<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. ___________)
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted
by Rule 14a-6(e)(2)).
[ ] Definitive proxy statement.
[X] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.
NEWSTAR MEDIA INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other The Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
NEWSTAR MEDIA INC.
8955 BEVERLY BOULEVARD
LOS ANGELES, CALIFORNIA 90048
-------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 8, 1999
-----------------
To the Shareholders of NewStar Media Inc.:
Notice is hereby given that the 1999 Annual Meeting of Shareholders
(the "Annual Meeting") of NewStar Media Inc., a California corporation (the
"Company"), will be held at NewStar Media Inc., 8955 Beverly Boulevard, Los
Angeles, California 90048, on Wednesday, December 8, 1999, at 10:00 a.m., local
time, for the following purposes:
1. To elect directors;
2. To approve and ratify the appointment of KPMG LLP as the Company's
independent accountants for the fiscal year ending December 31,
1999;
3. To consider and vote upon a proposal to approve the adoption of
the NewStar Media Inc. 1999 Stock Incentive Plan; and
4. To consider and act upon such other business as may properly come
before the meeting or any adjournment(s) thereof.
Information concerning these matters, including the names of the
nominees for election to the Board of Directors (the "Board"), is set forth in
the attached Proxy Statement, which is part of this Notice.
The Board has fixed November 1, 1999 as the record date for
determination of shareholders entitled to notice of and to vote at the Annual
Meeting. Accordingly, only those shareholders of record at the close of business
on that date are entitled to vote at the Annual Meeting or any adjournment(s)
thereof.
The Board urges that all shareholders of record exercise their right to
vote at the meeting personally or by proxy.
Your proxy will continue in full force and effect unless and until you
revoke such proxy prior to the vote to which such proxy pertains. You may revoke
your proxy by a writing delivered to the Company stating that the proxy is
revoked, by a subsequently dated proxy executed by you, or by attending the
Annual Meeting and voting in person. The dates set forth on the proxy cards
preemptively determine the order of execution, regardless of the postmark dates
on the envelopes in which they are mailed.
By Order of the Board of Directors
Terrence A. Elkes
Chairman and Chief Executive Officer
November 19, 1999
Los Angeles, California
TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN (DO NOT PRINT) YOUR NAME AND DATE THE ENCLOSED PROXY CARD(S) AS PROMPTLY AS
POSSIBLE AND RETURN IT (THEM) IN THE ENCLOSED PRE-ADDRESSED ENVELOPE. IF YOU
RECEIVE MORE THAN ONE PROXY CARD BECAUSE YOU OWN SHARES REGISTERED IN DIFFERENT
NAMES OR AT DIFFERENT ADDRESSES, EACH PROXY CARD SHOULD BE COMPLETED AND
RETURNED.
<PAGE>
NEWSTAR MEDIA INC.
8955 BEVERLY BOULEVARD
LOS ANGELES, CALIFORNIA 90048
-----------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 8, 1999
This Proxy Statement is furnished to the shareholders in connection
with the solicitation by the Board of Directors (the "Board") of NewStar Media
Inc., a California corporation (the "Company"), of proxies for use at the 1999
Annual Meeting of Shareholders of the Company (the "Annual Meeting") to be held
at NewStar Media Inc., 8955 Beverly Boulevard, Los Angeles, California 90048, on
Wednesday, December 8, 1999, at 10:00 a.m., local time, and any postponement(s)
and adjournment(s) thereof.
The Company's principal executive offices are located at 8955 Beverly
Boulevard, Los Angeles, California 90048 and its telephone number is (310) 786 -
1600.
This Proxy Statement, the accompanying Notice of Annual Meeting, the
accompanying proxy card(s) and the Company's 1998 Annual Report to Shareholders
(the "Annual Report") are being first mailed to shareholders of the Company on
or about November 19, 1999. The cost of preparing, assembling and mailing the
foregoing will be paid by the Company. The Company will pay brokers or other
persons holding stock in their names or the names of their nominees for the
expense of forwarding soliciting material to their principals. The Company may
use the services of its Directors, officers and other regular employees to
solicit proxies personally or by telephone. Such Directors, officers and
employees will not receive additional compensation for such solicitation but may
be reimbursed for reasonable out-of-pocket expenses incurred in connection with
such solicitation. The Annual Report is not to be regarded as proxy soliciting
material or as a communication by means of which any solicitation of proxies is
to be made.
VOTING
The accompanying proxy will be voted in accordance with the
instructions contained thereon. In the absence of such instructions, the persons
designated as proxies in the accompanying proxy card(s) will vote: for the
election of the Director nominees listed herein (the "Nominees"), for the
ratification of the selection of KPMG LLP as the Company's independent
accountants for the fiscal year ending December 31, 1999, for the approval of
the adoption of the NewStar Media Inc. 1999 Stock Incentive Plan, and, in their
discretion, as to any other business that may properly come before the Annual
Meeting or any postponement(s) and adjournment(s) thereof. The Board does not
know of any other business to be brought before the Annual Meeting.
Each duly executed proxy will continue in full force and effect unless
and until revoked by the person executing it prior to the vote pursuant thereto.
Such revocation may be effected by a writing delivered to the Company to the
attention of the Corporate Secretary at the address indicated above stating that
the proxy is revoked by a subsequently dated proxy, duly executed by or on
behalf of the person executing the prior proxy and presented at the Annual
Meeting, or by attending the Annual Meeting and voting in person.
1
<PAGE>
GENERAL INFORMATION
The Board has fixed November 1, 1999 as the record date (the "Record
Date") for the determination of shareholders entitled to notice of and to vote
at the Annual Meeting or any postponement(s) or adjournment(s) thereof. At the
close of business on the Record Date, 21,612,058 shares of the Company's common
stock, par value $.01 per share (the "Common Stock"), held by 106 holders of
record, were outstanding and entitled to vote at the Annual Meeting. As of that
date, there were 4,000 shares of the Company's Series B Preferred Stock (the
"Series B Preferred Stock"), 1,920 shares of the Company's Series C Preferred
Stock (the "Series C Preferred Stock"), and 214,113 shares of the Company's
Series D Preferred Stock (the "Series D Preferred Stock" and, together with the
Series B Preferred Stock and the Series C Preferred Stock, the "Preferred
Stock") outstanding and entitled to vote at the Annual Meeting. Each share of
Preferred Stock entitles the holder thereof to such number of votes per share
equal to the number of shares of Common Stock into which each share of Preferred
Stock is then convertible (the "Equivalent Common Stock") on the Record Date. On
such date, the Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock were convertible into 2,000,000, 960,000, and 258,000 shares of
Common Stock, respectively. The Preferred Stock will vote together with the
Common Stock on all actions taken by the shareholders of the Company except the
election of Directors, with respect to which the holders of the Series B
Preferred Stock, voting as a separate class, are entitled to elect one-third of
the Directors of the Company (i.e., two Directors at the Annual Meeting). There
are no other classes of stock of the Company entitled to vote at the Annual
Meeting.
