PRELIMINARY COPIES
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
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule14a-12
ENTERACTIVE, INC.
(Name of Registrants as Specified in Their Charters)
________________________________________________________________________
(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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined)::
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] 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:
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REVOCABLE PROXY -- ENTERACTIVE, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE 1997 ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Andrew Gyenes and Kenneth
Gruber, and each of them, proxies, with full powers of substitution, to act
for and in the name of the undersigned to vote all shares of common stock,
$.01 par value (the "Common Stock"), and Class A Preferred Stock, $.01 par
value (the "Preferred Stock"), of ENTERACTIVE, INC. (the "Company"), which
the undersigned is entitled to vote at the Annual Meeting of Stockholders
(the "Annual Meeting") and any adjournment thereof. The Annual Meeting will
be held at the Westbury Hotel, 15 East 69th Street, New York, New York,
10021 on April 3, 1997 at 10:00 A.M., local time.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES FOR DIRECTORS
LISTED BELOW AND "FOR" PROPOSALS 2 AND 3.
1. ELECTION OF DIRECTORS
____ _____
/____/ FOR all nominees listed below /_____/ WITHHOLD AUTHORITY
(except as marked to the to vote for all
contrary below) nominees listed below
Michael Alford, Rino Bergonzi, Steven Fischer, Andrew Gyenes,
Peter Gyenes, Randal Hujar and Harrison Weaver
(INSTRUCTION: To withhold authority to vote for any individual
nominee, print that nominee's name on the line provided below.)
_________________________________________________________________________
2. The approval of an amendment to the Company's Certificate of
Incorporation increasing the authorized number of shares of Common Stock.
FOR ____ AGAINST ____ ABSTAIN ____
/___/ /___/ /___/
3. The approval of amendments to the Company's 1994
Incentive and Non-Qualified Stock Option Plan.
FOR ____ AGAINST ____ ABSTAIN ____
/___/ /___/ /___/
The shares represented by this proxy will be voted as directed
by the undersigned. IF NO INSTRUCTIONS ARE SPECIFIED, THE UNDERSIGNED'S
VOTE WILL BE CAST "FOR" THE ELECTION OF THE NOMINEES NAMED IN PROPOSAL 1,
"FOR" PROPOSAL 2, "FOR" PROPOSAL 3 AND IN THE DISCRETION OF THE PROXIES AS
TO ANY OTHER MATTERS PRESENTED AT THE ANNUAL MEETING. At the present time,
the Board of Directors knows of no other business to be presented at the
Annual Meeting.
The undersigned stockholder may revoke this proxy at any time
before it is voted by delivering to the Secretary of the Company either a
written revocation of the proxy or a duly executed proxy bearing a later
date, or by appearing at the Annual Meeting and voting the shares subject
to the proxy by written ballot.
In their discretion, the proxies are authorized to
vote upon such other business as may properly come
before the Annual Meeting and any adjournment
thereof.
Please sign exactly as your name appears on the
certificate or certificates representing shares to
be voted by this proxy. When shares are held
jointly, both holders should sign. When signing as
attorney, executor, administrator, trustee or
guardian, please give your full title. If the
signer is a corporation, the full corporate name
should be signed by a duly authorized officer.
_____________________________________
Signature
_____________________________________
Signature, if held jointly
Date: _________________________, 1997
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY CARD
IN THE ENCLOSED PREPAID ENVELOPE.
ENTERACTIVE, INC.
110 W. 40th Street
Suite 2100
New York, NY 10018
NOTICE OF
ANNUAL MEETING
To Be Held April 3, 1997
To the Stockholders of ENTERACTIVE, INC.
The Annual Meeting of Stockholders of ENTERACTIVE, INC., a Delaware
corporation (the "Company"), is to be held at the Westbury Hotel, 15 East
69th Street, New York, New York, 10021 on Thursday, April 3, 1997,
commencing at 10:00 A.M., for the following purposes:
1. To elect seven directors for the Company for a
one-year term;
2. To approve an amendment to the Company's Certificate
of Incorporation increasing the authorized number of
shares of Common Stock;
3. To approve amendments to the Company's 1994 Incentive
and Non-Qualified Stock Option Plan; and
4. To transact such other business as may properly come
before the Annual Meeting.
The accompanying Proxy Statement contains further information with
respect to these matters.
Only stockholders of record at the close of business on February 3,
1997 are entitled to receive notice of and to vote at the meeting or any
adjournment thereof.
By order of the Board of Directors
Kenneth Gruber
Secretary
New York, New York
March 3, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE
ENCLOSED PROXY, WHICH IS SOLICITED BY THE BOARD OF DIRECTORS OF THE
COMPANY, AND RETURN IT TO THE COMPANY IN THE PREADDRESSED ENVELOPE
PROVIDED FOR THAT PURPOSE. ANY STOCKHOLDER MAY REVOKE HIS PROXY AT ANY
TIME BEFORE THE MEETING BY WRITTEN NOTICE TO SUCH EFFECT, BY SUBMITTING A
SUBSEQUENTLY DATED PROXY OR BY ATTENDING THE MEETING AND VOTING IN
PERSON.
ENTERACTIVE, INC.
110 W. 40th Street
Suite 2100
New York, NY 10018
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY, APRIL 3, 1997
This Proxy Statement and form of proxy are first being mailed to
holders of the Company's common stock, $.01 par value (the "Common
Stock"), and holders of the Company's Class A Preferred Stock, $.01 par
value (the "Preferred Stock"), (collectively, the "stockholders") of
Enteractive, Inc. (the "Company") on or about March 3 1997, and are
furnished in connection with the solicitation of proxies by the Board of
Directors (the "Board") of the Company, for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held at 10:00 A.M. on Thursday,
April 3, 1997, at the Westbury Hotel, 15 East 69th Street, New York, New
York, 10021, and at any and all adjournments thereof.
A copy of the Company's Annual Report, including financial
statements for the fiscal year ended May 31, 1996, is being mailed with
this Proxy Statement.
As of February 3, 1997, the record date for the Annual Meeting (the
"Record Date"), there were outstanding 7,679,441 shares of Common Stock.
In addition, as of the Record Date, there were outstanding 6,720 shares
of Preferred Stock. Only holders of record of the Company's Common Stock
and Preferred Stock at the close of business on the Record Date are
entitled to vote at the Annual Meeting. A list of stockholders entitled
to vote at the meeting, arranged alphabetically and showing the address
of each stockholder and the number of shares registered in the name of
each stockholder, will be available March 24, 1997 at the Company's
offices located at 110 W. 40th Street, Suite 2100, New York, New York,
10018 for examination by any stockholder. The list will also be available
at the meeting for examination by any stockholder.
All proxies duly executed and received by the Secretary prior to
the Annual Meeting, unless previously revoked, will be voted on all
matters presented at the Annual Meeting in accordance with the
specifications made in such proxies. Except as provided below, in the
absence of specified instructions, proxies so received will be voted (i)
FOR the election of the named nominees to the Company's Board, (ii) FOR
the approval of the amendment to the Company's Certificate of
Incorporation increasing the authorized number of shares of Common Stock,
and (iii) FOR the approval of the amendments to the Company's 1994
Incentive and Non-Qualified Stock Option Plan (the "1994 Plan"). The
Board does not know of any other matters that may be brought before the
meeting nor does it foresee or have reason to believe that proxy holders
will have to vote for substitute or alternate nominees. In the event that
any other matter should come before the meeting or any nominee is not
available for election, the persons named in the enclosed proxy will have
discretionary authority to vote all proxies with respect to such matters
in accordance with their best judgment.
The cost of this proxy solicitation will be borne by the Company.
It is expected that the solicitation of proxies will be primarily by
mail, but proxies may also be solicited personally or by telephone by
regular employees of the Company. Proxy materials may also be distributed
through brokers, custodians, and other nominees or fiduciaries to
beneficial owners of Common Stock and Preferred Stock, and the Company
expects to reimburse such parties for their charges and expenses in
connection therewith.
A proxy may be revoked at any time before being voted by written
notice to such effect received by the Secretary of the Company before the
proxy is voted at the Annual Meeting, by delivery to the Secretary of the
Company of a later dated proxy, or by a vote cast in person at the Annual
Meeting, but no revocation will affect any vote previously taken.
VOTING RIGHTS
Holders of each share of Common Stock are entitled to one vote for
each share held on all matters. Holders of each share of Preferred Stock
are entitled to 992 votes per share, aggregating 6,666,240 votes for all
outstanding shares of Preferred Stock. The shares of Common Stock and
Preferred Stock will vote together as a single class on the election of
directors, the amendment to the Certificate of Incorporation, and the
amendments to the 1994 Plan. In addition, the shares of Common Stock will
vote as a separate class on the amendment to the Certificate of Incorporation.
The holders of a majority of the outstanding shares of Common Stock
and Preferred Stock, whether present in person or represented by proxy,
will constitute a quorum for the election of directors, the vote on the
amendments to the 1994 Plan, any other matters that may come before the
meeting, and, when the holders of Common Stock and Preferred Stock are
voting together as a single class, for the vote on the amendment to the
Certificate of Incorporation. The holders of a majority of the
outstanding shares of Common Stock, whether present in person or
represented by proxy, will constitute a quorum when such holders are
voting as a separate class on the amendment to the Certificate of
Incorporation. Abstentions are counted as present in determining whether
the quorum requirements are satisfied. Proxies returned by brokers as
"non-votes" on behalf of shares held in street name because beneficial
owners' discretion has been withheld as to one or more matters on the
agenda for the Annual Meeting will not be treated as present for purposes
of determining a quorum for the Annual Meeting unless they are voted by
the broker on at least one matter on the agenda.
