SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED
IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2)).
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
HOLLYWOOD.COM, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11. (Set forth the
amount on which the filing fee is calculated and state how
it was determined.)
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------
2) Form, Schedule or Registration Statement No.:
-------------------
3) Filing Party:
----------------------------------------------------
4) Date Filed:
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26141.0003
<PAGE>
Dear Fellow Shareholders:
Through a series of acquisition and other initiatives over the last
two years, Hollywood.com, Inc. has evolved into a leading media and Internet
company with widely recognized brands and a broad and deep collection of
entertainment content. Hollywood.com and Broadway.com are premier web sites in
the areas of movies and live theater and HollywoodPro.com is a leading
subscription web site geared to movie professionals. CinemaSource and
EventSource compile and syndicate a wide range of entertainment and event
information to more than 200 different media outlets, including web portals,
major newspapers and wireless providers. MovieTickets.com, a joint venture with
several major theater exhibitors, sells movie tickets online for theaters
throughout the United States and Canada. Our live theater ticketing businesses,
Theater Direct International and Broadway.com, sell tickets online and to the
travel and tourism industry for shows in New York and London. We also continue
to operate the intellectual property business from which our company has
expanded and evolved.
To fully reflect our growth and multi-faceted businesses, the Board
of Directors of Hollywood.com, Inc. has voted in favor of changing our name to
Hollywood Media Corp.
We have scheduled an annual meeting of shareholders to vote on the
name change. You will also be asked to vote in favor of the election of nine
directors nominated by our Board of Directors and to approve the Company's 2000
Stock Incentive Plan.
Shareholders of record at the close of business on November 14, 2000
are entitled to notice of, and to vote at, the meeting or at any postponements
or adjournments of the meeting.
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the
annual meeting, please take the time to vote by completing and mailing the
enclosed proxy card to us. If you sign, date and mail your proxy card without
indicating how you want to vote, your vote will be counted as a vote in favor of
the proposals. If you fail to return your card, your shares will not be counted
as present or voting, unless you attend and vote in person.
You can obtain additional information about Hollywood.com from
documents we have filed with the Securities and Exchange Commission. We
encourage you to read this entire document carefully.
Mitchell Rubenstein
Chairman and Chief Executive Officer
This Proxy Statement is dated November 14, 2000 and is first being
mailed to shareholders on or about November 17, 2000.
<PAGE>
HOLLYWOOD.COM, INC.
2255 GLADES ROAD, SUITE 237 WEST
BOCA RATON, FLORIDA 33431
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Date: December 15, 2000
Time: 10:00 a.m.
Place: 2255 Glades Road, Suite 228 West
Boca Raton, Florida 33431
Notice is hereby given that an Annual Meeting of Shareholders of
Hollywood.com, Inc. (the "Company") will be held for the following purposes:
1. To consider and vote upon the election of nine directors
nominated by the Company's Board of Directors.
2. To consider and vote upon a proposal to change the Company's
name to Hollywood Media Corp.
3. To consider and vote upon the approval of the Company's 2000
Stock Incentive Plan.
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 on December 31, 2000.
5. Such other business as properly may be presented at the annual
meeting or any adjournments or postponements thereof.
You are cordially invited to attend the annual meeting. Whether or
not you plan to attend the annual meeting, please sign, date and return the
accompanying proxy card to ensure that your shares are represented at the
meeting. If you attend the annual meeting, you may vote in person if you wish,
whether or not you have executed and returned your proxy card. Your proxy may be
revoked at any time before it is voted. Please review the Proxy Statement
accompanying this notice for more complete information regarding the matters
proposed for your consideration at the annual meeting.
By Order of the Board of Directors
Laurie S. Silvers
President and Secretary
Boca Raton, Florida
November 17, 2000
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.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
QUESTIONS AND ANSWERS.......................................................................................... 1
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENT...................................................... 2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................................................ 3
THE MEETING.................................................................................................... 5
General............................................................................................. 5
Matters To Be Considered At The Meeting ............................................................ 5
Record Date; Quorum; Voting At The Meeting.......................................................... 5
Proxies ............................................................................................ 6
ELECTION OF DIRECTORS.......................................................................................... 8
Nominees for Election to the Board of Directors..................................................... 8
Meetigs of the Board of Directors of the Company.................................................... 11
Committees of the Board of Directors of the Company................................................. 11
Compliance with Section 16(a) of the Securities Exchange Act of 1934................................ 12
EXECUTIVE OFFICERS............................................................................................. 13
EXECUTIVE COMPENSATION......................................................................................... 14
Summary Compensation Table.......................................................................... 14
Employment Agreements............................................................................... 14
Option Grants in Last Fiscal Year................................................................... 16
Stock Option Exercises During 1999 and Stock Options Held at End of 1999............................ 16
Stock Option Plan................................................................................... 17
Long-Term Incentive and Pension Plans............................................................... 17
Compensation of Directors........................................................................... 17
Compensation Committee Interlocks and Insider Participation......................................... 18
Report of the Compensation Committee on Executive Compensation...................................... 18
Report of the Audit Committee....................................................................... 21
Performance Graphs.................................................................................. 22
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................................................. 24
Transactions with Viacom Inc........................................................................ 24
Transactions with Tribune Company................................................................... 27
Investments by Affiliate of the Simon Property Group................................................ 28
Investment by the Company's Directors............................................................... 29
Consulting Agreement with Dr. Martin H. Greenberg................................................... 29
Line of Credit...................................................................................... 30
PROPOSAL TO APPROVE AN AMENDMENT TO THE SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION TO
CHANGE THE COMPANY'S NAME TO HOLLYWOOD MEDIA CORP.............................................................. 31
Reasons for the Charter Amendment................................................................... 31
PROPOSAL TO APPROVE THE 2000 PLAN.............................................................................. 32
General............................................................................................. 32
Plan Description.................................................................................... 32
Terms and Conditions of Benefits.................................................................... 33
Federal Income Tax Effect of Options Granted Under the 2000 Plan.................................... 34
Securities Act Registration; Restriction on Resale.................................................. 36
PROPOSAL TO RATIFY THE SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS............................................. 37
i
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SUBMISSION OF FUTURE SHAREHOLDER PROPOSALS..................................................................... 37
EXPERTS 37
OTHER MATTERS.................................................................................................. 37
WHERE YOU CAN FIND MORE INFORMATION............................................................................ 37
</TABLE>
APPENDICES
APPENDIX A -- CHARTER OF THE AUDIT COMMITTEE
APPENDIX B -- COMPANY'S 2000 STOCK INCENTIVE PLAN
ii
<PAGE>
QUESTIONS AND ANSWERS
Q: WHAT AM I BEING ASKED TO VOTE UPON?
A: You are being asked to vote in favor of the election of
nine directors nominated by our Board of Directors. You are
also being asked to vote in favor of changing the Company's
name to Hollywood Media Corp. and to approve the Company's
2000 Stock Incentive Plan. Finally, you are being asked to
ratify the selection of Arthur Andersen LLP as the
Company's independent public accountants for 2000.
THE COMPANY'S BOARD OF DIRECTORS HAS APPROVED EACH OF THESE
PROPOSALS AND RECOMMENDS THAT YOU VOTE FOR EACH PROPOSAL.
Q: WHEN IS THE ANNUAL MEETING?
A: The annual meeting will be held on December 15, 2000 at
10:00 a.m., local time, at 2255 Glades Road, Suite 228
West, Boca Raton, Florida 33431.
Q: WHAT SHOULD I DO NOW?
A: You should mail your signed proxy card in the enclosed
postage paid envelope as soon as possible, so that your
shares will be represented at the annual meeting.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED IN A SIGNED PROXY
CARD?
A: Yes. You can change your vote in one of the following ways
at any time before your proxy is voted at the annual
meeting. First, you can revoke your proxy by delivering a
written notice to the Secretary of the Company prior to
he time it is exercised. Second, you can submit a new,
later dated proxy card prior to the time the initial proxy
is exercised. Third, you can attend the annual meeting and
vote in person.
Q: WHOM SHOULD I CALL WITH QUESTIONS?
A: Hollywood.com, Inc.
2255 Glades Road, Suite 237W
Boca Raton, Florida 33431
(561) 998-8000
Attention: Investor Relations Department
Q: WHERE CAN I FIND MORE INFORMATION ABOUT THE COMPANY?
A: From various sources described under "Where You Can Find
More Information" on page ___ of this Proxy Statement.
1
<PAGE>
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Proxy Statement contains forward-looking statements, including
(without limitation) those preceded by, followed by or that include the words
"believes," "expects," "anticipates" or similar expressions. For those
statements, the Company claims the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995. You should understand that the factors, discussed in this document
and in the documents which are incorporated herein by reference, could affect
the future results of the Company, and could cause those results to differ
materially from those expressed in such forward-looking statements. We undertake
no obligation to publicly update or revise any forward-looking statement,
whether as a result of new information, future events or otherwise. In light of
these risks, uncertainties and assumptions, the forward-looking events discussed
in this Proxy Statement might not occur.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the common stock of the Company as of the Record Date by
(1) each person known to beneficially own more than 5% of the outstanding shares
of the common stock, (2) each director and director nominee of the Company, (3)
the Company's Chief Executive Officer and four of the Company's other most
highly compensated executive officers whose total annualized salary and bonus in
1999 was $100,000 or more and (4) all directors 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. The Company is
not aware of any beneficial owner of more than five percent of the outstanding
shares of common stock of the Company other than as set forth in the following
table.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES BENEFICIALLY PERCENT OF
OF BENEFICIAL OWNER(1) OWNED CLASS
---------------------- ----- -----
<S> <C> <C>
Viacom Inc. (2) 7,950,923 31.7%
Tribune Company 2,452,623 9.8%
Mitchell Rubenstein(3) 2,503,854 9.7%
Laurie S. Silvers(3) 2,503,854 9.7%
Dr. Martin H. Greenberg(4) 362,500 1.4%
Jules L. Plangere, Jr.(5) 109,924 *
Deborah J. Simon (6) 37,067 *
Harry T. Hoffman(7) 19,313 *
Russell I. Pillar - *
Mitchell Semel - *
David Williams - *
W. Robert Shearer(8) 36,875 *
Nicholas G. Hall(9) 5,609 *
All directors and executive officers of the 3,075,142 11.8%
Company as a group (11 persons) (10)
</TABLE>
----------------
* Less than 1%
3
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(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 Viacom Inc. 1515
Broadway, 52nd Floor, New York, NY 10036-5794 and the business
address of The Tribune Company is 435 N. Michigan Ave., 6th floor,
Chicago, Illinois 60611.
(2) Includes 100,000 shares of common stock issuable under a currently
exercisable warrant.
(3) Except for 100,000 shares owned individually by each of Mr.
Rubenstein and Ms. Silvers, all of such shares are held by Mr.
Rubenstein and Ms. Silvers jointly as tenants by the entireties.
Includes an aggregate of 895,000 shares of common stock issuable
pursuant to stock options granted to, and 15,000 shares of common
stock issuable pursuant to warrants purchased by, Mr. Rubenstein and
Ms. Silvers that are currently exercisable or exercisable within 60
days of the Record Date.
(4) Includes 91,667 shares of common stock owned by Dr. Greenberg's
spouse, 47,052 shares of common stock issuable pursuant to currently
exercisable stock options, and 15,221 shares of common stock issuable
under currently exercisable warrants.
(5) Includes 11,826 shares of common stock issuable pursuant to options
that are currently exercisable and 28,334 shares of common stock
issuable under currently exercisable warrants.
(6) Includes 18,754 shares of common stock issuable pursuant to options
that are currently exercisable.
(7) Includes 17,713 shares of common stock issuable pursuant to options
that are currently exercisable and 400 shares of common stock
issuable under a currently exercisable warrant.
(8) Includes 35,375 shares of common stock issuable pursuant to options
that are currently exercisable or exercisable within 60 days of the
Record Date.
(9) Represents 5,609 shares of common stock issuable pursuant to options
granted to Mr. Hall's spouse that are currently exercisable.
(10) Includes 1,031,329 shares of common stock issuable pursuant to
options that are currently exercisable or exercisable within 60 days
of the Record Date and 58,955 shares of common stock issuable under
currently exercisable warrants.
4
<PAGE>
THE MEETING
GENERAL
This Proxy Statement is being furnished to holders of shares of
common stock in connection with the solicitation of proxies by the Company's
Board of Directors for use at the annual meeting of shareholders (the "Meeting")
to be held at the offices of the Company, located at 2255 Glades Road, Suite 228
West, Boca Raton, Florida 33431, on December 15, 2000, convening at 10:00 a.m.,
local time, and at any adjournments or postponements thereof. This Proxy
Statement and the accompanying form of proxy are first being mailed to holders
of common stock on or about November 15, 2000. Shareholders should review the
information in this Proxy Statement together with the Company's Annual Report to
Shareholders for the year ended December 31, 1999 which accompanies this Proxy
Statement. A list of shareholders entitled to vote at the Meeting will be
available at the Company's principal executive offices, 2255 Glades Road, Suite
237W, Boca Raton, Florida 33431, for a period of ten days prior to the Meeting
and at the Meeting itself for examination by any shareholder.
MATTERS TO BE CONSIDERED AT THE MEETING
At the Meeting, holders of shares of common stock will be requested
to consider and vote upon (1) the election of nine directors nominated by the
Company's Board of Directors, (2) a proposal to amend the Company's Second
Amended and Restated Articles of Incorporation to change the Company's name to
Hollywood Media Corp., (3) the approval of the Company's 2000 Stock Incentive
Plan, (4) a proposal to ratify the selection of Arthur Andersen LLP as the
Company's independent public accountants for the year ending on December 31,
2000 and (5) such other business as properly may be presented at the Meeting or
any adjournments or postponements thereof.
THE COMPANY'S BOARD OF DIRECTORS HAS APPROVED, AND RECOMMENDS THAT
HOLDERS OF COMMON STOCK VOTE IN FAVOR OF THE ELECTION OF THE NOMINEES TO THE
BOARD OF DIRECTORS OF THE COMPANY, THE AMENDMENT TO THE COMPANY'S SECOND AMENDED
AND RESTATED ARTICLES OF INCORPORATION TO CHANGE THE COMPANY'S NAME TO HOLLYWOOD
MEDIA CORP., THE APPROVAL OF THE COMPANY'S 2000 STOCK INCENTIVE PLAN AND THE
RATIFICATION OF THE COMPANY'S CHOICE OF INDEPENDENT PUBLIC ACCOUNTANTS.
RECORD DATE; QUORUM; VOTING AT THE MEETING
The Company's Board of Directors has fixed November 14, 2000 as the
Record Date. Accordingly, only holders of record of shares of common stock at
the Record Date will be entitled to notice of and to vote at the Meeting. At the
Record Date, there were 25,004,750 shares of common stock outstanding and
entitled to vote. Each holder of record of common stock on the Record Date is
entitled to cast one vote per share in respect of the proposals presented for
the vote of such holders, either in person or by proxy, at the Meeting. The
presence, in person or by proxy, of the holders of a majority of the voting
power of the outstanding shares of common stock entitled to vote at the Meeting
is necessary to constitute a quorum at the Meeting.