Shareholders who own shares registered in different names or at
different addresses will receive more than one proxy card. A shareholder must
sign and return each of the proxy cards received to ensure that all of the
shares owned by such shareholder are represented at the Annual Meeting.
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of Common Stock and Equivalent Common Stock entitled to
vote at the Annual Meeting will constitute a quorum. With respect to the
election of Directors, the five nominees receiving the highest number of
affirmative votes of the Common Stock and of the Equivalent Common Stock related
to the Series C Preferred Stock and the Series D Preferred Stock will be
elected, and two nominees will be elected solely by the holders of the Series B
Preferred Stock. With respect to the appointment of KPMG LLP as the Company's
independent accountants and the adoption of the NewStar Media Inc. 1999 Stock
Incentive Plan, the affirmative vote of the majority of the Common Stock and
Equivalent Common Stock represented at the Annual Meeting shall be required for
approval. Abstentions and broker non-votes (which occur if a broker or other
nominee does not have discretionary authority to vote the relevant shares as to
particular matters and has not received voting instructions from the beneficial
owner with respect to a particular item) are counted for the purpose of
determining the presence or absence of a quorum for the transaction of business.
Abstentions are counted in tabulations of the votes cast on proposals presented
to the shareholders and have the same legal effect as a vote against a
particular proposal (other than the election of Directors). Broker non-votes are
not taken into account for purposes of determining whether a proposal has been
approved by the requisite shareholder vote.
Each share of Common Stock and Equivalent Common Stock entitles the
holder thereof to one vote on each matter to be voted on at the Annual Meeting.
However, in the election of Directors, a shareholder (excluding holders of
Series B Preferred Stock) may cumulate his vote for one or more nominees, but
only if the names of nominees were placed in nomination prior to the voting and
any shareholder has given notice at the Annual Meeting prior to the voting of
his intention to so cumulate his votes. If any shareholder has given such
notice, all shareholders may cumulate their votes in such election of Directors.
If the voting for Directors is conducted by cumulative voting, each share of
Common Stock and Equivalent Common Stock will be entitled to a number of votes
equal to the number of Directors to be elected, which votes may be cast for a
single nominee or distributed between or among two or more nominees in such
proportions as the shareholder or proxy deems fit.
Stockholders do not have dissenters' rights of appraisal under
California law with respect to any proposal to be submitted by the Board of
Directors at the Annual Meeting.
2
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
Directors of the Company are elected annually by the shareholders to
serve for a term of one year or until their successors are duly elected and
qualified. As of the date hereof, the Board consists of seven members. The five
management nominees and two Series B Preferred Stock nominees for election of
Directors are set forth below. Unless otherwise marked, proxies will be voted
FOR the election of these nominees. Should any nominee become unavailable to
serve as a Director before the election (which event is not anticipated), the
proxies may be voted for a substitute nominee selected by the Board or the
authorized number of Directors may be reduced. If for any reason the authorized
number of Directors is reduced, the proxies will be voted, in the absence of
instructions to the contrary, for the election of those nominees selected by the
persons designated as proxies in the accompanying proxy card(s). To the best of
the Company's knowledge, all nominees are and will be available to serve. No
family relationships exist between or among any of the Director nominees or the
Directors of the Company.
INFORMATION WITH RESPECT TO DIRECTORS AND NOMINEES
The following table sets forth the nominees, their ages and present
principal occupations or employment.
<TABLE>
<CAPTION>
MANAGEMENT
DIRECTOR NOMINEES
NAME AGE PRINCIPAL OCCUPATION
---- --- --------------------
<S> <C> <C>
Terrence A. Elkes 65 Chairman of the Board and Chief Executive Officer of
NewStar Media Inc.; Managing Director and co-owner of
Apollo Partners, LLC
Ronald Lightstone 61 Principal, Sagpond Ventures and Director; former President
and Chief Executive Officer and Vice-Chairman of the
Company
Bruce Maggin 56 Principal, H.A.M. Media Group, LLC, Chief Executive
Officer of TDN, Inc. and Director
Lee Masters * 47 President and Chief Executive Officer of Liberty Digital
and Director
John R. Sprieser 51 Senior Vice President and Chief Financial Officer of IDC
Services, Inc.
SERIES B PREFERRED STOCK
DIRECTOR NOMINEES
NAME
----
Kenneth F. Gorman* 60 Vice-Chairman of NewStar Media Inc.; Managing Director
and co-owner of Apollo Partners, LLC
John T. Healy 60 Principal in the H.A.M. Media Group, LLC and Director
</TABLE>
- ---------------
* Denotes membership on the Audit Committee
Messrs. Lightstone, Healy and Gorman became Directors of the Company on
March 31, 1997 in connection with an equity investment in the Company by Media
Equities International, LLC ("MEI"). Messrs. Elkes and Maggin were appointed
Directors of the Company to fill the vacancies created in June 1997 upon the
resignation of two former Directors of the Company. Mr. Masters was appointed a
Director of the Company on September 30, 1997 to fill a then existing vacancy.
3
<PAGE>
Pursuant to the placement agent agreement entered into by the Company
in December 1995 in connection with a private placement, the Company agreed that
the placement agent, Whale Securities Co., L.P. ("Whale Securities"), and its
successors would have the right to designate a nominee for election, at its or
their option, either as a member or as a non-voting advisor to the Board, and
the Company agreed to use its reasonable best efforts to cause such nominee to
be elected and continue in office until December 14, 1997. Steven Mayer had been
so designated by Whale Securities, and became a member of the Board in November,
1996. Mr. Mayer resigned as a Director on November 11, 1999.
The Company has agreed to reimburse each Board member's travel
expenses. For service on the Board for 1997-1998 and for 1998-1999, the Company
granted to each Director options to purchase 10,000 shares of Common Stock,
which options vest 25% at the end of each quarter, and made cash payments of
$1,000 per quarter to each Director not associated with MEI.
During the 1998 fiscal year, there were 8 meetings of the Board and 5
actions of the Board were taken pursuant to unanimous written consents. These
were also two meetings of a special committee of the Board in the 1998 fiscal
year. Of the ten meetings of the Board and the special committee of the Board,
Mr. Maggin was unable to attend one, Mr. Masters was unable to attend four and
Mr. Mayer was unable to attend three. The Company maintains a standing audit
committee. There was one meeting of the Audit Committee during the 1998 fiscal
year apart from meetings of the entire Board of Directors. The Audit Committee
during 1998 was comprised of Messrs. Masters, Mayer and Gorman. The Company does
not have a standing nominating or compensation committee.