A plurality of the total votes cast by holders of Common Stock and
Preferred Stock, voting together as a single class, is required for the
election of directors. In tabulating the vote on the election of
directors, abstentions will be disregarded and will have no effect on the
outcome of such vote. The affirmative vote of a majority of the
outstanding shares of Common Stock and Preferred Stock, voting together
as a single class, entitled to vote thereon, together with a majority of
the outstanding shares of Common Stock entitled to vote thereon, voting
as a separate class, is required to approve the amendment to the
Company's Certificate of Incorporation. Accordingly abstentions and
broker non-votes will have the same effect as a negative vote. The
affirmative vote of a majority of the votes cast by holders of Common
Stock and Preferred Stock, voting together as a single class, is required
to approve the amendments to the 1994 Plan. In tabulating the votes on
the amendments to the 1994 Plan, shares as to which a stockholder
abstains are considered shares entitled to vote on the applicable
amendments and therefore an abstention would have the effect of a vote
against the amendments. Broker non-votes, however, are not considered
shares entitled to vote on the applicable amendments and are not included
in determining whether such amendments are approved.
PRINCIPAL SECURITY HOLDERS
The following table sets forth beneficial ownership of the
Company's Common Stock and Preferred Stock as of February 11, 1997 by (a)
each stockholder known by the Company to be the beneficial owner of five
percent or more of the outstanding Common Stock and Preferred Stock, (b)
each director and Named Executive Officer (as defined below) of the
Company individually, and (c) all directors and executive officers as a
group. Except as otherwise indicated in the footnotes below, (x) the
Company believes that each of the beneficial owners of the Common Stock
and Preferred Stock listed in the table, based on information furnished
by such owner, has sole investment and voting power with respect to such
shares, and (y) where no address is indicated, the address of the
beneficial owner is the address of the principal executive offices of the
Company.
Common Stock Preferred Stock
Name and Address of Number of % of Class Number % of
Beneficial Owner Shares(1) of Shares Class
Barry Rubenstein
68 Wheatley Road
Brookville, NY 11545 4,418,329(2) 41.2% 4,560(2) 67.9%
Woodland Venture Fund
68 Wheatley Road
Brookville, NY 11545 1,074,503 (3) 13.0% 560(3) 8.3%
Seneca Ventures
68 Wheatley Road
Brookville, NY 11545 1,074,503(4) 13.0% 560(4) 8.3%
Woodland Services Corp.
68 Wheatly Road
Brookville, NY 11545 1,074,503 (5) 13.0% 560(5) 8.3%
Woodland Partners
68 Wheatley Road
Brookville, NY 11545 1,074,503(6) 13.0% 560(6) 8.3%
Irwin Lieber
767 Fifth Avenue,
45th Floor
New York, NY 10153 3,385,826(7) 33.3% 4,000(7) 59.5%
21st Century
Communications Foreign
Partners, L.P.
c/o Fiduciary
Trust(Cayman)Limited
P.O. Box 1062 1,836,522(8) 20.6% 2,000(11) 29.8%
Grand Cayman, B.W.I.
21st Century
Communications
Partners, L.P.
767 Fifth Avenue
45th Floor 1,836,522(9) 20.6% 2,000(11) 29.8%
New York, NY 10153
21st Century
Communications T-E
Partners, L.P.
767 Fifth Avenue
45th Floor 1,836,522(10) 20.6% 2,000(11) 29.8%
New York, NY 10153
Michael J. Marocco
767 Fifth Avenue
45th floor
New York, NY 10153 1,836,522(12) 20.6% 2,000(12) 29.8%
Barry Lewis
767 Fifth Avenue
45th floor
New York, NY 10153 1,836,522(12) 20.6% 2,000(12) 29.8%
John Kornreich
767 Fifth Avenue
45th floor
New York, NY 10153 1,836,522(12) 20.6% 2,000(12) 29.8%
Harvey Sandler
767 Fifth Avenue
45th floor
New York, NY 10153 1,836,522(12) 20.6% 2,000(12) 29.8%
Andrew Sandler
767 Fifth Avenue
45th floor
New York, NY 10153 1,836,522(12) 20.6% 2,000(12) 29.8%
Barry Fingerhut
767 Fifth Avenue
45th floor
New York, NY 10153 3,363,826(13) 33.0% 4,000(13) 59.5%
Applewood Associates,
L.P.
68 Wheatley Road
Brookville, NY 11545 1,507,304(14) 16.9% 2,000(14) 29.8%
Applewood Capital Corp.
68 Wheatley Road
Brookville, NY 11545 1,507,304(14) 16.9% 2,000(14) 29.8%
Seth Lieber
767 Fifth Avenue
New York, NY 10153 1,507,304(14) 16.9% 2,000(14) 29.8%
Jonathan Lieber
767 Fifth Avenue
New York, NY 10153 1,507,304(14) 16.9% 2,000(14) 29.8%
Marilyn Rubenstein
68 Wheatley Road
Brookville, NY 11545 1,074,503(15) 13.0% 560(15) 8.3%
The Marilyn and Barry
Rubenstein Family
Foundation 1,074,503(16) 13.0% 560(16) 8.3%
Andrew Gyenes 258,333(17) 3.4% 0 *
Michael Alford 163,275 2.1% 0 *
Ken Gruber 58,333(18) * 0 *
Harrison Weaver 35,000(19) * 0 *
Rino Bergonzi 25,000(20) * 0 *
Peter Gyenes 21,000(21) * 0 *
Randal Hajar 303,651 4% 0 *
Steven Fisher 0 * *
John Ramo 0 * 0 *
All directors and
executive
officers as a group 1,153,969(22) 15.0% 0 *
* less than 1%
(1) Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission and generally includes any
person who, directly or indirectly, through any contract,
arrangement, understanding or otherwise, has or shares voting or
investment power with respect to securities. Shares of Common Stock
issuable upon the exercise of options, warrants and convertible
notes currently exercisable or convertible, or exercis-able or
convertible within 60 days are deemed outstanding for computing the
percentage ownership of the person holding such options or warrants
or convertible notes but are not deemed outstanding for computing
the percentage ownership of any other person.
(2) Based on Amendment Number 3 to a Schedule 13D filed on February 11,
1997 by Barry Rubenstein, Woodland Venture Fund ("Woodland Fund"),
Seneca Ventures ("Seneca"), Woodland Services Corp. ("Woodland
Corp."), 21st Century Communications Partners, L.P. ("21st
Partners"), 21st Century Communications T-E Partners, L.P. ("21st
T-E"), 21st Century Communications Foreign Partners, L.P. ("21st
Foreign"), Michael J. Marocco, Barry Lewis, John Kornreich, Harvey
Sandler, Andrew Sandler, Barry Fingerhut, Irwin Lieber, Woodland
Partners, Applewood Associates, L.P. ("Applewood"), Applewood
Capital Corp. ("Applewood Capital"), Seth Lieber, Jonathan Lieber,
Marilyn Rubenstein, The Marilyn and Barry Rubenstein Family
Foundation (the "Foundation"), and Brian Rubenstein (the "February
1997 13D"), Barry Rubenstein has sole beneficial ownership
of 332,500 shares of Common Stock (including 185,000 shares of
Common Stock underlying presently exercisable options). Mr.
Rubenstein may also be deemed to share beneficial ownership of
4,085,829 shares of Common Stock by virtue of being: (i) a
stockholder, officer and director of InfoMedia Associates, Ltd.
("InfoMedia") which is a general partner of 21st Partners, 21st T-E
and 21st Foreign which collectively hold 1,836,522 shares of Common
Stock (including 1,250,000 shares of Common Stock underlying
presently exercisable warrants issued in connection with the
Company's public offering in May 1996 (the "Common Stock
Warrants")); (ii) a trustee of the Foundation which holds 123,237
shares of Common Stock (including 20,000 shares of Common Stock
underlying presently exercisable Common Stock Warrants); and (iii)
a general partner of each of Applewood, Seneca, the Woodland Fund
and Woodland Partners which hold an aggregate of 2,126,070 shares
of Common Stock (including 1,580,000 shares of Common Stock
underlying presently exercisable Common Stock Warrants). In
addition, Mr. Rubenstein shares beneficial ownership of 4,560
shares of Preferred Stock with the above listed entities. Mr.
Rubenstein disclaims beneficial ownership of these securities,
except to the extent of his equity interest therein.
(3) Based on the February 1997 13D, the Woodland Fund has sole beneficial
ownership of 310,844 shares of Common Stock (including 150,000
shares of Common Stock underlying presently exercisable Common
Stock Warrants). The Woodland Fund may also be deemed to share
beneficial ownership of 763,659 shares of Common Stock (including
200,000 shares of Common Stock underlying presently exercisable
Common Stock Warrants) with Seneca, Woodland Corp., Woodland Partners
and the Foundation. In addition, the Woodland Fund has sole
beneficial ownership of 240 shares of Preferred Stock and shares
beneficial ownership of 320 shares of Preferred Stock with the
above listed entities. The Woodland Fund disclaims beneficial
ownership of these securities, except to the extent of its equity
interest therein.
(4) Based on the February 1997 13D, Seneca has sole beneficial ownership
of 207,922 shares of Common Stock (including 100,000 shares of
Common Stock underlying presently exercisable Common Stock
Warrants). Seneca may also be deemed to share beneficial owner-
ship of 866,581 shares of Common Stock (including 250,000 shares of
Common Stock underlying presently exercisable Common Stock
Warrants) with the Woodland Fund, Woodland Corp., Woodland Partners
and the Foundation. In addition, Seneca has sole beneficial ownership
of 160 shares of Preferred Stock and shares beneficial ownership of
400 shares of Preferred Stock with the above listed entities. Seneca
disclaims beneficial ownership of these securities, except to the
extent of its equity interest therein.
(5) Based on the February 1997 13D, Woodland Corp. shares beneficial
ownership of 1,074,503 shares of Common Stock (including 350,000
shares of Common Stock underlying presently exercisable Common
Stock Warrants) and 560 shares of Preferred Stock with the Woodland
Fund, Seneca, Woodland Partners and the Foundation. Woodland Corp.
disclaims beneficial ownership of these securities, except to the
extent of its equity interest therein.