Under Florida law, if a quorum is present at the Meeting, the
approval and adoption of the Charter Amendment by the Company's shareholders
will require the affirmative vote of the holders of a majority of the shares of
common stock voted at the Meeting. Under Florida law, nominees for director will
be elected if they receive the affirmative vote of a plurality of the votes of
the shares of common stock present in person or by proxy at the Meeting and
entitled to vote on the election of directors. The affirmative vote of the
holders of a majority of the shares of common stock represented in person or by
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<PAGE>
proxy at the Meeting will be required for approval of the Company's 2000 Stock
Incentive Plan and any other matter that may be submitted to a vote of the
shareholders. If less than a majority of the outstanding shares entitled to vote
are represented at the Meeting, a majority of the shares so represented may
adjourn the Meeting to another date, time or place.
Prior to the Meeting, the Company will select one or more inspectors
of election for the Meeting. Such inspector(s) shall determine the number of
shares of common stock 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 of common stock present and entitled to vote at the Meeting
and will be counted as votes cast at the Meeting, but will not be counted as
votes cast "for" or "against" any given matter. A broker or nominee holding
shares of common stock 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 matters addressed at the
Meeting. The inspectors of election will treat shares referred to as "broker or
nominee non-votes" (shares held by brokers or nominees as to which instructions
have not been received from the beneficial owners or persons entitled to vote
and the broker or nominee does not have discretionary voting power on a
particular matter) as shares that are present and entitled to vote for purposes
of determining the presence of a quorum. For purposes of determining the outcome
of any matter as to which the proxies reflect broker or nominee non-votes, share
represented by such proxies will be treated as not present and not entitled to
vote on that subject matter and therefore will not be considered by the
inspectors of election when counting votes cast on the matter (even though those
shares are considered entitled to vote for quorum purposes and may be entitled
to vote on other matters). Accordingly, broker or nominee non-votes will not
have the same effect as a vote against the election of any director. Abstentions
will not have the same effect as a vote against the election of any director.
Any such shares of common stock that are not represented at the Meeting either
in person or by proxy will not be considered to have cast votes on any matters
addressed at the Meeting.
As of the Record Date, the directors and executive officers of the
Company beneficially owned in the aggregate approximately 11.8% of the
outstanding shares of common stock.
PROXIES
This Proxy Statement is being furnished to holders of common stock in
connection with the solicitation of proxies by and on behalf of the Board of
Directors of the Company for use at the Meeting.
Shares of common stock represented by properly executed proxies
received at or prior to the Meeting that have not been revoked will be voted at
the Meeting in accordance with the instructions contained therein. Shares of
common stock represented by properly executed proxies for which no instruction
is provided will be voted for approval of the Charter Amendment, the election of
the nominees to the Board of Directors of the Company and the ratification of
the Company's choice of independent public accountants. Holders of common stock
are requested to complete, sign, date and return promptly the enclosed proxy
card in the postage-prepaid envelope provided for such purpose to ensure that
their shares are voted. Any holder of common stock who so desires may revoke
his, her or its proxy at any time prior to the time it is exercised by (1)
providing written notice to such effect to the Secretary of the Company at the
Company's principal executive offices, (2) duly executing a proxy bearing a date
subsequent to that of a previously furnished proxy or (3) attending the Meeting
and voting in person. Attendance at the Meeting will not in itself constitute a
revocation of a previously furnished proxy, and shareholders who attend the
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Meeting in person need not revoke their proxy (if previously furnished) and vote
in person.
If the Meeting is postponed or adjourned for any reason, at any
subsequent reconvening of the Meeting, all proxies will be voted in the same
manner as such proxies would have been voted at the initial convening of the
Meeting (except for any proxies that theretofore effectively have been revoked
or withdrawn), notwithstanding that they may have been effectively voted on the
same or any other matter at a previous meeting.
If any other matters properly are presented at the Meeting for
consideration, including consideration of a motion to adjourn the Meeting to
another time and/or place (including for the purpose of soliciting additional
proxies), the persons named in the enclosed form of proxy and acting thereunder
will have discretion to vote on such matters in accordance with their best
judgment
If any beneficial owner of common stock holds such stock in "street
name" and wishes to vote his or its stock at the Meeting, such owner must obtain
from the relevant nominee holding common stock a properly executed "legal proxy"
identifying the beneficial owner as a holder of common stock, authorizing the
beneficial owner to act on behalf of the nominee-record owner at the Meeting and
identifying the number of shares (and certificate numbers, if applicable) in
respect of which the authorization is granted.
The Company will pay the costs of soliciting proxies from the holders
of common stock, including the cost of printing, assembling and mailing this
Proxy Statement. In addition to solicitation by mail, directors, officers and
employees of the Company may solicit proxies by telephone, facsimile
transmission or otherwise. Such directors, officers and employees of the Company
will not be specially compensated for such solicitation, but may be reimbursed
for out-of-pocket expenses incurred in connection therewith. Brokerage firms,
fiduciaries and other custodians who forward soliciting material to the
beneficial owners of common stock held of record by them will be reimbursed for
their reasonable expenses incurred in forwarding such material. Arrangements
also will be made with custodians, nominees and fiduciaries for the forwarding
of proxy solicitation materials to beneficial owners of shares of common stock
held of record by such custodians, nominees and fiduciaries, and the Company
will reimburse such custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses incurred in connection therewith.
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<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
At the Meeting, nine directors will be elected by the shareholders to
serve until the next annual meeting of shareholders or until their successors
are elected and qualified. The accompanying form of proxy, when properly
executed and returned to the Company, will be voted FOR the election as
directors of the nine persons named below, unless the proxy contains contrary
instructions. Proxies cannot be voted for a greater number of persons than the
number of nominees named in this 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 as of the Record Date.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Mitchell Rubenstein 46 Chairman of the Board and Chief Executive
Officer
Laurie S. Silvers 48 Vice Chairman of the Board, President and
Secretary
Dr. Martin H. Greenberg 59 Director and Chief Executive Officer of
Tekno Books
Harry T. Hoffman 73 Director
Jules L. Plangere, Jr. 79 Director
Deborah J. Simon 44 Director
Mitchell Semel 41 Director
Russell I. Pillar 35 Director
David Williams 53 Director
</TABLE>
---------------
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, who 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. He currently serves on the NYU Tax Law
Advisory Board and is a member of the Founders Society, New York University, as
well as a member of the University of Virginia School of Law Business Advisory
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Council. Together with Ms. Silvers, Mr. Rubenstein was named 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 serves on the University of Miami International
Advisory Board and the University of Miami School of Law Visiting Committee. Ms.
Silvers served on the Board of Directors of the Pine Crest Preparatory School,
Inc. from 1993 to 1999. 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 named 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. 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 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. 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.
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.
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
9
<PAGE>
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, 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. She also has been an independent producer, with several
television credits to her name. She currently serves on the Board of Directors
of the Indianapolis Children's Museum, Indiana Repertory Theater, Indianapolis
Museum of Art and Chairperson of Simon Youth Foundation and Mercerburg Academy
Board of Regents.
MITCHELL SEMEL has served as a director of the Company since December
1999. Mr. Semel has served as Senior Vice President, Programming, East Coast for
CBS Entertainment since April 1996, where he has been involved in the production
of the Late Show with David Letterman, the Late Late Show with Tom Snyder and
the Late Late Show with Craig Kilborn. From 1994 to 1996 he worked with NBC
Productions, Inc. as a consulting producer and as an executive producer for
various shows. Mr. Semel was Senior Vice President, Programming, Comedy Central,
New York from 1992 to 1994, and from 1991 to 1992, he was Vice President,
Programming, Public Broadcasting Service, Washington, D.C.
RUSSELL I. PILLAR has served as a director of the Company since
September 2000. Mr. Pillar has served as President and Chief Executive Officer
of CBS Internet Group, managing the emerging technology investments and
businesses of Viacom Inc., since the Group's formation in January 2000. Mr.
Pillar also has served as Managing Partner of Critical Mass Ventures LLC, an
Internet-focused technology incubator and venture capital firm, since October
1991. From November 1998 to January 2000, Mr. Pillar served as President, Chief
Executive Officer, and a Director of Richard Branson's Virgin Entertainment
Group, Inc., a diversified international entertainment content retailer. From
September 1997 to August 1998, Mr. Pillar served as President and Chief
Executive Officer of Prodigy Internet, an Internet service provider, and served
as a member of Prodigy's board of directors, including serving as its Vice
Chairman, from October 1996 to February 2000. From December 1993 to September
1996, Mr. Pillar served as President, Chief Executive Officer, and a Director of
Precision Systems, Inc., a publicly-traded international telecommunications
software provider. In addition to his service on a number of private boards,
including iWon, Inc. and Playboy.com, Inc., Mr. Pillar serves as a director of
MarketWatch.com, Inc. and Sportsline.com, Inc. Mr. Pillar graduated Phi Beta
Kappa, cum laude with an A.B. in East Asian Studies from Brown University.
DAVID WILLIAMS has served as a director of the Company since
September 2000. Mr. Williams was named President and Chief Executive Officer of
Tribune Media Services in 1991. Tribune Media Services creates and markets a
wide range of editorial and advertising products and services for print, online
and on-screen distribution. Mr. Williams joined the Chicago Tribune Company in
1969, serving in various advertising and marketing capacities. In 1983, he was
appointed Director of classified advertising. Mr. Williams serves on the board
of directors for Knight Ridder/Tribune and the Newspaper Features Council. He
also is a marketing chairman for the Chicagoland United Way/Crusade of Mercy and
is on the board of advisors for Northwestern University's Masters and
Communications department. Mr. Williams holds a bachelor's degree in advertising
and marketing from Michigan State University.
See "Certain Relationships and Related Transactions" for a
description of the rights of each of Tribune Company, Viacom Inc. and Tekno
Simon LLC to nominate individuals to serve as directors of the Company.
10
<PAGE>
The Company's officers are elected annually by the Board of Directors
and serve at the discretion of the Board, subject to the terms and conditions of
such officers' employment agreements with the Company, if any. 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 OF DIRECTORS OF THE COMPANY RECOMMENDS THAT HOLDERS OF
COMMON STOCK VOTE IN FAVOR OF THE PERSONS NOMINATED FOR ELECTION TO THE BOARD OF
DIRECTORS.
MEETINGS OF THE BOARD OF DIRECTORS OF THE COMPANY
During the year ended December 31, 1999, the Company's Board of
Directors held three meetings and acted by unanimous written consent on nineteen
occasions. During 1999, all incumbent directors attended at least seventy-five
percent (75%) or more of the combined total meetings of the Board of Directors
and the committees on which they served.
COMMITTEES OF THE BOARD OF DIRECTORS OF THE COMPANY
The Board of Directors has established four committees: the
Compensation Committee, the Stock Option Committee, the Audit Committee and the
Nominating Committee, and may establish other committees from time to time as
the Board of Directors may determine.
COMPENSATION COMMITTEE. Harry T. Hoffman, Russell I. Pillar and
Mitchell Rubenstein are the current members of our 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, 1999.
STOCK OPTION COMMITTEE. Harry T. Hoffman and Jules L. Plangere, Jr.
are the current members of our Stock Option Committee. The Stock Option
Committee administers any and all present and future Stock Incentive Plans,
including the Director's Plan and the Hollywood.com 1993 Stock Option Plan, and
is authorized, subject to the provisions of the plans, to establish such rules
and regulations as it deems necessary for the proper administration of the plans
and to make such determinations and interpretations and to take such action in
connection with the plans and any benefits granted thereunder as it deems
necessary or advisable. During the year ended December 31, 1999, the Stock
Option Committee acted by unanimous written consent on two occasions.
AUDIT COMMITTEE. Harry T. Hoffman, Jules L. Plangere, Jr. and Deborah
J. Simon are the current members of our Audit Committee. The Board of Directors
adopted a formal written Audit Committee Charter on June 13, 2000, in compliance
with the Nasdaq Stock Market rules, and the Audit Committee Charter is included
as Appendix A to this Proxy Statement. 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 purpose of the Committee,
as further set forth in the Audit Committee Charter, is to assist the Board of
Directors in fulfilling its responsibilities to oversee: (a) the financial
reports and other financial information provided by the Company to any
governmental or regulatory body, the public, or any other user of such financial
statements; (b) the Company's systems of internal accounting and financial
controls; (c) the independence and performance of the Company's outside
auditors; and (d) compliance by the Company with any legal compliance and ethics
11
<PAGE>
programs as may be established by the Board of Directors and the Company's
management from time-to-time. The Audit Committee met on one occasion during the
year ended December 31, 1999.
NOMINATING COMMITTEE. Martin H. Greenberg, Mitchell Rubenstein and
Laurie S. Silvers are the current members of our Nominating Committee. The
Nominating Committee was formed in December of 1999, and as such during the
majority of the 1999 fiscal year, there was no nominating committee or other
similar committee of the Board of Directors. Such function was performed by the
Board of Directors as a whole. The Nominating Committee has responsibility for,
and may exercise all the powers and authority of the Board of Directors with
respect to selecting, interviewing and recommending to the full Board of
Directors individuals to serve on the Board of Directors. Generally, the
Nominating Committee will not consider nominees recommended by shareholders of
the Company, however, the Nominating Committee will consider director candidates
recommended by shareholders if the name, biographical data and qualifications of
the candidates are timely presented in writing to the Committee.
The Board of Directors does not have any other committees at this
time, although additional committees may be formed in the future.
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 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, 1999 have been complied with, except that each of Farid
Suleman and Thomas Unterman, then current members of the Board, were late in
filing a Form 3.
12
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth certain information concerning each
executive officer of the Company as of the Record Date.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Mitchell Rubenstein 46 Chairman of the Board and Chief Executive Officer
Laurie S. Silvers 48 Vice Chairman of the Board, President and Secretary
Dr. Martin H. Greenberg 59 Chief Executive Officer of Tekno Books
W. Robert Shearer 30 Senior Vice President and General Counsel
Nicholas G. Hall 46 Chief Operating Officer
</TABLE>
See "Election of Directors - Nominees for Election to the Board of
Directors" above for biographical information for Mitchell Rubenstein, Laurie S.
Silvers and Dr. Martin H. Greenberg.
W. ROBERT SHEARER joined the Company as Senior Vice President and
General Counsel in June 1999. From 1994 to May 1999, Mr. Shearer practiced law
with Weil Gotshal & Manges LLP with an emphasis on mergers and acquisitions and
securities law. Mr. Shearer received a Bachelor of Business Administration
degree from the University of Texas in 1991 with high honors and a J.D. degree
from the University of Houston Law Center in 1994, magna cum laude. Mr. Shearer
served as the Editor in Chief of the University of Houston Law Review during
1993 and 1994.