TERRENCE A. ELKES was appointed to the Board in June 1997. He was
elected Chairman on July 30, 1998 and became the Company's Chief Executive
Officer on May 14, 1999. Mr. Elkes is presently a principal of Apollo Partners,
LLC, formed in 1987, which is involved in the acquisition of companies in the
media, communications, entertainment and broadcasting fields. Mr. Elkes served
as President of Viacom from 1978 to 1982 and as Chief Executive Officer from
September 1983 to 1987. He also served on Viacom's Board of Directors from 1973
to 1987. Mr. Elkes joined Viacom in 1972 as Vice President, General Counsel and
Secretary. He became Executive Vice President in 1976 with responsibility for
the financial, legal and human resources areas of that company. Shortly
thereafter, he assumed responsibility for Viacom's pay television and cable
television operations as well. Prior to joining Viacom, Mr. Elkes served as Vice
President and General Counsel for Parsons and Whittemore, a privately-owned
paper corporation. In this capacity, he also managed the company's financial
operations and international development. Previously, Mr. Elkes was an attorney
at Norwich Pharmacal Company and later became General Counsel for Norwich's
International Division. Mr. Elkes received his bachelor's degree cum laude in
economics and political science from the City College of New York in 1955, and
in 1958 he earned a doctor of law degree from the University of Michigan. He is
a member of the New York City Bar Association and a former member of the
International Radio and Television Society's Board of Governors. Currently, Mr.
Elkes is Chairman of the Board of Video Services Corporation and a Director of
IDC Services, Inc. and Doane Agricultural Services Company. Mr. Elkes is a
member of the President's Advisory Committee of the University of Michigan, a
member of the University of Michigan's Investment Advisory Board and is a
Trustee of the Michigan Law School Foundation.
KENNETH F. GORMAN has been a director of the Company since March 1997.
He was elected Vice-Chairman on July 30, 1998 and Vice-Chairman of the Office of
the Chief Executive on May 14, 1999. Since October 1987, he has been a principal
of Apollo Partners, LLC, which is involved in the acquisition of companies in
the media, communications, entertainment and broadcasting fields. Mr. Gorman
joined Viacom in 1971 and served in various capacities, including Executive Vice
President and a member of the Board of Viacom from October 1983 until September
1987 and Chairman of the Viacom Networks Group from January 1986 until September
1987. Before joining Viacom, he was with the CBS Broadcast Group, serving in
various positions, including Controller of CBS Radio. Mr. Gorman started his
career in 1961 at the National Broadcasting Company (NBC Radio Division). Mr.
Gorman received a bachelor's degree in accounting from St. John's University in
New York in 1962 and an honorary doctorate degree in 1994. He was the recipient
of the President's Award of the National Cable Association in 1978. He formerly
served as the Treasurer and Director of the International Council of the
National Academy of Television Arts and Sciences. Mr. Gorman currently serves as
Chairman of IDC Services, Inc. and is a director of the Musicland Group, Inc.
and Doane Agricultural Services Company, and a member of the Advisory Board of
St. John's University.
4
<PAGE>
BRUCE MAGGIN was appointed to the Board in June 1997. Mr. Maggin is the
founder and a principal of H.A.M. Media Group, LLC and is Chief Executive
Officer of TDN, Inc. Prior to forming H.A.M. Media Group, LLC, Mr. Maggin was
Executive Vice President of the Capital Cities/ABC Multimedia Group. Mr. Maggin
was also responsible for ABC's home video business as well as its new media
sales activities and technology investments. As Executive Vice President, he was
responsible for several international consultancies including NHK in Japan and
the BBC in the UK. Mr. Maggin joined ABC originally in 1970 and had been
Director of Corporate Planning before his appointment as Vice President of Ziff
Corporation, the parent company of Ziff-Davis Publishing and Broadcasting. At
Ziff Corporation, Mr. Maggin was responsible for managing the company's
diversification efforts. He returned to ABC in 1982 in a newly created position,
Vice President of Cost Management and in 1983 became Vice President of ABC Video
Enterprises. Mr. Maggin has been a member of the board of several companies
including the cable networks, Lifetime and ESPN, and software ventures, Creative
Wonders and O.T. Sports. He is also a director of Phillips-Van Heusen
Corporation. A member of the New York State Bar, he received his BA degree from
Lafayette College.
JOHN T. HEALY has been a director of the Company since March 1997.
Since February 1997, he has been a principal of the H.A.M. Media Group, LLC,
which engages in investments and provides advisory services in all media. Mr.
Healy has served as an advisor to Disney/ABC International Television since July
1996. He originally joined the American Broadcasting Co. ("ABC") in August of
1970 and held various executive positions including Vice President Corporate
Planning (1976), Vice President, ABC Video Enterprises (1983), President, ABC
Distribution Company (1986). Most recently, he was President of ABC
International Operations and Executive Vice President of ABC Cable &
International Broadcast Group from July 1993 to July 1996. Mr. Healy was a
member of the Board of Directors of Arts & Entertainment (which became A&E
Networks), Lifetime and ESPN cable services from their inception until his
resignation from the ABC Company in July 1996.
LEE MASTERS was appointed to the Board on September 30, 1997. Mr.
Masters is currently the President and Chief Executive Officer and a director of
Liberty Digital, LLC. From January 1990 to December 1998, Mr. Masters was the
President and Chief Executive Officer of E! Entertainment Television. Prior to
E! Entertainment Television, Mr. Masters was Executive Vice President and
General Manager of MTV Networks where he oversaw the network's worldwide
expansion. Prior to his career in television, Mr. Masters enjoyed a 20 year
career in radio. He began as a disc jockey and moved through the ranks as a
programmer, station manager and then the owner of a group of radio stations.
Originally from Doylestown, Pennsylvania, he attended Philadelphia's Temple
University, where he studied mathematics and philosophy. Mr. Masters is
currently a director of TCI Music.
RONALD LIGHTSTONE was President and Chief Executive Officer of the
Company from June 1997 until May 14, 1999 and Co-Vice-Chairman of the Office of
the Chief Executive from May 14, 1999 to September 15, 1999. He has been a
director since March 1997. He currently is a principal of Sagpond Ventures. From
March 1992 to April 1994, he was a member of the Board of Starsight
Entertainment, a provider of an electronic on-screen television guide. From
December 1990 to October 1993, he was Chief Operating Officer and a member of
the Board of Spelling Entertainment Group, Inc. From September 1982 to September
1987 he was Senior Vice President of Viacom International Inc. ("Viacom"), and
from December 1980 until September 1982 he was Senior Vice President, Business
Affairs of the Viacom Entertainment Group. Prior to that he was Vice President
and General Counsel of Viacom from November 1975 until December 1980. Mr.
Lightstone has served as Chairman of Multimedia Labs, Inc., a manufacturer of
multimedia equipment, from February 1994 to March 1997. Mr. Lightstone is a
graduate of Columbia University and New York University School of Law. Mr.
Lightstone is a member of Media Equities International, LLC.
