that all beneficial
owners named in the table have sole voting and investment power with respect to
all shares of Common Stock beneficially owned by them.
<TABLE>
<CAPTION>
=====================================================================================================
NUMBER OF PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL SHARES BENEFICIAL
OWNER(1) BENEFICIALLY OWNERSHIP
OWNED
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
Mitchell Rubenstein(2) 1,742,955 28.5%
- -----------------------------------------------------------------------------------------------------
Laurie S. Silvers(2) 1,742,955 28.5%
- -----------------------------------------------------------------------------------------------------
Asbury Park Press, Inc.(3) 758,229 12.3%
- -----------------------------------------------------------------------------------------------------
Tekno Simon, LLC(4) 355,912 5.7%
- -----------------------------------------------------------------------------------------------------
Dr. Martin H. Greenberg(5) 254,062 4.2%
- -----------------------------------------------------------------------------------------------------
Harry T. Hoffman(6) 3,125 *
- -----------------------------------------------------------------------------------------------------
Dr. Lawrence Gould(6) 3,125 *
- -----------------------------------------------------------------------------------------------------
Jules L. Plangere, Jr.(7)(8) 7,517 *
- -----------------------------------------------------------------------------------------------------
E. Donald Lass(7)(8) 7,517 *
- -----------------------------------------------------------------------------------------------------
Deborah J. Simon(9) 4,166 *
- -----------------------------------------------------------------------------------------------------
John W. Waller, III 0 *
- -----------------------------------------------------------------------------------------------------
All directors, director 2,022,467 32.8%
nominees and executive
officers of the Company as a
group (nine persons)(7)(10)
=====================================================================================================
</TABLE>
* Less than 1%
(1) Except as noted in this footnote, the address of each beneficial
owner is c/o the Company, 2255 Glades Road, Suite 237 West, Boca
Raton, Florida 33431. The business address of Asbury Park Press is
3601 Highway 66, Neptune, New Jersey 07754 and the business
address of Tekno Simon, LLC is 115 W. Washington Street,
Indianapolis, Indiana 46204.
(2) All of such shares owned by Mr. Rubenstein and Ms. Silvers are
held by them as tenants by the entirety. Includes 36,250 shares of
Common Stock issuable pursuant to stock options exercisable within
60 days of the date of this Proxy Statement.
(3) Includes 100,000 shares of Common Stock issuable pursuant to
currently exercisable stock options.
4
<PAGE>
(4) Includes 192,000 shares of Series A Preferred Stock. The Series A
Preferred Stock votes together with the Common Stock as a single
class (except as required by law), with the Series A Preferred
Stock having one vote per share.
(5) Includes (i) 91,667 shares of Common Stock owned by Dr.
Greenberg's spouse and (ii) 24,028 shares of Common Stock issuable
pursuant to currently exercisable stock options.
(6) Represents shares of Common Stock issuable pursuant to currently
exercisable stock options.
(7) Does not include 758,229 shares of Common Stock beneficially owned
by Asbury Park Press, of which Messrs. Plangere and Lass are
directors and executive officers, with respect to which shares
Messrs. Plangere and Lass disclaim beneficial ownership.
(8) Includes shares of Common Stock issuable pursuant to
currently exercisable stock options held by each of
Messrs. Plangere and Lass.
(9) Includes 4,166 shares of Common Stock issuable pursuant to stock
options which become exercisable within 60 days of the date of
this Proxy Statement. Does not include the shares of Common Stock
and Series A Preferred Stock owned by Tekno Simon, LLC ("Tekno
Simon"), with respect to which Ms. Simon disclaims beneficial
ownership. Tekno Simon is controlled by Melvin Simon, Deborah J.
Simon's father.
(10) Includes 85,728 shares of Common Stock issuable pursuant to
options exercisable within 60 days of the date of this Proxy
Statement.
ELECTION OF DIRECTORS
At the Annual Meeting, nine directors will be elected by the shareholders
to serve until the next annual meeting of shareholders or until their successors
are elected and qualified. The accompanying form of proxy when properly executed
and returned to the Company, will be voted FOR the election as directors of the
nine persons named below, unless the proxy contains contrary instructions.
Proxies cannot be voted for a greater number of persons than the number of
nominees named in the Proxy Statement. Management has no reason to believe that
any of the nominees is unable or unwilling to serve if elected. However, in the
event that any of the nominees should become unable or unwilling to serve as a
director, the proxy will be voted for the election of such person or persons as
shall be designated by the Board of Directors.
The following table sets forth certain information concerning each
nominee.
NAME AGE POSITION
Mitchell Rubenstein 42 Chairman and Chief Executive Officer
Laurie S. Silvers 44 Vice Chairman, President, Secretary and
Publisher
Dr. Martin H. Greenberg 55 Chief Executive Officer of Tekno Books,
and Director a division of the Company
Harry T. Hoffman 68 Director
Dr. Lawrence Gould 65 Director
Jules L. Plangere, Jr. 75 Director
5
<PAGE>
E. Donald Lass 58 Director
Deborah J. Simon 39 Director
John W. Waller, III 44 Director Nominee
MITCHELL RUBENSTEIN is a co-founder of the Company and has served as its
Chairman of the Board and Chief Executive Officer since its inception in January
1993. Mr. Rubenstein was a co-founder of the Sci-Fi Channel, a 24 hour national
cable television network devoted to science fiction, fantasy and horror
programming which was acquired by USA Network (a partnership of Paramount
Pictures Corporation and MCA, Inc.) in March 1992. Mr. Rubenstein served as
President of the Sci-Fi Channel from January 1989 to March 1992 and served as
Co-Vice Chairman of the Sci-Fi Channel from March 1992 to March 1994. Prior to
co-founding the Sci-Fi Channel, Mr. Rubenstein practiced law for 10 years,
including as a partner with Rubenstein & Silvers, a law firm that specialized in
entertainment, cable television and broadcasting law, from 1981 to 1989. Mr.
Rubenstein also co-owned and served as an executive officer of several cable
television systems (including Flagship Cable Partners, which owned a cable
television system serving Boynton Beach and portions of Palm Beach County,
Florida) from 1983 to 1989. Mr. Rubenstein received a J.D. degree from the
University of Virginia School of Law in 1977 and a Masters in Tax Law from New
York University School of Law in 1979. Mr. Rubenstein was voted Co-Business
Person of the Year, City of Boca Raton, Florida in 1992. Mr. Rubenstein is
married to Laurie S. Silvers.
LAURIE S. SILVERS is a co-founder of the Company and has served as its
Vice Chairman, President and Secretary since its inception in January 1993. Ms.
Silvers also serves as the Company's Publisher. Ms. Silvers was a co-founder of
the Sci-Fi Channel. Ms. Silvers served as Chief Executive Officer of the Sci-Fi
Channel from January 1989 to March 1992 and served as Co-Vice Chairman of the
Sci-Fi Channel from March 1992 to March 1994. Prior to co-founding the Sci-Fi
Channel, Ms. Silvers practiced law for ten years, including as a partner with
Rubenstein & Silvers, a law firm that specialized in entertainment, cable
television and broadcasting law, from 1981 to 1989. Ms. Silvers also co-owned
and served as an executive officer of several cable television systems
(including Flagship Cable Partners, which owned a cable television system
serving Boynton Beach and portions of Palm Beach County, Florida) from 1983 to
1989 and co-owned a television station from 1990 to 1991. Ms. Silvers received a
J.D. degree from University of Miami School of Law in 1977. Ms. Silvers has also
served on the Board of Directors of the Pine Crest Preparatory School, Inc.
since 1993. She has been a member of the Pine Crest Preparatory School, Inc.
Board of Advisors (Boca Raton Campus) since 1987, and also currently serves as
its Chairman. Together with Mr. Rubenstein, Ms. Silvers was voted Co-Business
Person of the Year, City of Boca Raton, Florida in 1992 and has been a keynote
or other speaker at various business symposia, including one held at Harvard
Business School.
DR. MARTIN H. GREENBERG has served as a director of the Company since
July 1993, and as a consultant to the Company from February 1993 to December
1994. Since December 1994, Dr. Greenberg has served as Chief Executive Officer
of Tekno Books, 51% of which is owned by the Company and 49% of which is owned
by Dr. Greenberg. Dr. Greenberg was President and a principal shareholder of
Tomorrow, Inc., a company engaged in book licensing and packaging, from 1990
until its acquisition by the Company in 1994. See "Certain Transactions-Tomorrow
Acquisition." Dr. Greenberg is also co-publisher of Mystery Scene Magazine, a
trade journal of the mystery genre of which the Company owns a majority
interest, and a member of the Board of Advisors of the Sci-Fi Channel.
6
<PAGE>
Dr. Greenberg is widely regarded as the leading anthologist currently active in
trade publishing, and has served as editor or author of more than 600 books in
various genre, including science fiction, fantasy, mystery and adventure. Dr.
Greenberg also is the 1995 recipient of the Ellery Queen Award, presented by the
Mystery Writers of America for Lifetime Achievement.
HARRY T. HOFFMAN has served as a director of the Company since July 1993.
Prior to his retirement in 1991, Mr. Hoffman served as President and Chief
Executive Officer of Waldenbooks, Inc., a leading national retailer of books,
magazines and related items, from 1979 to 1991, and as President and Chief
Executive Officer of Ingram Book Company, a national book wholesaler, from 1968
to 1978.
DR. LAWRENCE GOULD has served as a director of the Company since July
1993. Dr. Gould served as an executive officer of M/A-COM, Inc., a New York
Stock Exchange listed company engaged in the manufacture of electronic
components for the defense industry, from 1962 to 1982, including as Chief
Executive Officer (1975 to 1982), President (1969 to 1975) and Executive Vice
President and Chief Operating Officer (1962 to 1969); he also served as Chairman
of the Board of M/A-COM, Inc. from 1978 to 1982 and as a consultant to that
company from 1982 to 1990. Dr. Gould's primary business activities since 1990
have been as Chairman of the Board and principal of several private companies,
including Gould Enterprises, Inc. (resort development) and Point Sebago
Enterprises, Inc. (management of the Point Sebago, Maine resort), since 1974,
and Chairman of the Board of Point Sebago Camp Sunshine, Inc., a not-for-profit
corporation, since 1985.
