SCHEDULE 14A INFORMATION
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:
|_| Preliminary Proxy Statement
|_| Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2)).
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to 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| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
.......................................................................
2) Aggregate number of securities to which transaction applies:
.......................................................................
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11. (Set forth the
amount on which the filing fee is calculated and state how it
was determined.)
......................................................................
4) Proposed maximum aggregate value of transaction:
......................................................................
5) Total fee paid:
......................................................................
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
..................................................................
2) Form, Schedule or Registration Statement No.:
..................................................................
3) Filing Party:
..................................................................
4) Date Filed:
..................................................................
<PAGE>
BIG ENTERTAINMENT, INC.
2255 GLADES ROAD, SUITE 237 WEST
BOCA RATON, FLORIDA 33431
------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 2, 1998
-----------------------------------------------------
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 Thursday, July 2, 1998, at 4:30 p.m., at 2255 Glades
Road, Suite 228W, Boca Raton, Florida 33431, for the following purposes, all of
which are set forth more completely in the accompanying proxy statement:
1. To elect eight Directors of the Company for the ensuing year;
2. To consider and vote upon a proposal to approve an amendment to
the Company's Directors Stock Option Plan (the "Directors Plan")
to increase the number of shares of the Company's Common Stock
reserved for issuance thereunder from an aggregate of 50,000
shares to an aggregate of 100,000 shares;
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 1,000,000 shares to an aggregate
of 1,500,000 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, 1998; 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 May 22, 1998
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, 1997 are enclosed.
BY ORDER OF THE BOARD OF DIRECTORS
Laurie S. Silvers, Secretary
Boca Raton, Florida
June 2, 1998
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
JULY 2, 1998
----------------------------
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 July 2, 1998, 1997, beginning at
4:30 p.m., at 2255 Glades Road, Suite 228W, 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 June 2, 1998. 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 Directors
Stock Option Plan (the "Directors Plan"); (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,
1998; and (v) in their discretion, upon such other business as may properly come
before the Annual 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 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 May
22, 1998 (the "Record Date"), the Company had outstanding 7,343,832 shares of
common stock, $.01 par value per share (the "Common Stock"), 217,600 shares of
Series A Variable Rate Convertible Preferred Stock, $6.25 stated value per share
(the "Series A Preferred Stock"), 122,846 shares of Series B Variable Rate
Convertible Preferred Stock, $5.21 stated value per share (the "Series B
Preferred Stock"), and 20,000 shares of Series C Variable Rate Convertible
Preferred Stock, $100 stated value per share (the "Series C Preferred Stock")
(the Common Stock, the Series A Preferred Stock, the Series B Preferred Stock
and the Series C 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 all Shares vote together as a single
class. Only holders of 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.
<PAGE>
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 that 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.
-2-
<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 SHARES PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED BENEFICIAL OWNERSHIP
- ----------------------------------------- ------------------ --------------------
<S> <C> <C>
Mitchell Rubenstein and Laurie S. Silvers(2) 2,011,255 26.32%
Gannett Co., Inc.(3) 758,229 10.19%
Tekno Simon, LLC(4) 539,961 7.35%
Dr. Martin H. Greenberg(5) 265,012 3.59%
Harry T. Hoffman(6) 7,887 *
Dr. Lawrence Gould(6) 7,887 *
Jules L. Plangere, Jr.(6) 11,764 *
E. Donald Lass(6) 11,764 *
Deborah J. Simon(6)(7) 8,928 *
State of Wisconsin Investment Board 400,000 5.45%
All directors, director nominees and executive 2,338,427 30.29%
officers of the Company as a group (10
persons)(7)(8)(9)
</TABLE>
- --------------------
* Less than 1%
(1) Except as noted in this footnote, the address of each
beneficial owner is in care of the Company, 2255 Glades Road,
Suite 237 West, Boca Raton, Florida 33431. The business
address of Gannett Co., Inc. is 1100 Wilson Boulevard,
Arlington, Virginia 22234, the business address of Tekno
Simon, LLC is 115 W. Washington Street, Indianapolis, Indiana
46204 and the business address of the State of Wisconsin
Investment Board is P.O. Box 7842, Madison, Wisconsin 53707.
(2) All of such shares owned by Mr. Rubenstein and Ms. Silvers are
held by them as tenants by the entireties. Includes an
aggregate of 297,500 shares of Common Stock issuable pursuant
to stock options granted to Mr. Rubenstein and Ms. Silvers
that are currently exercisable.
(3) Includes 100,000 shares of Common Stock issuable pursuant to
currently exercisable stock options.
-3-
<PAGE>
(4) Includes 217,600 shares of Series A Preferred Stock and
122,846 shares of Series B Preferred Stock. The Series A
Preferred Stock and the Series B Preferred Stock vote together
with the Common Stock as a single class (except as required by
law), with the Series A Preferred Stock and the Series B
Preferred Stock having one vote per share.
(5) Includes (i) 91,667 shares of Common Stock owned by Dr.
Greenberg's spouse and (ii) 30,278 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 the shares of Common Stock, Series A
Preferred Stock and Series B 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.
(8) Includes 376,008 shares of Common Stock issuable pursuant to
options that are currently exercisable.
(9) Includes the individuals previously listed in this table and
Marci L. Yunes, the Company's Chief Financial Officer, and
Andrew S. Bailen, Executive Vice President and Chief Operating
Officer of the Company's Retail Division.
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION TO THE BOARD
At the Annual Meeting, eight 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 eight 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. In
the event, however, 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.