5
<PAGE>
JOHN R. SPRIESER is Senior Vice President and Chief Financial Officer
of IDC Services, Inc. having been with that Company since December 1988. He was
elected to the Board of Directors of IDC Services, Inc. in 1996. From March 1996
to April 1998, Mr. Sprieser was Chief Operating Officer of ASI Marketing
Research, Inc., a subsidiary of IDC Services. Prior to joining IDC Services, Mr.
Sprieser was Vice President and Chief Financial Officer of Longman Group USA,
Inc., and before that, Chief Financial Officer of MTI Vacations, Inc. He is a
Certified Public Accountant, and received his BBA from the University of
Oklahoma and an MBA from Indiana University.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THE ELECTION OF THE PERSONS NOMINATED FOR DIRECTOR HEREIN.
MANAGEMENT
EXECUTIVE OFFICERS
Executive officers are elected by and serve at the discretion of the
Board, subject to the rights, if any, of the executive officer under any
contract of employment. No family relationships exist between or among any of
the executive officers of the Company.
The following table contains certain biographical information with
respect to current executive officers of the Company, other than executive
officers whose biographical information is set forth above under the heading
"Director Nominees", and employees who are not executive officers but who are
expected to make a significant contribution to the Company's business.
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
---- --- --------------------
<S> <C> <C>
John T. Brady 58 Vice President and Chief Financial Officer
Robert C. Murray 40 Vice President, Secretary and General Counsel
Peter Engel 64 President and Chief Executive Officer of NewStar Publishing and
Internet Services
Ron Ziskin 48 President of NewStar Television
Gene L. George 35 President of NewStar Worldwide
</TABLE>
JOHN T. BRADY has been Vice President and Chief Financial Officer of
the Company since January 1999. He was a consultant to the Company since
February 1997. Mr. Brady has more than 30 years experience in finance and
operations in the entertainment industry, having held senior management
positions with leading entertainment companies including Viacom and Spelling
Entertainment Group. Mr. Brady's management career at Viacom spanned sixteen
years from 1972 through 1988 and included serving as Senior Vice President and
Chief Financial Officer for Viacom's Cable Networks Group, comprised of MTV,
Showtime, The Movie Channel, VH1 and Nickelodeon. He was also Chief Financial
Officer of Viacom's Entertainment Group, responsible for television production
and distribution and product acquisitions. Mr. Brady was Senior Vice President
and Chief Financial Officer for Spelling Entertainment from 1988 to 1993 and
Chief Financial Officer at ITC Entertainment from 1993-1994 when the Company was
sold to Polygram Film Entertainment. Prior to joining NewStar, Mr. Brady was
president of his own consulting firm, Jaybe Enterprises, which provided merger
and acquisition and financial counseling to companies in the entertainment
industry. A graduate of Hofstra University in New York with a B.A. in Business
Administration, Mr. Brady is also a Certified Public Accountant and worked at
Coopers & Lybrand L.L.P. from 1964-1972.
ROBERT C. MURRAY joined the Company in October 1997 as Vice President
and General Counsel. Prior to joining the Company, Mr. Murray was a lawyer with
O'Melveny & Myers LLP specializing in corporate law and finance. Mr. Murray
received a BS degree from the University of Washington, a Ph.D. from the
Massachusetts Institute of Technology and a JD from Stanford Law School.
PETER ENGEL joined the Company in January 1999. He is the founder of
Affinity Communications Corporation, a leading West Coast book packager. Mr.
Engel has served as Senior Vice President of Colgate Palmolive in the 1970s
where he was a member of the executive team that helped build the company into a
five billion multinational corporation. Mr. Engel is a former Associate
Professor of Entrepreneurial Studies at the University of Southern California
and founder of the American Consulting Corporation.
6
<PAGE>
RONALD M. ZISKIN has been the President of the Company's television
production subsidiary, NewStar Television, since its creation in April 1996. Mr.
Ziskin is a producer and television executive with over twenty years of
experience. He spent nine years at ABC Television Station, serving as Executive
Producer of KABC-TV and KGO-TV. He was Vice President of Programming and
Production at Lifetime, where is helped launch that network. Mr. Ziskin founded
Four Point Entertainment, Inc. (the predecessor in interest to NewStar
Television) in 1984, and as President of such company he produced more than
1,000 hours of dramatic and reality television programming over a period of 13
years. Mr. Ziskin also was with Viacom International and Hearst/ABC/Viacom
Entertainment as Vice President Programming and Production, Cable Operations.
GENE L. GEORGE joined the Company in October 1995 as Vice President,
Sales and Acquisitions of Dove International, the film and television
distribution division of the Company. Prior to joining the Company, he was
Executive Vice President of Arista Films, Inc. and President of Arista Classics,
where he oversaw the worldwide distribution of over fifty independently produced
and specialized theatrical motion pictures over an eight-year period. In 1992,
he was elected to the Board of Directors of the American Film Marketing
Association, where he served six consecutive terms. In 1986, Mr. George received
his bachelor's degree cum laude in international business and marketing from
California State University at Northridge.
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation
for services to the Company for the years ended December 31, 1998, 1997 and
1996, respectively, of the Company's Chief Executive Officer, the two other
executive officers of the Company who received compensation in excess of
$100,000 during 1998, and persons who became executive officers n 1999:
<TABLE>
<CAPTION>
===============================================================================================================================
Restricted Securities
Name and Fiscal Stock Underlying All Other
Principal position Year Salary Bonus Awards Options/SARs Compensation
------------------ ---- ------ ----- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Terrence A. Elkes (1) (1) (1) (1) (1) (1) (1)
Chairman and
Chief Executive Officer
Kenneth F. Gorman (2) (2) (2) (2) (2) (2) (2)
Vice-Chairman
Ronald Lightstone (3) 1998 $200,000 -- -- -- $ 25,000(4)
President, Chief Executive 1997 $200,000 -- 612,400(5) -- --(4)
Officer and Director 1996 -- -- -- -- --
John T. Brady (6) 1998 -- -- -- -- $ 81,765(6)
Vice President and 1997 -- -- -- -- $ 50,345(6)
Chief Financial Officer 1996 -- -- -- -- --
Robert C. Murray 1998 $125,000 -- -- 30,000 $ 3,822(7)
Vice President and 1997 $ 26,442 -- -- -- $ 793(7)
General Counsel and Secretary 1996 -- -- -- -- --
Neil Topham (8) 1998 $175,000 $25,000 -- 100,000 $ 5,351(7)
Vice President and Chief 1997 $175,000 -- -- -- --
Financial Officer 1996 -- -- -- -- --
Peter Engel (9) (9) (9) (9) (9) (9) (9)
President and Chief
Executive Officer of NewStar
Publishing and Internet Services
</TABLE>
(1) Mr. Elkes became Chief Executive Officer in May 1999. In 1999, Mr. Elkes
was granted options to purchase 100,000 shares of Common Stock at $1.20 per
share. For the years 1997-1998, Mr. Elkes received no compensation from the
Company, other than for his service as a Director. For Director services
for 1997-1998, Mr. Elkes received options to purchase 10,000 shares of
Common Stock for $1.313 per share. For Director services for 1998-1999, Mr.