(6) Based on the February 1997 13D, Woodland Partners has sole beneficial
ownership of 100,000 shares of Common Stock (including 100,000
shares of Common Stock underlying presently exercisable Common
Stock Warrants). Woodland Partners may also be deemed to share
beneficial ownership of 974,503 shares of Common Stock (including
250,000 shares of Common Stock underlying presently exercisable
Common Stock Warrants) with the Woodland Fund, Seneca, Woodland
Corp. and the Foundation. In addition, Woodland Partners has sole
beneficial ownership of 160 shares of Preferred Stock and shares
beneficial ownership of 400 shares of Preferred Stock with the
above listed entities. Woodland Partners disclaims beneficial
ownership of these securities, except to the extent of its equity
interest therein.
(7) Based on the February 1997 13D, Irwin Lieber has sole beneficial
ownership of 42,000 shares of Common Stock (including 37,000 shares
of Common Stock underlying presently exercisable Common Stock
Warrants). By virtue of being a stockholder, officer and director
of InfoMedia and a general partner of Applewood, Irwin Lieber may
be deemed to share beneficial ownership of 3,343,826 shares of
Common Stock (including 2,500,000 shares of Common Stock underlying
presently exercisable Common Stock Warrants). In addition, Mr.
Lieber shares beneficial ownership of 4,000 shares of Preferred
Stock with the above listed entities. Mr. Lieber disclaims
beneficial ownership of these securities, except to the extent of
his equity ownership therein.
(8) Based on the February 1997 13D, this amount includes 48,896 shares of
Common Stock and 114,000 shares of Common Stock underlying
presently exercisable Common Stock Warrants. 21st Foreign disclaims
beneficial ownership of 398,490 shares of Common Stock and 847,500
shares of Common Stock underlying presently exercisable Common
Stock Warrants owned by 21st Partners and 139,136 shares of Common
Stock and 288,500 shares of Common Stock underlying presently
exercisable Common Stock Warrants owned by 21st T-E.
(9) Based on the February 1997 13D, this amount includes 398,490 shares of
Common Stock and 847,500 shares of Common Stock underlying
presently exercisable Common Stock Warrants. 21st Partners
disclaims beneficial ownership of 139,136 shares of Common Stock
and 288,500 shares of Common Stock underlying presently exercisable
Common Stock Warrants owned by 21st T-E and 48,896 shares of Common
Stock and 114,000 shares of Common Stock underlying presently
exercisable Common Stock Warrants owned by 21st Foreign.
(10) Based on the February 1997 13D, this amount includes 139,136 shares of
Common Stock and 288,500 shares of Common Stock underlying
presently exercisable Common Stock Warrants. 21st T-E disclaims
beneficial ownership 398,490 shares of Common Stock and 847,500
shares of Common Stock underlying presently exercisable Common
Stock Warrants owned by 21st Partners and 48,896 shares of Common
Stock and 114,000 shares of Common Stock underlying presently
exercisable Common Stock Warrants owned by 21st Foreign.
(11) Beneficial ownership of these shares of Preferred Stock is shared
by 21st Foreign, 21st T-E, and 21st Partners.
(12) Based on the February 1997 13D, Messrs. Marocco, Lewis, Kornreich, H.
Sandler and A. Sandler are each the sole stockholder, officer and
director of an entity which is a general partner of an entity which
is a general partner of 21st Partners, 21st T-E and 21st Foreign.
Accordingly, they may each be deemed to share beneficial ownership
of 1,836,522 shares of Common Stock (including 1,250,000 shares of
Common Stock underlying presently exercisable Common Stock
Warrants) and 2,000 shares of Preferred Stock which are
collectively held by 21st Partners, 21st T-E and 21st Foreign. Each
individual disclaims beneficial ownership of these securities,
except to the extent of his equity interest therein.
(13) Based on the February 1997 13D, Barry Fingerhut has sole beneficial
ownership of 20,000 shares of Common Stock underlying Common Stock
Warrants. By virtue of being a stockholder, officer and director of
InfoMedia and a general partner of Applewood, Barry Fingerhut may
be deemed to share beneficial ownership of 3,343,826 shares of
Common Stock (including 2,500,000 shares of Common Stock underlying
presently exercisable Common Stock Warrants) and 4,000 shares of
Preferred Stock. Mr. Fingerhut disclaims beneficial ownership of
these securities, except to the extent of his equity interest
therein.
(14) Based on the February 1997 13D, these amounts include 257,304 shares
of Common Stock, 1,250,000 shares of Common Stock underlying Common
Stock Warrants and 2,000 shares of Preferred Stock beneficially
owned by Applewood. By virtue of being a general partner of
Applewood, Applewood Capital may be deemed to share beneficial
ownership of these shares. In addition, by virtue of being offi-
cers of Applewood Capital, Seth and Jonathan Lieber may also be
deemed to share beneficial ownership of these shares. Applewood
Capital, Seth Lieber, and Jonathan Lieber each disclaim beneficial
ownership of these securities, except to the extent of their equity
interests therein.
(15) Based on the February 1997 13D, by virtue of being a general partner
of Woodland Partners, a trustee of the Foundation, and the wife of
Barry Rubenstein, Marilyn Rubenstein may be deemed to share
beneficial ownership of 1,074,503 shares of Common Stock (includ-
ing 350,000 shares of Common Stock underlying presently exer-
cisable Common Stock Warrants) and 560 shares of Preferred Stock.
Ms. Rubenstein disclaims beneficial ownership of these securi-
ties, except to the extent of her equity interest therein.
(16) Based on the February 1997 13D, the Foundation has sole beneficial
ownership of 123,237 shares of Common Stock (including 20,000
shares of Common Stock underlying presently exercisable Common
Stock Warrants). In addition, the Foundation may be deemed to share
beneficial ownership of 951,266 shares of Common Stock (including
350,000 shares of Common Stock underlying presently exercisable
Common Stock Warrants) and 560 shares of Preferred Stock with Mr.
and Ms. Rubenstein, the Woodland Fund, Seneca, Woodland Corp. and
Woodland Partner. The Foundation disclaims beneficial ownership
of these securities, except to the extent of its equity interest
therein.
(17) Consists of 258,333 shares of Common Stock issuable upon exercise
of presently exercisable options.
(18) Consists of 58,333 shares of Common Stock issuable upon exercise of
presently exercisable options.
(19) Consists of 20,000 shares of Common Stock issuable upon exercise of
presently exercisable options and 15,000 shares of Common Stock
issuable upon exercise of presently exercisable options granted
pursuant to the 1995 Stock Option Plan for Outside Directors (the
"Outside Directors' Plan"). Excludes 50,000 presently exercisable
options held by The Continuum Group, Inc., which options Mr. Weaver
disclaims beneficial ownership of.
(20) Consists of 5,000 shares of Common Stock owned by Mr. Bergonzi,
5,000 shares of Common Stock issuable upon exercise of presently
exercisable Common Stock Warrants and 15,000 shares of Common Stock
issuable upon exercise of presently exercisable options granted
pursuant to the Outside Directors' Plan.
(21) Consists of 3,000 shares of Common Stock owned by Mr. Peter Gyenes,
3,000 shares of Common Stock issuable upon exercise of presently
exercisable Common Stock Warrants and 15,000 shares of Common Stock
issuable upon exercise of presently exercisable options granted
pursuant to the Outside Directors' Plan.
(22) Also, includes presently exercisable options to purchase 28,510
shares of Common Stock and 564,518 shares of Common Stock held by
certain executive officers who are not Named Executive Officers.
ELECTION OF DIRECTORS
Seven directors are to be elected at the Annual Meeting to serve
for a one-year term or until their respective successors shall have been
elected and shall have qualified. Except as herein stated, the proxies
solicited hereby will be voted FOR the election of the seven nominees
listed below, unless otherwise directed. Each nominee elected is expected
to serve until the next annual meeting and until his successor shall be
duly elected and qualified.
The Board has been informed that all persons listed below are
willing to serve as directors, but in case any one or more of the
nominees is unable or unwilling to stand for election or serve if
elected, the named proxies will vote for such person or persons as they
in their discretion may choose to replace any such nominee. The Board has
no reason to believe that any nominees will be unable or unwilling to
stand for election or serve if elected.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE IN
FAVOR OF THE ELECTION OF THE BELOW LISTED
NOMINEES AS DIRECTORS.
The name, age, principal occupation for the last five years,
selected biographical information, and period of previous service as a
director of the Company with respect to each such nominee are set forth
below. The principal occupations listed refer to positions with the
Company unless otherwise indicated.
Name Age Position Director
Since
Andrew Gyenes 61 Chairman of the Board and Chief 1994
Executive Officer
Michael Alford 51 Vice President, Executive Producer 1994
and Director
Rino Bergonzi 51 Director 1995
Peter Gyenes 51 Director 1995
Harrison Weaver 65 Director 1993
Randal Hujar 36 Vice President, Marketing and Sales
and Director
Steven Fischer 51 Director
Andrew Gyenes has been Chairman of the Board and Chief Executive
Officer of the Company since May 1994. He was Chief Executive Officer,
President and a director of the Company from January 1994 through May
1994. For more than five years before joining the Company, Mr. Gyenes was
Vice President of Gyenes & Co., a computer software consulting company,
and Marketing Manager of Ann-Mar Manufacturing, Inc. ("Ann-Mar"), a
family owned textile company. Mr. Gyenes continued in both positions on a
part-time basis through January 1995, and since January 1995, has been a
consultant to Ann-Mar. Most of Mr. Gyenes' career has been in the
computer industry, including positions with Warner Communications (last
serving as an Assistant Vice President responsible for Worldwide
Information Systems), with IBM Corporation (last serving as Eastern
Regional Manager for Scientific Systems at Service Bureau Corporation, a
former wholly-owned IBM subsidiary), and with Western Union (last serving
as Assistant Vice President of Data Processing).
Michael Alford has been a director of the Company since May 1994.
Since July 1996, he has been Vice President, Executive Producer. From
1994 through 1996, he was Vice President, Development of the Company.
From 1992 through May 1994, he was the Vice President, Development and a
director of Sonic Images Production, Inc., the Company's predecessor in
interest. Prior to 1992, Mr. Alford was department head of Versar
Incorporated, an environmental consulting firm, for more than five years.