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------- --- ------------------------------------
<S> <C>
Mitchell Rubenstein 44 Chairman of the Board and Chief
Executive Officer
Laurie S. Silvers 46 Vice Chairman of the Board, President
and Secretary
Dr. Lawrence Gould 67 Director
Dr. Martin H. Greenberg 57 Director and Chief Executive Officer of
Tekno Books
Harry T. Hoffman 70 Director
E. Donald Lass 60 Director
Jules L. Plangere, Jr. 77 Director
Deborah J. Simon 42 Director
</TABLE>
-4-
<PAGE>
MITCHELL RUBENSTEIN is a 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 founder of the Sci-Fi Channel, a 24-hour national
cable television network devoted to science fiction, fantasy and horror
programming that was acquired by USA Network 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 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. Together with Ms. Silvers, 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 founder of the Company and has served as its
Vice Chairman, President and Secretary since its inception in January 1993. Ms.
Silvers was a founder of the Sci-Fi Channel, of which she served as Chief
Executive Officer from January 1989 to March 1992 and Co-Vice Chairman from
March 1992 to March 1994. Prior to founding the Sci-Fi Channel, Ms. Silvers
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. 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 served as its Chairman from 1995-1997. Ms. Silvers has served as a
member of the executive advisory board of the School of Business of Florida
Atlantic University, and has been a member of the Economic Council of Palm Beach
since 1995. 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
speaker at various business symposia, including one held at Harvard Business
School. Ms. Silvers is married to Mitchell Rubenstein.
DR. LAWRENCE GOULD has served as a director of the Company since July
1993. From 1962 to 1982 Dr. Gould served as an executive officer of M/A-COM,
Inc., then a New York Stock Exchange listed company engaged in the manufacture
of products for communications and the defense industry, 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 as Chairman of the Board of Point Sebago Camp Sunshine, Inc., a
not-for-profit corporation that provides a respite for families with critically
ill children, since 1985.
DR. MARTIN H. GREENBERG has served as a director of the Company since
July 1993, and as a consultant to the Company since February 1993. 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
-5-
<PAGE>
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 -- Tekno Books." Dr. Greenberg is also co-publisher of MYSTERY
SCENE MAGAZINE, a mystery genre trade journal of which the Company owns a
majority interest. Dr. Greenberg is widely regarded as the leading anthologist
in trade publishing, and has served as editor or author of more than 700 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. Dr. Greenberg is a former
Director of Graduate Studies at the University of Wisconsin - Green Bay.
HARRY T. HOFFMAN has served as a director of the Company since July
1993. From 1979 to 1991, Mr. Hoffman served as President and Chief Executive
Officer of Waldenbooks, Inc., a leading national retailer of books, magazines
and related items. From 1968 to 1978, he served as President and Chief Executive
Officer of Ingram Book Company, a national book wholesaler.
E. DONALD LASS has served as a director of the Company since July 1993.
In October 1997, he sold his family interest in New Jersey Press, Inc., which
owned two daily newspapers in New Jersey (the ASBURY PARK PRESS, the state's
second largest newspaper, and THE HOME NEWS AND TRIBUNE). Prior to the sale, Mr.
Lass served as publisher of both newspapers and, since 1991, served as President
and Chief Executive Officer of New Jersey Press, Inc. The broadcasting assets
owned by New Jersey Press, Inc. -- three radio stations in New Jersey and a
television station in Orlando, Florida -- were split off into a new entity named
Press Communications. Mr. Lass is an investor in the broadcasting properties and
intends to invest in additional entertainment/media properties through the Lass
Family Trust. Mr. Lass is a graduate of Lafayette College (1960) and the
Columbia University Graduate School of Journalism (1961).
JULES L. PLANGERE, JR. has served as a director of the Company since
July 1993. Mr. Plangere is the former Chairman of the Board of New Jersey Press,
Inc. and its two subsidiary companies, Asbury Park Press and Press Broadcasting
Co. Mr. Plangere held various positions with Asbury Park Press in his 50-year
career, including Production Manager from 1954 to 1974, President and General
Manager from 1974 to 1977, and Publisher and Chief Executive Officer from 1977
to 1991. In addition, Mr. Plangere is a former member of the Board of Directors
of the New Jersey State Chamber of Commerce, a former member of the Board of
Directors of New Jersey Bell Telephone Co., the former Chairman of the Board of
Trustees of Monmouth University and a present Life Trustee, and the former
President of the New Jersey Press Association.
DEBORAH J. SIMON has served as a director of the Company since November
1995. Ms. Simon has held the position of Senior Vice President of Simon Property
Group, now the Simon DeBartolo Group, an Indianapolis-based real estate
development and management firm that is listed on the New York Stock Exchange,
since 1991. Prior to that, Ms. Simon served as Vice President -- Western Region
Leasing of the 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.
-6-
<PAGE>
Pursuant to a November 1995 Stock Purchase Agreement with Tekno Simon
(the "Simon Stock Purchase Agreement"), Tekno Simon, an affiliate of Simon
DeBartolo 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 and Series B 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 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--Investment by Affiliate of Simon DeBartolo
Group."
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.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF THE PERSONS NOMINATED FOR
ELECTION TO THE BOARD OF DIRECTORS.
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 10% 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-10% beneficial owners for the
year ended December 31, 1997 have been complied with.
MEETINGS AND COMMITTEES
During the year ended December 31, 1997, the Board of Directors met on
nine occasions, once in person and eight times by unanimous written consent.
The Board of Directors has three committees, the Compensation
Committee, the Stock Option Committee and the Audit Committee. Mitchell
Rubenstein and two independent directors, Harry T. Hoffman and Dr. Lawrence
Gould, are the members of the Compensation Committee. The Compensation
Committee's responsibilities consist of recommending, reviewing, and approving
the salary and other benefits of the Company's officers and employees, including
compensation of executive officers of the Company. The Compensation Committee
acted by unanimous written consent on one occasion during the year ended
December 31, 1997.