NICHOLAS G. HALL joined the Company in August 2000, and is
responsible for overseeing and coordinating the activities and strategic growth
of the Company and its businesses. Mr. Hall presently serves as the Company's
Chief Operating Officer. With over 25 years of experience in financial and
operational management, Mr. Hall was formerly Vice President and Chief Financial
Officer of The Hair Club For Men from 1997 to 2000, where he was instrumental in
the company achieving its goal of profitability. Prior to this, from 1994 to
1997 Mr. Hall was Vice President and Chief Financial Officer of Allders
International USA, Inc., the U.S. division of the second largest duty-free
retailer in the world. Mr. Hall is a graduate of the Institute of Chartered
Secretaries and Administrators in London, England.
13
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth the
aggregate compensation paid in 1999, 1998 and 1997 to the named executive
officers during such years.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------------------- --------
RESTRICTED SHARES
OTHER ANNUAL STOCK UNDERLYING
NAME AND COMPENSATION AWARDS OPTIONS/SARS
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) ($) (#)
------------------ ---- ---------- --------- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Mitchell Rubenstein, 1999 237,763 25,000 7,800 (1) 450,000 (4)
Chief Executive Officer 1998 235,793 67,572 7,800 (1) - -
1997 185,217 25,000 7,800 (1) 306,200 (2) 37,500 (4)
-
Laurie S. Silvers, 1999 237,763 25,000 7,800 (1) 450,000 (4)
President 1998 235,793 67,572 7,800 (1) 306,200 (2) -
1997 185,217 25,000 7,800 (1) 37,500 (4)
-
W. Robert Shearer 1999 58,454 _ _ 46,250 (3) 87,500 (4)
Senior Vice President and
General Counsel(5)
</TABLE>
(1) Represents a car allowance paid to the named executive officer.
(2) Represents the value on the issuance date of 100,000 shares of
restricted common stock granted to the named executive officers,
which vest equally over 36 months beginning July 1, 1998. The value
of the 100,000 shares of restricted common stock as of December 31,
1998 was $1,400,000.
(3) Represents the value on the issuance date of 2,500 shares of common
stock granted to Mr. Shearer. The value of the 2,500 shares of common
stock as of December 31, 1999 was $47,500.
(4) Represents options granted under the Company's 1993 Stock Option
Plan, as amended.
(5) Mr. Shearer joined the Company on May 31, 1999.
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. Effective July 1, 1998, the Company
extended each of these employment agreements for an additional five-year term.
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 $238,686 (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 salary.
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
14
<PAGE>
(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.
Effective May 31, 1999, the Company entered into a four-year
employment agreement with W. Robert Shearer, the Company's Senior Vice President
and General Counsel. The agreement provides for an annual base salary currently
set at $132,000, increasing by 10% on each one-year anniversary of such date,
and a minimum annual bonus of $25,000. The agreement also provides for the
issuance of 75,000 options to purchase common stock of the Company upon the
effective date of the agreement and the issuance of at least 50,000 options to
purchase common stock of the Company on each one-year anniversary of the
effective date. If the executive's employment is terminated without cause at any
time during the term, the Company is required to pay to the executive an amount
equal to the greater of (a) the aggregate base salary that the executive would
have received for the remaining term of the agreement and (b) six months of
executive's then current salary. The term "cause" is defined in the agreement as
(a) any act or omission of the executive that constitutes a willful and material
breach of the agreement that is uncured at least 30 days' after notice thereof;
(b) fraud, embezzlement or misappropriation against the Company; or (c)
conviction of any criminal act that is a felony.
15
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR. The following table sets forth
certain information with respect to grants of stock options under the Company's
1993 Stock Option Plan, as amended to each of the Named Executive Officers of
the Company. In addition, there are shown hypothetical gains or "option spreads"
that could be realized for the respective options, based on arbitrarily assumed
rates of annual compound stock price appreciation of 0 percent, 5 percent and 10
percent from the date the options were granted over the full option terms.
<TABLE>
<CAPTION>
STOCK OPTION GRANTS IN 1999
Individual Grants
---------------------------------------------------------
Percent
Number of Of Total
shares Options Exercise or Market Potential Realizable Value at Assumed
Underlying Granted to Base Price Price on Annual Rates of Stock Price Appreciation
Options Employees Per Date of Expiration For Option Terms (2)
Granted (1) In 1999 Share Grant Date 0% 5% 10%
----------- ------- ----- ----- ---- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mitchell Rubenstein
Non-Statutory Stock Options 100,000 4.5% $12.688 $19.000 5/27/09 $631,200 $2,143,327 $4,694,214
Incentive Stock Options 200,000 9.0% $21.090 $19.000 5/27/09 - 2,606,254 7,708,028
Non-Statutory Stock Options 150,000 6.7% $16.500 $16.500 12/13/09 - 1,969,744 5,292,610
Laurie S. Silvers
Non-Statutory Stock Options 100,000 4.5% $12.688 $19.000 5/27/09 $631,200 $2,143,327 $4,694,214
Incentive Stock Options 200,000 9.0% $21.090 $19.000 5/27/09 - 2,606,254 7,708,028
Non-Statutory Stock Options 150,000 6.7% $16.500 $16.500 12/13/09 - 1,969,744 5,292,610
W. Robert Shearer
Incentive Stock Options 37,500 1.7% $14.375 $14.375 6/15/09 - $429,016 $1,152,747
Non-Statutory Stock Options 37,500 1.7% $12.125 $14.375 6/15/09 $84,375 513,391 1,237,122
Incentive Stock Options 12,500 0.6% $16.500 $16.500 12/13/09 - 164,145 441,051
</TABLE>
(1) The grant of 200,000 options to each of Mr. Rubenstein and Ms. Silvers
vested in full six months after the May 27, 1999 grant date. The grant of
100,000 options to each of Mr. Rubenstein and Ms. Silvers vests 25% per year
over four years beginning on the May 27, 1999 grant date and shall vest in full
upon the consummation by the Company or a subsidiary of the Company of a public
offering of common stock. All other options vest 25% per year over four years
beginning on their respective grant dates.
(2) These amounts represent certain assumed rates of appreciation only. There
can be no assurances that the amounts reflected will be achieved.
STOCK OPTION EXERCISES DURING 1999 AND STOCK OPTIONS HELD AT END OF
1999. The following table indicates the total number of shares acquired on
exercise of stock options during 1999 and the value realized therefrom, as well
as the total number and value of exercisable and unexercisable stock options
held by each Named Executive Officer as of December 31, 1999:
STOCK OPTION EXERCISES IN LAST YEAR AND YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mitchell Rubenstein - $ - 385,000 250,000 $ 2,234,200 $ 1,006,200
Laurie S. Silvers - $ - 385,000 250,000 $ 2,234,200 $ 1,006,200
W. Robert Shearer - $ - - 87,500 - $ 462,500
</TABLE>
16
<PAGE>
STOCK OPTION PLAN. Under the Hollywood.com, Inc. 1993 Stock Option
Plan, as amended (the "1993 Plan"), 3,000,000 shares of common stock are
reserved for issuance upon exercise of options. In addition, the 1993 Plan
provides that the number of shares reserved for issuance thereunder will
automatically be increased on the first day of each fiscal quarter of the
Company so that such number equals at least 12.5% of the Company's outstanding
Common Stock. The 1993 Plan is designed to serve as an incentive for retaining
qualified and competent consultants and employees. The Stock Option Committee of
the Company's Board of Directors administers and interprets the 1993 Plan and is
authorized to grant options thereunder to all eligible consultants and
employees, including officers of the Company.
The 1993 Plan provides for the granting of both "incentive stock
options" (as defined in Section 422 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 common stock purchased.
As of the Record Date, options to purchase 2,567,414 shares of common
stock were outstanding under the 1993 Plan and options to purchase 187,454
shares of common stock issued under the 1993 Plan had been exercised.
LONG-TERM INCENTIVE AND PENSION PLANS. The Company does not have any
other 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 in person, and all
directors are reimbursed for travel and lodging expenses in connection with
their attendance at meetings. The Company has established for the non-employee
directors the Director's 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
150,000 shares of common stock have been reserved for issuance upon exercise of
options granted under the Directors Plan. Options to issue 78,594 shares of
common stock have been issued under the Directors Plan. Options granted under
the Directors Plan become exercisable six months after the date of grant and,
except as otherwise approved by the Board of Directors, expire five years after
the date of grant. The Board of Directors, in its discretion, may cancel all
options granted under the Directors Plan that remain unexercised on the date of
consummation of certain corporate transactions described in the Directors Plan.
The Directors Plan will terminate in July 2003 unless sooner terminated under
the provisions thereof.
17
<PAGE>
As of the Record Date, options to purchase shares of common stock
have been issued to the Company's current directors 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>
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 $5.125 3/2/98 3/2/03
5,719 $5.0625 7/2/98 7/2/03
Jules L. Plangere, Jr. 4,107 $5.125 3/2/98 3/2/03
5,719 $5.0625 7/2/98 7/2/03
Deborah J. Simon 4,166 $6.00 11/8/95 11/8/05
4,762 $5.25 8/23/96 8/23/01
4,107 $5.125 3/2/98 3/2/03
5,719 $5.0625 7/2/98 7/2/03
</TABLE>
See "Certain Relationships and Related Transactions - Consulting
Agreement with Dr. Martin H. Greenberg" for a description of the consulting
agreement between the Company and Dr. Greenberg.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. All
compensation decisions during 1999 were made by the Compensation Committee,
which consisted of Mitchell Rubenstein and two independent directors, Harry T.
Hoffman and Dr. Lawrence Gould. Mr. Rubenstein is our Chairman and Chief
Executive Officer. Mr. Rubenstein does not participate in discussions or
decisions regarding his own compensation or performance appraisals.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Under the rules established by the Securities and Exchange
Commission, the Company is required to provide a report explaining the rationale
and considerations that led to fundamental compensation decisions affecting the
Company's executive officers (including the Named Executive Officers) during the
past fiscal year. The report of the Company's Compensation Committee is set
forth below.
Executive Compensation Objectives and Elements.
The Compensation Committee is responsible for determining and making
recommendations to the Board of Directors concerning executive compensation,
including base salaries, bonuses and the basis of their awards, stock options,
health insurance and other benefits. The Company's executive compensation
program, whose principal components consist of salary, bonus and stock options,
is designed to achieve the following objectives: (a) providing competitive base
pay to attract, retain and motivate qualified management; (b) delivering
performance-based bonuses when results, individual initiative and
accomplishments warrant; (c) generate outstanding returns to shareholders over
the long term; and (d) aligning management compensation with the achievement of
the Company's goals and performance. The Compensation Committee believes that
the Company's executive compensation program is competitive with those of other
media and Internet companies.
18
<PAGE>
The Compensation Committee reviews, recommends and approves changes
to the Company's executive compensation program and policies, and otherwise
seeks to ensure that the Company's compensation philosophy and objectives are
consistent with the its best interests and is properly implemented. Our
executive compensation strategy is for executives to receive a competitive base
salary, while being eligible for bonuses based on performance and stock option
grants to provide long-term incentive, and participation in benefit programs
available to other employees. In addition, the Compensation Committee may
recommend the grant of discretionary bonuses to the Company's executive
officers. During 1999, the Compensation Committee did not attempt to
specifically analyze compensation levels at comparable companies.
Executive Salaries.
During 1999, the executive officers were compensated in accordance
with their respective employment agreements, which agreements designate a
substantial portion of such executive's compensation. See "Executive
Compensation - Employment Agreements" above for a description of the Company's
agreements with Named Executive Officers related to compensation. The
Compensation Committee reviews the annual salary of the executive officers,
including the Chief Executive Officer. In determining appropriate executive
officer compensation, the Compensation Committee reviews and considers, among
other factors, each executive's scope of responsibility and commitment, level of
performance (with respect to specific areas of responsibility and on an overall
basis), past and present contribution to and achievement of Company goals and
performance, compensation levels at comparable companies and historical
compensation levels, and following consultation with and recommendation from the
Company's Chief Executive Officer. Based on the foregoing, during 1999, the
Compensation Committee approved salary increases for certain executive officers
that the Compensation Committee believes appropriately reflect the executive's
contribution, performance and responsibility in connection with the Company's
operations and growth.
Stock Option Grants.
The Company believes that long-term equity compensation is an
integral part of the Company's executive compensation program and serves to
provide important incentive to its executives. As such, generally it is the
Company's practice to set option exercise prices for executive officers at not
less than 100% of the fair market value of the common stock on the date of the
grant. Thus, the options have no monetary benefit to the executives unless the
market price of our common stock increases above the exercise price. Moreover,
options granted to executive officers generally provide that they are not
exercisable until either six months or one year after the date of grant, at
which time they become exercisable on a cumulative basis at an annual rate of
25% of the total number of shares underlying the option grant. We anticipate
that future option grants will be based in part on a subjective analysis of
various performance criteria.
Annual Cash Bonuses.
In addition to compensation through base salaries and stock option
grants, the Compensation Committee has the authority to issue performance-based
annual cash bonus awards. Bonus awards vary depending on the officer's base
salary and the Compensation Committee's review and consideration of the factors
noted above and the executive officer's contribution to the Company's
achievement of its goals.
19
<PAGE>
Chief Executive Officer Compensation.
Mr. Rubenstein's 1999 compensation was paid pursuant to and in
accordance with Mr. Rubenstein's existing employment agreement with the Company.
With the exception of stock options granted to Mr. Rubenstein in 1999, Mr.
Rubenstein received the compensation specified in the employment agreement. The
principal factors considered by the Compensation Committee in determining the
stock option portion of the 1999 compensation for Mr. Rubenstein, included the
factors described in the preceding paragraphs, the Compensation Committee's
positive assessment of Mr. Rubenstein's performance during 1999, and Mr.
Rubenstein's substantial contribution to, and integral role in, the completion
of a number of significant strategic alliances and acquisitions, the raising of
funds for working capital, and the successful recruiting and hiring of other key
employees. Based on such factors, Mr. Rubenstein was issued stock options as
reported as described in "Executive Compensation - Option Grants in Last Fiscal
Year" herein.
Policy on Deductability of Compensation.
Section 162(m) of the U.S. Internal Revenue Code generally limits
the tax deduction to public companies for compensation in excess of $1 million
paid to a corporation's chief executive officer and any other of its four most
highly compensated executive officers. However, compensation which qualifies as
"performance-based" is excluded from the $1 million limit if, among other
requirements, the compensation is payable only upon attainment of
pre-established, objective performance goals under a plan approved by
stockholders. The Compensation Committee does not presently expect total cash
compensation payable for salaries to exceed the $1 million limit for any
individual executive. The Compensation Committee will study the potential impact
of Section 162(m), and will, to the extent it deems appropriate, take reasonable
steps to minimize or eliminate any potential impact of Section 162(m) on the
Company, while at the same time preserving the objective of providing
appropriate incentive awards. The Compensation Committee believes that there are
no current executive compensation programs or outstanding awards that would be
impacted by Section 162(m). The Compensation Committee will continue to monitor
the compensation levels potentially payable under the Company's cash
compensation programs, but intends to retain the flexibility necessary to
provide total cash compensation in line with competitive practice, the Company's
compensation objectives and the Company's best interests.