JULES L. PLANGERE, JR. has served as a director of the Company since
July 1993. Mr. Plangere has been Chairman of the Board of Asbury Park Press,
Inc. ("Asbury Park Press"), the owner of Asbury Park Press, New Jersey's second
largest newspaper since 1980 and has served Asbury Park Press in various
capacities since 1947, including Chief Executive Officer (1980 to 1991),
Publisher of Asbury Park Press (1977 to 1991), President and General Manager
(1974 to 1977) and Production Manager (1954 to 1974). In addition, Mr. Plangere
has been Chairman of the Board of New Jersey Press, Inc., of which Asbury Park
Press is a wholly owned subsidiary, since May 1991. Mr. Plangere is a former
director of the New Jersey State Chamber of Commerce and a trustee and former
chairman of the Monmouth College Board of Trustees.
E. DONALD LASS has served as a director of the Company since July 1993.
Mr. Lass has been President and Chief Executive Officer of New Jersey Press
since May 1991, President and Chief Executive Officer of Asbury Park Press since
1980 and 1991, respectively, and Editor and Publisher of Asbury Park Press since
1991. Mr. Lass is a member of numerous trade organizations, including the
American Society of Newspaper Editors, the American Newspaper Publishers
Association, the Society of Newspaper Design, the National Association of
Broadcasters and the National Association of Television Programming Executives,
and has served as Chairman (1989) and President (1988) of the New Jersey Press
Association and as President (1989) of the New Jersey Press Foundation. Mr. Lass
currently serves as Chairman of the New Jersey State Committee on Press Freedom
and Press Responsibility, director of the Journalism Resources Institute at
Rutgers University, member of the Board of Visitors of Columbia University
Graduate School of Journalism and member of the Board of Overseers of Rutgers
University.
DEBORAH J. SIMON was appointed a director of the Company in November
1995. Ms. Simon has held the position of Senior Vice President of Simon Property
Group, L.P., an Indianapolis-based real
7
<PAGE>
estate development and management firm that is listed on the New York Stock
Exchange, since 1991 ("Simon Property Group"). Prior to that, Ms. Simon served
as Vice President-Western Region Leasing at Simon Property Group. Prior to
serving as a leasing representative, Ms. Simon served as director of internal
communications and assistant director of training at Simon Property Group. She
also has been an independent producer, with several television credits to her
name. A native of Indianapolis, Ms. Simon attended the University of Southern
California. She is a member of the International Council of Shopping Centers and
is a graduate of that organization's leasing institute. She currently serves on
the Board of Directors of the Indianapolis Children's Museum, Indiana Repertory
Theater, Indianapolis Museum of Art and Circle Centre's Youth Investment Fund.
JOHN W. WALLER, III has been nominated to serve as a director of the
Company. Mr. Waller is the Chairman of Waller Capital Corporation, a cable
television investment banking firm which he founded in 1982. Prior to founding
Waller Capital Corporation, Mr. Waller served as a divisional manager for Home
Box Office, Inc. ("HBO"), with responsibility for HBO's relationship with over
300 cable operators in the middle-atlantic states. Prior to working with HBO,
Mr. Waller served as a financial analyst in the corporate treasurer's office of
Time, Inc., the parent company of HBO. A native of Alexandria, Virginia, Mr.
Waller holds an undergraduate degree and a master's degree in Business
Administration from the University of Virginia. Mr. Waller serves on the Board
of Directors of Convergent Media Systems Corporation and Winthrop Opportunity
Funds, and is a member of the James Madison Council of the Library of Congress.
The Company's officers are elected annually by the Board of Directors and
serve at the discretion of the Board. The Company's directors hold office until
the next annual meeting of shareholders and until their successors have been
duly elected and qualified.
Pursuant to a November 1995 Stock Purchase Agreement with Tekno Simon,
LLC (the "Simon Stock Purchase Agreement"), Tekno Simon, an a affiliate of the
Simon Property Group, has the right to designate one nominee to the Company's
Board of Directors until such time as Tekno Simon holds less than 25% of the sum
of (i) the shares of Series A Preferred Stock purchased pursuant to the Simon
Stock Purchase Agreement (or shares of Common Stock issued or issuable upon
conversion thereof) and (ii) the shares of Common Stock purchased by Tekno Simon
in the Company's August 1995 private offering. Certain principal shareholders of
the Company, including Mitchell Rubenstein, Laurie S. Silvers, Asbury Park Press
and Dr. Martin H. Greenberg, have agreed to vote their shares of Common Stock in
favor of the election of Tekno Simon's nominee to the Board of Directors. Tekno
Simon's current nominee on the Board of Directors is Deborah J. Simon. See
"Certain Transactions-Preferred Stock Investment by Tekno Simon."
In connection with a public offering by the Company consummated in April
1996 the Company has also agreed, for the one year period from consummation of
the offering, to elect one designee of Barington Capital Group, L.P.
("Barington") to the Board of Directors of the Company. Barington's nominee to
the Board of Directors is John W. Waller, III.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF THE PERSONS NOMINATED FOR
ELECTION TO THE BOARD OF DIRECTORS.
8
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers, and persons who own more than ten
percent of the Company's outstanding Common Stock, to file with the Securities
and Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock. Such persons are required by SEC
regulation to furnish the Company with copies of all such reports they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company or written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
executive officers, directors and greater than ten percent beneficial owners for
the year ended December 31, 1995 have been complied with, except as follows:
(i) Due to an administrative oversight, the May 1995 grant of stock
options to purchase 72,500 shares of Common Stock to each of Mitchell Rubenstein
and Laurie S. Silvers was not reported on Form 4, but rather was reported on a
Form 5 filed in February 1996.
(ii) Due to an administrative oversight, a Form 4 reporting the April
1995 purchase of 3,700 shares of Common Stock by Dr. Martin H. Greenberg, was
filed approximately 25 days late.
(iii) Due to an administrative oversight, Form 4s reporting the July
1995 and January 1996 grants of stock options to purchase 1,724 and 1,786
shares, respectively, to each of E. Donald Lass and Jules L. Plangere were not
filed until June 1996.
MEETINGS AND COMMITTEES
During the year ended December 31, 1995, all Board of Directors actions
were taken by way of unanimous written consent, as such, the Board of Directors
did not meet in person during such year. The Board of Directors acted by
unanimous written consent on two occasions during such year.
The Board of Directors has two committees, the Compensation Committee and
the Stock Option Committee. Mitchell Rubenstein, Laurie S. Silvers and Dr.
Martin H. Greenberg are the members of the Compensation Committee. The
Compensation Committee's responsibilities consist of recommending, reviewing,
and approving the salary and fringe benefits of the Company, including
compensation of executive officers of the Company. The Compensation Committee
did not meet during the year ended December 31, 1995, since all executive
officers of the Company had employment agreements with the Company and no
changes were made to any of such agreements.
Mitchell Rubenstein, Harry T. Hoffman and Dr. Lawrence Gould are the
members of the Stock Option Committee. The Stock Option Committee administers
the Company's 1993 Stock Option Plan (the "1993 Plan"). The Stock Option
Committee did not meet during the year ended December 31, 1995, but rather acted
by unanimous consent on two occasions during such year. There is no nominating
(or
9
<PAGE>
audit) committee or similar committee of the Board of Directors. Rather,
these functions are performed by the Board of Directors as a whole.
10
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth the aggregate
compensation paid in 1995, 1994 and 1993 to the Chief Executive Officer and to
the President, the only other executive officer of the Company whose total
annual salary and bonus during 1995 was $100,000 or more (the Chief Executive
Officer and the President are sometimes referred to herein together as the
"Named Executive Officers").
<TABLE>
<CAPTION>
=====================================================================================================
ANNUAL COMPENSATION LONG-TERM
COMPENSATION
AWARDS
- -----------------------------------------------------------------------------------------------------
SHARES
NAME AND OTHER UNDERLYING
PRINCIPAL YEAR SALARY($) BONUS($) ANNUAL OPTIONS/SARS(#)
POSITION COMPENSATION($)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mitchell 1995 199,200 25,000 7,800(1) 72,500(2)
Rubenstein, 1994 151,800 40,000 7,800(1)
Chief 1993 87,500 ___ 49,468(3)
Executive
Officer
- -----------------------------------------------------------------------------------------------------
Laurie S. 1995 199,200 25,000 7,800(1) 72,500(2)
Silvers, 1994 151,800 40,000 7,800(1)
President 1993 87,500 --- 49,468(3)
=====================================================================================================
</TABLE>
(1) Represents a car allowance paid to the Named Executive Officer.
(2) Represents options granted under the Company's 1993 Plan.
(3) For each officer, includes $36,968 in consulting fees paid prior to
effectiveness of the officer's respective employment contracts and
$12,500 in advances against future salary.
EMPLOYMENT AGREEMENTS. Effective July 1, 1993, the Company entered into
five year employment agreements with each of Mitchell Rubenstein, the Company's
Chairman and Chief Executive Officer, and Laurie S. Silvers, the Company's Vice
Chairman and President. The terms of each of the employment agreements will
automatically be extended for successive one year terms unless the Company or
the Named Executive Officer gives written notice to the other at least 90 days
prior to the then- scheduled expiration date. Each of the employment agreements
provides for an annual salary currently set at $200,000 (subject to automatic
cost-of living increases), an annual bonus in an amount determined by the Board
of Directors (but not less than $25,000) and an automobile allowance of $650 per
month. Each employment agreement provides that each of the Named Executive
Officers will continue to receive his or her salary until the expiration of the
term of the employment agreements if the Named Executive Officer's employment is
terminated by the Company for any reason other than death, disability or Cause
(as defined in the employment agreements), or for a period of 12 months after
termination of the employment agreement as a result of the Named Executive
Officer's disability, and that the Named Executive Officer's estate will receive
a lump sum payment equal to one year's base salary plus a pro rata portion of
any bonus to which the Named Executive Officer is entitled upon termination of
the
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<PAGE>
employment agreement by reason of the Named Executive Officer's death. The
term Cause is defined in the employment agreements to mean (a) a Named Executive
Officer's act or omission which constitutes a willful and material breach of
such Named Executive Officer's employment agreement which is not cured within 30
days after such Named Executive Officer's receipt of notice of such breach, (b)
a Named Executive Officer's fraud, embezzlement or misappropriation of the
Company's assets or property, or (c) a Named Executive Officer's conviction for
a criminal act that is a felony. A termination by the Company of one of the
Named Executive Officer's employment without Cause will constitute a termination
without Cause of the other Named Executive Officer for purposes of the
employment agreements. Each employment agreement also prohibits the Named
Executive Officer from directly or indirectly competing with the Company for one
year after termination of the employment agreement for any reason except the
Company's termination of the Named Executive Officer's employment without Cause.