Mitchell Rubenstein, Harry T. Hoffman and Dr. Lawrence Gould are the
members of the Stock Option Committee. The Stock Option Committee administers
the Directors Plan and the 1993 Plan. The Stock Option Committee acted by
unanimous consent on five occasions during such year.
-7-
<PAGE>
Laurie S. Silvers, Harry T. Hoffman and Dr. Lawrence Gould are the
members of the Audit Committee. The Audit Committee is responsible for
recommending auditors to be engaged by the Company, assisting with the planning
of the audit, reviewing the results from the audit and directing and supervising
investigations into matters relating to the audit. The Audit Committee was
formed in late 1997 and did not meet during the year ended December 31, 1997.
Its first meeting is scheduled to occur prior to the Annual Meeting.
During the 1997 fiscal year, there was no nominating committee or other
similar committee of the Board of Directors. Rather, such function was performed
by the Board of Directors as a whole.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth the
aggregate compensation paid in 1997, 1996 and 1995 to the Chief Executive
Officer of the Company and to the President, the only other executive officer of
the Company whose total annual salary and bonus during 1997 was $100,000 or more
(the Chief Executive Officer and the President are sometimes referred to herein
together as the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------------- ---------------
SHARES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING
POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS/SARS(#)
- ----------------------- ---- --------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Mitchell Rubenstein, 1997 185,217 25,000 7,800(1) 37,500(2)
Chief Executive Officer 1996 208,811 25,000 7,800(1) 75,000(2)
1995 199,200 25,000 7,800(1) 72,500(2)
Laurie S. Silvers, 1997 185,217 25,000 7,800(1) 37,500(2)
President 1996 208,811 25,000 7,800(1) 75,000(2)
1995 199,200 25,000 7,800(1) 72,500(2)
</TABLE>
(1) Represents a car allowance paid to the Named Executive Officer.
(2) Represents options granted under the Company's 1993 Plan.
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 are
automatically 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 $230,000 (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. During 1997, the Named Executive Officers elected to waive a portion of
their base salaries.
-8-
<PAGE>
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 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.
The Company, through its wholly owned retail subsidiary, also entered
into an employment agreement with Andrew S. Bailen effective as of March 26,
1998, pursuant to which Mr. Bailen shall serve as the Company's Executive Vice
President and Chief Operating Officer of the Company's Retail Division for three
years from the effective date of the agreement. Mr. Bailen was employed with
Blockbuster Entertainment Group from 1995 to 1997, where he held various
positions, including Senior Vice President -- General Merchandise Manager. Mr.
Bailen's salary under the agreement is $75,000 during the first two years of
employment and $125,000 during the third year of employment. Mr. Bailen also
received a $50,000 bonus upon execution of the agreement paid in shares of the
Company's Common Stock, and is entitled to an annual bonus equal to the greater
of 50% of his annual salary or $50,000 contingent on achieving certain
performance goals in sales and earnings, which is also payable in shares of the
Company's Common Stock and is subject to forfeiture if Mr. Bailen resigns his
position, is terminated for cause or vacates his position due to death or
disability. Mr. Bailen is eligible to receive
-9-
<PAGE>
options to purchase a total of 187,500 shares of Common Stock at an exercise
price equal to the closing bid price of the Common Stock as reported by Nasdaq
at the close of business on the date prior to the grant date in accordance with
the following schedule:
NUMBER OF DATE
SHARES UNDERLYING OF
OPTION GRANTS GRANT
----------------- --------------
62,500 March 1998
25,000 March 1999
37,500 March 1999 (1)
25,000 March 2000
37,500 March 2000 (1)
- ------------------
(1) Grant of options is subject to achievement of certain specified
budgeted performance goals in sales and earings.
These options shall become exercisable in accordance with and are subject to the
1993 Plan. If Mr. Bailen's employment is terminated without cause, Mr. Bailen
shall have six months from the date of such termination to exercise any options
granted under the agreement, notwithstanding any provision to the contrary in
the 1993 Plan.
OPTION GRANTS IN LAST FISCAL YEAR. The following table sets forth
information concerning individual grants of stock options made during the fiscal
year ended December 31, 1997 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF SHARES OPTIONS GRANTED EXERCISE OR
UNDERLYING OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(#)(1) FISCAL YEAR ($/SHARE) DATE
- -------------------- ------------------ --------------- ----------- ----------
<S> <C> <C> <C> <C>
Mitchell Rubenstein 37,500 21% $5.938 10/01/07
Laurie S. Silvers 37,500 21% $5.938 10/01/07
- ---------------
</TABLE>
(1) Represents options granted under the 1993 Plan. Such options are fully
exercisable as of April 1, 1998.
STOCK OPTIONS HELD AT END OF 1997. 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, 1997. No options were exercised
by the Named Executive Officers during the year ended December 31, 1997.