Respectfully,
Members of the Compensation Committee
Dr. Lawrence Gould
Harry T. Hoffman
Mitchell Rubenstein
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REPORT OF THE AUDIT COMMITTEE
Our Board of Directors has appointed an Audit Committee consisting of
three directors. All of the members of the committee are "independent" of our
Company and management, as that term is defined in the Nasdaq listing standards.
The primary responsibility of the Audit Committee is to oversee our
company's financial reporting process on behalf of the Board of Directors.
Management has the primary responsibility for the financial statements and the
reporting process, including the systems of internal controls. The independent
auditors are responsible for auditing our financial statements and expressing an
opinion on the conformity of those audited financial statements with generally
accepted accounting principles.
In fulfilling its oversight responsibilities, the Audit Committee
reviewed our audited financial statements with management and the independent
auditors. The Audit Committee discussed with the independent auditors the
matters required to be discussed by Statement of Auditing Standards No. 61. This
included a discussion of the auditors' judgments as to the quality, not just the
acceptability, of our Company's accounting principles and such other matters as
are required to be discussed with the Audit Committee under generally accepted
auditing standards. In addition, the Audit Committee received from the
independent auditors written disclosures and the letter required by Independence
Standards Board Standard No. 1. The Audit Committee also discussed with the
independent auditors the auditors' independence from management and our Company,
including the matters covered by the written disclosures and letter provided by
the independent auditors.
The Audit Committee discussed with our Company's internal and
independent auditors the overall scope and plans for their respective audits.
The Audit Committee meets with the internal and independent auditors, with and
without management present, to discuss the results of their examinations, their
evaluations of our company, our internal controls, and the overall quality of
our financial reporting. The committee held one meeting during fiscal 1999 in
addition to a number of informal correspondence.
Based on the reviews and discussions referred to above, the committee
recommended to the Board of Directors, and the board approved, that the audited
financial statements be included in our Annual Report on Form 10-K for the year
ended December 31, 1999 for filing with the Securities and Exchange Commission.
The committee and the Board of Directors also have recommended, subject to
shareholder approval, the selection of our Company's independent auditors. See
"Proposal to Ratify the Selection of Independent Public Accountants."
Our Board of Directors has adopted a written charter for the Audit
Committee. A copy of that charter is included as "Appendix A" to this Proxy
Statement.
November 3, 2000
Harry T. Hoffman, Audit Committee Member
Jules L. Plangere, Jr., Audit Committee Member
Deborah Simon, Audit Committee Member
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PERFORMANCE GRAPHS
The following graph compares, for the period from December 31, 1995
to December 31, 1999, the cumulative total shareholder return on our common
stock with:
o The Nasdaq Stock Market Index; and
o The Standard & Poor's Entertainment and Leisure Composite
Index.
The graph assumes that $100 was invested on December 31, 1995 in our
common stock, the Nasdaq Stock Market Index and the Standard & Poor
Entertainment Index, and further assumes no payment or reinvestment of
dividends. The stock price performance on the following graph is historical and
not necessarily indicative of future stock price performance.
<TABLE>
<CAPTION>
12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
HOLLYWOOD.COM, INC. 100.00 77.97 85.60 189.83 257.63
NASDAQ 100.00 122.71 149.25 208.40 386.76
S&P'S ENTERTAINMENT INDEX 100.00 103.58 137.16 181.77 201.26
</TABLE>
22
<PAGE>
The following graph compares, for the period from November 2, 1998
(the beginning of the period in which the Company entered the Internet business)
to December 31, 1999, the cumulative total shareholder return on our common
stock with:
o The Nasdaq Stock Market Index; and
o The Goldman Sachs Internet Index.
The graph assumes that $100 was invested on November 2, 1998 in our
common stock, the Nasdaq Stock Market Index and the Goldman Sachs Internet
Index, and further assumes no payment or reinvestment of dividends. The stock
price performance on the following graph is historical and not necessarily
indicative of future stock price performance.
<TABLE>
<CAPTION>
GOLDMAN SACHS
DATE HOLLYWOOD.COM,INC. NASDAQ INTERNET INDEX
---- ------------------ ------ --------------
<S> <C> <C> <C>
11/2/98 100.00 100.00 100.00
12/1/98 276.91 111.26 132.28
12/31/98 313.27 121.75 184.08
1/4/99 369.21 122.61 182.88
2/1/99 290.89 139.38 238.15
3/1/99 289.51 127.45 225.42
4/1/99 278.32 138.45 306.43
5/3/99 475.50 140.79 296.52
6/1/99 413.96 133.93 251.86
7/1/99 349.63 150.27 272.70
8/2/99 419.56 145.68 219.98
9/1/99 405.57 152.74 218.53
10/1/99 391.59 151.97 246.80
11/1/99 380.40 164.79 256.57
12/1/99 385.99 186.22 316.84
12/31/99 425.15 225.96 387.13
</TABLE>
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTION WITH VIACOM INC.
We entered into a strategic, seven-year relationship with Viacom Inc.
in January 2000 that provides for extensive promotion of the Hollywood.com and
Broadway.com web sites. In connection with our strategic relationship, Viacom
Inc. purchased 6,672,031 shares of our common stock, representing approximately
30% of our outstanding common stock, in exchange for $5,303,030 in cash and
$100,000,000 of advertising, promotion, content and advertising sales support
over a seven-year term pursuant to an Advertising and Promotion Agreement and a
Content Agreement. We also issued to Viacom a Warrant to purchase an additional
1,178,892 shares of our Common Stock for an aggregate exercise price of
$10,937,002. Viacom exercised the warrant in full during March 2000. Half of the
warrant exercise price was paid in cash and half is payable in additional
advertising and promotion under the Advertising and Promotion Agreement and will
be furnished to us during the 24-month period following the exercise of the
Warrant. We also entered into an Investor's Rights Agreement, a Registration
Rights Agreement and a Voting Agreement with Viacom, which contain, among other
things, transfer restrictions, standstill provisions, pre-emptive rights,
registration rights and voting rights.
ADVERTISING AND PROMOTION AGREEMENT. Viacom has agreed to provide us
an aggregate of $70 million in advertising and promotion of the Hollywood.com
and Broadway.com web sites over a seven-year term. In addition, we have the
right to allocate up to $30 million in value deliverable under the Content
Agreement to additional advertising and promotion under the Advertising and
Promotion Agreement for a total of up to $100 million in advertising and
promotion. Viacom Inc. conducts the advertising and promotion across its full
range of CBS media properties, including the CBS television network, CBS owned
and operated television stations, CBS cable networks, Infinity Broadcasting
Corporation's radio stations and outdoor billboards, CBS Internet sites and CBS
syndicated television programs. The advertising and promotion is provided
pursuant to media plans jointly developed each year by Viacom and us, which will
provide broad-based exposure for the Hollywood.com web site, including prominent
placements in conjunction with appropriate entertainment-related events and
programming. The value of all advertising and promotion furnished by Viacom to
us will be based on the average unit price paid to Viacom by third parties for
the particular media on which the advertising and promotion occurs.
Viacom has the right to terminate its obligation to deliver
advertising and promotion under the Advertising and Promotion Agreement under a
number of circumstances, including, among others, if the Hollywood.com web site
contains, or links to, content that violates specified CBS license guidelines
and we fail to remove such content or links, we violate the terms of our other
agreements with Viacom or if certain defined competitors of Viacom acquire a
significant equity stake in the Company.
CONTENT LICENSE AGREEMENT. Viacom has agreed to provide us an
aggregate of $30 million in value over a seven-year term to be allocated in our
discretion to the license of content, advertising sales or advertising and
promotion. We will receive $4.3 million in value during each of the first six
years of the term and $4.2 million in value during the last year of the term.
License of Content. Viacom granted to us a license to use, distribute
and otherwise make available on the Hollywood.com web site certain text,
graphics, photographs, video, audio and other information owned by Viacom and
related to the movie business or any particular motion picture. In addition,
subject to compliance by us with certain obligations, Viacom has the right to
archive the content on the Hollywood.com web site after expiration of the term
of the Content License Agreement.
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Advertising Sales. We have the right to require Viacom to sell
advertisements on the Hollywood.com web site totaling gross advertising revenues
of up to $1.5 million per year and Viacom has agreed to include the
Hollywood.com web site in all advertising sales programs and presentations that
are appropriate for the sale of advertising on the web site. We have agreed to
pay to Viacom a commission of 8% of gross advertising revenues generated by
advertising sold by Viacom on the Hollywood.com web site in excess of the
portion of the $1.5 million guaranteed amount selected by us each year.
Advertising and Promotion. We have the right to allocate all or any
portion of the $30 million in value to additional advertising and promotion of
the Hollywood.com and Broadway.com web sites to be furnished by Viacom under the
Advertising and Promotion Agreement.
Viacom Inc. has the right to terminate its obligations under the
Content Agreement upon the occurrence of any of the events that permit it to
terminate its obligations under the Advertising and Promotion Agreement.
INVESTOR'S RIGHTS AGREEMENT. The Investor's Rights Agreement between
the Company and Viacom Inc. sets forth various rights and obligations of the
Company and Viacom related to Viacom's ownership of the Company's common stock,
including Viacom's registration rights with respect to the common stock, the
Company's right of first refusal with respect to transfers by Viacom of the
common stock, standstill provisions to which Viacom is bound, and preemptive
rights of Viacom with respect to certain issuances of common stock and other
securities by the Company.
Registration Rights. Viacom has the right to initiate up to four
registrations under the Securities Act of 1933 of the common stock that it
acquired from the Company. The Investor's Rights Agreement contains various
restrictions on the timing of such registrations. In addition, Viacom has
"piggyback" registration rights allowing it to include the shares of common
stock that it acquires from the Company in registrations of the Company's common
stock initiated by the Company or other shareholders. The Company will pay all
expenses associated with any such registrations other than underwriters' fees or
commissions relating to the sale of the common stock.
Transfer Restrictions; Right of First Refusal. Viacom is not
permitted to transfer any shares of the Company's common stock prior to January
3, 2001, except to certain affiliates of Viacom. If Viacom proposes to transfer
any shares of common stock during the six year period following the first year,
other than to certain affiliates or in a bona fide public distribution pursuant
to an effective registration statement, the Company has the right to purchase
the shares on the same terms on which Viacom proposes to transfer them to a
third party. The Company's right of first refusal will terminate (a) at such
time as Mitchell Rubenstein, the Company's Chairman of the Board and Chief
Executive Officer, and Laurie S. Silvers, the Company's Vice Chairman of the
Board and President, have sold more than 60% of the common stock owned by them
as of the closing of the transaction or (b) at any time after the second
anniversary of the closing if Viacom owns less than 15% of the Company's
outstanding common stock (other than as a result of transfers by Viacom of at
least half of the common stock acquired by it from the Company).
25
<PAGE>
Standstill Provisions. For a period of seven years ending in January
2007, Viacom agrees that, except as contemplated by the Investor's Rights
Agreement, it will not, directly or indirectly, do any of the following:
(1) acquire or propose to acquire any securities of the
Company if, after giving effect thereto, Viacom and its
affiliates beneficially own in excess of 34.8% of the
Company's outstanding common stock;
(2) solicit proxies or become a participant in a solicitation
of proxies or consents with respect to any securities of
the Company or initiate or encourage the submission of any
stockholder proposal or election contest with respect to
the Company;
(3) take any action for the purpose of convening a meeting of
the shareholders of the Company or initiate any process to
solicit or obtain consents of shareholders in lieu of a
meeting;
(4) except as may be required by applicable law, make any
public announcement or disclosure in respect in respect of
any plan, contract or arrangement relating to the
acquisition of capital stock of the Company or a merger,
sale of assets or other extraordinary corporate
transaction relating to the Company;
(5) deposit capital stock of the Company into a voting trust
or subject capital stock of the Company to voting
agreements, or grant a proxy or power-of-attorney with
respect to any capital stock of the Company to any person
not designated by the Company who is not an officer,
director or employee of Viacom or its affiliates;
(6) form or in any participate in a group for the purpose of
acquiring, holding, voting or disposing of securities of
the Company; or
(7) disclose publicly any intention or arrangement
inconsistent with the foregoing or enter into any
discussions or understandings with any third party with a
view to encouraging any action prohibited with the
foregoing.
If the Company's Board of Directors approves or recommends to its
shareholders for approval any transaction in which a party (other than Company's
existing large shareholders) would acquire at least 50% of the Company's
outstanding common stock, then the restrictions described above would not apply
during the pendency of the transaction and would cease upon the consummation of
the transaction.
VOTING AGREEMENT. The Voting Agreement among the Company, Viacom and
certain shareholders of the Company contains agreements by such parties with
respect to nominating individuals to serve on the Company's Board of Directors
and the voting of the common stock owned by such parties in favor of such
nominees. Viacom has the right to nominate for election to the Company's Board
of Directors a number of individuals equal to the product of Viacom's percentage
ownership of the Company's common stock and the total number of members of the
Board of Directors (rounded down to the nearest whole number). In addition, as
long as the Promotion Agreement and the Content Agreement remain in effect,
Viacom shall have the right to designate at least one nominee to the Board of
Directors. In all elections for members of the Board of Directors, each of the
shareholders that is a party to the Voting Agreement agrees to vote all shares
beneficially owned by them in favor of the Viacom designees. Each of Tribune
Company, Mitchell Rubenstein, Laurie S. Silvers, Martin H. Greenberg and
Rosalind Greenberg are parties to the Voting Agreement. As of the Record Date,
those shareholders beneficially owned approximately 20.9% of the Company's
26
<PAGE>
outstanding common stock. Viacom's current nominees to the Board of Directors
are Mitchell Semel and Russell I. Pillar.
In all elections for members of the Board of Directors, Viacom agrees
to vote all shares of common stock owned by it, or over which it has voting
control, in favor of (1) each individual nominated for election to the Board by
the Company, and (2) each individual nominated for election to the Board by
Tribune Company pursuant to the Shareholder Agreement between the Company and
Tribune Company.
Viacom's right to nominate directors for election to the Board will
terminate upon the acquisition by Viacom of an equity interest in excess of 15%
in any entity who owns, operates or controls a web site that is a competitor of
the Hollywood.com web site. The Voting Agreement contains a description of the
type of web site that will constitute a competitor of the Hollywood.com web
site.
TRANSACTIONS WITH TRIBUNE COMPANY
In May 1999 the Company completed the acquisition of hollywood.com,
Inc. (formerly known as Hollywood Online Inc.) from Tribune Company. The Company
paid the purchase price for the acquisition by issuing to Tribune Company
2,300,075 shares of common stock and an unsecured promissory note for
$1,928,138. The promissory note was repaid in full by the issuance of 152,548
shares of common stock to Tribune Company.
The Company and Tribune Company entered into the following additional
agreements in connection with the Company's acquisition of hollywood.com, Inc.