If a Change of Control (as defined in the employment agreements) occurs, the
employment agreements provide for the continued employment of the Named
Executive Officers until the earlier of two years following the Change of
Control or the then scheduled expiration date of the term of employment. The
term Change of Control, as used in the employment agreements, is defined to mean
(a) any person's or group's acquisition of 20% or more of the combined voting
power of the Company's outstanding securities, or (b) in the event of any cash
tender or exchange offer, merger or other business combination, sale of assets
or contested election, the persons who were directors of the Company prior to
such transaction ceasing to constitute a majority of the Board of Directors
following the transaction. In addition, following a Change in Control, if the
Named Executive Officer's employment is terminated by the Company other than for
Cause or by reason of the Named Executive Officer's death or disability, or by
the Named Executive Officer for certain specified reasons (such as a reduction
of the Named Executive Officer's compensation or diminution of the Named
Executive Officer's duties), the Named Executive Officer will receive a lump sum
cash payment equal to three times the Named Executive Officer's then existing
base salary and most recent annual bonus.
OPTION GRANTS IN LAST FISCAL YEAR. The following table sets forth
information concerning individual grants of stock options made during the fiscal
year ended December 31, 1995 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
==========================================================================================================
NUMBER OF % OF TOTAL
SHARES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE EXPIRATION
NAME OPTIONS EMPLOYEES IN PRICE DATE
GRANTED(#)(1) FISCAL YEAR ($/SHARE)
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Mitchell 72,500 40 8.00 5/30/00
Rubenstein
- ----------------------------------------------------------------------------------------------------------
Laurie S. 72,500 40 8.00 5/30/00
Silvers
==========================================================================================================
</TABLE>
(1) Represents options granted under the 1993 Plan. Such options vest in four
equal installments over a four year period commencing one year from the
date of grant.
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<PAGE>
STOCK OPTIONS HELD AT END OF 1995. The following table indicates the
total number and value of exercisable and unexercisable stock options held by
each Named Executive Officer as of December 31, 1995. No options were exercised
by the Named Executive Officers during the year ended December 31, 1995.
<TABLE>
<CAPTION>
==========================================================================================================
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR IN-THE-MONEY OPTION
END AT FISCAL YEAR END(1)
- ----------------------------------------------------------------------------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Mitchell --- 72,500 $-0- $-0-
Rubenstein
- ----------------------------------------------------------------------------------------------------------
Laurie S. Silvers --- 72,500 -0- -0-
==========================================================================================================
</TABLE>
(1) Based on a closing price on December 29, 1995 (the last trading day in
1995) of $7.375 per share as reported by NASDAQ.
LONG-TERM INCENTIVE AND PENSION PLANS. The Company does not have any
long-term incentive or pension plans.
COMPENSATION OF DIRECTORS. Directors of the Company who are neither
employees nor consultants ("non-employee directors") are compensated at the rate
of $1,000 for each meeting of the Board of Directors attended, and all directors
are reimbursed for travel and lodging expenses in connection with their
attendance at meetings. The Company has established for the non-employee
directors the Director's Stock Option Plan (the "Directors Plan") which provides
for automatic grants to each non-employee director of options to purchase shares
of Common Stock having a market value at the time of grant equal to $25,000 (i)
upon a person's election as a director and (ii) each year thereafter upon such
person's reelection as a director of the Company, in both instances at an
exercise price equal to the fair market value of the Common Stock on the date of
the grant. A total of 50,000 shares of Common Stock have been reserved for
issuance upon exercise of options granted under the Directors Plan. Options
granted under the Directors Plan become exercisable six months after the date of
grant and expire five years after the date of grant. The Board of Directors, in
its discretion, may cancel all options granted under the Directors Plan that
remain unexercised on the date of consummation of certain corporate transactions
described in the Directors Plan. The Directors Plan will terminate in July 2003
unless sooner terminated under the provisions thereof. As of the date of this
Proxy Statement, options to purchase 10,416 shares of Common Stock were
outstanding under the Directors Plan as follows:
<TABLE>
<CAPTION>
=======================================================================================================
NUMBER OF
SHARES EXERCISE EXPIRATION
NAME OF DIRECTOR SUBJECT PRICE GRANT DATE DATE
TO OPTIONS
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
Harry T. Hoffman 3,125 $8.00 11/1/93 11/1/03
13
<PAGE>
- -------------------------------------------------------------------------------------------------------
Dr. Lawrence Gould 3,125 $8.00 11/1/93 11/1/03
- -------------------------------------------------------------------------------------------------------
Deborah J. Simon 4,166 $6.00 11/8/95 11/8/05
=======================================================================================================
</TABLE>
See "Certain Transactions-Consulting Agreements" for a description of
consulting agreements between the Company and certain of its directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All compensation decisions during 1995 were made by the Compensation
Committee, which at the time of such decisions consisted of Mitchell Rubenstein,
Laurie S. Silvers and Dr. Martin H. Greenberg. No changes to the compensation of
any of the foregoing persons was made in 1995.
CERTAIN TRANSACTIONS
ORGANIZATION OF THE COMPANY
The Company was incorporated on January 22, 1993 by Mitchell Rubenstein
and Laurie S. Silvers, whose initial capital contribution for the 1,969,192
shares of Common Stock issued to them as tenants by the entirety was $50,000.
Mr. Rubenstein and Ms. Silvers also purchased an additional 25,000 shares of
Common Stock in the Company's initial public offering (the "IPO") for $200,000.
In February, April and July 1993, the Company issued and sold to Dr.
Martin H. Greenberg, a director of the Company, James R. Fisher and Louis
Taylor, 30,881, 10,808 and 10,294 shares of Common Stock, respectively, for
aggregate purchase prices of $100,000, $35,000 and $50,000, respectively. The
Company's subscription agreements with Dr. Greenberg and Messrs. Fisher and
Taylor provided that in the event the Company issued shares in an initial public
offering for less than a certain price, the Company would issue them, for no
additional consideration, a certain number of additional shares based on the
public offering price per share. Pursuant to their respective subscription
agreements, upon consummation of the IPO, the Company issued to Dr. Greenberg
and Mr. Taylor an additional 6,619 and 8,456 shares of Common Stock,
respectively, and did not issue any additional shares of Common Stock to Mr.
Fisher.
The Company's subscription agreements with Mitchell Rubenstein and Laurie
S. Silvers, Dr. Martin H. Greenberg, James R. Fisher and Louis Taylor grant each
of such persons certain "piggyback" registration rights under the Securities Act
for the shares issued to them pursuant to such agreements. Pursuant to such
registration rights, each of these individuals is entitled, subject to certain
exceptions, to have all or part of their shares of the Company's common stock
included, at the Company's expense,
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<PAGE>
in any registration statement filed by the Company under the Securities Act of
1933, as amended (the "Securities Act").
ASBURY PARK PRESS
In July 1993, the Company and Asbury Park Press entered into a stock
purchase agreement pursuant to which Asbury Park Press agreed to purchase
224,575 shares of Common Stock for $1,250,000, $1,000,000 of which was payable
in cash installments and $250,000 of which was payable in the form of services
rendered at the Company's request any time during the three years following the
date of the agreement. Asbury Park Press paid the Company $333,333 of the cash
portion of the purchase price in July 1993 and the balance of $666,667 in March
1994. Of the remaining amount owed by Asbury Park Press, $63,981 was provided to
the Company in the form of services during 1994 and the balance of $186,019 at
December 31, 1994 was realized through the performance of services and a cash
payment of $160,000. Pursuant to the agreement with Asbury Park Press, the
Company was required to issue to Asbury Park Press, for no additional
consideration, additional shares of Common Stock so that Asbury Park Press would
continue to have 10% of the issued and outstanding capital stock of the Company,
until such time as the Company had issued an aggregate of 4,000,000 shares of
Common Stock (the "Antidilution Rights"). Pursuant to the Antidilution Rights,
(i) effective upon the consummation of the IPO, Asbury Park Press was issued
168,341 shares of Common Stock and (ii) as a result of the issuance of
additional shares pursuant to the Tomorrow Acquisition (see "-Tomorrow
Acquisition," below), the Company issued to Asbury Park Press an additional
7,084 shares of Common Stock, after which no further shares of Common Stock were
issuable to Asbury Park Press pursuant to the Antidilution Rights. The Company
has granted to Asbury Park Press certain "piggyback" registration rights under
the Securities Act for the shares of Common Stock purchased by it from the
Company.
In July 1993, Mitchell Rubenstein and Laurie S. Silvers entered into a
stock option agreement with Asbury Park Press, at the request of Asbury Park
Press, pursuant to which they granted Asbury Park Press a two year option to
purchase a number of shares of Common Stock equal to 2.5% of the total number of
shares of the Company's common stock outstanding from time to time from them for
an exercise price of $250,000. In January 1995, Asbury Park Press exercised the
option and purchased 98,229 shares of Common Stock from Mr. Rubenstein and Ms.
Silvers. Asbury Park Press has no further rights to purchase additional shares
of Common Stock from Mr. Rubenstein and Ms. Silvers.
In July 1995, the Company granted Asbury Park Press an option to purchase
100,000 shares of Common Stock at a price of $6.13 per share (the "Asbury
Option"). The Asbury Option is exercisable until July 2000. The Company
currently has no other outstanding agreements with Asbury Park Press.
TOMORROW ACQUISITION
During the fourth quarter of 1994, the Company acquired a controlling
interest in the book licensing and packaging business conducted by Dr. Martin H.
Greenberg, a director of the Company, and Tomorrow, Inc., a corporation owned by
Dr. Greenberg and his wife, Rosalind Greenberg (the
15
<PAGE>
"Tomorrow Acquisition"). As a result of these transactions, the book licensing
and packaging business formerly conducted by Dr. Greenberg and Tomorrow, Inc. is
now held in Tekno Books, a general partnership, 51% of which is owned by the
Company and 49% of which is owned by Dr. Greenberg. Dr. Greenberg serves as
Chief Executive Officer of Tekno Books.
The Tomorrow Acquisition was effected through the following transactions:
(i) a newly formed subsidiary of the Company merged with Tomorrow, Inc.,
whereupon Dr. Greenberg and his wife, Rosalind Greenberg, the sole shareholders
of Tomorrow, Inc., received an aggregate of 183,334 shares of Common Stock in
consideration for their interests in Tomorrow, Inc.; (ii) following the merger,
Tomorrow, Inc. (which was then a wholly owned subsidiary of the Company) and Dr.
Greenberg formed a partnership ("Tekno Books"), to which Tomorrow, Inc.
contributed all of its assets in exchange for a 34.375% interest and Dr.