Rino Bergonzi has served as a director of the Company since January
1995. Since November 1993, Mr. Bergonzi has served as Vice President and
Division Executive of Corporate Information Technology Services at
AT&T, and has 25 years of experience in the information services field
that includes working for such companies as Western Union, United Parcel
Service Information Services and EDS Corp.
Peter Gyenes has served as a director of the Company since January
1995. Mr. Gyenes has served as Executive Vice President, International
Operations and Worldwide Sales of VMARK Software, Inc. ("VMARK") since
August 1996. From May 1996 to August 1996, he served as Executive Vice
President, International Operations of VMARK. Mr. Gyenes served as
President and Chief Executive Officer of Racal InterLan, Inc., a leading
supplier of local area networking products, from May 1995 to May 1996.
Since January 1986, he has also served as a director of Axis Computer
Systems, Inc. From January 1994 to April 1995, he was President of the
Americas Division of Fibronics International, Inc. and, from August 1990
to December 1993, Vice President and General Manager of Data General
Corporation's international operations and mini-computer business unit.
Mr. Gyenes has also held management, marketing, sales and technical
positions with Encore Computer, Prime Computer, Xerox and IBM. Mr. Peter
Gyenes is the brother of Andrew Gyenes, Chairman of the Board and Chief
Executive Officer of the Company.
Harrison Weaver has been a director of the Company since December
1993. He was a Vice President of the Company from December 1993 through
May 1994. He has been a director of The Continuum Group, Inc.
("Continuum") since 1987, the Chairman of the Board and Chief Executive
Officer of Continuum since December 1991 and the President of Continuum
since August 1994. He is the founder and President of Weaver Associates,
a diversified printing concern located in Cranford, New Jersey, which has
been in business for over 25 years.
Randal Hujar has been a Vice President of the Company since
February 29, 1996 and Vice President of Marketing and Sales since April
1996. Prior to joining the Company, Mr. Hujar was President, Chief
Executive Officer, and a director of Lyriq International Corp. ("Lyriq")
from its founding in December 1991 until the Company's acquisition of
Lyriq in February, 1996. See "Certain Transactions."
Steven Fischer has served as Senior Vice President and Regional
Manager of Transamerica Business Credit Corporation since March 1992.
From February 1981 through March 1992, Mr. Fischer served as Vice
President and Regional Manager of Citibank, N.A. Mr. Fischer has served
as a director of ScanSource Inc. since December 1995.
Pursuant to the terms of an Agreement and Plan of Merger dated as
of February 28, 1996 (the "Merger Agreement") by and among the Company,
Enteractive Acquisitions Corp., Lyriq, Randal Hujar, and Gary Skiba
whereby the Company acquired Lyriq in a stock for stock merger, the
Company agreed to use its best efforts to have one designee named jointly
by Messrs. Hujar and Skiba elected to the Board of the Company as soon as
practicable following the closing of the merger. Such obligation
continues in effect until the earlier of (i) February 28, 1998, and (ii)
the occurrence of two consecutive profitable fiscal quarters for the
Company. Under the terms of the Merger Agreement, the designee named by
Messrs. Hujar and Skiba must be reasonably satisfactory to the Company,
and the first designee is to be Mr. Hujar. The Merger Agreement also
provides that Messrs. Hujar and Skiba will be invited to attend meetings
of the Board of the Company in their capacity as officers of the Company,
except where such may be unwarranted under the circumstances, until Mr.
Hujar first becomes a director of the Company. A further discussion of
the merger is provided in "Certain Transactions."
BOARD MEETINGS AND STANDING COMMITTEES
The Board held 11 meetings during the Company's last fiscal year
ended May 31, 1996.
Messrs. Bergonzi and Weaver are members of the Audit Committee,
which recommends to the Board the appointment of the independent auditors
and reviews the results and scope of the audit and the other services
provided by the Company's independent accountants. The Audit Committee
held no meetings during the Company's last fiscal year.
Messrs. Bergonzi and Weaver are members of the Compensation and
Stock Option Committee, which is charged with determining the
compensation of the officers of the Company and administering the 1994
Plan, the 1994 Consultant Stock Option Plan, and the Outside Directors'
Plan. The Compensation and Stock Option Committee held 2 meeting during
the Company's last fiscal year.
The Company does not have a standing nominating committee.
Each of the incumbent directors attended 75% or more of the
aggregate number of meetings of the Board and committees on which he
served during the fiscal year ended May 31, 1996.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors, executive officers, and persons who own
more than 10% of a registered class of the Company's equity securities,
to file initial reports of ownership and reports of changes in ownership
of the Common Stock and other equity securities of the Company with the
Securities and Exchange Commission (the "SEC"). Executive officers,
directors and beneficial owners of greater than 10% of the Common Stock
are required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely on its review of the
copies of such forms furnished to the Company and written representations
from certain reporting persons that no other reports on forms were
required for such persons, during the fiscal year ended May 31, 1996 all
Section 16(a) filing requirements applicable to its officers, directors
and greater than 10% owners were complied with.
COMPENSATION OF DIRECTORS
Directors do not receive a fee for attending Board or committee
meetings. All directors are reimbursed for all ordinary travel expenses
related to attendance at Board or committee meetings.
Under the terms of the Outside Directors' Plan, each of Messrs.
Bergonzi, Peter Gyenes and Weaver (being all of the non-employee
directors) were granted non-qualified options to purchase 5,000 shares of
Common Stock on January 1, 1995, subject to stockholder approval of the
Outside Directors' Plan. Pursuant to the terms of the Outside Directors'
Plan, each non-employee director will be granted on January 1 of each
year, non-qualified stock options to purchase 5,000 shares of Common
Stock, provided the director is serving on the Board on the date of the
grant. Grants under the Outside Directors' Plan will be 100% vested as of
the date of grant.
No other director receives compensation for his services as such.
EXECUTIVE OFFICERS
The executive officers of the Company as of February 3, 1997, are as
follows:
Name Age Position
Andrew Gyenes..... 61 Chairman of the Board and Chief Executive
Officer
Michael Alford.... 51 Vice President, Executive Producer and Di-
rector
Kenneth Gruber.... 44 Vice President, Chief Financial Officer
and Secretary
Randal Hujar...... 36 Vice President, Marketing and Sales
Gary Skiba........ 34 Vice President, Chief Technology Officer
Jon Singer..........33 Vice President, Director of Development
Andrew Gyenes, Chairman of the Board and Chief Executive Officer.
See information under "Election of Directors."
Michael Alford, Vice President, Executive Producer. See information
under "Election of Directors."
Kenneth Gruber has been Vice President and Chief Financial Officer
of the Company since November 7, 1994. He has been Secretary of the
Company since September 1995. Prior to joining the Company, Mr. Gruber
was employed by Children's Television Workshop ("CTW") since 1984, and
served as CTW's Vice President and Chief Financial Officer from 1993 to
November 1994, as CTW's Vice President of Finance and Administration from
1989 to 1993 and as Vice President of Finance from 1988 to 1989.
Jon Singer has been Vice President, Director of Development since
July, 1996. From May 1994 to June 1996, he was the Vice President of
Software Development for the Company. From December 1992 to May 1994, he
held a similar position with Sonic Images Production, Inc. ("Sonic").
From December 1990 to December 1992 he was a software engineer with
Sonic.
Randal Hujar, Vice President, Marketing and Sales. See information
under "Election of Directors."
Gary Skiba has been a Vice President of the Company since February
29, 1996 and Chief Technology Officer since July 16, 1996. Prior to
joining the Company, Mr. Skiba was Chairman of the Board and Chief
Technical Officer of Lyriq from its founding in December 1991 through the
Company's acquisition of Lyriq in February, 1996. See "Certain
Transactions."
EXECUTIVE COMPENSATION
The following table sets forth, for fiscal 1996, 1995 and 1994, all
compensation awarded to, earned by or paid to Andrew Gyenes, the Chairman
of the Board and Chief Executive Officer of the Company, Kenneth Gruber,
Vice President, Chief Financial Officer and Secretary and John Ramo,
formerly President and Chief Operating Officer, the only executive
officers of the Company whose annual salary and bonus exceeded $100,000
during the fiscal year ended May 31, 1996 (the "Named Executive
Officers.")
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term
Compensation
Awards
Securities
Name and Principal Fiscal Other Annual Underlying
Position Year Salary ($) Bonus ($) Compensation Options
- -------- ---- ---------- --------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Andrew Gyenes 1996 $100,000 $16,369 (1) 100,000 (2)
Chairman of the 1995 $100,000
Board 1994 $ 40,705 225,000 (3)
and Chief Executive
Officer
John Ramo 1996 $105,000 $14,763 (5)
President and 1995 $105,000
Chief Operating 1994 $104,331
Officer (4)
Kenneth Gruber 1996 $ 80,000 $20,000 $14,091 (7) 25,000 (8)
Vice President, 1995 $ 11,667 75,000 (9)
Chief Financial 1994
Officer (6)
</TABLE>
(1) This amount includes $7,104 that the Company paid for a leased car
and related insurance and $8,580 the Company paid towards Mr.
Gyenes' health insurance premium.
(2) Represents options to purchase 100,000 shares of the Company's
Common Stock granted on June 12, 1995 under the 1994 Plan, of which
one-third became exercisable June 12, 1996. None of such options
have been exercised.
(3) Represents options to purchase 125,000 shares of Common Stock
granted on January 3, 1994 under the 1994 Plan, which became
exercisable January 3, 1995 and 100,000 options to purchase Common
Stock granted February 1, 1994 under the 1994 Plan, which became
exercisable February 1, 1995. None of such options have been
exercised.
(4) Mr. Ramo served as President and Chief Executive Officer of the
Company until his resignation from such positions on August 1,
1996. At that time, the Company and Mr. Ramo agreed to the terms of
a separation agreement under which Mr. Ramo received a lump-sum
payment of $132,461 representing the remaining balance of
compensation due to him under his employment agreement through its
original expiration date of October 20, 1997. See "Certain
Transactions."
(5) This amount includes $5,436 that the Company paid for a leased car
and related insurance and $4,364 the Company paid towards Mr.
Ramo's life insurance premiums.