Shareholder Agreement. The Company and Tribune Company entered into a
Shareholder Agreement containing various rights and obligations associated with
Tribune Company's ownership of the common stock. Pursuant to the Shareholder
Agreement, Tribune Company agreed to certain standstill provisions, including
that it will not acquire any additional equity securities of the Company or
solicit proxies or consents with respect to the securities of the Company or
initiate any shareholder proposal. In addition, Tribune Company agreed that it
will not transfer any common stock to any competitor of the Company, or to any
transferee or group of related transferees of the Company that would, after such
transfer, hold more than 2.5% of the voting securities of the Company.
Tribune Company also agreed pursuant to the Shareholder Agreement
that for a period of three years after the closing of the acquisition it will
vote all shares of common stock owned by it in favor of the nominees for
election to the Company's Board of Directors recommended to the Company's
shareholders by the Board of Directors. In addition, with respect to all other
matters submitted to a vote of the shareholders of the Company (other than
certain transactions that would dilute its ownership of Company common stock or
result in a change of control of the Company), Tribune Company agrees that for a
period of three years it will vote all shares of Company common stock owned by
it in the same proportion as all other shareholders of the Company vote on any
such matter.
Tribune Company will be entitled to designate one person as a nominee
for election to the Company's Board of Directors as long as it beneficially owns
at least 5% of the voting securities of the Company. If the Company increases
the size of its Board of Directors from nine to ten members, Tribune Company
will be entitled to designate one additional person as a nominee for election to
the Company's Board of Directors. If the Company increases the size of its Board
of Directors to a number greater than ten, Tribune Company shall be entitled to
designate a number of nominees proportionate to its percentage ownership of
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<PAGE>
Company common stock. Tribune Company's current nominee to the Board of
Directors is David Williams.
The standstill provisions of the Shareholder Agreement terminate upon
the earlier to occur of January 10, 2004 and the date of a change of control (as
defined) of the Company. The other provisions of the Shareholder Agreement
terminate on the earliest of these dates and the date on which Tribune Company
beneficially owns less than 5% of the voting securities of the Company.
Registration Rights Agreement. The Company and Tribune Company
entered into a Registration Rights Agreement upon the closing of the
acquisition, which provides Tribune Company with the right to require the
Company to register the common stock acquired by Tribune Company in the
acquisition under the Securities Act under certain conditions. Tribune Company
and its permitted transferees have the right on four separate occasions to
require the Company to effect a registration under the Securities Act of at
least 20% of the common stock acquired by Tribune Company in the acquisition to
be sold in a firm commitment underwritten public offering for cash. In addition,
at any time when the Company proposes to register shares of common stock under
the Securities Act, it will give notice to Tribune Company and its permitted
transferees of its intention to do so and of the material terms of the proposed
registration. The Company will use its best efforts to include in the proposed
registration all shares of common stock that it is requested in writing by
Tribune Company or its permitted transferees to register. The permitted
transferees of Tribune Company that are entitled to the benefits of the
Registration Rights Agreement include only wholly owned subsidiaries of Tribune
Company and certain charitable organizations affiliated with Tribune Company.
Non-Competition Agreement. The Company and Tribune Company also
entered into a Non-Competition Agreement upon the closing of the acquisition.
Tribune Company agrees in the Non-Competition Agreement that for a period of
three years after the closing, it will not engage or participate in any business
or venture that operates as its primary focus a national- or
international-targeted web site dedicated to providing movie-going consumers
with movie-related information or offering for sale movie-themed merchandise or
tickets for movies (a "Competing Business"). In addition, Tribune Company agrees
that for a period of three years after the closing, it will not own, manage,
operate, promote, control, or be connected with as a stockholder (other than on
a passive basis with less than 5% of the equity of a publicly-traded company or
less than 10% of the equity of a privately-owned company), joint venturer or
partner in, any Competing Business. Notwithstanding the foregoing, certain
business ventures and activities of Tribune Company shall not be considered a
Competing Business, including, among others, the operation of the current web
sites operated by newspapers owned by Tribune Company to the extent the web
sites provide primarily local and regional movie information and movie-themed
merchandise and the licensing and syndication of movie information by the L.A.
Times Syndicate to third parties, which information is posted to such parties'
web sites.
INVESTMENTS BY AFFILIATE OF THE SIMON PROPERTY GROUP
Pursuant to a 1995 stock purchase agreement with Tekno Simon, an
affiliate of the Simon Property Group, and its Co-Chairman, Melvin Simon, Tekno
Simon invested $2,000,000 in shares of the Company's Series A Preferred Stock
and Series B Preferred Stock and $1,000,000 in shares of the Company's common
stock.
Under the original Simon Stock Purchase Agreement, the Series A
Preferred Stock and the Series B Preferred Stock were convertible at the option
of the holder, at any time prior to November 28, 1997, into shares of common
stock on a one-for-one basis.
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<PAGE>
In May 1999 the Company agreed to extend the conversion option and
allow Tekno Simon to convert the Series A and Series B Preferred Stock into
common stock. In exchange, Tekno Simon agreed to waive certain accrued dividends
payable on the Series A and Series B Preferred Stock. In May 1999 Tekno Simon
converted all of the Series A and Series B Preferred Stock into 300,631 shares
of common stock.
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 common
stock issued upon conversion of the Series A Preferred Stock, and (ii) the
shares of common stock purchased by Tekno Simon in 1995. 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.
INVESTMENT BY THE COMPANY'S DIRECTORS
In September 2000, the Company entered into definitive agreements to
issue a total of 733,696 shares of the Company's common stock to investors for
an aggregate purchase price of $4,250,000 in cash. The transaction was
structured as a private placement to accredited investors and the Company agreed
to register the shares for resale by the investors. As part of the private
placement, Mitchell Rubenstein, the Chairman and Chief Executive Officer of the
Company, purchased 125,001 shares of the Company's common stock at a purchase
price of $6.00 per share.
In May 1999, the Company issued 569,820 shares of common stock in a
private placement at a purchase price of $21.25 per share. In addition, the
Company issued to the same investors warrants to purchase an aggregate of
189,947 shares of common stock at an exercise price of $21.25 per share. Five
members of the Company's then current Board of Directors participated in the
private placement and purchased an aggregate of 35,700 shares of common stock
and received warrants to purchase an aggregate of 11,902 shares of common stock
on the same terms as the other investors in the private placement.
In July 1998, six members of the Company's then current Board of
Directors (including Mitchell Rubenstein, the Company's Chairman of the Board
and Chief Executive Officer, Laurie S. Silvers, the Company's Vice Chairman and
President, and Martin H. Greenberg, the Chief Executive Officer of Tekno Books,
the Company's 51%-owned subsidiary) purchased an aggregate of 187,442 shares of
the Company's common stock for $5.00 per share, the then market price of the
stock. In conjunction with the private placement of these shares, the investors
received five-year warrants to purchase an aggregate of 93,721 shares of the
Company's common stock at $5.00 per share.
CONSULTING AGREEMENT WITH DR. MARTIN H. GREENBERG
In 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 intellectual properties 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
attending trade shows and conventions on the Company's behalf. The consulting
agreement will expire in November 2003, unless terminated earlier, which
termination may take place only under certain conditions. Pursuant to the
consulting agreement, in November 1993 Dr. Greenberg began receiving consulting
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<PAGE>
fees of $30,000 per year and was granted an option to purchase 6,250 shares of
common stock at an exercise price of $8.00 per share. In connection with the
acquisition of Tekno Books, the consulting agreement was amended on December 9,
1994 (1) to provide that Dr. Greenberg will have the exclusive right to package
novelizations based on the Company's entertainment properties, and (2) in lieu
of future annual stock option grants to which Dr. Greenberg was entitled under
the original agreement, to grant Dr. Greenberg options to purchase 17,778 shares
of common stock at an exercise price of $8.4375 per share (the then approximate
market price of the common stock). Mr. Greenberg received the stock options and
receives the consulting fees in lieu of a base salary. Mr. Greenberg does not
receive a salary for serving as the Chief Executive Officer of Tekno Books.
LINE OF CREDIT
During the first quarter of 1999, Mitchell Rubenstein, the Company's
Chairman of the Board and Chief Executive Officer, and Laurie S. Silvers, the
Company's Vice Chairman and President, agreed to increase their previously
extended $1.1 million unsecured line of credit facility to the Company to $5.5
million to enable the Company to meet its working capital requirements for the
balance of 1999. The interest rate on the line of credit was set at the JP
Morgan Bank prime rate of interest. This commitment terminated in accordance
with its terms during the second quarter of 1999 as a result of the Company
raising in excess of $5.5 million from other sources for working capital
purposes. In addition, during the second quarter of 2000, Mitchell Rubenstein
and Laurie S. Silvers, advanced a $2,050,000 unsecured line of credit facility
to the Company. The Company drew upon this line of credit in the second quarter
of 2000 to enable the Company to meet its obligation to lend to a former
shareholder of CinemaSource funds to pay a portion of the shareholder's taxes
resulting from the sale of CinemaSource to the Company, and again in the third
quarter of 2000. The loans were repaid in full and there are no borrowings by
the Company under the line of credit as of the Record Date.
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PROPOSAL TO APPROVE AN AMENDMENT
TO THE SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
(PROPOSAL NO. 2)
The Board of Directors has unanimously approved an amendment and
restatement of the Company's Second Amended and Restated Articles of
Incorporation to change the name of the Company to Hollywood Media Corp. (the
"Charter Amendment"), and has directed that the Charter Amendment be submitted
to the shareholders of the Company for approval. To effect such changes, Article
I of the Company's Second Amended and Restated Articles of Incorporation will be
amended to read as follows:
"ARTICLE I
NAME
The name of the corporation is Hollywood Media Corp. (the
"Corporation")."
If the Charter Amendment is approved by the required vote of
shareholders, it will become effective upon the filing of the Third Amended and
Restated Articles of Incorporation with the Secretary of State of the State of
Florida.
REASONS FOR THE CHARTER AMENDMENT
Through a series of acquisition and other initiatives over the last
two years, Hollywood.com, Inc. has evolved into a leading media and Internet
company with widely recognized brands and a broad and deep collection of
entertainment content. Hollywood.com and Broadway.com are premier web sites in
the areas of movies and live theater and HollywoodPro.com is a leading
subscription web site geared to movie professionals. CinemaSource and
EventSource compile and syndicate a wide range of entertainment and event
information to more than 200 different media outlets, including web portals,
major newspapers and wireless providers. MovieTickets.com, a joint venture with
several major theater exhibitors, sells movie tickets online for theaters
throughout the United States and Canada. Our live theater ticketing businesses,
Theater Direct International and Broadway.com, sell tickets online and to the
travel and tourism industry for shows in New York and London. We also continue
to operate the intellectual property business from which our company has
expanded and evolved.
To fully reflect our growth and multi-faceted businesses, the Board
of Directors has voted in favor of changing our name to Hollywood Media Corp.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT HOLDERS OF
COMMON STOCK VOTE FOR APPROVAL OF THE PROPOSED CHARTER AMENDMENT.
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PROPOSAL TO APPROVE THE 2000 STOCK INCENTIVE PLAN
(PROPOSAL NO. 3)
GENERAL
The Board of Directors of the Company has approved the Company's 2000
Stock Incentive Plan (the "2000 Plan") and recommends that holders of common
stock vote for approval of the Plan. The existing employee stock option plan
maintained by the Company was adopted in 1993 and fewer than 250,000 shares of
common stock are available for issuance under the 1993 Plan. The average
exercise price of stock options outstanding under the 1993 Plan is $14.36 per
share. Accordingly, the Board of Directors and management of the Company believe
that the Company should adopt the 2000 Plan in order to continue to attract,
retain, and motivate highly competent persons as officers and key employees of
the Company.
PLAN DESCRIPTION
The statements in this Proxy Statement concerning the terms and
provisions of the 2000 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 2000 Plan, which is attached hereto as Appendix B.
The purpose of the 2000 Plan is to advance the interests of the
Company by providing an additional incentive to attract, retain and motivate
highly competent persons as officers and key employees of, and consultants to,
the Company and its subsidiaries and affiliates and to encourage stock ownership
in the Company by such persons by providing them opportunities to acquire shares
of the Company's common stock, or to receive monetary payments based on the
value of such shares pursuant to the Benefits described therein. Additionally,
the 2000 Plan is intended to assist in further aligning the interests of the
Company's officers, key employees and consultants to those of its other
stockholders.
The 2000 Plan is 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 common stock subject to options, the exercise
price of options and the other terms and conditions thereof.
The 2000 Plan provides for the issuance of Incentive Stock Options
and 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. 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. In addition, the Benefits under the Plan may
be granted in any one or a combination of Options, Stock Appreciation Rights,
Stock Awards, Performance Awards and Stock Units.
If this proposal is approved by the shareholders, 1,000,000 shares
will be available for issuance pursuant to Benefits granted under the 2000 Plan.
In addition, if this proposal is approved by the shareholders, the 2000 Plan
will provide that the number of shares reserved for issuance thereunder shall
automatically be increased on the first day of each fiscal quarter of the
Company so that such number equals at least 5% of the Company's outstanding
common stock. The maximum number of shares issuable pursuant to Incentive Stock
Options will be 1,000,000. If any Benefit granted pursuant to the 2000 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 2000
Plan. The shares acquired upon exercise of Benefits granted under 2000 Plan will
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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 2000 Plan.
All employees of the Company, including officers and directors and
consultants to the Company, are eligible to receive grants of Benefits under the
2000 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 Benefits, each holder of a Benefit must enter into a benefit
agreement with the Company that contains the appropriate terms and conditions as
determined by the Stock Option Committee.
TERMS AND CONDITIONS OF BENEFITS
Option Price. For any Option granted under the 2000 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" of the
Common Stock on the date such Incentive Stock Option is granted. As of the
Record Date, the Fair Market Value of the common stock was $_____ 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, 100% of the unvested outstanding Options
and Stock Appreciation Rights held by each Optionee under the 2000 Plan shall
become immediately exercisable in full (i) if there occurs any transaction
approved by the Company's Board of Directors and consummated (which shall
include a series of transactions occurring within 60 days or occurring pursuant
to a plan), that will have the result that (A) any legal entity or person owns
at least 51 percent of the voting stock of the Company or (B) 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 consolidation, merger, liquidation or like
business combination or reorganization; (ii) during any period of two
consecutive years, the individuals who at the beginning of such period
constitute the Company's Board of Directors or any individuals who would be
"Continuing Directors" cease for any reason to constitute at least a majority
thereof; (iii) the Company's Common Stock ceases to be publicly traded; or (iv)
the Company Board of Directors approves a sale of all or substantially all of
the assets of the Company, and such transaction shall have been consummated. 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. As used in
the 2000 Plan, "Continuing Directors" means (x) the directors of the Company in
office on November 3, 2000 and (y) any successor to any such director and any
additional director who after November 3, 2000 was nominated or selected by a
majority of the Continuing Directors (or the Nominating Committee of the Board
of Directors of the Company) in office at the time of his or her nomination or
selection.