Greenberg contributed substantially all of his rights, including royalties and
other income, to market, sell and distribute books, magazines and other
publications packaged, printed, produced, published and/or otherwise created by
him or pursuant to any contract between him and any author or collaborator in
exchange for a 65.625% interest; and (iii) the Company purchased from Dr.
Greenberg a 16.625% interest in Tekno Books for $500,000 cash. In connection
with the Tomorrow Acquisition, the Company agreed to repurchase up to 50,000 of
the shares of Common Stock issued to Dr. Greenberg and his wife in the Tomorrow
Acquisition at a price of $6.00 per share if either (i) the Company raised in
excess of $1,000,000 in capital through the sale of its securities prior to
September 9, 1995 and they so elect or (ii) they otherwise request the Company
to do so at certain times prior to May 1996. The Greenbergs did not exercise
such rights and such rights have expired.
CONSULTING AGREEMENTS
In February 1993, the Company entered into a consulting agreement with
Dr. Martin H. Greenberg pursuant to which Dr. Greenberg agreed to render
advisory and consulting services to the Company, including identifying
best-selling authors to create characters for the Company and negotiating
agreements with such authors, arranging for the publication of prose novels and
anthologies for children and adults based on the Company's characters and comic
books, and attending trade shows and conventions on the Company's behalf. The
consulting agreement will expire in November 2003, unless terminated earlier,
which termination may only take place under certain conditions. Pursuant to the
consulting agreement, in November 1993 Dr. Greenberg began receiving consulting
fees of $30,000 per year and was granted options to purchase 6,250 shares of
Common Stock at an exercise price of $8.00 per share. In connection with the
Tomorrow Acquisition, the consulting agreement was amended on December 9, 1994
(i) to provide that Dr. Greenberg will have the exclusive right to package book
novelizations based on the Company's entertainment properties, and (ii) in lieu
of future annual stock option grants to which Dr. Greenberg was entitled under
the original agreement, to grant Dr. Greenberg options to purchase 17,778 shares
of Common Stock at an exercise price of $8.4375 per share.
In July 1993, the Company entered into consulting agreements with each of
Messrs. Jules L. Plangere, Jr. (Chairman of the Board of Asbury Park Press), E.
Donald Lass (President and Chief Executive Officer of Asbury Park Press), Robert
E. McAllan (President of Press Broadcasting Company, Inc., a subsidiary of
Asbury Park Press) and Alfred D. Colantoni (Chief Financial Officer of Asbury
Park Press and other subsidiaries and affiliates of New Jersey Press) (the
"Consultants"), pursuant to which
16
<PAGE>
each Consultant agreed, in his individual capacity, to render advisory and
consulting services to the Company with respect to the publishing,
communications and printing industries. In consideration for their services,
each Consultant receives at the end of each six month period during the term of
the agreements $12,500, at the option of the Consultant, in cash or in stock
options, exercisable for nominal consideration, to purchase a number of shares
of Common Stock having a market value at the time of payment equal to $12,500.
The consulting agreements were scheduled to expire in July 1995. In May 1995,
the Company extended the term of the consulting agreements for a two-year
period, provided that all subsequent compensation thereunder shall be payable
solely in stock options.
AUGUST 1995 PRIVATE OFFERING
In August 1995, the Company sold 650,000 shares of its Common Stock for
$6.25 per share in a private offering and realized gross proceeds of $4,062,500
and net proceeds of $3,435,738, after deducting fees of the placement agent
(Bear Stearns & Co., Inc.) and other professional fees and related expenses.
Pursuant to registration rights granted in connection with the private offering,
the Company has registered the 650,000 shares of Common Stock sold therein for
resale under the Securities Act by the holders thereof. Asbury Park Press and
Tekno Simon each purchased 160,000 shares of Common Stock in the private
offering. Contemporaneously with the private offering, the Company also entered
into an agreement to sell to two investors, for $250,000 and $249,600,
respectively, immediately exercisable four-year warrants to purchase an
aggregate of 240,000 shares of Common Stock at an exercise price of $6.25 per
share (the "Offering Warrants"). One investor, who participated in the August
1995 private offering, has paid for his Offering Warrants in full and the second
investor, Martin Ergas, who subsequently purchased Canadian franchise rights
from the Company, paid $90,000 during the fourth quarter of 1995 and $59,600
during the first quarter of 1996, with the balance payable in ten monthly
installments of $10,000 each commencing in March 1996.
PREFERRED STOCK INVESTMENT BY TEKNO SIMON
In November 1995, the Company entered into the Simon Stock Purchase
Agreement to sell up to 320,000 shares of the Series A Preferred Stock to Tekno
Simon, an entity controlled by Melvin Simon, Co-Chairman of the Simon Property
Group. The proceeds from the sales of Series A Preferred Stock are being and
will be used to fund construction, installation and other costs directly related
to the opening of up to 25 Entertainment Supero Kiosks through 1996. The Simon
Stock Purchase Agreement provides for shares of Series A Preferred Stock to be
purchased by Tekno Simon from time to time in installments of 12,800 shares each
at a price of $6.25 per share. One installment will close following the signing
of each new lease between the Company (or one of its affiliates) and Simon
Property Group (or one of its affiliates) or any other third party approved by
Tekno Simon for a lease by the Company of shopping center space for one of the
Company's Entertainment Supero Kiosks. Neither the Company, Simon Property Group
nor any of their respective affiliates are obligated to enter into any such
lease. As of the date of this Proxy Statement, the Company had funded the
development of 15 Entertainment Supero Kiosks through the sale of 192,000 shares
of Series A Preferred Stock for $1,200,000 pursuant to the Simon Stock Purchase
Agreement. The Company anticipates that it will enter into ten additional
17
<PAGE>
leases and close the remaining ten related installments in 1996. No shares of
Series A Preferred Stock will be sold pursuant to the Simon Stock Purchase
Agreement for leases entered into after December 31, 1996.
The Series A Preferred Stock has a stated value of $6.25 per share and
accrues noncash dividends, payable quarterly in shares of Common Stock based on
prevailing market prices for the Common Stock. The dividends accrue on the
stated value of the outstanding shares of the Series A Preferred Stock at a
variable rate equal to a specified bank prime rate (8.25% as of the Record
Date). During the two year period commencing on November 28, 1995, the Series A
Preferred Stock is convertible at the option of the holders into shares of
Common Stock on a one-for-one basis. After the conversion period expires, the
Series A Preferred Stock will be redeemable at any time after November 28, 1997
at the Company's option for $7.1875 per share in cash. Except as required by
law, the holders of the Series A Preferred Stock will be entitled to vote
together with the holders of Common Stock on all matters with each share of
Series A Preferred Stock having one vote. The Series A Preferred Stock has a
liquidation preference of $7.1825 per share over the Common Stock. The holders
of the Series A Preferred Stock have certain demand and "piggyback" registration
rights to have such shares and the shares of Common Stock issued upon conversion
thereof or as dividends thereunder registered by the Company for sale by such
holders under the Securities Act.
Pursuant to the Simon Stock Purchase Agreement, Tekno Simon has the right
to designate one nominee to the Company's Board of Directors until such time as
Tekno Simon holds less than 25% of the sum of (i) the shares of Series A
Preferred Stock purchased pursuant to the Simon Stock Purchase Agreement (or
shares of Common Stock issued or issuable upon conversion thereof) and (ii) the
shares of Common Stock purchased by Tekno Simon in the Company's August 1995
private offering. Certain principal shareholders of the Company, including
Mitchell Rubenstein, Laurie S. Silvers, Asbury Park Press and Dr. Martin H.
Greenberg, have agreed to vote their shares of Common Stock in favor of the
election of Tekno Simon's nominee to the Board of Directors. Tekno Simon's
current nominee on the Board of Directors is Deborah J. Simon.
The Simon Property Group and other affiliates of Tekno Simon are party to
various leases with the Company for certain of the Company's Entertainment
Supero Kiosks.
APPROVAL OF AFFILIATED TRANSACTIONS
All transactions between the Company and its directors, executive
officers and principal shareholders have been, and in the case of future
transactions will be, on terms no less favorable than could be obtained from
unaffiliated third parties and have been, and in the case of future transactions
will be, subject to approval by a majority of the independent, disinterested
directors of the Company.
PROPOSAL TO APPROVE AN AMENDMENT TO ARTICLES OF INCORPORATION
18
<PAGE>
The Board of Directors of the Company has approved and recommends that
the shareholders of the Company approve an amendment to the Company's Articles
of Incorporation for the purpose of increasing the number of its authorized
shares of Common Stock from 11,000,000 to 25,000,000. Such amendment may be
accomplished by either amending or amending and restating the Company's Articles
of Incorporation, as the Board shall determine.
The Company's authorized capital stock consists of 11,000,000 shares of
Common Stock, par value $.01 per share, and 1,000,000 shares of Preferred Stock,
par value $.01 per share. As of the date of this Proxy Statement, 6,085,725
shares of Common Stock and 192,000 shares of Series A Preferred Stock are
outstanding, an additional 1,037,836 shares (1,687,836 shares if Proposal 3 is
approved) of Common Stock are reserved for issuance upon exercise of outstanding
options and warrants and for future grants of options under the 1993 Plan and
the Directors Plan and an additional 320,000 shares of Common Stock are reserved
for issuance upon the conversion of the Series A Preferred Stock.
Shareholders of the Company do not have preemptive rights to subscribe
for or purchase any of the additional shares of Common Stock to be authorized.
Additional shares could be used for any proper corporate purpose, including
acquisitions, raising of additional equity capital, stock dividends or upon the
exercise of stock options. The future issuance of additional shares of Common
Stock on other than a pro rata basis may dilute the ownership of the current
shareholders, as well as their proportionate voting rights.
If the proposed amendment to the Company's Articles of Incorporation is
adopted, no further approval of the holders of Common Stock would be required
for the issuance of shares of Common Stock as authorized by the amendment and,
absent any legal or stock exchange requirements, it is not contemplated that
further approval of the holders of Common Stock would be sought for issuance of
any shares authorized by the amendment. The Company has no present plans to
issue any shares of Common Stock which would be authorized hereby; however, the
Board of Directors has adopted the Shareholders' Rights Plan described below,
subject to shareholder approval of this proposal.
SHAREHOLDERS' RIGHTS PLAN
On May 16, 1996, the Board of Directors of the Company declared a
dividend distribution of one right ("Right") for each outstanding share of
Common Stock on August 31, 1996, subject to shareholder approval of an amendment
to the increase in the number of shares of Common Stock authorized for issuance.