(6) Mr. Gruber's employment commenced on November 7, 1994.
(7) This amount includes $6,807 that the Company paid for a leased car
and related insurance and $7,247 the Company paid towards Mr.
Gruber's health insurance premium.
(8) Represents options granted to purchase 25,000 shares of Common
Stock on June 12, 1995 under the 1994 Plan, of which one-third
became exercisable June 12, 1996. None of such options have been
exercised.
(9) Represents options to purchase 75,000 shares of Common Stock
granted on November 7, 1994 under the 1994 Plan, of which one-third
became exercisable November 7, 1995 and one-third became
exercisable in November 1996. None of such options have been
exercised.
Stock option grants
The following table provides further information with respect to
the options granted in fiscal 1996 to Mr. Gyenes and Mr. Gruber under the
1994 Plan.
STOCK OPTION TABLE
% of Total
Number of Se- Options
Name and Prin- curities Un- Granted to
cipal Position derlying Op- Employees Exercise or Expiration
tion in Fiscal Base Price Date
Year
Andrew Gyenes
Chairman of
the Board and
Chief
Executive Offi-
cer 100,000 63% $3.00 6/12/00
Kenneth Gruber
Vice
President, Chief
Financial
Officer 25,000 16% $3.00 6/12/00
Fiscal Year End Option Values
No options were exercised by the Named Executive Officers during
fiscal 1996. The following table shows, for Mr. Gyenes and Mr. Gruber,
the number of shares covered by both exercisable and unexercisable
employee stock options as of May 31, 1996, and the values for
"in-the-money" options, which represent the positive spread between the
exercise price of any outstanding stock option and the price of the
Common Stock as of May 31, 1996, which was $4.375.
FISCAL YEAR END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised in-the Money Options
Options at FY End (#) at FY-End ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
Andrew Gyenes 258,333/66,667 $501,458/$91,667
Kenneth Gruber 33,333/66,667 $27,083/$54,167
EMPLOYMENT CONTRACTS
The Company entered into an employment agreement with Andrew Gyenes
dated January 3, 1994, as amended, which expires October 20, 1997. Mr.
Gyenes has agreed to devote such of his working time and attention to the
business of the Company as the Board deems necessary for him to
effectively perform his duties under his agreement. Mr. Gyenes currently
serves as a consultant to Ann-Mar Manufacturing Inc., which is engaged
in textiles, and is permitted by the terms of his agreement to continue
to serve in such capacity so long as such activity will not prevent him
from performing his obligations on behalf of the Company. Mr. Gyenes has
also agreed not to compete with the business of the Company for a period
of one year following termination of his employment agreement. Pursuant
to his employment agreement, Mr. Gyenes is entitled to receive an annual
salary of $100,000. In addition, pursuant to the employment agreement,
Mr. Gyenes received options under the 1994 Plan to purchase 125,000
shares of Common Stock at an exercise price of $2.35 per share, which are
currently exercisable.
Mr. Ramo served as President of the Company under an employment
agreement which had an expiration date of October 20, 1997. Upon Mr.
Ramo's resignation from his positions as President, Chief Operating
Officer and director of the Company on August 1, 1996, Mr. Ramo and the
Company terminated his employment agreement. Pursuant to the terms of the
separation agreement, Mr. Ramo may not compete with the business of the
Company before May 21, 1998. See "Certain Transactions."
CERTAIN TRANSACTIONS
In January 1996, the Company consummated a $2,700,000 bridge
financing (the "January 1996 Private Placement")in which 21st Foreign,
21st Partners, 21st T-E, Seneca, Woodland Fund, the Foundation, Applewood
and Dalewood Associates, L.P. ("Dalewood") purchased $100,000, $850,000,
$300,000, $100,000, $200,000, $100,000, $250,000 and $200,000 principal
amount of Unsecured Convertible Promissory Notes ("Convertible Notes"),
respectively and 20,000, 170,000, 60,000, 20,000, 40,000, 20,000, 50,000
and 40,000 warrants (the "January 1996 Warrants"), respectively. Upon the
consummation of the Company's public offering in May 1996 all of the
January 1996 Warrants were converted into the same number of Common
Stock Warrants. In addition, all of the Convertible Notes held by 21st
Foreign, 21st Partners, 21st T-E, Applewood, Seneca and Woodland Fund
were converted into (a) 32,922; 279,835; 98,765; 82,305; 32,922; and
65,844 shares of Common Stock, respectively, and (b) 65,844; 559,671;
197,531; 164,608; 65,844; and 131,688 Common Stock Warrants, respectively.
The $100,000 principal amount of Convertible Notes held by the Foundation
and the $200,000 principal amount of Convertible Notes held by Dalewood
were not converted, but instead, were paid in full by the Company. The
Common Stock Warrants are presently exercisable into one share of Common
Stock for each Common Stock Warrant. The Company was advised that on May 16,
1996 such entities sold Common Stock Warrants held by them. A further
description of Mr. Rubenstein's relationship with the above-described
entities is provided in "Principal Security Holders."
In February 1996, the Company acquired Lyriq, a developer and
publisher of interactive multimedia software, through a merger in which
Lyriq became a wholly-owned subsidiary of the Company. Pursuant to the
terms of the Merger Agreement, Messrs. Hujar and Skiba received 303,651
and 310,867 shares of the Company's Common Stock, respectively, upon the
closing of the merger. In addition, Messrs. Hujar and Skiba became
executive officers of the Company.
In May 1996, the Company repurchased under a Stock Purchase
Agreement dated December 28, 1995, an aggregate of 1,000,000 shares of
Common Stock, for an aggregate purchase price of $1,000,000, from John
Ramo, Jolie Barbiere, Zenon Slawinski and Michael Alford, each of whom,
at the time, was a director and/or executive officer of the Company.
Under the terms of the purchase agreement, one third of the purchase
price was paid at the closing and the balance was to be paid on the first
and second anniversaries of the closing. Of the aggregate amount, the
Company purchased 347,138 shares from Mr. Ramo, 315,271 shares from Ms.
Barbiere, 216,961 shares from Mr. Slawinski and 120,630 shares from Mr.
Alford.
In August 1996, the Company entered into separation agreements with
John Ramo, President, Chief Operating Officer and a director of the
Company, and Mr. Ramo's wife, Jolie Barbiere, a vice president and
director of the Company. Pursuant to the separation agreements: Mr. Ramo
resigned his officer positions and received a lump sum payment of
$132,461 representing the remaining balance of compensation due him under
his employment agreement through its original termination date of October
20, 1997; Ms. Barbiere's employment agreement, which expired July 16,
1996, was not renewed, and she received a lump sum severance payment of
$40,000; and both Mr. Ramo and Ms. Barbiere resigned as members of the
Board. In addition, the parties agreed that a substantial portion of the
remaining payments due under the Stock Purchase Agreement, in respect of
the Common Stock purchased from Mr. Ramo and Ms. Barbiere, would be
accelerated. As part of Mr. Ramo's and Ms. Barbiere's separation
agreements, a stockholders agreement by and among the Company, Andrew
Gyenes, John Ramo, Jolie Barbiere, Zenon Slawinski and Michael Alford,
which agreement provided for certain rights of refusal with respect to
the issuance of Company securities and certain rights with respect to the
election of directors, was terminated. The Company also entered into a
separation agreement with Zenon Slawinski in August 1996. Pursuant to the
separation agreement, Mr. Slawinski's employment agreement, which expired
July 15, 1996, was not renewed and he received a lump sum severance
payment of $40,000. No payments due Mr. Slawinski under the Stock
Purchase Agreement were accelerated at that time.
In October 1996, the Company agreed to further accelerate the
remaining amounts due Mr. Ramo and Ms. Barbiere and to accelerate the
remaining amounts due Mr. Slawinski under the Stock Purchase Agreement if
GKN Securities Corp. ("GKN") could locate a buyer for all of the
remaining shares of the Company's Common Stock then owned by Mr. Ramo,
Ms. Barbiere, and Mr. Slawinski at a specified purchase price. In January
1997, Mr. Ramo, Ms. Barbiere and Mr. Slawinski sold such shares, through
GKN, and the Company paid Mr. Ramo, Ms. Barbiere and Mr. Slawinski
approximately $160,000, $175,000 and $148,000, respectively, which
amounts included accrued interest, in full satisfaction of its
obligations under the Stock Purchase Agreement.
All of the above transactions resulted from arms-length
negotiations and were approved by a majority of the independent members
of the Board who did not have interests in the transactions.
AMENDMENT OF THE CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK TO 50,000,000
The Board has adopted a resolution providing that Article Fourth of
the Certificate of Incorporation be amended to increase the number of
shares of Common Stock which the Company is authorized to issue from
30,000,000 to 50,000,000 shares, subject to stockholder approval. The
full text of the proposed amendment is attached to this Proxy Statement
as Exhibit A.
As of February 3, 1997, there were 7,679,441 shares of Common Stock
issued and outstanding, and no shares of Common Stock were held as
treasury stock. 2,369,390 unexercised options for 2,369,390 shares of
Common Stock were outstanding. 962,610 shares of Common Stock were
reserved for future option grants under the plans and 10,271,468 shares
of Common Stock were reserved for issuance upon exercise of the Common
Stock Warrants. In addition, 6,720 shares of Preferred Stock are
outstanding and are convertible commencing on April 30, 1998, at the
holders' option, into 6,666,240 shares of Common Stock and such number of
shares of common stock have been reserved for conversion of the Preferred
Stock. The additional 20,000,000 shares of Common Stock, if approved,
would increase the number of authorized, unissued, and unreserved shares
to 22,050,851. The additional shares would be part of the existing class
of Common Stock and, if and when issued, would have the same rights and
privileges as the shares of Common Stock presently outstanding.