Post-Employment Exercises. The exercise of any Option after
termination of employment of a participant with the Company, a subsidiary of the
Company or with any company providing consulting services to the Company shall
be subject to conditions imposed by the Stock Option Committee at the time of
the grant and satisfaction of the conditions precedent that the participant
neither (i) competes with, or takes other employment with or renders services to
a competitor of, the Company, its subsidiaries or affiliates without the written
consent of the Company; provided that this clause (i) shall not apply to
consultants of the Company, nor (ii) conducts himself or herself in a manner
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adversely affecting the Company; provided, however, that the Stock Option
Committee, in its sole discretion, may waive any conditions imposed in the grant
letter or as set forth in (i) and (ii) above relating to the exercise of options
after the date of termination of employment during the term of the option.
Nontransferability. Benefits granted under the 2000 Plan are not
transferable by a participant other than by will or the laws of descent and
distribution, and Benefits are exercisable during a participant's lifetime only
by the participant.
Termination Of Benefits. The expiration date of a Benefit 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 any Benefit be
exercisable after 10 years from the date it is granted.
The 2000 Plan is not qualified under the provisions of Section 401(a)
of the Code, nor are they subject to any of the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
FEDERAL INCOME TAX EFFECT OF OPTIONS GRANTED UNDER THE 2000 PLAN
INCENTIVE STOCK OPTIONS. Incentive Stock Options granted under the
2000 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 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 a 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
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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 2000 Plan will generally recognize, at the date of exercise of
such Nonqualified Stock Option, ordinary income equal to the difference between
the exercise price and the fair market value of the shares of common stock
subject to the Nonqualified Stock Option. This taxable ordinary income will be
subject to federal income tax withholding. A federal income tax deduction will
be allowed to the Company in an amount equal to the ordinary income to be
recognized by the Optionee, provided that such amount constitutes an ordinary
and necessary business expense to the Company and is reasonable, and the Company
satisfies its withholding obligation with respect to such income.
If an Optionee exercises a Nonqualified Stock Option by delivering
other shares, the Optionee will not recognize gain or loss with respect to the
exchange of such shares, even if their then fair market value is different from
the Optionee's tax basis. The Optionee, however, will be taxed as described
above with respect to the exercise of the Nonqualified Stock Option as if he 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. Moreover,
because the tax consequences to any optionee may depend on his or her particular
situation, each optionee should consult his or her tax adviser as the Federal,
state, local or other tax consequences of the grant or exercise of an option or
the disposition of Common Stock acquired on exercise of an option.
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SECURITIES ACT REGISTRATION; RESTRICTIONS ON RESALE
The Company plans to register all of the shares of Common Stock
available for issuance under the 2000 Plan on a Registration Statement on Form
S-8 to be filed with the Securities and Exchange Commission.
The federal securities laws prohibit sales of shares of Common Stock
by persons who possess material, non-public, adverse information about the
Company. Therefore, shares acquired under the 2000 Plan should not be resold by
any person who possesses such information. The Company from time to time
notifies employees who may have access to material, non-public information that
such persons should refrain from transactions involving Company stock for a
specified period. During such a period, an employee may be required to not sell
Common Stock or otherwise engage in transactions under the 2000 Plan, even if he
or she does not in fact possess material, non-public information regarding the
Company. Certain employees are also subject to potential short-swing profits
liability under Section 16(b) of the Exchange Act with respect to purchases and
sales of shares of Common Stock. The Company intends that grants of options and
the payment of Common Stock in lieu of cash fees under the 2000 Plan will be
exempt from Section 16(b) by virtue of Rule 16b-3 under the Exchange Act, and an
exercise of an option be exempt under both Rule 16b-3 and Rule 16b-6(b). Under
current SEC rules, sales of shares in the open market will in most cases not be
exempt, although the grant and exercise of an option under the 2000 Plan in most
cases will be exempt.
In addition, affiliates (as such term is defined in Rule 144 under
the Securities Act; may resell the shares acquired by them to the public only
pursuant to Rule 144 or other applicable exemptions from the registration
requirements of the Securities Act, or pursuant to a registration statement
under the Securities Act (if any). Compliance with Rule 144 for an affiliate's
resales requires, among other things, that, at the time of any offer or sale,
certain information regarding the Company be on file with the SEC and up to
date; that the affiliate's shares be sold only through a broker or to a market
maker; that the amount of sales by the affiliate in any three-month period under
Rule 144 be limited as prescribed in the Rule; and that proposed sales in excess
of certain minimum amounts be reported through the filing of a Form 144 with the
SEC. Because shares acquired under the 2000 Plan will generally not be
considered to be "restricted securities" for purposes of Rule 144, the one-year
holding period imposed by Rule 144(d) will not apply to resales of shares
acquired under the 2000 Plan. The Company's transfer agent may in some cases
require the Company's counsel to give an opinion that all of the requirements of
Rule 144 are being complied with by the affiliate selling the shares.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT HOLDERS OF
COMMON STOCK VOTE FOR APPROVAL OF THE 2000 PLAN.
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PROPOSAL TO RATIFY THE SELECTION OF INDEPENDENT
PUBLIC ACCOUNTANTS
(PROPOSAL NO. 4)
The firm of Arthur Andersen LLP, independent public accountants,
served as the Company's independent public accountants for the fiscal year ended
December 31, 1999. Pursuant to the recommendation of the Audit Committee, the
Board of Directors has appointed Arthur Andersen LLP to serve as the Company's
independent public accountants for the current year ending December 31, 2000 and
has directed that management submit such appointment for ratification by the
shareholders at the Meeting. One or more representatives of Arthur Andersen LLP
are expected to be present at the 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.
SUBMISSION OF FUTURE SHAREHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated by the SEC, a shareholder
intending to present a proposal to be included in the Company's proxy statement
for the Company's 2000 Annual Meeting of Shareholders must deliver a proposal in
writing to the Company's principal executive offices no later than July 15,
2001. Such proposals also will need to comply with SEC regulations regarding the
inclusion of shareholder proposals in Company sponsored proxy materials.
EXPERTS
The financial statements and schedules are incorporated by reference
in this Proxy Statement from the Company's Annual Report on Form 10-K for the
year ended December 31, 1999 and have been audited by Arthur Andersen LLP,
independent certified public accountants, as indicated in their reports with
respect thereto, and are incorporated in this Proxy Statement in reliance upon
the authority of said firm as experts in accounting and auditing in giving said
reports.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of the
Company does not intend to present, and have not been informed that any other
person intends to present, any matter for action at the Meeting, other than as
specifically discussed herein.
WHERE YOU CAN FIND MORE INFORMATION
The SEC allows us to "incorporate by reference" the information we
file with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this Proxy Statement, and later information that we
file with the SEC will automatically update and supersede this information. We
incorporate by reference the following filings and any filings made with the SEC
prior to the date of the Meeting under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
o Our Annual Report on Form 10-K for the year ended December
31, 1999;
o Our Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2000;
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o Our Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2000;
o Our Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2000; and
o Our Current Reports on Form 8-K filed with the SEC on
August 29, 2000 and October 5, 2000.
We will provide, without charge, to each person to whom a copy of
this Proxy Statement is delivered, upon request, a copy of any or all of the
information incorporated herein by reference. Exhibits to any of the documents,
however, will not be provided unless such exhibits are specifically incorporated
by reference into such documents. The requests should be addressed to: Investor
Relations Department, Hollywood.com, Inc., 2255 Glades Road, Suite 237 West,
Boca Raton, Florida 33431, telephone number (561) 998-8000.
By Order of the Board of Directors
Laurie S. Silvers
President and Secretary
Boca Raton, Florida
November 15, 2000
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APPENDIX A
CHARTER OF THE AUDIT COMMITTEE OF
HOLLYWOOD.COM, INC.
PURPOSE AND SCOPE
This Charter governs the operations of the Audit Committee (the "Committee") of
the Board of Directors (the "Board") of HOLLYWOOD.COM, INC., a Florida
corporation (the "Company"). The purpose of the Committee is to assist the Board
in fulfilling its responsibilities to oversee:
o the financial reports and other financial information provided by
the Company to any governmental or regulatory body, the public, or
any other user of such financial statements;
o the Company's systems of internal accounting and financial controls;
o the independence and performance of the Company's outside auditors;
and
o compliance by the Company with any legal compliance and ethics
programs as may be established by the Board and the Company's
management from time-to-time.
In fulfilling its obligations, the Committee shall maintain free and open
communications between the Committee and the Company's:
o independent auditors,
o internal accounting staff, and
o management.
In discharging its oversight role, the Committee is empowered to investigate any
matter brought to its attention with full access to all books, records,
facilities, and personnel of the Company. The Committee is authorized to retain
outside or special counsel, auditors, accounting or other consultants, experts,
and professionals for this purpose.
The Committee may request any officer or employee of the Company or the
Company's outside counsel or independent auditors to attend a meeting of the
Committee or to meet with any members of, or consultants or advisors to, the
Committee.
The Committee shall review and reassess the adequacy of this Charter annually
and recommend any proposed changes to the Board for approval. This Charter shall
be published as an appendix to the Company's Proxy Statement for the Company's
annual meeting of shareholders to the extent required by the rules and
regulations of the Securities and Exchange Commission.
MEMBERS OF THE COMMITTEE
The Committee shall be comprised of not less than three members of the Board.
The members of the Committee shall meet all "independence" and qualification
requirements of the rules and regulations of the Nasdaq Stock Market, as such
rules and regulations may be amended or supplemented from time-to-time.
Accordingly, each member of the Committee must be a director who:
o has no relationship to the Company that may interfere with the
exercise of his or her independent judgment in carrying out the
responsibilities of a director; and
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o is able to read and understand fundamental financial statements,
including a company's balance sheet, income statement, and cash flow
statement, or will become able to do so within a reasonable period
of time after appointment to the Committee.
In addition, at least one member of the Committee must have past employment
experience in finance or accounting, professional certification in accounting,
or other comparable experience or background that results in such individual's
financial sophistication including, but not limited to, being or having been a
chief executive officer, chief financial officer, or other senior officer with
financial oversight responsibilities.
Under exceptional and limited circumstances, however, one director who is not
independent as defined in the rules and regulations of the Nasdaq Stock Market
and who is not a current employee or an immediate family member of an employee
of the Company may serve as a member of the Committee, provided that:
o the Board determines that membership by the individual on the
Committee is required by the best interests of the Company and its
shareholders, and
o the Company complies with all other requirements of the rules and
regulations of the Nasdaq Stock Market with respect to
non-independent members of the Committee, as such rules and
regulations may be amended or supplemented from time-to-time.
KEY RESPONSIBILITIES AND PROCESSES
The primary responsibility of the Committee is to oversee the Company's
financial reporting process on behalf of the Board and to report the results of
the Committee's activities to the Board. The Committee recognizes that
management shall be responsible for preparing the Company's financial statements
and the independent auditors shall be responsible for auditing those financial
statements. The functions set forth below shall be the principal recurring
activities of the Committee in carrying out its oversight function. In carrying
out its responsibilities, however, the Committee shall remain flexible in order
to best react to changing conditions and circumstances. The following functions
are set forth as a guide with the understanding that the Committee may deviate
from this guide and supplement these functions as the Committee deems
appropriate under the circumstances.
1. The Committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the Board and the Committee, as representatives of the
Company's shareholders. The Committee and the Board shall have the
ultimate authority and responsibility to select (or to nominate for
shareholder approval) the independent auditors, to approve the fees to be
paid to the independent auditors, to evaluate the performance of the
independent auditors, and, if appropriate, to replace the independent
auditors.
2. The Committee shall discuss with management and the independent auditors
the overall scope and plans for the audit, including the adequacy of
staffing and the compensation to be paid to the independent auditors. The
Committee also shall discuss with management and the independent auditors
the adequacy and effectiveness of the Company's accounting and financial
controls, including the Company's system to monitor and management
business risk, as well as legal and ethical compliance programs. To the
extent the Committee deems it to be necessary, the Committee shall meet
separately with the internal accounting staff and the independent
auditors, with or without management present, as well as the Company's
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Chief Financial Officer and other management personnel, to discuss the
results of the Committee's examinations.
3. The Committee shall:
o ensure that the independent auditors submit annually a formal
written statement delineating all relationships between the
independent auditors and the Company, consistent with Independence
Standards Board Standard No. 1, as such standard may be amended or
supplemented from time to time;
o discuss with the independent auditors any such relationships or
services provided by the independent auditors and their impact on
the objectivity and independence of the independent auditors; and
o recommend that the Board take appropriate action to oversee the
independence of the independent auditors.
4. If so requested by the independent auditors or the Company's management,
prior to the filing of the Company's Quarterly Report on Form 10-Q the
Committee (as a whole or acting through the Committee chair) shall:
o review the interim financial statements with management and the
independent auditors, and
o discuss the results of the quarterly review and any other matters
required to be communicated to the Committee by the independent
auditors under generally accepted auditing standards, including
Statement of Auditing Standards ("SAS") No. 71, as such may be
amended or supplemented from time to time.
5. The Committee shall review with management and the independent auditors
the financial statements to be included in the Company's Annual Report on
Form 10-K (or the Annual Report to Shareholders if distributed prior to
the filing of the Form 10-K), including the auditors' judgment about the
quality, not just acceptability, of the Company's accounting principles,
the consistency of the Company's accounting policies and their
application, and the clarity and completeness of the Company's financial
statements and related disclosures. The Committee also shall discuss the
results of the annual audit and any other matters required to be
communicated to the Committee by the independent auditors under generally
accepted auditing standards, including SAS No. 61, as such may be amended
or supplemented.
6. The Committee shall prepare the report required by the rules of the
Securities and Exchange Commission to be included in the Company's Proxy
Statement to be delivered to shareholders in connection with the Company's
annual meeting of shareholders.
7. The Committee shall review with the independent auditors any problems or
difficulties the auditors may have encountered and any management letter
provided by the independent auditors and the Company's response to that
letter. Such review should include:
o any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access to
required information;
o any changes required in the planned scope of the internal audit; and
o the internal audit department responsibilities, budget, and
staffing.
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8. The Committee shall meet periodically with management to review the
Company's major financial risk exposures and the steps management has
taken to monitor and control such exposures.
9. The Committee shall review major changes to the Company's auditing and
accounting principles and practices as suggested by the independent
auditors, internal auditors or management.
10. The Committee shall review the significant reports to management prepared
by the internal auditing department and management's responses.
11. The Committee shall advise the Board with respect to the Company's
policies and procedures regarding compliance with applicable laws and
regulations and with the Company's internal policies and procedures.
12. The Committee shall review with the Company's general counsel any legal
matters that may have a material impact on the financial statements, the
Company's compliance policies, and any material reports or inquiries
received from regulators or governmental agencies.
With respect to the foregoing responsibilities and processes, the Committee
recognizes that the Company's financial management, including its internal audit
staff, as well as the independent auditors, have more time, knowledge, and more
detailed information regarding the Company than do Committee members.