The Rights will expire on the close of business on August 31, 2006, unless
earlier redeemed by the Company.
Initially, the Rights will be attached to all Common Stock certificates,
and the Rights will automatically trade with shares of Common Stock. However,
ten business days after a person or group announces an offer the consummation of
which would result in such person or group owning 30% or more of the Common
Stock, or ten business days after a public announcement that a person or group
has acquired 15% or more of the Common Stock (an "Acquiring Person"), the Rights
will become exercisable, and separate certificates representing the Rights will
be issued. The term "Acquiring Person" does not include, the Company, its
subsidiaries and their respective employee benefit plans, any person
19
<PAGE>
who owned 15% or more of the outstanding Common Stock on May 16, 1996 or any
person who becomes an Acquiring Person pursuant to any action or transaction
approved by the Board of Directors prior to such person becoming an Acquiring
Person. The Company may redeem the Rights at a price of $.01 per Right at any
time until ten business days after an Acquiring Person has been identified as
such.
In the event a person or group announces an offer the consummation of
which would result in such person or group owning 15% or more of the Common
Stock, each holder of a Right will be entitled to purchase one share of Common
Stock (the "Common Stock") from the Company at a price of $20.00 per share,
subject to adjustment.
Unless the Rights are earlier redeemed or the transaction is approved by
the Board of Directors, in the event that after the time that the Rights become
exercisable the Company were to be acquired in a merger or other business
combination (in which any shares of the Company's Common Stock are changed into
or exchanged for other securities or assets) or more than 50% of the assets or
earning power of the Company and its subsidiaries (taken as a whole) were to be
sold or transferred in one or a series of related transactions, proper provision
will be made so that each holder of record of a Right will from and after such
date have the right to receive, upon payment of the exercise price of the
Rights, that number of shares of common stock of the acquiring company having a
market value at the time of such transaction equal to two times the exercise
price of the Rights. In addition, in the event a person or group becomes an
Acquiring Person, each holder of a Right (other than an Acquiring Person) will
have the right to purchase the number of shares of Common Stock (or, in certain
circumstances, cash, property or other securities of the Company or a reduction
in the purchase price) having a value equal to two times the exercise price of
the Rights.
The number of shares of Common Stock issuable upon exercise of the Rights
is subject to certain adjustments from time to time in the event of a stock
dividend on, or a subdivision or combination of, the Common Stock. The exercise
price of the Rights is subject to adjustment in the event of extraordinary
distributions of cash or other property to holders of Common Stock.
The Rights have certain anti-takeover effects. The Rights may cause
substantial dilution to a person or group that attempts to acquire the Company
in a manner or on terms not approved by the Board of Directors. The Rights,
however, should not deter any prospective offeror willing to negotiate in good
faith with the Board of Directors, nor should the Rights interfere with any
merger or other business combination approved by the Board of Directors.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
PROPOSAL TO APPROVE AN AMENDMENT TO THE 1993 STOCK OPTION PLAN
On May 16, 1996, the Board of Directors of the Company amended, subject
to shareholder approval, the Big Entertainment, Inc. 1993 Stock Option Plan (the
"1993 Plan") to increase the number of shares of Common Stock authorized for
issuance under the 1993 Plan by 650,000 shares from a total of 350,000 shares to
1,000,000 shares of Common Stock.
20
<PAGE>
PLAN DESCRIPTION
The statements in this Proxy Statement concerning the terms and
provisions of the 1993 Plan are summaries only and do not purport to be
complete. All such statements are qualified in their entirety by reference to
the full text of the 1993 Plan, which is attached hereto as Exhibit A.
The purpose of the 1993 Plan is to advance the interests of the Company
by providing an additional incentive to attract and retain qualified and
competent persons as employees or consultants, upon whose efforts and judgment
the success of the Company is largely dependent, through the encouragement of
stock ownership in the Company by such persons.
The 1993 Plan was effective as of July 1, 1993, and, unless sooner
terminated by the Board of Directors of the Company in accordance with the terms
thereof, shall terminate on July 1, 2003. Certain employees and consultants to
the Company, whether or not employees, who are selected by the stock option
committee may participate in the 1993 Plan; however, no incentive stock option,
as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code" or "Internal Revenue Code") shall be granted to a consultant who is not
also an employee of the Company or its subsidiaries.
The 1993 Plan provides for the issuance of incentive stock options
("Incentive Stock Options") and nonqualified stock options ("Nonqualified Stock
Options"). An Incentive Stock Option is an option to purchase Common Stock that
meets the definition of "incentive stock option" set forth in Section 422 of the
Code. A Nonqualified Stock Option is an option to purchase Common Stock that
meets certain requirements in the Plans but does not meet the definition of an
"incentive stock option" set forth in Section 422 of the Code. Nonqualified
Stock Options and Incentive Stock Options are sometimes referred to herein as
"Options."
The number of shares of Common Stock that may be issued pursuant to
Options granted under the 1993 Plan is presently 350,000, and if this proposal
is approved by the shareholders, will be increased to 1,000,000. If any Option
granted pursuant to the 1993 Plan terminates, expires, or is canceled or
surrendered, in whole or in part, shares subject to the unexercised portion may
again be issued pursuant to the exercise of Options granted under the 1993 Plan.
The shares acquired upon exercise of Options granted under the 1993 Plan will be
authorized and unissued shares of Common Stock. The Company's shareholders will
not have any preemptive rights to purchase or subscribe for the shares reserved
for issuance under the 1993 Plan.
The 1993 Plan is administered by a stock option committee of two or more
directors (the "Committee") or, if a Committee is not designated by the Board of
Directors, by the Board of Directors as a whole. The Committee is presently
comprised of the following directors: Mitchell Rubenstein, Harry T. Hoffman and
Dr. Lawrence Gould. The Committee has the right to determine, among other
things, the persons to whom Options are granted, the number of shares of Common
Stock subject to Options, the exercise price of Options and the term thereof.
All employees of the Company, including officers and directors and
consultants to the Company, are eligible to receive grants of Options under the
1993 Plan; however, no Incentive Stock Option may
21
<PAGE>
be granted to a consultant who is not also an employee of the Company or any of
its subsidiaries. Upon receiving grants of Options, each holder of the Options
(the "Optionee") shall enter into an option agreement with the Company which
contains the terms and conditions deemed necessary by the Committee.
TERMS AND CONDITIONS OF OPTIONS
OPTION PRICE. For any Option granted under the 1993 Plan, the option
price per share of Common Stock may be any price not less than par value per
share as determined by the Committee; however, the option price per share of any
Incentive Stock Option may not be less than the Fair Market Value of the Common
Stock on the date such Incentive Stock Option is granted. On July , 1996, the
closing price of the Company's Common Stock as reported by the NASDAQ SmallCap
Market was [$ ] per share.
Under the 1993 Plan, the "Fair Market Value" is the closing price of
Common Stock on the business day immediately preceding the date of grant;
however, if the Common Stock is not publicly traded, then the Fair Market Value
will be the average of the price of sales of Common Stock by the Company during
the 90 days prior to the date of grant. If no sales have occur during the 90
days prior to the date of grant, the Committee will in its sole discretion
determine the Fair Market Value in a fair and uniform manner. The closing price
of Common Stock on any business day under the Plans is (i) if Common Stock is
listed or admitted for trading on any United States national securities
exchange, or if actual transactions are otherwise reported on a consolidated
transaction reporting system, the last reported sale price of Common Stock on
such exchange or reporting system, as reported in any newspaper of general
circulation, (ii) if Common Stock is quoted on the National Association of
Securities Dealers Automated Quotations System, or any similar system of
automated dissemination of quotations of securities prices in common use, the
mean between the closing high bid and low asked quotations for such day of
Common Stock on such system, or (iii) if neither clause (i) nor (ii) is
applicable, the mean between the high bid and low asked quotations for Common
Stock as reported by the National Quotation Bureau, Incorporated if at least two
securities dealers have inserted both bid and asked quotations for Common Stock
on at least 5 of the 10 preceding days.
EXERCISE OF OPTIONS. Each Option is exercisable in such amounts at such
intervals and upon such terms as the Committee may determine. In no event may an
Option be exercisable after 10 years from the date of grant. Unless otherwise
provided in an Option, each outstanding Option granted under the 1993 Plan shall
become immediately fully exercisable (i) if there occurs any transaction (which
shall include a series of transactions occurring within 60 days or occurring
pursuant to a plan), that has the result that shareholders of the Company
immediately before such transaction cease to own at least 51 percent of the
voting stock of the Company or of any entity that results from the participation
of the Company in a reorganization, consolidation, merger, liquidation or any
other form of corporate transaction; (ii) if the shareholders of the Company
shall approve a plan of merger, consolidation, reorganization, liquidation or
dissolution in which the Company does not survive (unless such plan is
subsequently abandoned); or (iii) if the shareholders of the Company shall
approve a plan for the sale, lease, exchange or other disposition of all or
substantially all the property and assets of the Company (unless such plan is
subsequently abandoned). The Committee may in its sole discretion accelerate the
date on which any Option may be exercised and may accelerate the vesting of any
shares subject to any
22
<PAGE>
Option or previously acquired by the exercise of any Option. Options granted to
the officers and directors under the 1993 Plan may not be exercised until six
months following the date of the grant.
Unless further limited by the Committee in any Option, shares of Common
Stock purchased upon the exercise of Options must be paid for in cash, by
certified or official bank check, by money order, with already owned shares of
Common Stock, or a combination of the above. The Committee, in its sole
discretion, may accept a personal check in full or partial payment. If paid in
whole or in part with shares of already owned Common Stock, the value of the
shares surrendered is deemed to be their Fair Market Value on the date the
Option is exercised. Proceeds from the sale of Common Stock pursuant to the
exercise of Options will be added to the general funds of the Company to be used
for general corporate purposes.
NONTRANSFERABILITY. Options granted under the 1993 Plan are not
transferable by an Optionee other than by will or the laws of descent and
distribution, and Options are exercisable during an Optionee's lifetime only by
the Optionee.
TERMINATION OF OPTIONS. The expiration date of an Option is determined by
the Committee at the time of the grant and is set forth in the applicable stock
option agreement. In no event may an Option be exercisable after 10 years from
the date it is granted.