-10-
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR END IN-THE-MONEY OPTION
AT FISCAL YEAR END
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Mitchell Rubenstein 111,250 73,750 $-0- $14,044
Laurie S. Silvers 111,250 73,750 $-0- $14,044
</TABLE>
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 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, pursuant to the
terms of the options granted to date, 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. No new stock
option grants can be made under the Directors Plan after July 2003. As of the
date hereof, options to purchase 49,999 shares of Common Stock were outstanding
under the Directors Plan as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES SUBJECT EXERCISE EXPIRATION
NAME OF DIRECTOR TO OPTIONS PRICE GRANT DATE DATE
- --------------------------- -------------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Harry T. Hoffman 3,125 $8.00 11/1/93 11/1/03
4,762 $5.25 8/23/96 8/23/01
4,107 $5.13 3/2/98 3/2/03
Dr. Lawrence Gould 3,125 $8.00 11/1/93 11/1/03
4,762 $5.25 8/23/96 8/23/01
4,107 $5.13 3/2/98 3/2/03
E. Donald Lass 4,107 $5.13 3/2/98 3/2/03
Jules L. Plangere, Jr. 4,107 $5.13 3/2/98 3/2/03
Deborah J. Simon 4,166 $6.00 11/8/95 11/8/00
4,762 $5.25 8/23/96 8/23/01
4,107 $5.13 3/2/98 3/2/03
</TABLE>
Additionally, John W. Waller, III, a former director of the Company,
holds an option to purchase 4,762 shares of Common Stock under the Directors
Plan, which option expires in November 1998. The Company's current directors
will, if the proposal to amend the Directors Plan to increase the number of
-11-
<PAGE>
shares of Common Stock is approved by the shareholders, each be granted options
to purchase shares of Common Stock having a market value at the time of grant
equal to $3,931, representing the balance of options due to each of them
pursuant to the Directors Plan in connection with the Company's November 1997
annual meeting, and options to purchase shares of Common Stock having a market
value at the time of grant equal to $25,000 in connection with the upcoming
Annual Meeting.
See "Certain Transactions--Consulting Agreements" for a description of
consulting agreements between the Company and certain of its directors.
STOCK OPTION PLAN. Under the 1993 Plan, 1,000,000 shares of Common
Stock are reserved for issuance upon exercise of options. The 1993 Plan is
designed to serve as an incentive for retaining qualified and competent
employees. The Stock Option Committee of the Company's Board of Directors (the
"Stock Option Committee") administers and interprets the 1993 Plan and is
authorized to grant options thereunder to all eligible employees, including
officers of the Company.
The 1993 Plan provides for the granting of both "incentive stock
options" (as defined in Section 442 of the Code) and nonqualified stock options.
Options are granted under the 1993 Plan on such terms and at such prices as
determined by the Stock Option Committee. Each option is exercisable after the
period or periods specified in the option agreement, but no option can be
exercised until six months after the date of grant or more than 10 years from
the date of grant. Options granted under the 1993 Plan are not transferable
other than by will or by the laws of descent and distribution. The 1993 Plan
also authorizes the Company to make loans to optionees to enable them to
exercise their options. Such loans must provide for recourse to the optionee, be
interest-bearing and be secured by the shares of the Common Stock purchased.
Except for certain options granted pursuant to the consulting
agreements (see "Certain Transactions -- Consulting Agreements"), the exercise
price of all options granted under the 1993 Plan will not be less than 85% of
fair market value of Common Stock on the date of the grant.
As of the Record Date, options to purchase 964,544 shares of Common
Stock were outstanding under the 1993 Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All compensation decisions during 1997 were made by the Compensation
Committee, which consisted of Mitchell Rubenstein and two independent directors,
Harry T. Hoffman and Dr. Lawrence Gould. No changes to the compensation of Mr.
Rubenstein or Laurie S. Silvers, the Named Executive Officers, were made in
1997.
CERTAIN TRANSACTIONS
ASBURY PARK PRESS
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.
-12-
<PAGE>
GANNETT CO., INC.
In October 1997, Gannett Co., Inc. acquired 100% of the outstanding
capital stock of Asbury Park Press, including the Asbury Option. In that
transaction, the consideration paid on account of the Company's Common Stock
held by Asbury Park Press was $7.00 per share.
TEKNO BOOKS
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 (the "Tekno Books Acquisition"). As a result of this
transaction, 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 Tekno Books 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, 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 Tekno Books
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 Tekno Books 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
Tekno Books 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
-13-
<PAGE>
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., E. Donald Lass, Robert E. McAllan, and Alfred
D. Colantoni (individually, a "Consultant" and collectively, the "Consultants"),
pursuant to which 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. Throughout the term of these consulting
agreements, each of the Consultants was an executive officer of Asbury Park
Press and Messrs. Plangere and Lass served as directors of the Company. In
consideration for their services, each Consultant received 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, which were scheduled to
expire in July 1995, were extended in May 1995 for a two-year period, provided
that all subsequent compensation thereunder was payable solely in stock options.
As of the date hereof, the consulting agreements have expired and have not been
renewed by mutual agreement of the parties.
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 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 invested in the
private offering $1,000,000 for 160,000 shares of Common Stock.
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").
INVESTMENTS BY AFFILIATE OF SIMON DEBARTOLO GROUP
To facilitate expansion of its entertainment division, the Company
established a long-term relationship with the largest U.S. shopping mall
developer, the Simon DeBartolo Group (formerly known as the Simon Property
Group), and its Co-Chairman, Melvin Simon. Tekno Simon, an affiliate of Mr.
Simon, initially invested $1,000,000 in shares of the Company's Common Stock in
the Company's August 1995 private placement. Additionally, pursuant to the Simon
Stock Purchase Agreement entered into in November 1995 and as amended October
1996, Tekno Simon has also invested a total of $2,000,000. Of such investment,
$1,360,000 was used to acquire 217,600 shares of the Company's Series A
Preferred Stock, and $640,000 was used to acquire 122,846 shares of the
Company's Series B Preferred Stock.
The Series A Preferred Stock has a stated value of $6.25 per share and
accrues non-cash 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 (8.5% as of the date hereof).
The Series A Preferred Stock is redeemable at any time at the Company's option
for $7.1875 per share in cash. Except as otherwise required by law, the holders
of the Series A Preferred Stock will be entitled
-14-
<PAGE>
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
will have 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.