Consequently, in discharging its oversight responsibilities, the Committee will
not provide or be deemed to provide any expertise or special assurance as to the
Company's financial statements or any professional certification as to the
independent auditors' work. While the Committee has the responsibilities and
powers set forth in this Charter, it is not the duty of the Committee to plan or
conduct audits or to determine that the Company's financial statements are
complete and accurate and are in accordance with generally accepted accounting
principles. This is the responsibility of management and the independent
auditors. Nor is it the duty of the Committee to conduct investigations, to
resolve disagreements, if any, between management and the independent auditors,
or to assure compliance with laws and regulations and the Company's internal
policies and procedures.
Dated: June 13, 2000
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APPENDIX B
HOLLYWOOD.COM, INC.
2000 STOCK INCENTIVE PLAN
1. PURPOSE. The Hollywood.com, Inc. 2000 Stock Incentive Plan (the
"Plan") is intended to provide incentives which will attract, retain and
motivate highly competent persons as officers and key employees of, and
consultants to, Hollywood.com, Inc. (the "Company") and its subsidiaries and
affiliates, by providing them opportunities to acquire shares of the Company's
common stock, par value $.01 per share (the "Common Stock"), or to receive
monetary payments based on the value of such shares pursuant to the Benefits (as
defined below) described herein. Additionally, the Plan is intended to assist in
further aligning the interests of the Company's officers, key employees and
consultants to those of its other stockholders.
2. ADMINISTRATION.
(a) The Plan will be administered by one or more committee
(collectively, the "Committee") appointed by the Board of Directors of the
Company from among its members (which may be or include the Compensation
Committee). The Committee is authorized, subject to the provisions of the Plan,
to establish such rules and regulations as it deems necessary for the proper
administration of the Plan and to make such determinations and interpretations
and to take such action in connection with the Plan and any Benefits granted
hereunder as it deems necessary or advisable. All determinations and
interpretations made by the Committee shall be binding and conclusive on all
participants and their legal representatives. No member of the Committee and no
employee of the Company shall be liable for any act or failure to act hereunder,
except in circumstances involving his or her bad faith, gross negligence or
willful misconduct, or for any act or failure to act hereunder by any other
member or employee or by any agent to whom duties in connection with the
administration of this Plan have been delegated. The Company shall indemnify
members of the Committee and any agent of the Committee who is an employee of
the Company, a subsidiary or an affiliate against any and all liabilities or
expenses to which they may be subjected by reason of any act or failure to act
with respect to their duties on behalf of the Plan, except in circumstances
involving such person's bad faith, gross negligence or willful misconduct.
(b) The Committee may delegate to one or more of its members, or to
one or more agents, such administrative duties as it may deem advisable, and the
Committee, or any person to whom it has delegated duties as aforesaid, may
employ one or more persons to render advice with respect to any responsibility
the Committee or such person may have under the Plan. The Committee may employ
such legal or other counsel, consultants and agents as it may deem desirable for
the administration of the Plan and may rely upon any opinion or computation
received from any such counsel, consultant or agent. Expenses incurred by the
Committee in the engagement of such counsel, consultant or agent shall be paid
by the Company, or the subsidiary or affiliate whose employees have benefited
from the Plan, as determined by the Committee.
3. PARTICIPANTS. Participants will consist of such officers and key
employees of, and such consultants to, the Company and its subsidiaries and
affiliates as the Committee in its sole discretion determines to be
significantly responsible for the success and future growth and profitability of
the Company and whom the Committee may designate from time to time to receive
Benefits under the Plan. Designation of a participant in any year shall not
require the Committee to designate such person to receive a Benefit in any other
year or, once designated, to receive the same type or amount of Benefit as
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granted to the participant in any other year. The Committee shall consider such
factors as it deems pertinent in selecting participants and in determining the
type and amount of their respective Benefits.
4. TYPE OF BENEFITS. Benefits under the Plan may be granted in any
one or a combination of (a) Stock Options, (b) Stock Appreciation Rights, (c)
Stock Awards, (d) Performance Awards and (e) Stock Units (each as described
below, and collectively, the "Benefits"). Stock Awards, Performance Awards, and
Stock Units may, as determined by the Committee in its discretion, constitute
Performance-Based Awards, as described in Section 11 hereof. Benefits shall be
evidenced by agreements (which need not be identical) in such forms as the
Committee may from time to time approve; provided, however, that in the event of
any conflict between the provisions of the Plan and any such agreements, the
provisions of the Plan shall prevail.
5. COMMON STOCK AVAILABLE UNDER THE PLAN. The aggregate number of
shares of Common Stock that may be subject to Benefits, including Stock Options,
granted under this Plan shall be up to 1,000,000 shares of Common Stock, which
may be authorized and unissued or treasury shares, subject to any adjustments
made in accordance with Section 13 hereof. Any shares of Common Stock subject to
a Stock Option or Stock Appreciation Right which for any reason is cancelled or
terminated without having been exercised, any shares subject to Stock Awards,
Performance Awards or Stock Units which are forfeited, any shares subject to
Performance Awards settled in cash or any shares delivered to the Company as
part or full payment for the exercise of a Stock Option or Stock Appreciation
Right shall again be available for Benefits under the Plan. The preceding
sentence shall apply only for purposes of determining the aggregate number of
shares of Common Stock subject to Benefits. In addition, as the number of
outstanding shares of Common Stock increases from time to time (which number
shall be determined without considering as outstanding any shares of Common
Stock that are the subject of any unexercised options under this Plan or any
other option plan of the Company or any shares of Common Stock owned by the
Company or any of its subsidiaries) the number of shares of Common Stock
available for issuance under this Plan shall increase proportionately on the
first day of each fiscal quarter of the Company beginning on January 1, 2001, so
that such number equals at least five percent (5%) of the outstanding shares of
Common Stock; provided, however, that the maximum number of shares of Common
Stock for which Incentive Stock Options may be granted under the Plan shall not
exceed 1,000,000 shares of Common Stock (which number is subject to adjustment
as provided in Section 13).
6. STOCK OPTIONS. Stock Options will consist of awards from the
Company that will enable the holder to purchase a number of shares of Common
Stock, at set terms. Stock Options may be "incentive stock options" ("Incentive
Stock Options"), within the meaning of Section 422 of the Code, or Stock Options
which do not constitute Incentive Stock Options ("Nonqualified Stock Options").
The Committee will have the authority to grant to any participant one or more
Incentive Stock Options, Nonqualified Stock Options, or both types of Stock
Options (in each case with or without Stock Appreciation Rights). Each Stock
Option shall be subject to such terms and conditions consistent with the Plan as
the Committee may impose from time to time, subject to the following
limitations:
(a) EXERCISE PRICE. Each Stock Option granted hereunder shall have
such per-share exercise price as the Committee may determine at the date of
grant; provided, however, subject to subsection (d) below, that the per-share
exercise price for Incentive Stock Options granted hereunder shall not be less
than 100% of the Fair Market Value (as defined below) of the Common Stock on the
date the Incentive Stock Option is granted.
(b) PAYMENT OF EXERCISE PRICE. The option exercise price may be paid
in cash or, in the discretion of the Committee, by the delivery of shares of
Common Stock of the Company then owned by the participant, or by delivery to the
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Company of (x) irrevocable instructions to deliver directly to a broker the
stock certificates representing the shares for which the Option is being
exercised, and (y) irrevocable instructions to such broker to sell such shares
for which the Option is being exercised, and promptly deliver to the Company the
portion of the proceeds equal to the Option exercise price and any amount
necessary to satisfy the Company's obligation for withholding taxes, or any
combination thereof. For purposes of making payment in shares of Common Stock,
such shares shall be valued at their Fair Market Value on the date of exercise
of the Option and shall have been held by the Participant for at least six
months. To facilitate the foregoing, the Company may enter into agreements for
coordinated procedures with one or more brokerage firms. The Committee may
prescribe any other method of paying the exercise price that it determines to be
consistent with applicable law and the purpose of the Plan, including, without
limitation, in lieu of the exercise of a Stock Option by delivery of shares of
Common Stock of the Company then owned by a participant, providing the Company
with a notarized statement attesting to the number of shares owned, where upon
verification by the Company, the Company would issue to the participant only the
number of incremental shares to which the participant is entitled upon exercise
of the Stock Option.
(c) EXERCISE PERIOD. Stock Options granted under the Plan shall be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Committee; provided, however, that no Stock Option
shall be exercisable later than ten years after the date it is granted except in
the event of a participant's death, in which case, the exercise period of such
participant's Stock Options may be extended beyond such period but no later than
one year after the participant's death. All Stock Options shall terminate at
such earlier times and upon such conditions or circumstances as the Committee
shall in its discretion set forth in such option agreement at the date of grant;
provided, however, the Committee may, in its sole discretion, later waive any
such condition.
(d) LIMITATIONS ON INCENTIVE STOCK OPTIONS. Incentive Stock Options
may be granted only to participants who are employees of the Company or one of
its subsidiaries (within the meaning of Section 424(f) of the Code) at the date
of grant. The aggregate Fair Market Value (determined as of the time the Stock
Option is granted) of the Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by a participant during any calendar
year (under all option plans of the Company and of any parent corporation or
subsidiary corporation (as defined in Sections 424(e) and (f) of the Code,
respectively)) shall not exceed $100,000. For purposes of the preceding
sentence, Incentive Stock Options will be taken into account in the order in
which they are granted. The per-share exercise price of an Incentive Stock
Option shall not be less than 100% of the Fair Market Value of the Common Stock
on the date of grant, and no Incentive Stock Option may be exercised later than
ten years after the date it is granted; provided, however, Incentive Stock
Options may not be granted to any participant who, at the time of grant, owns
stock possessing (after the application of the attribution rules of Section
424(d) of the Code) more than 10% of the total combined voting power of all
classes of stock of the Company or any parent or subsidiary corporation of the
Company, unless the exercise price is fixed at not less than 110% of the Fair
Market Value of the Common Stock on the date of grant and the exercise of such
option is prohibited by its terms after the expiration of five years from the
date of grant of such option. In addition, no Incentive Stock Option may be
issued to a participant in tandem with a Nonqualified Stock Option.
(e) POST-EMPLOYMENT EXERCISES. The exercise of any Stock Option after
termination of employment of a participant with the Company, a subsidiary of the
Company or with any company providing consulting services to the Company shall
be subject to such conditions as imposed by the Committee at the time of the
grant and satisfaction of the conditions precedent that the participant neither
(i) competes with, or takes other employment with or renders services to a
competitor of, the Company, its subsidiaries or affiliates without the written
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consent of the Company; provided that this clause (i) shall not apply to
consultants of the Company, nor (ii) conducts himself or herself in a manner
adversely affecting the Company; provided, however, that the Committee, in its
sole discretion, may waive any conditions imposed in the grant letter or as set
forth in (i) and (ii) above relating to the exercise of options after the date
of termination of employment during the term of the option.
7. STOCK APPRECIATION RIGHTS.
(a) The Committee may, in its discretion, grant Stock Appreciation
Rights to the holders of any Stock Options granted hereunder. In addition, Stock
Appreciation Rights may be granted independently of, and without relation to,
Stock Options. A Stock Appreciation Right means a right to receive a payment in
cash, Common Stock or a combination thereof, in an amount equal to the excess of
(x) the Fair Market Value, or other specified valuation, of a specified number
of shares of Common Stock on the date the right is exercised over (y) the Fair
Market Value, or other specified valuation (which shall be no less than the Fair
Market Value) of such shares of Common Stock on the date the right is granted,
all as determined by the Committee; provided, however, that if a Stock
Appreciation Right is granted in tandem with or in substitution for a Stock
Option, the designated Fair Market Value in the award agreement may be the Fair
Market Value on the date such Stock Option was granted. Each Stock Appreciation
Right shall be subject to such terms and conditions as the Committee shall
impose from time to time.
(b) Stock Appreciation Rights granted under the Plan shall be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Committee; provided, however, that no Stock
Appreciation Rights shall be exercisable later than ten years after the date it
is granted except in the event of a participant's death, in which case, the
exercise period of such participant's Stock Appreciation Rights may be extended
beyond such period but no later than one year after the participant's death. All
Stock Appreciation Rights shall terminate at such earlier times and upon such
conditions or circumstances as the Committee shall in its discretion set forth
in such right at the date of grant.
(c) The exercise of any Stock Appreciation Right after termination of
employment of a participant with the Company, a subsidiary of the Company or
with any company providing consulting services to the Company shall be subject
to satisfaction of the conditions precedent that the participant neither (i)
competes with, or takes other employment with or renders services to a
competitor of, the Company, its subsidiaries or affiliates without the written
consent of the Company; provided that this clause (i) shall not apply to
consultants of the Company, nor (ii) conducts himself or herself in a manner
adversely affecting the Company; provided, however, that the Committee, in its
sole discretion, may waive any conditions imposed in the grant letter or as set
forth in (i) and (ii) above relating to the exercise of options after the date
of termination of employment during the term of the option.
8. STOCK AWARDS. The Committee may, in its discretion, grant Stock
Awards (which may include mandatory payment of bonus incentive compensation in
stock) consisting of Common Stock issued or transferred to participants with or
without other payments therefor. Stock Awards may be subject to such terms and
conditions as the Committee determines appropriate, including, without
limitation, restrictions on the sale or other disposition of such shares, the
right of the Company to reacquire such shares for no consideration upon
termination of the participant's employment within specified periods, and may
constitute Performance-Based Awards, as described in Section 11 hereof. The
Committee may require the participant to deliver a duly signed stock power,
endorsed in blank, relating to the Common Stock covered by such an Award. The
Committee may also require that the stock certificates evidencing such shares be
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held in custody or bear restrictive legends until the restrictions thereon shall
have lapsed. The Stock Award shall specify whether the participant shall have,
with respect to the shares of Common Stock subject to a Stock Award, all of the
rights of a holder of shares of Common Stock of the Company, including the right
to receive dividends and to vote the shares.
9. PERFORMANCE AWARDS.
(a) Performance Awards may be granted to participants at any time and
from time to time, as shall be determined by the Committee. Performance Awards
may constitute Performance-Based Awards, as described in Section 11 hereof. The
Committee shall have complete discretion in determining the number, amount and
timing of awards granted to each participant. Such Performance Awards may be in
the form of shares of Common Stock or Stock Units. Performance Awards may be
awarded as short-term or long-term incentives. Performance targets may be based
upon, without limitation, Company-wide, divisional and/or individual
performance.
(b) With respect to those Performance Awards that are not intended to
constitute Performance-Based Awards, the Committee shall have the authority at
any time to make adjustments to performance targets for any outstanding
Performance Awards which the Committee deems necessary or desirable unless at
the time of establishment of such targets the Committee shall have precluded its
authority to make such adjustments.
(c) Payment of earned Performance Awards shall be made in accordance
with terms and conditions prescribed or authorized by the Committee. The
participant may elect to defer, or the Committee may require or permit the
deferral of, the receipt of Performance Awards upon such terms as the Committee
deems appropriate.