Elkes received options to purchase 10,000 Common Stock for $0.875 per
share.
(2) Mr. Gorman became Vice Chairman of the Office of the Chief Executive in May
1999. In 1999, Mr. Gorman was granted options to purchase 100,000 shares of
Common Stock at $1.20 per share. For the years 1997-1998, Mr. Gorman
received no compensation from the Company, other than for his service as a
Director. For Director services for 1997-1998, Mr. Gorman received options
to purchase 10,000 shares of Common Stock for $1.313 per share. For
Director services for 1998-1999, Mr. Gorman received options to purchase
100,000 shares of common stock for $0.875 per share.
8
<PAGE>
(3) Mr. Lightstone resigned as President and Chief Executive Officer in May
1999.
(4) Pursuant to his employment agreement, Mr. Lightstone was to have received a
monthly automobile allowance of $1,000, but did not receive such payments
in 1997. In 1998, Mr. Lightstone received all amounts owed for car
allowance for 1997 and 1998 (an aggregate of $19,000). In 1998, the amount
under "All Other Compensation" also includes 401(k) Company matching
contributions in 1998 of $6,000.
(5) Represents 400,000 shares issued to Mr. Lightstone in January 1998 which
vest over a three year period (1/36 of such shares vesting each month),
which vesting commenced July 10, 1997.
(6) Mr. Brady became Vice President and Chief Financial Officer on January 1,
1999. Prior to that time he was a consultant for the Company and only
received consulting fees. For 1997, Media Equities International paid a
portion of Mr. Brady's total consulting fees equal to $25,000.
(7) Represents 401(k) Company matching contributions.
(8) Mr. Topham resigned as Vice President and Chief Financial Officer as of
December 31, 1998.
(9) Peter Engel joined the Company in 1999. He received no compensation prior
to that time.
OPTION/SAR GRANTS IN 1998
There were no SARs granted to the named executive officers during 1998.
The following tables set forth stock options granted to the named executive
officers during 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES PERCENT OF TOTAL OPTIONS/ EXERCISE OR
UNDERLYING OPTIONS/SARS SARS GRANTED TO EMPLOYEES BASE PRICE EXPIRATION
NAME GRANTED IN FISCAL YEAR ($/SHARE) DATE
- ---- ------- -------------- --------- ----
<S> <C> <C> <C> <C>
Ronald Lightstone -- -- N/A N/A
Robert C. Murray 30,000 5.7% $1.50 1/2/09
Neil Topham 100,000 19.2% $1.50 1/2/09
</TABLE>
OPTIONS EXERCISED IN 1998 AND YEAR-END OPTION VALUES
No stock options were exercised by any named executive officer during
1998. The following table provides certain information concerning the number of
shares covered by both exercisable and non-exercisable stock options held as of
December 31, 1998. Also shown are values for "in-the-money" options, which
represent the positive difference between the exercise price of such options and
the price of the Common Stock at December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES NUMBER OF SECURITIES VALUE OF VALUE OF
UNDERLYING UNDERLYING UNEXERCISED UNEXERCISED
UNEXERCISED UNEXERCISED IN-THE-MONEY IN-THE-MONEY
OPTIONS/SARs OPTIONS/SARs OPTIONS/SARs OPTIONS/SARs
NAME UNEXERCISABLE EXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Ronald Lightstone -- -- -- --
Robert C. Murray 30,000 -- -- --
Neil Topham -- 100,000 -- --
</TABLE>
9
<PAGE>
COMPENSATION OF DIRECTORS
For the fiscal year ended December 31, 1998, the Company granted to each
Director options to purchase 10,000 shares of Common Stock, which options vest
25% at the end of each quarter, and made a cash payment of $1,000 per quarter to
each director not associated with MEI.
EMPLOYMENT AGREEMENTS
None of the executive officers (i.e. Terrence A. Elkes, Kenneth F.
Gorman, John T. Brady, Robert C. Murray and Peter Engel) have an employment
agreement with the Company.
Pursuant to an employment agreement dated as of February 4, 1998,
Ronald Lightstone was employed by the Company as its President and Chief
Executive Officer. The term of Mr. Lightstone's employment agreement commenced
on June 10, 1997 and ended on June 10, 1999. Pursuant to the agreement, Mr.
Lightstone was paid a base salary of $200,000 per year. In addition to such base
salary, Mr. Lightstone was granted 400,000 shares of Common Stock, ownership of
which vests over a three year period (1/36 of such shares vesting each month),
commencing July 10, 1997. The employment agreement also provided for (i) three
weeks paid vacation, (ii) reimbursement of business related expenses, (iii) a
car allowance of $1,000 per month, and (iv) eligibility to participate in all
compensation, pension, retirement and welfare and fringe benefit plans, programs
and policies of the Company applicable to executives of the Company generally.
Each of Messrs. Brady and Murray have entered into a Key Executive
Severance Agreement with the Company. Pursuant to such agreements, if such
executive's employment is terminated in anticipation of or within 1 year after
specified events constituting a change in control, such executive shall be
entitled to receive a lump sum payment equal to such executive's then current
annual salary, and all stock options previously granted to such executive shall
immediately vest and become exercisable.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables sets forth information as of November 15, 1999, concerning
shares of equity securities of the Company beneficially owned by each
shareholder known to the Company to own beneficially more than five percent (5%)
of the outstanding shares of such class, by each Director, each Director
nominee, each named executive officer and all current directors and executive
officers as a group. Unless otherwise specified, the address of each beneficial
owner listed below is 8955 Beverly Boulevard, Los Angeles, California 90048.
10
<PAGE>
COMMON STOCK
------------
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS (1)
- ------------------------ ------------------ --------------------
<S> <C> <C>
Terrence A. Elkes..................... 12,238,557 (2)(3) 43.8%
Kenneth F. Gorman..................... 12,238,556 (2)(4) 43.8%
Ronald Lightstone..................... 9,021,840 (2)(5) 31.9%
H.A.M. Media Group, LLC............... 7,642,042 (2)(6) 27.5%
Bruce Maggin.......................... 7,712,042 (2)(7) 27.6%
John T. Healy......................... 7,717,042 (2)(7) 27.7%
Media Equities International, LLC..... 7,642,042 (2)(8) 27.5%
Apollo Partners, LLC.................. 7,642,042 (2)(9) 27.5%
Elkes Limited Partnership............. 4,426,515 (10) 20.5%
Gorman Limited Partnership............ 4,476,514 (11) 20.7%
Lee Masters........................... 95,000 (12) *
John R. Sprieser...................... 0 *
John T. Brady......................... 113,332 (13) *
Robert C. Murray...................... 100,000 (14) *
Peter Engel........................... 250,000 1.1%
All current Directors and executive officers
as a group (9 individuals)............ 18,918,201 (15) 65.4%
</TABLE>
- ------------------
* Less than 1%.