The terms of the Series B Preferred Stock are identical to those of the
Series A Preferred Stock, except that the Series B Preferred Stock has a
purchase price adjustment provision, based on the market prices of the Common
Stock at the time of each such funding. The Series B Preferred Stock has a
stated and a liquidated value of $5.21 per share after giving effect to the
purchase price adjustment provision.
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 and Series B Preferred Stock purchased pursuant to the stock
purchase agreement, as amended (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
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 DeBartolo Group and other affiliates of Tekno Simon are
parties to various leases with the Company's retail subsidiary for certain of
the Company's Entertainment SuperoKiosks and its in-line store at the Mall of
America.
LINE OF CREDIT
Mitchell Rubenstein and Laurie S. Silvers, the Company's Chairman of
the Board and Chief Executive Officer and the Company's Vice Chairman and
President, respectively, have extended to the Company a $1.1 million line of
credit facility providing for interest-only payments calculated at the JP Morgan
Bank prime rate of interest, prepayable at any time without penalty by the
Company and payable on demand of the holders. The outstanding balance under this
line of credit was $85,000 at December 31, 1997 and $1,016,000 at March 31,
1998. The line of credit currently remains available to the Company.
REGISTRATION RIGHTS
The Company granted "piggyback" registration rights to certain related
parties in connection with certain stock purchases by them in 1993: to Mitchell
Rubenstein and Laurie S. Silvers for 1,969,192 shares of the Company's Common
Stock purchased by them as tenants by the entireties, to Dr. Martin Greenberg
for 37,500 shares of the Company's Common Stock purchased by him and to Asbury
Park Press for 400,000 shares of the Company's Common Stock purchased by it.
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, in any registration
statement filed by the Company under the Securities Act of 1933, as amended.
These registration rights have not been exercised by such parties.
-15-
<PAGE>
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 are subject to approval by a majority of the
independent, disinterested directors of the Company.
PROPOSAL TO APPROVE AN AMENDMENT TO
THE DIRECTORS STOCK OPTION PLAN
On June 2, 1998, the Board of Directors of the Company amended the
Directors Plan, subject to shareholder approval, to increase the number of
shares of Common Stock reserved for issuance thereunder from a total of 50,000
shares to 100,000 shares.
PLAN DESCRIPTION
The statements in this Proxy Statement concerning the terms and
provisions of the Directors 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 Directors Plan, which is attached hereto as EXHIBIT A.
The purpose of the Directors Plan is to advance the interests of the
Company by providing an additional incentive to attract and retain qualified and
experienced persons to serve as directors of the Company and to encourage stock
ownership in the Company by such persons. The Directors Plan was adopted in
1993, and, unless sooner terminated by the Board of Directors of the Company in
accordance with the terms thereof, shall continue in effect until all options
granted thereunder have expired or been exercised. No option shall be granted
after 10 years from the date the Directors Plan became effective.
The Directors Plan is administered by the Stock Option Committee, or if
a Stock Option Committee is not designated by the Board of Directors, by the
Board of Directors as a whole. The Stock Option Committee is currently composed
of Mitchell Rubenstein and two of the Company's independent directors, Harry T.
Hoffman and Dr. Lawrence Gould. The Stock Option Committee has the right to
adopt rules and regulations for purposes of administering the Directors Plan,
and its interpretation and construction of any provision of the Directors Plan
is final and conclusive.
The Directors Plan currently provides for the issuance of stock options
to purchase up to 50,000 shares of the Company's authorized but unissued Common
Stock, and if this proposal is approved by the shareholders, the number of
shares available for issuance pursuant to options granted under the Directors
Plan will be increased to 100,000. If any option granted pursuant to the
Directors Plan terminates, expires, or is canceled or surrendered, in whole or
in part, new options may thereafter be granted covering such shares. The
Company's shareholders do not have any preemptive rights to purchase or
subscribe for the shares reserved for issuance under the Directors Plan.
Only "Eligible Directors" may be granted options under the Directors
Plan. An "Eligible Director" is defined as any person who is a member of the
Company's Board of Directors and who is not an employee, full-time or part-time,
of or consultant to the Company. For purposes of the Directors Plan, a director
who does not receive regular compensation from the Company or its subsidiaries,
other than directors' fees and reimbursement for expenses, shall not be
considered to be an employee or
-16-
<PAGE>
consultant of the Company, even if such director is an officer of the Company or
a subsidiary of the Company. There are currently five such Eligible Directors
serving on the Company's Board of Directors, and the number of options received
or to be received by each such Eligible Director is set forth under the section
captioned "Compensation of Directors."
Each Eligible Director is entitled to receive: (1) an initial grant of
an option to purchase shares of Common Stock having a "Fair Market Value" (as
defined in the Directors Plan) at the time of the grant equal to $25,000 on the
date (the "Initial Grant Date") such person becomes an Eligible Director and (2)
an annual grant of an option to purchase shares of Common Stock having a "Fair
Market Value" (as defined in the Directors Plan) at the time of grant equal to
$25,000, on the date of the annual meeting of the Company's shareholders at
which directors are elected, beginning with the first annual meeting Date after
the Initial Grant Date for each such Eligible Director.
TERMS AND CONDITIONS OF OPTIONS
EXERCISE PRICE. The exercise price per share of any option granted
under the Directors Plan shall be the Fair Market Value of the shares of Common
Stock underlying such option on the date such option is granted. As of the
Record Date, the Fair Market Value of the Company's Common Stock was $5.125 per
share.