10. STOCK UNITS.
(a) The Committee may, in its discretion, grant Stock Units to
participants hereunder. The Committee shall determine the criteria for the
vesting of Stock Units. Stock Units may constitute Performance-Based Awards, as
described in Section 11 hereof. A Stock Unit granted by the Committee shall
provide payment in shares of Common Stock at such time as the award agreement
shall specify. Shares of Common Stock issued pursuant to this Section 10 may be
issued with or without other payments therefor as may be required by applicable
law or such other consideration as may be determined by the Committee. The
Committee shall determine whether a participant granted a Stock Unit shall be
entitled to a Dividend Equivalent Right (as defined below).
(b) Upon vesting of a Stock Unit, unless the Committee has determined
to defer payment with respect to such unit or a participant has elected to defer
payment under subsection (c) below, shares of Common Stock representing the
Stock Units shall be distributed to the participant unless the Committee
provides for the payment of the Stock Units in cash or partly in cash and partly
in shares of Common Stock equal to the value of the shares of Common Stock which
would otherwise be distributed to the participant.
(c) Prior to the year with respect to which a Stock Unit may vest,
the participant may elect not to receive a distribution upon the vesting of such
Stock Unit and for the Company to continue to maintain the Stock Unit on its
books of account. In such event, the value of a Stock Unit shall be payable in
shares of Common Stock pursuant to the agreement of deferral.
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(d) A "Stock Unit" means a notional account representing one share of
Common Stock. A "Dividend Equivalent Right" means the right to receive the
amount of any dividend paid on the share of Common Stock underlying a Stock
Unit, which shall be payable in cash or in the form of additional Stock Units.
11. PERFORMANCE-BASED AWARDS. Certain Benefits granted under the Plan
may be granted in a manner such that the Benefits qualify for the
performance-based compensation exemption of Section 162(m) of the Code
("Performance-Based Awards"). As determined by the Committee in its sole
discretion, either the granting or vesting of such Performance-Based Awards
shall be based on achievement of hurdle rates and/or growth rates in one or more
business criteria that apply to the individual participant, one or more business
units or the Company as a whole. The business criteria shall be as follows,
individually or in combination: (i) net earnings; (ii) earnings per share; (iii)
net sales growth; (iv) market share; (v) net operating profit; (vi) expense
targets; (vii) working capital targets relating to inventory and/or accounts
receivable; (viii) operating margin; (ix) return on equity; (x) return on
assets; (xi) planning accuracy (as measured by comparing planned results to
actual results); (xii) market price per share; and (xiii) total return to
stockholders. In addition, Performance-Based Awards may include comparisons to
the performance of other companies, such performance to be measured by one or
more of the foregoing business criteria. With respect to Performance-Based
Awards, (i) the Committee shall establish in writing (x) the performance goals
applicable to a given period, and such performance goals shall state, in terms
of an objective formula or standard, the method for computing the amount of
compensation payable to the participant if such performance goals are obtained
and (y) the individual employees or class of employees to which such performance
goals apply no later than 90 days after the commencement of such period (but in
no event after 25% of such period has elapsed) and (ii) no Performance-Based
Awards shall be payable to or vest with respect to, as the case may be, any
participant for a given period until the Committee certifies in writing that the
objective performance goals (and any other material terms) applicable to such
period have been satisfied. With respect to any Benefits intended to qualify as
Performance-Based Awards, after establishment of a performance goal, the
Committee shall not revise such performance goal or increase the amount of
compensation payable thereunder (as determined in accordance with Section 162(m)
of the Code) upon the attainment of such performance goal. Notwithstanding the
preceding sentence, the Committee may reduce or eliminate Benefits payable upon
the attainment of such performance goal.
12. FOREIGN LAWS. The Committee may grant Benefits to individual
participants who are subject to the tax laws of nations other than the United
States, which Benefits may have terms and conditions as determined by the
Committee as necessary to comply with applicable foreign laws. The Committee may
take any action which it deems advisable to obtain approval of such Benefits by
the appropriate foreign governmental entity; provided, however, that no such
Benefits may be granted pursuant to this Section 12 and no action may be taken
which would result in a violation of the Exchange Act, the Code or any other
applicable law.
13. ADJUSTMENT PROVISIONS; CHANGE IN CONTROL.
(a) If there shall be any change in the Common Stock of the Company
or the capitalization of the Company through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, reverse stock
split, split up, spin-off, combination of shares, exchange of shares, dividend
in kind or other like change in capital structure or distribution (other than
normal cash dividends) to stockholders of the Company in order to prevent
dilution or enlargement of participants' rights under the Plan, the Committee,
in its sole discretion, shall adjust, in an equitable manner, as applicable, the
number and kind of shares that may be issued under the Plan, the number and kind
of shares subject to outstanding Benefits, the exercise price applicable to
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outstanding Benefits, and the Fair Market Value of the Common Stock and other
value determinations applicable to outstanding Benefits; provided, however, that
any such arithmetic adjustment to a Performance-Based Award shall not cause the
amount of compensation payable thereunder to be increased from what otherwise
would have been due upon attainment of the unadjusted award. Appropriate
adjustments may also be made by the Committee in the terms of any Benefits under
the Plan to reflect such changes or distributions and to modify any other terms
of outstanding Benefits on an equitable basis, including modifications of
performance targets and changes in the length of performance periods; provided,
however, that any such arithmetic adjustment to a Performance-Based Award shall
not cause the amount of compensation payable thereunder to be increased from
what otherwise would have been due upon attainment of the unadjusted award. In
addition, other than with respect to Stock Options, Stock Appreciation Rights,
and other awards intended to constitute Performance-Based Awards, the Committee
is authorized to make adjustments to the terms and conditions of, and the
criteria included in, Benefits in recognition of unusual or nonrecurring events
affecting the Company or the financial statements of the Company, or in response
to changes in applicable laws, regulations, or accounting principles.
Notwithstanding the foregoing, (i) each such adjustment with respect to an
Incentive Stock Option shall comply with the rules of Section 424(a) of the
Code, and (ii) in no event shall any adjustment be made which would render any
Incentive Stock Option granted hereunder other than an incentive stock option
for purposes of Section 422 of the Code. The determination of the Committee as
to the foregoing adjustments, if any, shall be conclusive and binding on
participants under the Plan.
(b) Notwithstanding any other provision of this Plan, if there is a
Change in Control of the Company, all then outstanding Stock Options and Stock
Appreciation Rights shall immediately vest and become exercisable. For purposes
of this Section 14(b), a "Change in Control" of the Company shall be deemed to
have occurred upon any of the following events:
(i) the Company's Board of Directors shall approve any
merger, consolidation, or like business combination or reorganization
of the Company (which shall include a series of transactions
occurring within 60 days or occurring pursuant to a plan), that will
have the result that (A) any legal entity or person owns at least 51
percent of the voting stock of the Company or (B) 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 the transaction, and
such transaction shall have been consummated; or
(ii) during any period of two (2) consecutive years, the
individuals who at the beginning of such period constitute the
Company's Board of Directors or any individuals who would be
"Continuing Directors" (as hereinafter defined) cease for any reason
to constitute at least a majority thereof; or
(iii) the Company's Common Stock shall cease to be publicly
traded; or
(iv) the Company's Board of Directors shall approve a sale
of all or substantially all of the assets of the Company, and such
transaction shall have been consummated.
For purposes of this Section 13(b), "Continuing Directors" shall mean
(x) the directors of the Company in office on the Effective Date (as defined
below) and (y) any successor to any such director and any additional director
who after the Effective Date was nominated or selected by a majority of the
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Continuing Directors (or the Nominating Committee of the Board of Directors of
the Company) in office at the time of his or her nomination or selection.
The Committee, in its discretion, may determine that, upon the
occurrence of a Change in Control of the Company or the other events specified
in Section 13(a), each Stock Option and Stock Appreciation Right outstanding
hereunder shall terminate within a specified number of days after notice to the
holder, and such holder shall receive, with respect to each share of Common
Stock subject to such Stock Option or Stock Appreciation Right, an amount equal
to the excess of the Fair Market Value of such shares of Common Stock
immediately prior to the occurrence of such Change in Control over the exercise
price per share of such Stock Option or Stock Appreciation Right; such amount to
be payable in cash, in one or more kinds of property (including the property, if
any, payable in the transaction) or in a combination thereof, as the Committee,
in its discretion, shall determine. The provisions contained in the preceding
sentence shall be inapplicable to a Stock Option or Stock Appreciation Right
granted within six (6) months before the occurrence of a Change in Control if
the holder of such Stock Option or Stock Appreciation Right is subject to the
reporting requirements of Section 16(a) of the Exchange Act and no exception
from liability under Section 16(b) of the Exchange Act is otherwise available to
such holder.
14. NONTRANSFERABILITY. Each Benefit granted under the Plan to a
participant shall not be transferable otherwise than by will or the laws of
descent and distribution, and shall be exercisable, during the participant's
lifetime, only by the participant. In the event of the death of a participant,
each Stock Option or Stock Appreciation Right theretofore granted to him or her
shall be exercisable during such period after his or her death as the Committee
shall in its discretion set forth in such option or right at the date of grant
and then only by the executor or administrator of the estate of the deceased
participant or the person or persons to whom the deceased participant's rights
under the Stock Option or Stock Appreciation Right shall pass by will or the
laws of descent and distribution. Notwithstanding the foregoing, at the
discretion of the Committee, an award of a Benefit other than an Incentive Stock
Option may permit the transferability of a Benefit by a participant solely to
the participant's spouse, siblings, parents, children and grandchildren or
trusts for the benefit of such persons or partnerships, corporations, limited
liability companies or other entities owned solely by such persons, including
trusts for such persons, subject to any restriction included in the award of the
Benefit.
15. OTHER PROVISIONS. The award of any Benefit under the Plan may
also be subject to such other provisions (whether or not applicable to the
Benefit awarded to any other participant) as the Committee determines
appropriate, including, without limitation, for the installment purchase of
Common Stock under Stock Options, for the installment exercise of Stock
Appreciation Rights, to assist the participant in financing the acquisition of
Common Stock, for the forfeiture of, or restrictions on resale or other
disposition of, Common Stock acquired under any form of Benefit, for the
acceleration of exercisability or vesting of Benefits in the event of a change
in control of the Company, for the payment of the value of Benefits to
participants in the event of a change in control of the Company, or to comply
with federal and state securities laws, or understandings or conditions as to
the participant's employment in addition to those specifically provided for
under the Plan. The Committee shall have full discretion to interpret and
administer the Plan.
16. FAIR MARKET VALUE. For purposes of this Plan and any Benefits
awarded hereunder, Fair Market Value shall be (i) the closing price of the
Company's Common Stock on the date preceding the date of calculation (or on the
last preceding trading date if Common Stock was not traded on such date) if the
Company's Common Stock is readily tradeable on a national securities exchange or
other market system, (ii) if the Company's Common Stock is not readily
tradeable, Fair Market Value shall mean the amount determined in good faith by
the Committee as the fair market value of the Common Stock of the Company and
(iii) in connection with a Change in Control of the Company or an event
specified in Section 13(a), the value of the consideration paid to stockholders
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in connection with such Change in Control or event or if no consideration is
paid in respect thereof, the amount determined pursuant to clause (i) above.
17. WITHHOLDING. All payments or distributions of Benefits made
pursuant to the Plan shall be net of any amounts required to be withheld
pursuant to applicable federal, state and local tax withholding requirements. If
the Company proposes or is required to distribute Common Stock pursuant to the
Plan, it may require the recipient to remit to it or to the corporation that
employs such recipient an amount sufficient to satisfy such tax withholding
requirements prior to the delivery of any certificates for such Common Stock. In
lieu thereof, the Company or the employing corporation shall have the right to
withhold the amount of such taxes from any other sums due or to become due from
such corporation to the recipient as the Committee shall prescribe. The
Committee may, in its discretion and subject to such rules as it may adopt
(including any as may be required to satisfy applicable tax and/or non-tax
regulatory requirements), permit an optionee or award or right holder to pay all
or a portion of the federal, state and local withholding taxes arising in
connection with any Benefit consisting of shares of Common Stock by electing to
have the Company withhold shares of Common Stock having a Fair Market Value
equal to the amount of tax to be withheld, such tax calculated at rates required
by statute or regulation.
18. TENURE. A participant's right, if any, to continue to serve the
Company or any of its subsidiaries or affiliates as an officer, employee, or
otherwise, shall not be enlarged or otherwise affected by his or her designation
as a participant under the Plan.
19. UNFUNDED PLAN. Participants shall have no right, title, or
interest whatsoever in or to any investments which the Company may make to aid
it in meeting its obligations under the Plan. Nothing contained in the Plan, and
no action taken pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship between the Company and
any participant, beneficiary, legal representative or any other person. To the
extent that any person acquires a right to receive payments from the Company
under the Plan, such right shall be no greater than the right of an unsecured
general creditor of the Company. All payments to be made hereunder shall be paid
from the general funds of the Company and no special or separate fund shall be
established and no segregation of assets shall be made to assure payment of such
amounts except as expressly set forth in the Plan. The Plan is not intended to
be subject to the Employee Retirement Income Security Act of 1974, as amended.
20. NO FRACTIONAL SHARES. No fractional shares of Common Stock shall
be issued or delivered pursuant to the Plan or any Benefit. The Committee shall
determine whether cash, or Benefits, or other property shall be issued or paid
in lieu of fractional shares or whether such fractional shares or any rights
thereto shall be forfeited or otherwise eliminated.
21. DURATION, AMENDMENT AND TERMINATION. No Benefit shall be granted
more than ten years after the Effective Date. The Committee may amend the Plan
from time to time or suspend or terminate the Plan at any time. No amendment of
the Plan may be made without approval of the stockholders of the Company if the
amendment will: (i) disqualify any Incentive Stock Options granted under the
Plan; (ii) increase the aggregate number of shares of Common Stock that may be
delivered through Stock Options under the Plan; (iii) change the types of
business criteria on which Performance-Based Awards are to be based under the
Plan; or (iv) modify the requirements as to eligibility for participation in the
Plan.
22. GOVERNING LAW. This Plan, Benefits granted hereunder and actions
taken in connection herewith shall be governed and construed in accordance with
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the laws of the State of Florida (regardless of the law that might otherwise
govern under applicable Delaware principles of conflict of laws).
23. EFFECTIVE DATE.
(a) The Plan shall be effective as of November 3, 2000, the date on
which the Plan was adopted by the Board of Directors (the "Effective Date"),
provided that the Plan is approved by the stockholders of the Company at an
annual meeting, any special meeting or by written consent of stockholders of the
Company within 12 months of the Effective Date, and such approval of
stockholders shall be a condition to the right of each participant to receive
any Benefits hereunder. Any Benefits granted under the Plan prior to such
approval of stockholders shall be effective as of the date of grant (unless,
with respect to any Benefit, the Committee specifies otherwise at the time of
grant), but no such Benefit may be exercised or settled and no restrictions
relating to any Benefit may lapse prior to such stockholder approval, and if
stockholders fail to approve the Plan as specified hereunder, any such Benefit
shall be cancelled.
(b) This Plan shall terminate on November 3, 2010 (unless sooner
terminated by the Committee).
* * *
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