(1) Percentages set forth are based upon 21,612,058 shares of Common Stock
outstanding as of November 15, 1999 adjusted in each case for contingently
issuable Common Stock.
(2) Includes (i) 3,000,000 shares of Common Stock issuable to Media Equities
International, LLC ("MEI") upon exercise of warrants currently exercisable
as follows: 1,000,000 shares of Common Stock with an exercise price of
$2.00 per share, 1,000,000 shares of Common Stock with an exercise price of
$2.50 per share and 1,000,000 shares of Common Stock with an exercise price
of $3.00 per share, (ii) 2,000,000 shares of Common Stock issuable to MEI
upon conversion of 4,000 shares of Series B Preferred Stock currently
convertible, (iii) 960,000 shares of Common Stock issuable to MEI upon
conversion of 1,920 shares of Series C Preferred Stock currently
convertible, (iv) 258,000 shares of Common Stock issuable upon to MEI
conversion of 214,113 shares of Series D Preferred Stock currently
convertible and (v) 1,424,042 issued and outstanding shares of Common Stock
owned of record by MEI. The Series B Preferred Stock table (below) includes
4,000 shares of Series B Preferred Stock. The Series C Preferred Stock
table (below) includes 1,920 shares of Series C Preferred Stock. The Series
D Preferred Stock table below includes 214,113 shares of Series D Preferred
Stock. Apollo Partners, LLC ("Apollo"), H.A.M. Media Group, LLC ("H.A.M.
Media") and Mr. Lightstone are members of MEI. Messrs. Elkes and Gorman are
members and managers of Apollo. Messrs. Healy and Maggin are members and
managers of H.A.M. Media. The business address for MEI, Apollo and Messrs.
Elkes and Gorman is 500 5th Avenue Suite 3520, New York, NY 10110. The
business address for H.A.M. Media and Messrs. Healy and Maggin is 305
Madison Avenue, Suite 3016, New York, New York 10017.
(3) Includes 4,426,515 shares beneficially owned by Elkes Limited Partnership.
Mr. Elkes is the managing general partner of Elkes Limited Partnership.
Includes 120,000 shares of Common Stock issuable to Mr. Elkes upon exercise
of options currently exercisable.
11
<PAGE>
(4) Includes 4,476,514 shares beneficially owned by Gorman Limited Partnership.
Mr. Gorman is the managing general partner of Gorman Limited Partnership.
Includes 120,000 shares of Common Stock issuable to Mr. Gorman upon
exercise of options currently exercisable.
(5) Includes 400,000 shares of Common Stock issued pursuant to Mr. Lightstone's
employment agreement with the Company. As of November 15, 1999, only
322,219 shares have vested and another 22,222 shares will vest within 60
days of such date. However, all 400,000 shares, whether vested or not, have
been included as being owned by Mr. Lightstone. Also includes an additional
559,798 shares held directly by Mr. Lightstone and 420,000 shares of Common
Stock issuable upon exercise of options currently exercisable.
(6) Does not include shares owned directly by Messrs. Healy or Maggin.
(7) Includes 70,000 shares of Common Stock issuable upon exercise of options
currently exercisable.
(8) Does not include shares owned directly by Apollo Partners, LLC, H.A.M.
Media Group, LLC or Messrs. Healy, Maggin, Gorman, Elkes or Lightstone.
(9) Does not include shares owned directly by Messrs. Elkes or Gorman.
(10) Does not include any shares beneficially owned by MEI, Apollo or Mr. Elkes.
The business address for Elkes Limited Partnership is 500 5th Avenue Suite
3520, New York, NY 10110.
(11) Does not include any shares beneficially owned by MEI, Apollo or Mr.
Gorman. The business address for Gorman Limited Partnership is 500 5th
Avenue Suite 3520, New York, NY 10110.
(12) Includes 70,000 shares of Common Stock issuable to Mr. Masters upon
exercise of options currently exercisable. The business address for Mr.
Masters is Liberty Interactive Media, 12312 Olympic Boulevard, Los Angeles,
CA 90064.
(13) Includes 25,000 shares of Common Stock issuable to Mr. Brady upon exercise
of stock options currently exercisable with an exercise price of $1.50 per
share, and 83,332 shares of Common Stock issuable to Mr. Brady upon
exercise of stock options currently exercisable or exercisable with in 60
days with an exercise price of $1.20 per share. Excludes options, which are
not currently exercisable and will not be exercisable within the next 60
days, to purchase 41,667 shares of Common Stock with an exercise price of
$1.20 per share.
(14) Includes 20,000 shares of Common Stock issuable to Mr. Murray upon exercise
of stock options currently exercisable or exercisable within 60 days with
an exercise price of $1.50 per share, and 80,000 shares of Common Stock
issuable to Mr. Murray upon exercise of stock options currently exercisable
or exercisable within 60 days with an exercise price of $1.20 per share.
Excludes options, which are not currently exercisable and will not be
exercisable within the next 60 days, to purchase 20,000 shares of Common
Stock with an exercise price of $1.50 per share and 40,000 shares of Common
Stock with an exercise price of $1.20 per share.
(15) Includes the shares identified in footnotes (2), (3), (4), (5), (7), (12),
(13), and (14).
<TABLE>
SERIES B PREFERRED STOCK
------------------------
<CAPTION>
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
- ------------------------ ------------------ ----------------
<S> <C> <C>
Media Equities International, LLC............. 4,000 (a) 100%
Apollo Partners LLC........................... 4,000 (a) 100%
Terrence A. Elkes............................. 4,000 (a) 100%
Kenneth F. Gorman............................. 4,000 (a) 100%
H.A.M. Media Group LLC........................ 4,000 (a) 100%
Bruce Maggin.................................. 4,000 (a) 100%
John T. Healy................................. 4,000 (a) 100%
Ronald Lightstone............................. 4,000 (a) 100%
</TABLE>
12
<PAGE>
(a) Each share of Series B Preferred is convertible six months after issuance
into 500 shares of Common Stock, subject to certain anti-dilution protections,
and has the right to vote together with all other voting classes and series of
stock of the Company as a single class on all actions to be taken by the
shareholders of the Company except that the Series B Preferred Stock shall not
be entitled to vote on the election of directors except voting as a separate
class shall be entitled to elect one-third of the directors of the Company. On
each such action that the shares of Series B Preferred Stock votes together with
other classes, each share of Series B Preferred Stock shall be entitled to such
number of votes as such shares are then convertible into on the Record Date. See
footnote 2 above.