The 1993 Plan provides that if an Optionee's employment is terminated,
or, in the case of a consultant, if the consultant ceases his or her
relationship with the Company, for any reason other than for cause, mental or
physical disability or death, then the unexercised portion of the Optionee's
Options shall terminate 3 months after the such termination. If an Optionee's
employment is terminated or the consultant is removed for cause, the unexercised
portion of the Optionee's Options shall terminate immediately upon such
termination. If an Optionee's employment is terminated or the consultant is
removed by reason of the Optionee's mental or physical disability, the
unexercised portion of the Optionee's Options shall terminate six months after
such termination. If an Optionee's employment is terminated or the consultant is
removed by reason of the Optionee's death, the unexercised portion of the
Optionee's Options shall terminate 12 months after the Optionee's death.
The Committee in its sole discretion may by giving written notice cancel,
effective upon the date of the consummation of certain corporate transactions
that would result in an Option becoming fully exercisable, any Option that
remains unexercised on such date. Such notice shall be given a reasonable period
of time prior to the proposed date of such cancellation and may be given either
before or after shareholder approval of such corporate transaction.
OUTSTANDING OPTIONS
As of the Record Date, Options for a total of 584,937 shares of Common
Stock had been granted pursuant to the 1993 Plan, none of which had been
exercised. Outstanding Options are held by 24 persons and are exercisable
through various expiration dates from May 1, 1999, to May 16, 2006. Included in
such outstanding Options are 28,660 Options which are exercisable at a price of
$.01 per share, which were granted to four individuals as compensation for
consulting services. The remaining
23
<PAGE>
556,277 Options are exercisable at prices ranging from $4.25 per share to $8.00
per share, which prices equalled or exceeded the fair market value of the Common
Stock on the date of grant. Also, included in such outstanding Options are
Options granted for 276,250 shares which are contingent upon shareholder
approval of the proposed amendment to the 1993 Plan. The contingent Options to
purchase 276,250 shares of Common Stock will become null and void if the
Company's shareholders do not approve the proposed amendment to the 1993 Plan.
Mitchell Rubenstein, Laurie S. Silvers and Dr. Martin H. Greenberg were issued
contingent Options for the purchase of 75,000, 75,000, and 12,500 shares of
Common Stock, respectively, at exercise prices of $6.375 (the fair market value
on the date of grant), which are exercisable until May 16, 2006.
FEDERAL INCOME TAX EFFECTS
The 1993 Plan is not qualified under the provisions of Section 401(a) of
the Code, nor is it subject to any of the provisions of the Employee Retirement
Income Security Act of 1974, as amended.
INCENTIVE STOCK OPTIONS. Incentive Stock Options are "incentive stock
options" as defined in Section 422 of the Internal Revenue Code. Under the Code,
an Optionee generally is not subject to ordinary income tax upon the grant or
exercise of an Incentive Stock Option. However, an employee who exercises an
Incentive Stock Option by delivering shares of Common Stock previously acquired
pursuant to the exercise of an Incentive Stock Option is treated as making a
Disqualifying Disposition (defined below) of such shares if the employee
delivers such shares before the expiration of the holding period applicable to
such shares. The applicable holding period is the longer of two years from the
date of grant or one year from the date of exercise. The effect of this
provision is to prevent "pyramiding" the exercise of an Incentive Stock Option
(i.e., the exercise of the Incentive Stock Option for one share and the use of
that share to make successive exercise of the Incentive Stock Option until it is
completely exercised) without the imposition of current income tax.
The amount by which the fair market value of the shares acquired at the
time of exercise of an Incentive Stock Option exceeds the purchase price of the
shares under such Option will be treated as an item of adjustment included in
the Optionee's alternative minimum taxable income for purposes of the
alternative minimum tax. If, however, there is a Disqualifying Disposition in
the year in which the Option is exercised, the maximum amount of the item of
adjustment for such year is the gain on the disposition of the Common Stock. If
there is Disqualifying Disposition in a year other than the year of exercise,
the dispositions will not result in an item of adjustment for such other year.
If, subsequent to the exercise of an Incentive Stock Option (whether paid
for in cash or in shares), the Optionee holds the shares received upon exercise
for a period that exceeds (a) two years from the date such Incentive Stock
Option was granted or, if later, (b) one year from the date of exercise (the
"Required Holding Period"), the difference (if any) between the amount realized
from the sale of such shares and their tax basis to the holder will be taxed as
long-term capital gain or loss. If the holder is subject to the alternative
minimum tax in the year of disposition, such holder's tax basis in his or her
shares will be increased for purposes of determining his alternative minimum tax
for such year, by the
24
<PAGE>
amount of the item of adjustment recognized with respect to such shares in the
year the Option was exercised.
In general, if, after exercising an Incentive Stock Option, an employee
disposes of the shares so acquired before the end of the Required Holding Period
(a "Disqualifying Disposition"), such Optionee would be deemed in receipt of
ordinary income in the year of the Disqualifying Disposition, in an amount equal
to the excess of the fair market value of the shares at the date the Incentive
Stock Option was exercised over the exercise price. If the Disqualifying
Disposition is a sale or exchange which would permit a loss to be recognized
under the Code (were a loss in fact to be sustained), and the sales proceeds are
less than the fair market value of the shares on the date of exercise, the
Optionee's ordinary income would be limited to the gain (if any) from the sale.
If the amount realized upon disposition exceeds the fair market value of the
shares on the date of exercise, the excess would be treated as short-term or
long- term capital gain, depending on whether the holding period for such shares
exceeded one year.
An income tax deduction is not allowed to the Company with respect to the
grant or exercise of an Incentive Stock Option or the disposition, after the
Required Holding Period, of shares acquired upon exercise. In the event of a
Disqualifying Disposition, a Federal income tax deduction will be allowed to the
Company in an amount equal to the ordinary income to be recognized by the
Optionee, provided that such amount constitutes an ordinary and necessary
business expense to the Company and is reasonable, and the Company satisfies its
withholding obligation with respect to such income.
NONQUALIFIED STOCK OPTIONS. An Optionee granted a Nonqualified Stock
Option under the 1993 Plan will generally recognize, at the date of exercise of
such Nonqualified Stock Option, ordinary income equal to the difference between
the exercise price and the fair market value of the shares of Common Stock
subject to the Nonqualified Stock Option. This taxable ordinary income will be
subject to Federal income tax withholding. A Federal income tax deduction will
be allowed to the Company in an amount equal to the ordinary income to be
recognized by the Optionee, provided that such amount constitutes an ordinary
and necessary business expense to the Company and is reasonable, and the Company
satisfies its withholding obligation with respect to such income.
If an Optionee exercises a Nonqualified Stock Option by delivering other
shares, the Optionee will not recognize gain or loss with respect to the
exchange of such shares, even if their then fair market value is different from
the Optionee's tax basis. The Optionee, however, will be taxed as described
above with respect to the exercise of the Nonqualified Stock Option as if he had
paid the exercise price in cash, and the Company likewise generally will be
entitled to an equivalent tax deduction. Provided a separate identifiable stock
certificate is issued therefor, the Optionee's tax basis in that number of
shares received on such exercise which is equal to the number of shares
surrendered on such exercise will be equal to his tax basis in the shares
surrendered and his holding period for such number of shares received will
include his holding period for the shares surrendered. The Optionee's tax basis
and holding period for the additional shares received on exercise of a
Nonqualified Stock Option paid for, in whole or in part, with shares will be the
same as if the Optionee had exercised the Nonqualified Stock Option solely for
cash.
Code Section 162(m) limits the deductibility of any compensation expense
in excess of $1,000,000 to certain executive officers of companies whose
securities are publicly traded. To the extent that compensation paid to certain
of the Company's executive officers were to approach this $1,000,000 limit,
25
<PAGE>
the amount otherwise deductible by the Company upon the exercise of a
Nonqualified Stock Option or upon a Disqualifying Disposition of an Incentive
Stock Option could be limited by this Code Section.
The discussion set forth above does not purport to be a complete analysis
of the potential tax consequences relevant to the Optionees or to the Company,
or to describe tax consequences based on particular circumstances. It is based
on Federal income tax law and interpretational authorities as of the date of
this Proxy Statement, which are subject to change at any time.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
PROPOSAL TO RATIFY THE SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Arthur Anderson LLP, independent public accountants, served
as the Company's independent public accountants for the year ending December 31,
1995. The Board of Directors, at a meeting held on May 16, 1996, directed that
management submit the appointment of Arthur Anderson LLP for ratification by the
shareholders at the Annual Meeting as the Company's independent public
accountants for the current year ending December 31, 1996. One or more
representatives of Arthur Anderson LLP are expected to be present at the Annual
Meeting, will have the opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate questions from
shareholders.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
OTHER MATTERS
The Board of Directors is not aware of any other business that may come
before the Annual Meeting. However, if additional matters properly come before
the Annual Meeting, the persons named in the accompanying proxy will vote
proxies as in their discretion they may deem appropriate, unless they are
directed by a proxy to do otherwise.
SHAREHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated by the Securities and Exchange
Commission, a shareholder intending to present a proposal to be included in the
Company's proxy statement for the Company's 1997 Annual Meeting of Shareholders
must deliver a proposal in writing to the Company's principal executive offices
no later than March 15, 1997.
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<PAGE>
ADDITIONAL INFORMATION
A copy of the Company's Annual Report to Shareholders for the year ended
December 31, 1995, is being provided to shareholders with this Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
Laurie S. Silvers, Secretary
July 15, 1996
Boca Raton, Florida
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS BEING
SOLICITED, UPON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 1995, AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL STATEMENTS
THERETO. REQUESTS FOR COPIES OF SUCH REPORT SHOULD BE DIRECTED TO MITCHELL
RUBENSTEIN, CHIEF EXECUTIVE OFFICER, BIG ENTERTAINMENT, INC., 2255 GLADES ROAD,
SUITE 237 WEST, BOCA RATON, FLORIDA 33431.
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<PAGE>
BIG ENTERTAINMENT, INC.
----------------------
1993 STOCK OPTION PLAN
AS AMENDED MAY 16, 1996
-----------------------
1. PURPOSE. The purpose of this Plan is to advance the interests of BIG
ENTERTAINMENT, INC., a Florida corporation (the "Company"), by providing an
additional incentive to attract and retain qualified and competent persons as
employees or consultants or upon whose efforts and judgment the success of the
Company is largely dependent, through the encouragement of stock ownership in
the Company by such persons.
2. DEFINITIONS. As used herein, the following terms shall have the
meaning indicated:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Committee" shall mean the stock option committee appointed
by the Board pursuant to Section 13 hereof or, if not appointed, the Board.
(c) "Common Stock" shall mean the Company's Common Stock, par
value $.01 per share.
(d) "Director" shall mean a member of the Board.