Although the Board has no present plans for the issuance of Common
Stock, the additional shares of Common Stock that would be authorized but
unissued and not reserved for issuance would be available to the Company
for issuance in connection with general corporate purposes, including,
without limitation, stock splits, stock dividends, dividend reinvestment
plans and other employee benefit plans, raising additional capital and
acquisitions. The Board believes that additional authorized Common Stock
would give the Company greater flexibility in executing its business
strategies by allowing the Company to issue shares of Common Stock
without the expense and delay of a stockholders' meeting to authorize
additional shares if and when the need arises. However, the Company has
no agreements, understandings, commitments or plans with respect to the
sale or issuance of additional shares of Common Stock other than pursuant
to its 1994 Plan, 1994 Stock Option Plan for Consultants, and its Outside
Directors' Plan.
The proposed amendment of the Certificate of Incorporation is not
being recommended in response to any specific effort of which management
is aware to obtain control of the Company. However, it should be noted
that shares of authorized and unreserved Common Stock could be issued to
a holder who might thereby obtain sufficient voting power to create
voting impediments that would frustrate third parties seeking to gain
control of the Company against the wishes of the Board, whether or not
such a takeover bid is in the best interest of the stockholders.
It should also be noted that the issuance of additional shares of
Common Stock by the Company may, depending upon the circumstances under
which the shares are issued, reduce stockholders' equity per share and
may reduce the percentage of ownership of Common Stock of existing
stockholders. The issuance of additional shares of Common Stock in
payment of a stock dividend or to effect a stock split, however, would
not reduce the percentage of ownership of the Company by existing
stockholders or reduce any stockholder's interest in the earnings of the
Company. Stockholders have no preemptive right to subscribe for or
purchase any additional shares of Common Stock issued by the Company.
The additional shares of Common Stock would be available for
issuance without further action by the stockholders and without the
accompanying delay and expense involved in calling a special meeting of
stockholders, unless such action is required by applicable law or the
rules of any stock exchange on which the Company's securities may be
listed. The Company's Common Stock is presently traded on the NASDAQ
SmallCap Market and the Boston Stock Exchange.
Proxies received which contain no instructions to the contrary will
be voted FOR approval of the proposed amendment to the Certificate of
Incorporation. The affirmative vote of a majority of the outstanding
shares of Common Stock and Preferred Stock, voting together as a single
class, entitled to vote thereon, together with the majority of the
outstanding shares of Common Stock entitled to vote thereon, voting as a
separate class, is required for its approval. If the proposal is approved
by the stockholders, the amendment to the Certificate of Incorporation
would become effective upon the filing of the amendment of the
Certificate of Incorporation with the Secretary of State of Delaware,
which would occur as soon as practicable following the approval of the
proposal by the stockholders.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF THE APPROVAL OF THE AMEND-
MENT TO THE CERTIFICATE OF INCORPORATION INCREASING THE AUTHORIZED
NUMBER OF SHARES OF COMMON STOCK
APPROVAL OF AMENDMENTS TO THE COMPANY'S
1994 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
General
The Company has adopted the 1994 Incentive and Non-Qualified Stock
Option Plan (the "1994 Plan") to attract, retain and provide incentive to
employees. Under the 1994 Plan, options to purchase an aggregate of
1,500,000 shares of Common Stock (subject to adjustment in the event of
certain corporate events) may be granted from time to time to employees
of the Company or of any subsidiary.
Summary of the Amendments to the Incentive Plan
The Board has approved an amendment to the 1994 Plan, subject to
stockholder approval, which would increase the number of shares of Common
Stock authorized for issuance upon exercise of the options granted
pursuant to the 1994 Plan from 1,500,000 to 2,500,000. The Board believes
that the proposed increase in the number of shares available for issuance
under the 1994 Plan is necessary to continue the effectiveness of the
Plan in attracting, motivating and retaining employees with appropriate
experience and ability and to increase the grantees' alignment of
interest with the Company's stockholders.
The Board has also approved amendments to the 1994 Plan to enable
the 1994 Plan to comply with the amended Rule 16b-3 ("Rule 16b-3")
promulgated under Section 16 of the Securities Exchange Act of 1934, as
amended. The amendments provide that, unless otherwise determined by the
Board, the 1994 Plan may be administered by a committee of "non-employee
directors" within the meaning of Rule 16b-3, or by the entire Board, and
that the Board may amend the 1994 Plan without stockholder approval
unless such approval is required for the 1994 Plan to comply with Rule
16b-3, or is required by other provisions of applicable law. In
addition, the amendments update the 1994 Plan section providing that the
1994 Plan will be administered in compliance with amended Rule 16b-3.
Summary of Plan
The following summary of certain features of the 1994 Plan is
qualified in its entirety by reference to the 1994 Plan, as amended,
which is attached hereto as Exhibit B.
The 1994 Plan was adopted by the Board on January 3, 1994, and
ratified by action of written consent by the then sole stockholder of the
Company on April 11, 1994. The 1994 Plan was amended by the Board on
August 17, 1994 and the amendment was ratified by an affirmative vote of
the holders of a majority of the outstanding Common Shares of the Company
on August 17, 1994. The 1994 Plan was further amended by the Board on
March 14, 1996 by an Action by Unanimous Written Consent of the Board. As
a result of such amendments, 1,500,000 shares of Common Stock are
authorized for issuance upon exercise of options granted pursuant to the
1994 Plan.
The 1994 Plan is administered by the Compensation and Stock Option
Committee, which consists of two non-employee directors. The Compensation
and Stock Option Committee is generally empowered to interpret the 1994
Plan, prescribe rules and regulations relating thereto, determine the
terms of the option agreements, amend them with the consent of the
optionee, determine the employees to whom options are being granted, and
determine the number of shares subject to each option and the exercise
price thereof. Under the 1994 Plan, the per-share exercise price for
incentive stock options ("ISOs") will not be less than 100% of the fair
market value of a share of Common Stock on the date the option is granted
(110% of fair market value on the date of grant of an ISO if the optionee
owns more than 10% of all classes of stock of the Company) and for
non-qualified stock options ("NQSOs") will not be less than 75% of the
fair market value of the Common Stock on the date of grant. Upon exercise
of an option, the optionee may pay the purchase price in cash, by check
or, as determined by the Compensation and Stock Option Committee, with
previously acquired securities of the Company, provided that, with
respect to incentive stock options applicable holding requirements under
the Internal Revenue Code of 1986 (the "Code") are satisfied.
Options granted pursuant to the 1994 Plan may be designated as
ISOs, with the attendant tax benefits provided under Sections 421 and 422
of the Code. Accordingly, the 1994 Plan provides that the aggregate fair
market value (determined at the time an ISO is granted) of the Common
Stock subject to ISOs exercisable for the first time by an employee
during any calendar year (under all plans of the Company and its
subsidiaries) may not exceed $100,000.
The Board may amend, suspend or terminate the 1994 Plan; provided,
however, that the 1994 Plan may not be amended without stockholder
approval to the extent that such approval is required (i) for the 1994
Plan to meet the requirements of Rule 16b-3, or (ii) by any other
provision of applicable law. The Compensation and Stock Option Committee
may amend the terms of options previously granted; provided, however,
that no such amendment may impair an optionee's rights under an option
previously granted without the consent of the optionee.
Options may not be transferred other than by will or the laws of
descent and distribution, and options may be exercised solely by the
optionee during his or her lifetime. No options may be granted pursuant
to the 1994 Plan on or after January 3, 2004. The market value of Common
Stock as of February 11, 1997, was $2.875 per share.
Certain Federal Income Tax Consequences
The following discussion is a brief summary of the principal United
States federal income tax consequences under current federal income tax
laws relating to awards under the 1994 Plan. This summary is not intended
to be exhaustive and, among other things, does not describe state, local
or foreign income and other tax consequences.
Incentive Stock Options ("ISOs")
No taxable income will be realized by an optionee upon the grant or
timely exercise of an ISO. If shares are issued to an optionee pursuant
to the timely exercise of an ISO and a disqualifying disposition of such
shares is not made by the optionee (i.e. no disposition is made within
two years after the date of grant or within one year after the receipt of
shares by such optionee, whichever is later), then (i) upon sale of the
shares, any amount realized in excess of the exercise price of the ISO
will be taxed to the optionee as a long-term capital gain and any loss
sustained will be a long-term capital loss, and (ii) no deduction will be
allowed to the Company. However, if shares acquired upon the timely
exercise of an ISO are disposed of prior to satisfying the holding period
described above, generally (a) the optionee will realize ordinary income
in the year of disposition in an amount equal to the excess (if any) of
the fair market value of the shares at the time of exercise (or, if less,
the amount realized on the disposition of the shares) over the exercise
price thereof, and (b) subject to the provisions of Section 162(m) of the
Code, the Company will be entitled to deduct an amount equal to such
income. Any additional gain recognized by the optionee upon a disposition
of shares prior to satisfying the holding period described above will be
taxed as a short-term or long-term capital gain, as the case may be, and
will not result in any deduction for the Company.
If an ISO is not exercised on a timely basis, the option will be
treated as an NQSO. Subject to certain exceptions, an ISO generally will
not be exercised on a timely basis if it is exercised more than three
months following termination of employment.
The amount that the fair market value of shares of the Common Stock
on the exercise date of an ISO exceeds the exercise price generally will
constitute an item that increases the optionee's "alternative minimum
taxable income."
In general, the Company will not be required to withhold income or
payroll taxes on the timely exercise of an ISO.
Nonqualified Stock Options ("NQSOs")
In general, an optionee will not be subject to tax at the time an
NQSO is granted. Upon exercise of an NQSO where the exercise price is
paid in cash, the optionee generally must include in ordinary income at
the time of exercise an amount equal to the excess, if any, of the fair
market value of the shares of Common Stock at the time of exercise over
the exercise price. The optionee's tax basis in the shares acquired upon
exercise will equal the exercise price plus the amount taxable as
ordinary income to the optionee. The federal income tax consequences of
an exercise of an NQSO where the exercise price is paid in previously
owned shares of Common Stock are generally similar to those where the
exercise price is paid in cash. However, the optionee will not be subject
to tax on the surrender of such shares, and the tax basis of the shares
acquired on exercise that are equal in number to the shares surrendered
will be the same as the optionee's tax basis in such surrendered shares.