<TABLE>
SERIES C PREFERRED STOCK
------------------------
<CAPTION>
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
- ------------------------ ------------------ ----------------
<S> <C> <C>
Media Equities International, LLC............. 1,920 (b) 100%
Apollo Partners LLC........................... 1,920 (b) 100%
Terrence A. Elkes............................. 1,920 (b) 100%
Kenneth F. Gorman............................. 1,920 (b) 100%
H.A.M. Media Group LLC........................ 1,920 (b) 100%
Bruce Maggin.................................. 1,920 (b) 100%
John T. Healy................................. 1,920 (b) 100%
Ronald Lightstone............................. 1,920 (b) 100%
</TABLE>
- ------------------
(b) Each share of Series C Preferred is convertible six months after issuance
into 500 shares of Common Stock subject to certain anti-dilution protections.
Each share of Series C Preferred Stock has the right to vote together with all
other voting classes and series of stock of the Company as a single class on all
actions to be taken by the shareholders of the Company. On each such action that
the shares of Series C Preferred Stock vote together with other classes, each
share of Series C Preferred Stock shall be entitled to such number of votes as
such shares are then convertible into on the Record Date. See footnote 2 above.
<TABLE>
SERIES D PREFERRED STOCK
------------------------
<CAPTION>
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
- ------------------------ ------------------ ----------------
<S> <C> <C>
Media Equities International, LLC............. 214,113 (c) 100%
Apollo Partners LLC........................... 214,113 (c) 100%
Terrence A. Elkes............................. 214,113 (c) 100%
Kenneth F. Gorman............................. 214,113 (c) 100%
H.A.M. Media Group LLC........................ 214,113 (c) 100%
Bruce Maggin.................................. 214,113 (c) 100%
John T. Healy................................. 214,113 (c) 100%
Ronald Lightstone............................. 214,113 (c) 100%
</TABLE>
- -----------------
(c) Each share of Series D Preferred Stock is convertible into 1.20497 shares of
Common Stock, subject to certain anti-dilution protections. Each share of Series
D Preferred Stock has the right to vote together with all other voting classes
and series of stock of the Company as a single class on all actions to be taken
by the shareholders of the Company. On each such action Series D Preferred Stock
vote together with other classes, each share Series D Preferred Stock shall be
entitled to such number of votes as such shares are then convertible into on the
Record Date. See footnote 2 above.
13
<PAGE>
CHANGE IN CONTROL
No change in control of the registrant has occurred since the beginning
of January 1, 1998. As of December 31, 1997 Media Equities International, LLC
("MEI") controlled the Company through its ownership of equity securities and
the majority presence of its affiliates on the Board. From August 1998 through
May 1999, Elkes Limited Partnership ("ELP") purchased 4,426,515 shares of common
stock from the Company at prices ranging from $ 0.72 to $1.20 per share. From
August 1998 through August 1999 Gorman Limited Partnership ("GLP") purchased
4,476,614 shares of common stock from the Company at prices ranging from $ 0.72
to $1.20 per share. The managing general partner of ELP is Terrence A. Elkes.
The managing general partner of GLP is Kenneth F. Gorman. Each of Messrs. Elkes
and Gorman is a member of Apollo Partners, LLP which in turn is a member of MEI.
From August 1998 through December 1998, Mr. Lightstone purchased 742,698 shares
of common stock from the Company at a price of $0.72 per share. Mr. Lightstone
is a member of MEI.
Pursuant to a Stock Purchase Agreement among MEI, the Company and
others, dated March 27, 1997 (the "MEI Stock Purchase Agreement"), the Company
must obtain MEI's consent, which right of consent is required to be exercised in
good faith and in a commercially reasonable manner, prior to undertaking certain
activities (including adopting an annual budget, incurring any debt for borrowed
money or issuing securities (subject to certain limited exceptions) or changing
or altering its principal business or entering into new businesses) and prior to
the Company's executive officers undertaking certain activities (including
certain personnel matters, changes in certain of the Company's outside advisors,
certain litigation matters, certain acquisition or production matters and
certain other activities).
Pursuant to the MEI Stock Purchase Agreement and the terms of the
Series B Preferred Stock (all of the shares of which are beneficially owned by
MEI, as of November 1, 1999) so long as MEI owns 750,000 shares of common stock
of the Company (assuming for such purposes that the shares of the Series B
Preferred Stock and Series C Preferred Stock are converted in their entirety),
(i) so long as MEI holds a majority of the initially issued shares of Series B
Preferred Stock, the holders of the Series B Preferred Stock have the right to
elect one-third of the Board, and (ii) if MEI no longer owns a majority of the
initially issued shares of the Series B Preferred, MEI has the right to
nominate, and the Company is obligated to use its best efforts to have elected
as management nominees, one-third of the Board. The MEI Stock Purchase Agreement
provides for a board of directors having up to nine members. In the event of
default by the Company in the observance of certain covenants in the MEI Stock
Purchase Agreement, MEI has the right to appoint two additional directors, which
directors shall continue to serve until the earlier of the next occurring annual
meeting of the Company following the cure of any default or until MEI no longer
owns at least 750,00 shares of common stock of the Company (assuming for such
purposes that the shares of Series B Preferred Stock and Series C Preferred
Stock are converted in their entirety).
ELP, GLP, and Mr. Lightstone are parties to a Stock Purchase Agreement,
dated as of July 30, 1998 (the "First E G and L Stock Purchase Agreement"). In
the event of default by the Company in the observance of certain covenants in
the First E G and L Stock Purchase Agreement, ELP, GLP and Mr. Lightstone have
the right to appoint two additional directors, which directors shall continue to
serve until the earlier of the next occurring annual meeting of the Company
following the cure of any default or until ELP, GLP, and Mr. Lightstone no
longer own at least 750,00 shares of common stock of the Company.
ELP, GLP and Mr. Lightstone are parties to a Stock Purchase Agreement,
dated as of November 12, 1998 (the "Second E G and L Stock Purchase Agreement").
In the event of default by the Company in the observance of certain covenants in
the Second E G and L Stock Purchase Agreement, ELP, GLP, and Mr. Lightstone have
the right to appoint two additional directors, which directors shall continue to
serve until the earlier of the next occurring annual meeting of the Company
following the cure of any default or until ELP, GLP and Mr. Lightstone no longer
own at least 750,00 shares of common stock of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In September 1996, the Company entered into a consulting agreement with
Steven F. Mayer whereby Mr. Mayer was to provide certain financial consulting
and investment banking services to the Company. Such agreement provided for
compensation of $3,000 per month, options to purchase 10,000 shares of Common
Stock, certain contingent compensation and customary expense reimbursement. The
agreement ended effective February 28, 1997.