EXERCISE OF OPTIONS. Options under the Directors Plan are 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
exercise price of the shares as to which the option is exercised has been made,
and (iii) arrangements that are satisfactory to the Stock Option Committee in
its sole discretion have been made for the payment to the Company of the amount
that is necessary to be withheld in accordance with applicable federal or state
tax withholding requirements.
EXERCISABILITY OF OPTIONS. Each option granted under the Directors Plan
is not exercisable until after six months following its grant to an Eligible
Director. Thereafter, such option shall be exercisable in full. The expiration
date of an option under the terms of the Directors Plan is 10 years after the
date of grant of the option.
Notwithstanding the foregoing, unless otherwise provided in any option,
each outstanding option shall become immediately exercisable in full (i) if
there occurs any transaction (which shall include a series of transactions
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% 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).
TRANSFERABILITY OF OPTIONS. The options granted under the Directors
Plan are not transferable by the optionee other than by will or the laws of
descent and distribution, and are exercisable during the optionee's lifetime
only by the optionee.
-17-
<PAGE>
TERMINATION OF OPTIONS. 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) one year after the date on which
the optionee ceases to be a director for any reason other than for "Cause" as
defined in the Directors Plan and (ii) immediately upon the removal of the
optionee as a director for "Cause." Prior to becoming null and void as provided
above, an option held at the date on which an optionee ceases to be a director
of the Company may be exercised in whole or in part, but only to the extent such
option was exercisable at the date such optionee ceased to be a director.
OUTSTANDING OPTIONS. As of the Record Date, options exercisable for a
total of 49,999 shares of Common Stock had been granted pursuant to the
Directors Plan, none of which had been exercised. Outstanding options, which are
held by six persons, are exercisable at prices ranging from $5.13 per share to
$8.00 per share and expire on various dates from August 23, 2001 through March
2, 2003.
AMENDMENT OF DIRECTORS PLAN. The Directors Plan provides that
shareholder approval is required in order to amend the Directors Plan to
increase the number of shares reserved for issuance upon exercise of options
granted thereunder.
The Directors 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.
For a description of certain federal income tax effects of options
granted under the Directors Plan, see "Federal Income Tax Effects of Options
Granted Under Directors Plan and 1993 Plan."
THE BOARD RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
PROPOSAL TO APPROVE AN AMENDMENT TO THE 1993 STOCK OPTION PLAN
On June 2, 1998, the Board of Directors of the Company amended the 1993
Plan, subject to shareholder approval, to increase the number of shares of
Common Stock reserved for issuance thereunder from a total of 1,000,000 shares
to a total of 1,500,000 shares.
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 B.
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 to serve as employees of or consultants to the Company, upon
whose efforts and judgment the success of the Company is largely dependent, and
to encourage 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.
The 1993 Plan is also administered by the Stock Option Committee, which
has the right to determine, among other things, the persons to whom options are
granted, the number of shares of
-18-
<PAGE>
Common Stock subject to options, the exercise price of options and the other
terms and conditions thereof.
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
Internal Revenue Code of 1986, as amended (the "Code"). A Nonqualified Stock
Option is an option to purchase Common Stock that meets certain requirements in
the plan 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 hereinafter as "Options."
The number of shares of Common Stock that may be issued pursuant to
Options granted under the 1993 Plan is currently 1,000,000, and if this proposal
is approved by the shareholders, the number of shares available for issuance
pursuant to options granted under the 1993 Plan will be increased to 1,500,000.
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 do not have any preemptive rights to purchase or subscribe for the
shares reserved for issuance under the 1993 Plan.
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 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 an Option (an "Optionee") must enter
into an option agreement with the Company that contains the appropriate terms
and conditions as determined 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 is determined by the Stock Option Committee but
may not be less than par value; furthermore, the option price per share of any
Incentive Stock Option may not be less than the "Fair Market Value" (as defined
in the 1993 Plan) of the Common Stock on the date such Incentive Stock Option is
granted. As of the Record Date, the fair market value of the Company's Common
Stock was $5.125 per share.
EXERCISE OF OPTIONS. Each Option is exercisable in such amounts at such
intervals and upon such terms as the Stock Option 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 exercisable in full (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% 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,
-19-
<PAGE>
lease, exchange or other disposition of all or substantially all the property
and assets of the Company (unless such plan is subsequently abandoned). The
Stock Option 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. Options
granted under the 1993 Plan may not be exercised until six months following the
date of the grant.
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 Stock Option 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 three months after the such termination. "Cause" is
defined under the 1993 Plan as 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. 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 Stock Option 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 exercisable for a total of 964,544
shares of Common Stock had been granted pursuant to the 1993 Plan, none of which
had been exercised. Outstanding Options, which are held by 40 persons, are
exercisable at prices ranging from $0.01 per share to $8.44 per share and expire
on various dates from August 15, 1998 through October 1, 2007.
The following table sets forth the number of Options under the 1993
Plan received or to be received by: (i) the Named Executive Officers; (ii) all
current executive officers as a group; (iii) all current directors who are not
executive officers as a group; (iv) each nominee for election as a director; (v)
each associate of any such director, executive officer or nominee; (vi) each
other person who received or is to receive 5% of such Options; and (vii) all
employees, including all current officers who are not executive officers, as a
group:
-20-
<PAGE>
NUMBER OF
OPTIONEE OPTIONS HELD
-------------------------------------------------------------- -------------
Mitchell Rubenstein........................................... 185,000
Laurie S. Silvers............................................. 185,000
Dr. Lawrence Gould(1)......................................... 0
Dr. Martin Greenberg.......................................... 36,528
Harry T. Hoffman(1)........................................... 0
E. Donald Lass(1)............................................. 11,764
Jules L. Plangere, Jr.(1)..................................... 11,764
Deborah J. Simon(1)........................................... 0
Andrew S. Bailen.............................................. 62,500
Marci L. Yunes................................................ 50,000
All current executive officers
as a group (five persons)................................... 519,028
All current directors who are
not executive officers as a group........................... 23,528
Gannett Co., Inc.............................................. 100,000
Robert Gottlieb............................................... 75,000
All employees, including all current officers
who are not executive officers, as a group.................. 80,982
- --------------
(1) Does not include an aggregate of 45,237 options granted to these
individuals under the Directors Plan.