The Company generally will be entitled to a deduction in the amount
of an optionee's ordinary income at the time such income is recognized by
the optionee upon the exercise of a NQSO, subject to the provisions of
Section 162(m) of the Code. Income and payroll taxes are required to be
withheld for optionees on the amount of ordinary income resulting from
the exercise of an NQSO.
New Plan Benefits
Grants under the 1994 Plan are generally made at the discretion of
the Compensation and Stock Option Committee and are therefore not
determinable with respect to dollar value or amount. The following table
sets forth the total number of Options granted under the 1994 Plan during
the 1996 and 1997 fiscal years and the dollar value of such Options as of
February 3, 1997 based on the closing trading price of the Common Stock
on such date.
NEW PLAN BENEFITS
1994 Plan
Number of
Options Granted
in Fiscal 1996
Name and Position Dollar Value ($) and 1997
---------------- ---------------
Andrew Gyenes $37,500 300,000
John Ramo 0 0
Ken Gruber $ 6,250 50,000
Executive Group $50,000 400,000
Non-Executive Director Group 0 0
Non-Executive Officer Group $21,813 222,500
THE BOARD RECOMMENDS A VOTE IN FAVOR OF THE APPROVAL
OF THE AMENDMENTS TO THE 1994 PLAN
SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of stockholders intending to be presented at the
Company's 1998 Annual Meeting of Stockholders must be received by the
Company, 110 West 40th Street, Suite 2100, New York, New York, 10018, by
November 3, 1997 in order to be considered for inclusion in the 1998
Proxy Statement.
RELATIONSHIP WITH INDEPENDENT AUDITORS
The Audit Committee of the Board of the Company approved the
engagement of the independent auditing firm of KPMG Peat Marwick LLP to
serve as the Company's independent auditors for the year ended May 31,
1997.
Representatives of KPMG Peat Marwick LLP are expected to be
available at the Annual Meeting and will have the opportunity to make a
statement if they so desire. Such representatives are expected to be
available to respond to appropriate questions from stockholders.
AVAILABILITY OF FORM 10-KSB
The Company has mailed a copy of its Annual Report to each
stockholder entitled to vote at this meeting. A copy of the Company's
Form 10-KSB for the fiscal year ended May 31, 1996 and Forms 10-QSB for
the quarterly periods ended August 31,1996 and November 30, 1996 are
available, upon written request, at no charge to all stockholders. For a
copy, write to Enteractive, Inc., 110 W. 40th Street, Suite 2100, New
York, New York, 10018 Attention: Investor Relations Department.
By Order of the Board of Directors
Kenneth Gruber
Secretary
New York, New York
March 3, 1997
Exhibit A
PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION
The Certificate of Incorporation is hereby amended by deleting the
first paragraph of Article FOURTH thereof in its entirety and
substituting the following paragraph in lieu thereof:
"The total number of shares of capital stock which the Company
shall have authority to issue is fifty-two million (52,000,000)
shares, of which fifty million (50,000,000) shares are to be shares
of Common Stock, par value $.01 per share, and two million
(2,000,000) shares are to be shares of Preferred Stock, par value
$.01 per share."
Exhibit B
1994 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN OF
ENTERACTIVE, INC.
1. Purpose of the Plan
This 1994 Incentive and Nonqualified Stock Option Plan (the "Plan")
is intended as an incentive, to retain in the employ of Enteractive, Inc.
(the "Company") and any Subsidiary of the Company (within the meaning of
Section 424(f) of the Internal Revenue Code of 1986, as amended (the
"Code")), persons of training, experience and ability, to attract new
employees whose services are consider valuable, to encourage the sense of
proprietorship and to stimulate the active interest of such persons in
the development and financial success of the Company and its
Subsidiaries.
It is further intended that certain options granted pursuant to the
Plan shall constitute incentive stock options within the meaning of
Section 422 of the Code ("Incentive Options") while certain other options
granted pursuant to the Plan shall be nonqualified stock options
("Nonqualified Options"). Incentive Options and the Nonqualified Options
are hereinafter referred to collectively as "Options".
2. Administration of the Plan
The Board of Directors of the Company (the "Board") shall appoint
and maintain as administrator of the Plan a Committee (the "Committee")
consisting of two or more directors of the Company, or the entire Board.
Unless otherwise determined by the Board, no person shall be eligible to
service on the Committee unless he is then a "non-employee director"
within the meaning of Rule 16b-3 of the Securities and Exchange
Commission ("Rule 16b-3") promulgated under the Securities Exchange Act
of 1934, as amended (the "Act"), if and as Rule 16b-3 is then in effect.
The members of the Committee shall serve at the pleasure of the Board.
The Committee, subject to Section 3 hereof, shall have full power
and authority to designate recipients of Options, to determine the terms
and conditions of respective Option agreements (which need not be
identical) and to interpret the provisions and supervise the
administration of the Plan. Subject to Section 7 hereof, the Committee
shall have the authority, without limitation, to designate which Options
granted under the Plan shall be Incentive Options and which shall be
Nonqualified Options. To the extent any Option does not qualify as an
Incentive Option, it shall constitute a separate Nonqualified Option.
Notwithstanding any provision in the Plan to the contrary, no Options may
be granted under the Plan to any member of the Committee during the term
of his membership on the Committee.
Subject to the provisions of the Plan, the Committee shall
interpret the Plan and all Options granted under the Plan, shall make
such rules as it deems necessary for the proper administration of the
Plan, shall make all other determinations necessary or advisable for the
administration of the Plan and shall correct any defects or supply any
omission or reconcile any inconsistency in the Plan or in any Options
granted under the Plan in the manner and to the extent that the Committee
deems desirable to carry the Plan or any Options into effect. The act or
determination of a majority of the Committee shall be deemed to be the
act or determination of the Committee and any decision reduced to writing
and signed by all of the members of the Committee shall be fully
effective as if it had been made by a majority at a meeting duly held.
Subject to the provisions of the Plan, any action taken or determination
made by the Committee pursuant to this and the other paragraphs of the
Plan shall be conclusive on all parties.
3. Designation of Optionees
The persons eligible for participation in the Plan as recipients of
Options ("Optionees") shall include only full-time key employees
(including full-time key employees who also serve as directors) of the
Company or any Subsidiary. In selecting Optionees, and in determining the
number of shares to be covered by each Option granted to Optionees, the
Committee may consider the office or position held by the Optionee, the
Optionee's degree of responsibility for and contribution to the growth
and success of the Company or any Subsidiary, the Optionee's length of
service, age, promotions, potential and any other factors which the
Committee may consider relevant. An employee who has been granted an
Option hereunder may be granted an additional Option or Options, if the
Committee shall so determine.
4. Stock Reserved for the Plan
Subject to adjustment as provided in Section 7 hereof, a total of
two million five hundred thousand (2,500,000) shares of common stock,
$.01 par value ("Stock"), of the Company shall be subject to the Plan.
The shares of Stock subject to the Plan shall consist of unissued shares
or previously issued shares reacquired and held by the Company or any
Subsidiary of the Company, and such amount of shares of Stock shall be
and is hereby reserved for such purpose. Any of such shares of Stock
which may remain unsold and which are not subject to outstanding Options
at the termination of the Plan shall cease to be reserved for the purpose
of the Plan, but until termination of the Plan the Company shall at all
times reserve a sufficient number of shares of Stock to meet the
requirements of the Plan. Should any Option expire or be cancelled prior
to its exercise in full or should the number of shares of Stock to be
delivered upon the exercise in full of an Option be reduced for any
reason, the shares of Stock theretofore subject to such Option may again
be subject to an Option under the Plan.
5. Terms and Conditions of Options
Options granted under the Plan shall be subject to the following
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem
desirable:
(a) Option Price. The purchase price of each share of Stock
purchasable under an Option shall be determined by the Committee at the
time of grant but shall not be less than 100% of the fair market value of
such share of Stock on the date the Option is granted in the case of an
Incentive Option and not less than 75% of the fair market value of such
share of Stock on the date the Option is granted in the case of a
non-Incentive Option; provided, however, that with respect to an
Incentive Option, in the case of an Optionee who at the time such Option
is granted, owns (within the meaning 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 of any Subsidiary, then the purchase price per share of
Stock shall be at least 110% of the Fair Market Value (as defined below)
per share of Stock at the time of grant. The exercise price for each
Incentive Option shall be subject to adjustment as provided in Section 7
below. The fair market value ("Fair Market Value") means the closing
price of publicly traded shares of Stock on the national securities
exchange on which shares of Stock are listed (if the shares of Stock are
so listed) or on the NASDAQ National Market System or NASDAQ
over-the-counter system (if the shares of Stock are regularly quoted on
the NASDAQ National Market System or NASDAQ over-the-counter system), or,
if not so listed or regularly quoted, the mean between the closing bid
and asked prices of publicly traded shares of Stock in the
Over-The-Counter Electronic Bulletin Board, or, if such bid and asked
prices shall not be available, as reported by any nationally recognized
quotation service selected by the Company, or as determined by the
Committee in a manner consistent with the provisions of the Code.
(b) Option Term. The term of each Option shall be fixed by the
Committee, but no Option shall be exercisable more than ten years after
the date such Option is granted; provided, however, that in the case of
an Optionee who, at the time an Incentive Option is granted, owns more
than 10% of the total combined voting power of all classes of stock of
the Company or any Subsidiary, then such Incentive Option shall not be
exercisable with respect to any of the shares subject to such Incentive
Option later than the date which is five years after the date of grant.
(c) Exercisability. Subject to paragraph (j) of this Section 5,
Options shall be exercisable at such time or times and subject to such
terms and conditions as shall be determined by the Committee at grant,
provided, however, that except as provided in paragraphs (f) and (g) of
this Section 5, unless a shorter or longer vesting period is otherwise
determined by the Committee at grant, Options shall be exercisable as
follows: up to thirty-three (33%) percent of the aggregate initial shares
of Stock purchasable under an Option shall be exercisable commencing one
year after the date of grant, an additional thirty-four (34%) percent of
the aggregate initial shares of Stock purchasable under an Option shall
be exercisable commencing two years after the date of grant and up to an
additional thirty-three (33%) percent of the aggregate initial shares of
Stock purchasable under an Option shall be exercisable commencing three
years from the date of grant. The Committee may waive such installment
exercise provision at any time in whole or in part based on performance
and/or such other factors as the Committee may determine in its sole
discretion, provided, however, no Option shall be exercisable until more
than six months have elapsed from the date of grant of such Option.