(e) "Disinterested Person" shall mean a Director who is not,
during the one year prior to his or her service as an administrator of this
Plan, or during such service, granted or awarded equity securities pursuant to
this Plan or any other plan of the Company or any of its affiliates, except
that:
(i) participation in a formula plan meeting the
conditions in paragraph (c)(2)(ii) of Rule 16b-3 promulgated under the
Securities Exchange Act shall not disqualify a Director from being a
Disinterested Person;
(ii) participation in an ongoing securities acquisition
plan meeting the conditions in paragraph (d)(2)(i) of Rule 16b-3 promulgated
under the Securities Exchange Act shall not disqualify a Director from being a
Disinterested Person; and
(iii) an election to receive an annual retainer fee in
either cash or an equivalent amount of securities, or partly in cash and partly
in securities, shall not disqualify a Director from being a Disinterested
Person.
(f) "Fair Market Value" of a Share on any date of reference shall
be the "Closing Price" (as defined below) of the Common Stock on the business
day immediately preceding such date, unless the Common Stock is not publicly
traded, in which case, the "Fair Market Value" shall be the average of the price
of sales of Common Stock by the Company during the 90 days prior to the date of
grant or, if no sales have occurred during that period, "Fair Market Value"
shall be determined by the Committee in its sole discretion in a fair and
uniform manner without regard to any restriction other than a restriction which
by its terms will never lapse. For the purpose of determining Fair Market Value,
the "Closing Price" of the Common Stock on any business day shall be (i) if the
Common Stock is listed or admitted for trading on any United States national
securities exchange, or if actual transactions are otherwise reported on a
consolidated transaction reporting system, the last reported sale price of
Common Stock on such exchange or reporting system, as reported in any newspaper
of general circulation, (ii) if the Common Stock is quoted on the National
Association of Securities Dealers Automated Quotations System ("NASDAQ"), or any
similar system of automated dissemination of
<PAGE>
quotations of securities prices in common use, the mean between the closing high
bid and low asked Quotations for such day of Common Stock on such system, or
(iii) if neither clause (i) or (ii) is applicable, the mean between the high bid
and low asked quotations for the Common Stock as reported by the National
Quotation Bureau, Incorporated if at least two securities dealers have inserted
both bid and asked quotations for Common Stock on at least five of, the ten
preceding days.
(g) "Incentive Stock Option" shall mean an incentive stock option
as defined in Section 422 of the Internal Revenue Code.
(h) "Internal Revenue Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time.
(i) "Non-Statutory Stock Option" shall mean an Option which is
not an Incentive Stock Option.
(j) "Officer" shall mean the Company's president, principal
financial officer, principal accounting officer and any other person who the
Company identifies as an "executive officer" for purposes of reports or proxy
materials filed by the Company pursuant to the Securities Exchange Act.
(k) "Option" (when capitalized) shall mean any option granted
under this Plan.
(l) "Optionee" shall mean a person to whom a stock option is
granted under this Plan or any person who succeeds to the rights of such person
under this Plan by reason of the death of such person.
(m) "Plan" shall mean this Stock Option Plan for the Company.
(n) "Securities Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
(o) "Share(s)" shall mean a share or shares of the Common
Stock.
3. SHARES AND OPTIONS. The Company may grant to all Optionees from time
to time Options to purchase a total of one million (1,000,000) Shares from
Shares held in the Company's treasury or from authorized and unissued Shares. If
any Option granted under the Plan shall terminate, expire, or be canceled or
surrendered as to any Shares, new Options may thereafter be granted covering
such Shares. An Option granted hereunder shall be either an Incentive Stock
Option or a Non-Statutory Stock Option as determined by the Committee at the
time of grant of such Option and shall clearly state whether it is an Incentive
Stock Option or Non-Statutory Stock Option. All Incentive Stock Options shall be
granted within 10 years from the effective date of this Plan.
4. DOLLAR LIMITATION. Options otherwise qualifying as Incentive Stock
Options hereunder will not be treated as Incentive Stock Options to the extent
that the aggregate fair market value (determined at the time the Option is
granted) of the Shares, with respect to which Options meeting the requirements
of Internal Revenue Code Section 422 are exercisable for the first time by any
individual during any calendar year (under all plans of the Company), exceeds
$100,000.
5. CONDITIONS FOR GRANT OF OPTIONS.
(a) Each Option shall be evidenced by an option agreement that
may contain any term deemed necessary or desirable by the Committee, provided
such terms are not inconsistent with this Plan or any applicable law. Optionees
shall be those persons selected by the Committee from the class of all regular
employees of the Company, and all consultants to the Company, whether or not
employees; provided, however, that no Incentive Stock Option shall be granted to
a consultant who is not also an employee of the Company or a Subsidiary. Any
person who files with the Committee, in a form satisfactory to the Committee, a
written waiver of eligibility to receive any Option under this Plan shall not be
eligible to receive any Option under this Plan for the duration of such waiver.
<PAGE>
(b) In granting Options, the Committee may take into
consideration the contribution the person has made to the success of the Company
and such other factors as the Committee shall determine. The Committee shall
also have the authority to consult with and receive recommendations from
officers and other personnel of the Company with regard to these matters. The
Committee may from time to time in granting Options under the Plan prescribe
such other terms and conditions concerning such Options as it deems appropriate,
including, without limitation (i) prescribing the date or dates on which the
Option becomes exercisable, (ii) providing that the Option rights accrue or
become exercisable in installments over a period of years, or upon the
attainment of stated goals or both, or (iii) relating an Option to the continued
employment of the Optionee for a specified period of time, provided that such
terms and conditions are not more favorable to an Optionee than those expressly
permitted herein.
(c) The Options granted to employees under this Plan shall be in
addition to regular salaries, pension, life insurance or other benefits related
to their employment with the Company. Neither the Plan nor any Option granted
under the Plan shall confer upon any person any right to employment or
continuance of employment by the Company.
(d) Notwithstanding any other provision of this Plan, and in
addition to any other requirements of this Plan, Options may not be granted to a
Director or Officer unless the grant of such Options is authorized by, and all
of the terms of such Options are determined by, a Committee that is appointed in
accordance with Section 13 of this Plan and all of whose members are
Disinterested Persons.
6. OPTION PRICE. The option price per Share of any Option shall be any
price determined by the Committee but shall not be less than the par value per
Share; provided, however, that in no event shall the option price per Share of
any Incentive Stock Option be less than the Fair Market Value of the Shares
underlying such Option on the date such Option is granted.
7. EXERCISE OF OPTIONS. An Option shall be deemed exercised when (i) the
Company has received written notice of such exercise in accordance with the
terms of the Option, (ii) full payment of the aggregate option price of the
Shares as to which the Option is exercised has been made, and (iii) arrangements
that are satisfactory to the Committee in its sole discretion have been made for
the Optionee's payment to the Company of the amount that is necessary for the
Company employing the Optionee to withhold in accordance with applicable Federal
or state tax withholding requirements. Unless further limited by the Committee
in any Option, the option price of any Shares purchased shall be paid in cash,
by certified or official bank check, by money order, with Shares or by a
combination of the above; provided further, however, that the Committee in its
sole discretion may accept a personal check in full or partial payment of any
Shares. If the exercise price is paid in whole or in part with Shares, the value
of the Shares surrendered shall be their Fair Market Value on the date the
Option is exercised. The Company in its sole discretion may, on an individual
basis or pursuant to a general program established by the Committee in
connection with this Plan, lend money to an Optionee to exercise all or a
portion of an Option granted hereunder. If the exercise price is paid in whole
or part with Optionee's promissory note, such note shall (i) provide for full
recourse to the maker, (ii) be collateralized by the pledge of the Shares that
the Optionee purchases upon exercise of such Option, (iii) bear interest at a
rate no less than the rate of interest payable by the Company to its principal
lender, and (iv) contain such other terms as the Committee in its sole
discretion shall require. No Optionee shall be deemed to be a holder of any
Shares subject to an Option unless and until a stock certificate or certificates
for such Shares are issued to such person(s) under the terms of this Plan. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued, except as
expressly provided in Section 10 hereof.
8. EXERCISABILITY OF OPTIONS. Any Option shall become exercisable
in such amounts, at such intervals and upon such terms as the Committee shall
provide in such Option, except as otherwise provided in this Section 8.
(a) The expiration date of an Option shall be determined by the
Committee at the time of grant but in no event shall an Option be exercisable
after the expiration of 10 years from the date of grant of the Option.
3
<PAGE>
(b) Unless otherwise provided in any Option, each outstanding
Option shall become immediately fully exercisable:
(i) if there occurs any transaction (which shall
include a series of transactions occurring within 60 days or occurring pursuant
to a plan), that has the result that shareholders of the Company immediately
before such transaction cease to own at least 51 percent of the voting stock of
the Company or of any entity that results from the participation of the Company
in a reorganization, consolidation, merger, liquidation or any other form of
corporate transaction;
(ii) if the shareholders of the Company shall approve a
plan of merger, consolidation, reorganization, liquidation or dissolution in
which the Company does not survive (unless the approved merger, consolidation,
reorganization, liquidation or dissolution is subsequently abandoned); or
(iii) if the shareholders of the Company shall approve a
plan for the sale, lease, exchange or other disposition of all or substantially
all the property and assets of the Company (unless such plan is subsequently
abandoned).
(c) The Committee may in its sole discretion accelerate the date
on which any Option may be exercised and may accelerate the vesting of any
Shares subject to any Option or previously acquired by the exercise of any
Option.
(d) Options granted to Officers and Directors shall not be
exercisable until the expiration of a period of at least six months following
the date of grant.
9. TERMINATION OF OPTION PERIOD.
(a) The unexercised portion of any Option shall automatically and
without notice terminate and become null and void at the time of the earliest to
occur of the following:
(i) three months after the date on which the Optionee's
employment is terminated (or, in the case of a consultant, the date on which the
Optionee ceases his or her relationship with the Company) or, in the case of a
Non-Statutory Stock Option, and unless the Committee shall otherwise determine
in writing in its sole discretion, the date on which the Optionee's employment
is terminated, in either case for any reason other than by reason of (A) Cause,
which, solely for purposes of this Plan, shall mean the termination of the
Optionee's employment (or in the case of a consultant, the removal of the
Optionee as a consultant) by reason of the Optionee's willful misconduct or
gross negligence, (B) a mental or physical disability as determined by a medical
doctor satisfactory to the Committee, or (C) death;
(ii) immediately upon the termination of the Optionee's
employment for (or, in the case of a consultant, the removal of the Optionee as
a consultant) Cause;
(iii) one year after the date on which the Optionee's
employment is terminated (or, in the case of a consultant, the date the Optionee
is removed as a consultant) by reason of a mental or physical disability (within
the meaning of Internal Revenue Code Section 22(e)) as determined by a medical
doctor satisfactory to the Committee; or
(iv) twelve months after the date of termination of the
Optionee's employment (or, in the case of a consultant, the date the Optionee is
removed as a consultant) by reason of death of the employee.