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.
For a description of certain federal income tax effects of options
granted under the 1993 Plan, see "Federal Income Tax Effects of Options Granted
Under Directors Plan and 1993 Plan."
THE BOARD RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
FEDERAL INCOME TAX EFFECTS OF OPTIONS
GRANTED UNDER DIRECTORS PLAN AND 1993 PLAN
INCENTIVE STOCK OPTIONS
Incentive Stock Options granted under the 1993 Plan 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
-21-
<PAGE>
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 exercises 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 exercises 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 or her
alternative minimum tax for such year, by the 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 that 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 and all Optionees granted options under the Directors
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
-22-
<PAGE>
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 or
she 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 that is equal to the number of shares
surrendered on such exercise will be equal to his or her tax basis in the shares
surrendered, and his or her holding period for such number of shares received
will include the 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.
The deductibility by the Company of compensation expense in excess of
$1,000,000 to certain executive officers is prohibited by Section 162(m) of the
Code. 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 may be counted against such $1,000,000 limit.
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.
PROPOSAL TO RATIFY THE SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Arthur Andersen LLP, independent public accountants, served
as the Company's independent public accountants for the fiscal year ended
December 31, 1997. The Board of Directors, by a unanimous written consent dated
June 2, 1998, directed that management submit the appointment of Arthur Andersen
LLP for ratification by the shareholders at the Annual Meeting as the Company's
independent public accountants for the current fiscal year ending December 31,
1998. One or more representatives of Arthur Andersen 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 as
proxies in their discretion as they may deem appropriate, unless they are
directed by a proxy to do otherwise.
-23-
<PAGE>
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 1999 Annual Meeting of Shareholders
must deliver a proposal in writing to the Company's principal executive offices
no later than February 2, 1999.
ADDITIONAL INFORMATION
A copy of the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997 is being provided to shareholders with this Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
Laurie S. Silvers, Secretary
June 2, 1998
Boca Raton, Florida
-24-
<PAGE>
EXHIBIT A
BIG ENTERTAINMENT, INC.
------------------
DIRECTORS STOCK OPTION PLAN
------------------
1. PURPOSE. The purpose of this Plan is to advance the interests of BIG
ENTERTAINMENT, INC., a Florida corporation, by providing an additional incentive
to attract and retain directors who are neither employees nor consultants
through the encouragement of stock ownership m the Company by such persons.
2. DEFINITIONS. As used herein, the following terms shall have the
meaning indicated:
(a) "Annual Meeting Date" shall mean the date of the annual meeting of
the Company's shareholders at which the Directors are elected.
(b) "Board" shall mean the Company's Board of Directors.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Committee" shall mean the stock option committee appointed by the
Board pursuant to Section 12 hereof or if not appointed, the Board.
(e) "Common Stock" shall mean the Common Stock, par value $.01 per
share, of the Company.
(f) "Company" shall mean BIG ENTERTAINMENT, INC., a Florida
corporation.
(g) "Director" shall mean a member of the Board.
(h) "Eligible Director" means any person who is a member of the Board
and who is not an employee, full time or part time, of or consultant to the
Company. For purposes of this Plan, a director who does not receive regular
compensation from the Company or its subsidiaries, other than directors' fees
and reimbursement for expenses, shall not be considered to be an employee or
consultant of the Company, even if such director is an officer of the Company or
a subsidiary of the Company.
(i) "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
<PAGE>
preceding such date, unless the Common Stock is not publicly traded, in which
case, "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 as
determined by the Committee in its sole discretion in a fair and uniform manner;
provided, that for purposes of grants made on the Initial Grant Date to persons
are Eligible Directors on the Effective Date, the term "Fair Market Value" shall
mean the initial public offering price per share of Common Stock. For this
purpose, the "Closing Price" of the Common Stock on any business day shall be
(i) if such 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 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 the 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 the
Common Stock on at least five of the ten preceding days.
(j) "Initial Grant Date" means (i) in the case persons who are or
become Eligible Directors of the Company on the effective date of the Company's
Registration Statement on Form SB-2 (the "Effective Date") to be filed with the
Securities and Exchange Commission in connection with the Company's initial
public offering, the Effective Date and (ii) in all other cases, the date on
which a person is elected as a member of the Board.
(k) "Option" (when capitalized) shall mean any option granted under
this Plan.
(l) "Option Agreement means the agreement between the Company and the
Optionee for the grant of an option.
(m) "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.
(n) "Parent" means a "parent corporation" as defined in Section 425(e)
and (g) of the Code.
(o) "Plan" shall mean this Directors Stock Option Plan for the Company.
(p) "Share(s)" shall mean a share or shares of the Common Stock.
(q) "Subsidiary" shall mean any corporation (other than the Company) in
any unbroken chain of corporations beginning with the Company if, at the time of
the granting of
2
<PAGE>
the Option, each of the corporations other than the last corporation in the
unbroken chain owns stock possessing 50 percent or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
3. SHARES AND OPTIONS. Subject to Section 9 of this Plan, the Company
may grant to all Optionees from time to time Options to purchase a total of
fifty thousand (50,000) Shares 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.