(d) Method of Exercise. Options may be exercised in whole or in
part at any time during the option period, by giving written notice to
the Company specifying the number of shares to be purchased, accompanied
by payment in full of the purchase price, in cash, by check or such other
instrument as may be acceptable to the Committee. As determined by the
Committee, in its sole discretion, at or after grant, payment in full or
in part may also be made in the form of Stock owned by the Optionee
(based on the Fair Market Value of the Stock on the trading day before
the Option is exercised); provided, however, that if such Stock was
issued pursuant to the exercise of an Incentive Option under the Plan,
the holding requirements for such Stock under the Code shall have first
been satisfied. An Optionee shall have the rights to dividends or other
rights of a stockholder with respect to shares subject to the Option
after (i) the Optionee has given written notice of exercise and has paid
in full for such shares and (ii) becomes a stockholder of record.
(e) Non-transferability of Options. Options are not transferable
and may be exercised solely by the Optionee during his lifetime or after
his death by the person or persons entitled thereto under his will or the
laws of descent and distribution. Any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of, or to subject to execution,
attachment or similar process, any Option contrary to the provisions
hereof shall be void and ineffective and shall give no right to the
purported transferee.
(f) Termination by Death. Unless otherwise determined by the
Committee at grant, if any Optionee's employment with the Company or any
Subsidiary terminates by reason of death, the Option may thereafter be
immediately exercised, to the extent then exercisable (or on such
accelerated basis as the Committee shall determine at or after grant), by
the legal representative of the estate or by the legatee of the Optionee
under the will of the Optionee, for a period of one year from the date of
such death or until the expiration of the stated term of such Option as
provided under the Plan, whichever period is shorter.
(g) Termination by Reason of Disability. Unless otherwise
determined by the Committee at grant, if any Optionee's employment with
the Company or any Subsidiary terminates by reason of total and permanent
disability as determined under the Company's long term disability
policy ("Disability"), any Option held by such Optionee may thereafter be
exercised, to the extent it was exercisable at the time of termination
due to Disability (or on such accelerated basis as the Committee shall
determine at or after grant), but may not be exercised after one year
from the date of such termination of employment or the expiration of the
stated term of such Option, whichever period is shorter; provided,
however, that, if the Optionee dies within such one-year period, any
unexercised Option held by such Optionee shall thereafter be exercisable
to the extent to which it was exercisable at the time of death for a
period of one year from the date of such death or for the stated term of
such option, whichever period is shorter.
(h) Termination by Reason of Retirement. Unless otherwise
determined by the Committee at grant, if any Optionee's employment with
the Company or any Subsidiary terminates by reason of Normal or Early
Retirement (as such terms are defined below), any Option held by such
Optionee may thereafter be exercised to the extent it was exercisable at
the time of such Retirement (as defined below) (or on such accelerated
basis as the Committee shall determine at or after grant), but may not be
exercised after three months from the date of such termination of
employment or the expiration of the stated term of such Option, whichever
period is shorter; provided, however, that, if Optionee dies within such
three-month period, any unexercised Option held by such Optionee shall
thereafter be exercisable, to the extent to which it was exercisable at
the time of death, for a period of one year from the date of such death
or for the stated term of such Option, whichever period is shorter.
For purposes of this paragraph (h), Normal Retirement shall mean
retirement from active employment with the Company or any Subsidiary on
or after the normal retirement date specified in the applicable Company
or Subsidiary pension plan. Early Retirement shall mean retirement from
active employment with the Company or any Subsidiary pursuant to the
early retirement provisions of the applicable Company or Subsidiary
pension plan. Retirement shall mean Normal or Early Retirement.
(i) Other Termination. Unless otherwise determined by the Committee
at grant, if any Optionee's employment with the Company or any Subsidiary
terminates for any reason other than death, Disability or Retirement, the
Option shall thereupon terminate, except that the exercisable portion of
any Option which was exercisable on the date of such termination of
employment may be exercised for the lesser of three months from the date
of termination or the balance of such Option's term if the Optionee's
employment with the Company or any Subsidiary is involuntarily terminated
by the Optionee's employer without Cause. Cause shall mean a felony
conviction or the failure of any Optionee to contest prosecution for a
felony or an Optionee's willful misconduct or dishonesty, any of which is
harmful to the business or reputation of the Company or any Subsidiary.
The transfer of an Optionee from the employ of the Company to a
Subsidiary, or vice versa, or from one Subsidiary to another, shall not
be deemed to constitute a termination of employment for purposes of the
Plan.
(j) Limit on Value of Incentive Option. The aggregate Fair Market
Value, determined as of the date the Option is granted, of the Stock for
which Incentive Options are exercisable for the first time by any
Optionee during any calendar year under the Plan (and/or any other stock
option plans of the Company or any Subsidiary) shall not exceed $100,000.
(k) Transfer of Incentive Option Shares. The stock option agreement
evidencing any Incentive Options granted under this Plan shall provide
that if the Optionee makes a disposition, within the meaning of Section
424(c) of the Code and regulations promulgated thereunder, of any share
or shares of Stock issued to him pursuant to his exercise of an Incentive
Option granted under the Plan within the two-year period commencing on
the day after the date of the grant of such Incentive Option or within a
one-year period commencing on the day after the date of transfer of the
share or shares to him pursuant to the exercise of such Incentive Option,
he shall, within ten days of such disposition, notify the Company thereof
and immediately deliver to the Company any amount of federal income tax
withholding required by law.
6. Terms of Plan
No Option shall be granted pursuant to the Plan on or after the
tenth anniversary of the date the Plan is approved by the Board, but
Options granted may extend beyond that date.
7. Capital Change of the Company
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Stock, the Committee shall make an appropriate and
equitable adjustment in the number and kind of shares reserved for
issuance under the Plan and in the number and option price of shares
subject to outstanding Options granted under the Plan, to the end that
after such event each Optionee's proportionate interest shall be
maintained as immediately before the occurrence of such event.
8. Purchase for Investment
Unless the Options and shares covered by the Plan have been
registered under the Securities Act of 1933, as amended, or the Company
has determined that such registration is unnecessary, each person
exercising an Option under the Plan may be required by the Company to
give a representation in writing that he is acquiring the shares for his
own account for investment and not with a view to, or for sale in
connection with, the distribution of any part thereof.
9. Taxes
The Company may make such provisions as it may deem appropriate,
consistent with applicable law, in connection with any Options granted
under the Plan with respect to the withholding of any taxes or any other
tax matters.
10. Effective Date of Plan
The Plan shall be effective on the date it is approved by the
Board; provided, however, that the Plan shall subsequently be approved by
majority vote of the Company's stockholders in the manner contemplated by
Rule 16b-3 within one (l) year from the date approved by the Board.
11. Amendment and Termination
The Board may amend, suspend or terminate the Plan; provided,
however, that the Plan may not be amended without stockholder approval
to the extent that such approval is required (a) for the Plan to meet the
requirements of Rule 16b-3 under the Act, or (b) by any other provision
of applicable law.
The Committee may amend the terms of any Option therefore granted,
prospectively or retroactively, but no such amendment shall impair the
rights of any Optionee without his consent. The Committee may also
substitute new Options for previously granted Options, including options
granted under other plan applicable to the participant and previously
granted Options having higher option prices, upon such terms as the
Committee may deem appropriate.
12. Government Regulations
The Plan, and the granting and exercise of Options hereunder, and
the obligation of the Company to sell and deliver shares under such
Options, shall be subject to all applicable laws, rules and regulations,
and, to such approvals by any governmental agencies or national
securities exchanges as may be required.
13. Rule 16b-3 Compliance
The Company intends that the Plan meet the requirements of Rule
16b-3 and that grants and transactions pursuant to the Plan will be
exempt from the operations of Section 16(b) of the Act. In all cases, the
terms, provisions, conditions and limitations of the Plan shall be
construed and interpreted consistent with the Company's intent as stated
in this Section 13.
14. General Provisions
(a) Certificates. All certificates for shares of Stock delivered
under the Plan shall be subject to such stock transfer orders and other
restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the stock is then listed and
any applicable Federal or state securities law, and the Committee may
cause a legend or legends to be placed on any such certificates to make
appropriate reference to such restrictions.
(b) Employment Matters. The adoption of the Plan shall not confer
upon any Optionee of the Company or any Subsidiary, any right to
continued employment (or, in case the Optionee is also a director,
continued retention as a director) with the Company or a Subsidiary, as
the case may be, nor shall it interfere in any way with the right of the
Company or Subsidiary to terminate the employment of its employees at any
time.
(c) Limitation of Liability. No member of the Board or the
Committee, or any officer or employee of the Company acting on behalf of
the Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect
to the Plan, and all members of the Board or the Committee and each and
any officer or employee of the Company acting on their behalf shall, to
the extent permitted by law, be fully indemnified and protected by the
Company in respect of any such action, determination or interpretation.
(d) Registration of Options. Notwithstanding any other provision in
the Plan, no Option may be exercised unless and until the Stock to be
issued upon the exercise thereof has been registered under the Securities
Act of 1933 and applicable state securities laws, or are, in the opinion
of counsel to the Company, exempt from such registration. The Company
shall not be under any obligation to register, under applicable federal
or state securities laws, any Stock to be issued upon the exercise of an
Option granted hereunder, or to comply with an appropriate exemption from
registration under such laws in order to permit the exercise of an Option
and the issuance and sale of the Stock subject to such Option however,
the Company may in its sole discretion register such Stock at such time
as the Company shall determine. If the Company chooses to comply with
such an exemption from registration, the Stock issued under the Plan may,
at the direction of the Committee, bear an appropriate restrictive legend
restricting the transfer or pledge of the Stock represented thereby, and
the Committee may also give appropriate stop-transfer instructions to the
transfer agent to the Company.