Prior to becoming null and void as provided above, an Option held at the date of
termination of an Optionee's employment or consulting relationship with the
Company may be exercised in whole or in part, but only to the extent such Option
was exercisable at the date of such termination in accordance herewith.
4
<PAGE>
(b) The Committee in its sole discretion may by giving written
notice ("cancellation notice") cancel effective upon the date of the
consummation of any corporate transaction described in Subsections 8(b)(ii) or
(iii) hereof any Option that remains unexercised on such date. Such cancellation
notice shall be given a reasonable period of time prior to the proposed date of
such cancellation and may be given either before or after approval of such
corporate transaction.
10. ADJUSTMENT OF SHARES.
(a) If at any time while the Plan is in effect or unexercised
Options are outstanding, there shall be any increase or decrease in the number
of issued and outstanding Shares through the declaration of a stock dividend or
through any recapitalization resulting in a stock split-up, combination or
exchange of Shares, then and in such event:
(i) appropriate adjustment shall be made in the maximum
number of Shares available for grant under the Plan, so that the same percentage
of the Company's issued and outstanding Shares shall continue to be subject to
being so optioned; and
(ii) appropriate adjustment shall be made in the number
of Shares and the exercise price per Share thereof then subject to any
outstanding Option, so that the same percentage of the Company's issued and
outstanding Shares shall remain subject to purchase at the same aggregate
exercise price.
(b) Subject to the specific terms of any Option, the Committee
may change the terms of Options outstanding under this Plan, with respect to the
option price or the number of Shares subject to the Options, or both, when, in
the Committee's sole discretion, such adjustments become appropriate by reason
of a corporate transaction described in Subsections 8(b)(ii) or (iii) hereof;
provided, however, that the option price as so changed shall not be less than
the Fair Market Value of the shares subject to the Option at the time of such
change.
(c) Except as otherwise expressly provided herein, the issuance
by the Company of shares of its capital stock of any class, or securities
convertible into shares of capital stock of any class, either in connection with
direct sale or upon the exercise of rights or warrants to subscribe therefor, or
upon conversion of shares or obligations of the Company convertible into such
shares or other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to the number of or exercise price of Shares
then subject to outstanding Options granted under the Plan.
(d) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under the Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate (i)
any or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business; (ii) any merger or
consolidation of the Company; (iii) any issue by the Company of debt securities,
or preferred or preference stock that would rank above the Shares subject to
outstanding Options; (iv) the dissolution or liquidation of the Company; (v) any
sale, transfer or assignment of all or any part of the assets or business of the
Company; or (vi) any other corporate act or proceeding, whether of a similar
character or otherwise.
11. TRANSFERABILITY OF OPTIONS. Each Option shall provide that such
Option shall not be transferable by the Optionee otherwise than by will or the
laws of descent and distribution, and each Option shall be exercisable during
the Optionee's lifetime only by the Optionee.
12. ISSUANCE OF SHARES. As a condition of any sale or issuance of Shares
upon exercise of any Option, the Committee may require such agreements or
undertakings, if any, as the Committee may deem necessary or advisable to assure
compliance with any such law or regulation including, but not limited to, the
following:
(i) a representation and warranty by the Optionee to
the Company, at the time any option is exercised that he is acquiring the Shares
to be issued to him for investment and not with a view to, or for sale in
connection with, the distribution of any such Shares; and
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(ii) a representation, warranty and/or agreement to be
bound by any legends that are, in the opinion of the Committee, necessary or
appropriate to comply with the provisions of any securities law deemed by the
Committee to be applicable to the issuance of the Shares and are endorsed upon
the Share certificates.
13. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Committee, which shall
consist of not less than two Directors, each of whom shall be Disinterested
Persons to the extent required by Section 5(d) hereof. The Committee shall have
all of the powers of the Board with respect to the Plan. Any member of the
Committee may be removed at any time, with or without cause, by resolution of
the Board and any vacancy occurring in the membership of the Committee may be
filled by appointment by the Board.
(b) The Committee, from time to time, may adopt rules and
regulations for carrying out the purposes of the Plan. The Committee's
determinations and its interpretation and construction of any provision of the
Plan shall be final and conclusive.
(c) Any and all decisions or determinations of the Committee
shall be made either (i) by a majority vote of the members of the Committee at a
meeting or (ii) without a meeting by the unanimous written approval of the
members of the Committee.
14. INCENTIVE OPTIONS FOR 10% SHAREHOLDERS. Notwithstanding any other
provisions of the Plan to the contrary, an Incentive Stock Option shall not be
granted to any person owning directly or indirectly (through attribution under
Section 424(d) of the Internal Revenue Code) at the date of grant, stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company (or of any subsidiary (as defined in Section 424 of the
Internal Revenue Code) at the date of grant) unless the option price of such
Option is at least 110% of the Fair Market Value of the Shares subject to such
Option on the date the Option is granted, and such Option by its terms is not
exercisable after the expiration of five years from the date such Option is
granted.
15. INTERPRETATION.
(a) The Plan shall be administered and interpreted so that all
Incentive Stock Options granted under the Plan will qualify as Incentive Stock
Options under Section 422 of the Internal Revenue Code. If any provision of the
Plan should be held invalid for the granting of Incentive Stock Options or
illegal for any reason, such determination shall not affect the remaining
provisions hereof, but instead the Plan shall be construed and enforced as if
such provision had never been included in the Plan.
(b) This Plan shall be governed by the laws of the State of
Florida.
(c) Headings contained in this Plan are for convenience only and
shall in no manner be construed as part of this Plan.
(d) Any reference to the masculine, feminine, or neuter gender
shall be a reference to such other gender as is appropriate.
16. TERM OF PLAN; AMENDMENT AND TERMINATION OF THE PLAN.
(a) This Plan shall become effective upon its adoption by the
Board, and shall continue in effect until all Options granted hereunder have
expired or been exercised, unless sooner terminated under the provisions
relating thereto. No Option shall be granted after 10 years from the date of the
Board's adoption of this Plan.
(b) The Board may from time to time amend the Plan or any Option;
PROVIDED, HOWEVER, that, except to the extent provided in Section 10, no such
amendment may (i) without approval by the Company's shareholders,
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increase the number of Shares reserved for Options or change the class of
persons eligible to receive Options or involve any other change or modification
requiring shareholder approval under Rule 16b-3 of the Securities Exchange Act
of 1934, as amended, (ii) permit the granting of Options that expire beyond the
maximum 10-year period described in Subsection 8(a), or (iii) extend the
termination date of the Plan as set forth in Section 16(a); and, PROVIDED,
FURTHER, that, except to the extent otherwise specifically provided in Section
9, no amendment or suspension of the Plan or any Option issued hereunder shall
substantially impair any Option previously granted to any Optionee without the
consent of such Optionee.
(c) Notwithstanding anything else contained herein, the
provisions of this Plan which govern the number of Options to be awarded
hereunder, the exercise price per share under each such Option, when and under
what circumstances an Option will be granted and the period within which each
Option may be exercised, shall not be amended more than once every six months
(even with shareholder approval), other than to conform to changes to the Code,
or the rules promulgated thereunder, and under the Employee Retirement Income
Security Act of 1974, as amended, or the rules promulgated thereunder, or with
rules promulgated by the Securities and Exchange Commission.
(d) The Board, without further approval of the Company's
shareholder, may at any time terminate or suspend this Plan. Any such
termination or suspension of the Plan shall not affect Options already granted
and such Options shall remain in full force and effect as if this Plan had not
been terminated or suspended. No Option may be granted while the Plan is
suspended or after it is terminated. The rights and obligations under any Option
granted to any Optionee while this Plan is in effect shall not be altered or
impaired by the suspension or termination of this Plan without the consent of
such Optionee.
17. RESERVATION OF SHARES. The Company, during the term of the Plan,
will at all times reserve and keep available a number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
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BIG ENTERTAINMENT, INC.
PROXY
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING TO BE HELD AUGUST 23, 1996
The undersigned hereby appoints Mitchell Rubenstein and Laurie S.
Silvers, and each of them, the proxy or proxies of the undersigned, with full
power of substitution to vote all shares of the capital stock of Big
Entertainment, Inc., a Florida corporation (the "Company"), that the undersigned
is entitled to vote at the Annual Meeting of Shareholders of the Company to be
held on August 23, 1996, or adjournments thereof, with all powers the
undersigned would possess if personally present, on the following as specified
and, in their discretion, on such other matters as may properly come before the
meeting.
PROPOSAL 1: Elect Directors.
Mitchell Rubenstein Laurie S. Silvers Dr. Martin H. Greenberg
Harry T. Hoffman Dr. Lawrence Gould Jules L. Plangere, Jr.
E. Donald Lass Deborah J. Simon John W. Waller, III
[ ] For All Nominees listed above [ ] Withhold authority to vote for
(except as marked to the contrary below) All Nominees listed above
- -------------------------------------------------------------------------------
(To withhold your vote for any nominee or nominees, print the name(s)
above.)
PROPOSAL 2: Approve Amendment to the Company's Articles of Incorporation.
[ ] For [ ] Against [ ]Abstain
PROPOSAL 3: Approve Amendment to the Company's 1993 Stock Option Plan.
[ ] For [ ] Against [ ]Abstain
PROPOSAL 4: Ratify Selection of Arthur Andersen LLP as Independent Public
Accountants.
<PAGE>
[ ] For [ ] Against [ ]Abstain
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4 AND IN
THE DISCRETION OF THE PROXIES NOMINATED HEREBY ON ANY OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING.
Please sign exactly as name appears below.
DATED:_______________________________, 1996.
___________________________________________
Signature
___________________________________________
Signature, if held jointly
Please sign exactly as your name appears on
this Proxy. If shares are registered in more
than one name, the signatures of all such
holders are required. A corporation should
sign in its full corporate name by a duly
authorized officer, stating such officer's
title and official capacity, giving the full
title as such. A partnership should sign in
the partnership name by a authorized person,
stating such person's title and relationship
to the partnership.
<PAGE>
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY,
USING THE ENCLOSED ENVELOPE.