4. GRANTS OF OPTIONS.
(a) On the Initial Grant Date, each Eligible Director shall
receive the grant of an Option to purchase Shares having a Fair Market Value at
the time of grant equal to $25,000.
(b) Each Eligible Director shall receive an annual grant of an
Option to purchase Shares having a Fair Market Value at the time of grant equal
to $25,000, on each Annual Meeting Date subsequent to his election as a director
of the Company or commencement of the Plan, beginning with the first Annual
Meeting Date after the Initial Grant Date for each such Eligible Director.
(c) Upon the grant of each Option, the Company and the
Eligible Director shall enter into an Option Agreement, which shall specify the
grant date and the exercise price and shall include or incorporate by reference
the substance of this Plan and such other provisions consistent with this Plan
as the Committee may determine.
5. EXERCISE PRICE. The exercise price per Share of any Option shall be
the Fair Market Value of the Shares underlying such Option on the date such
Option is granted.
6. 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 exercise 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 Optionees payment to the Company of the amount that is necessary for the
Company to withhold in accordance with applicable Federal or state tax
withholding requirements. The exercise price of any Shares purchased shall be
paid in cash, by certified or official bank check or personal check, by money
order, with Shares or by a combination of the above. 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. 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 the 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
3
<PAGE>
prior to the date such stock certificate is issued, except as expressly provided
in Section 9 hereof.
7. EXERCISABILITY OF OPTIONS.
(a) Each Option granted hereunder shall not be exercisable
until after six months following its grant to an Eligible Director. Thereafter,
such option shall be exercisable in full. The expiration date of an Option shall
be 10 years after the date of grant of the Option.
(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 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).
8. 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) one year after the date on which the Optionee
ceases to be a Director for any reason other than by reason of Cause, which, for
purposes of this Plan, shall mean the removal of the Optionee as a Director by
reason of any act of (1) fraud or intentional misrepresentation or (2)
embezzlement, misappropriation, or conversion of assets or opportunities of the
Company or any Subsidiary; and
(ii) immediately upon the removal of the Optionee as
a Director for Cause.
Prior to becoming null and void as provided above, an Option held at the date on
which an Optionee ceases to be a Director of the Company may be exercised in
whole or in part, but only
4
<PAGE>
to the extent such Option was exercisable at the date of such Optionee ceased to
be a Director.
(b) The Committee in its sole discretion may, by giving
written notice ("Cancellation Notice"), cancel any Option that remain,
unexercised on the date of the consummation of any corporate transaction:
(i) 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
(ii) 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),
provided that Cancellation Notice shall be given a reasonable period of time
prior to the proposed date of such cancellation, upon the giving of a
Cancellation Notice, all Options shall vest in full and at any time prior to the
date of cancellation the Option may be exercised in whole or in part.
9. 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
exercise 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)(i) or (ii) hereof.
(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
5
<PAGE>
capital stock of any class, either in connection with a 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 or exercise price of the 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.
10. TRANSFERABILITY OF OPTIONS. Each 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.
11. 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
(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.
12. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Committee of not
less than two Directors who are not Eligible Directors. 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 the purposes of the Plan. The Committee's determinations and its
interpretation and construction
6
<PAGE>
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.
13. INTERPRETATION.
(a) If any provision of the Plan should be held invalid 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. The determinations and the
interpretation and construction of any provision of the Plan by the Committee
shall be final and conclusive.
(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.
14. TERM OF PLAN; AMENDMENT AND TERMINATION OF THE PLAN.
(a) 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 9, no
such amendment may (i) without approval by the Company's shareholders, 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
10-year period described in Subsection 7(a), or (iii) extend the termination
date of the Plan as set forth in Section 14(a); and, provided, further, that,
except to the extent otherwise specifically provided in Section 8, 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.
7
<PAGE>
EXHIBIT B
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.
(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
2
<PAGE>
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.
(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
3
<PAGE>
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.
(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.
4
<PAGE>
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
(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
5
<PAGE>
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, 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
6
<PAGE>
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.
7
<PAGE>
BIG ENTERTAINMENT, INC.
PROXY
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING TO BE HELD ON JULY
2, 1998
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 July
2, 1998 (the "Annual Meeting"), and all adjournments thereof, with all powers
the undersigned would possess if personally present, on the following proposals
as specified and, in their discretion, on such other matters as may properly
come before the Annual Meeting.
PROPOSAL 1: Election of Directors.
<TABLE>
<S> <C> <C> <C>
Dr. Lawrence Gould Harry T. Hoffman Jules L. Plangere, Jr. Laurie S. Silvers
Dr. Martin H. Greenberg E. Donald Lass Mitchell Rubenstein Deborah J. Simon
</TABLE>
<TABLE>
<S> <C>
[ ] FOR ALL NOMINEES LISTED ABOVE [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed above
</TABLE>
- --------------------------------------------------------------------------------
(To withhold your vote for any nominee or nominees, print the name(s) above.)
PROPOSAL 2: Amendment of the Company's Directors Stock Option Plan (the
"Directors Plan") to increase the number of shares of the Company's Common
Stock reserved for issuance thereunder from an aggregate of 50,000 shares to an
aggregate of 100,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL 3: Amendment of 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 1,000,000 shares to an aggregate of 1,500,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL 4: Ratify selection of Arthur Andersen LLP as the Company's
independent public accountants for the year ending
December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED ON OTHER SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 THROUGH 4 AND IN
THE DISCRETION OF THE PROXIES APPOINTED HEREBY ON ANY OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE ANNUAL MEETING.
Please sign exactly as name appears below.
Dated: __________________ , 1998.
--------------------------------
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
an authorized person, stating
such person's title and
relationship to the partnership.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY, USING THE ENCLOSED
ENVELOPE.