14
<PAGE>
Pursuant to the MEI Stock Purchase Agreement, (i) on March 27, 1997 MEI
purchased from the Company 3,000 shares of Series B Preferred Stock at $1,000
per share and warrants to purchase 1,500,000 shares of Common Stock, (ii) on May
15, 1997, MEI purchased from the Company 250 shares of Series B Preferred Stock
at $1,000 per share and warrants to purchase 125,000 shares of Common Stock and
(iii) on June 3, 1997, MEI purchased from the Company 750 shares of Series B
Preferred Stock at $1,000 per share and warrants to purchase 375,000 shares of
Common Stock. The MEI Stock Purchase Agreement provides for a three year
consulting arrangement with MEI which arrangement commenced on April 1, 1997
(the "Consulting Agreement"). MEI has agreed to provide substantial general
management consulting advice and services including but not limited to,
financial (including assisting in obtaining bank financing), television and film
distribution and business affairs. As compensation for such services and advice,
the Company is to pay MEI $300,000 per year, of which $200,000 is to be payable
in cash quarterly in advance and the remaining $100,000 is to be paid in shares
of Common Stock valued at the current market value on the date of payment,
payable quarterly in arrears. In 1998, the Company and MEI amended the
Consulting Agreement to provide that consulting fees for 1998 would be $200,000
instead of $300,000. During the year ended December 31, 1997, the Company paid
MEI $75,000 and accrued $75,000 in respect of such consulting fees. In 1998, the
Company and MEI agreed that the balance of the consulting fees for the year
ended December 31, 1997 and for all of fiscal year 1998 would be paid in Common
Stock. The Company issued a total of 308,028 shares of Common Stock as payment
of such consulting fees.
In September 1997, the Company entered into an agreement with MEI
providing the Company with a $450,000 loan facility for working capital purposes
(the "MEI Loan"). The MEI Loan was subsequently increased to $550,000. The MEI
Loan was secured by substantially all of the Company's assets, other than the
Company's building, which security interest was junior to the security interest
of Sanwa Bank. The MEI Loan provided for interest at 10% per annum, payable
monthly and was required to be repaid in full in the event the Company
refinanced the term loan with Sanwa Bank. The Company drew the entire $550,000
of the MEI Loan. On November 12, 1997, the MEI Loan was repaid in full from the
proceeds from a loan facility provided to the Company by The Chase Manhattan
Bank (the "Credit Facility"), and the MEI Loan was terminated.
Pursuant to Guaranty Agreements each dated as of November 4, 1997, each
of the principals of MEI (i.e. Messrs. Elkes, Gorman, Healy, Maggin and
Lightstone) agreed to guaranty the obligations of the Company under the Credit
Facility in an amount not to exceed the lesser of $2,000,000 and the outstanding
principal of and any interest on all loans made under the Credit Facility in
excess of the borrowing base (which borrowing base must be equal to or less than
$6,000,000). Each MEI principal guarantees an amount not to exceed the product
of 110% of such principal's ownership interest in MEI multiplied by the
aggregate amount guaranteed. The Company was not permitted to borrow any amounts
under the Credit Facility in excess of the borrowing base without the prior
written approval of MEI. The Company agreed to pay MEI an annual fee of $25,000
for such guaranty by its principals. In order to secure the repayment of any
amounts the MEI principals may be required to pay to The Chase Manhattan Bank
under the guarantees, MEI was granted a security interest in substantially all
of the assets of the Company. Such security interest is junior to the security
interest of The Chase Manhattan Bank which secures the Company's obligations
under the Credit Facility. In July 1998, and in connection with the increase of
the Credit Facility from $8,000,000 to $10,000,000, the principals of MEI agreed
to increase the guaranty of the obligations of the Company under the Credit
Facility to an amount not to exceed the lesser of $4,000,000 and the outstanding
principal of and any interest on all loans made under the Credit Facility in
excess of the borrowing base. As consideration for the increase in the guaranty,
the Company agreed to pay MEI an additional annual fee of $25,000 for such
guaranty by its principals. In August 1998, the Company issued 34,014 shares of
Common Stock to MEI, at the fair market value of the stock on the date of
issuance, as payment for such guarantee fees.
On January 28, 1999, the Company and The Chase Manhattan Bank were
notified by one of the principals of MEI that there would be no approvals for
further extensions of credit under the Credit Facility. Subsequently, the
Company, MEI, the principals of MEI and The Chase Manhattan Bank agreed to set
the guaranty of the obligations of the Company under the Credit Facility to an
amount not to exceed the lesser of (i) $2,000,000 and (ii) the outstanding
principal of and any interest on all loans made under the Credit Facility in
excess of the borrowing base, and that the Company would be permitted to borrow
amounts under the Credit Facility in excess of the borrowing base without the
prior approval of MEI. In consideration of such agreement, the Company agreed to
extend the exercise period of the warrants owned by MEI for one year and to
provide for a "cashless exercise" of such warrants.
The Company has agreed to reimburse each Director's travel expenses.
For service as a Director during the years 1997-1998 and 1998-1999, the Company
granted to each Director options to purchase 10,000 shares of Common Stock,
which options vest 25% at the end of each quarter, and made a cash payment of
$1,000 per quarter to each director not associated with MEI.
15
<PAGE>
In July 1998, the Company entered into a loan agreement with Apollo
pursuant to which the Company borrowed $1,500,000 with a due date of the earlier
of January 17, 1999 or the date of the sale of the Company's principal office
building. Interest accrued at the prime rate of The Chase Manhattan Bank plus 2%
and was payable upon the principal due date. The loan was secured by a second
mortgage on the Company's principal office building and land. In September 1998,
the loan and accrued interest was fully paid.
In August 1998, the Company issued 392,854 shares of Common Stock to
MEI (as the owner of all of the Company's Series B, Series C and Series D
Preferred Stock) as payment of approximately $589,000 of accrued dividends on
such Preferred Stock. In November 1998, the Company authorized the issuance of
189,146 shares of Common Stock to MEI as payment of approximately $107,000 of
accrued dividends on such Preferred Stock. 171,057 of those shares were issued
in December 1998 and 18,089 were issued in January 1999. In December 1998, MEI
agreed to forgive all accrued dividends on such Preferred Stock for the quarter
ended December 31, 1998 (approximately $102,000).
Pursuant to a Stock Purchase Agreement, dated as of July 30, 1998,
between Apollo and Ronald Lightstone and the Company, and a Stock Purchase
Agreement, dated as of November 12, 1998, between Apollo, Mr. Lightstone and the
Company, the Company sold an aggregate of 8,122,393 shares of Common Stock of
the Company to Elkes Limited Partnership ("ELP") (as assignee of Apollo), Gorman
Limited Partnership ("GLP") (as assignee of Apollo) and Mr. Lightstone for an
aggregate price of $5,840,000 (or $0.719 per share). In connection with such
stock purchase agreements, the Company, Apollo and Mr. Lightstone entered into
registration rights agreements. The managing general partner of ELP is Terrence
Elkes, the Chairman and Chief Executive Officer of the Company. The managing
general partner of GLP is Kenneth Gorman, the Vice-Chairman of the Company. At
the time of the transaction, Mr. Lightstone was the President and Chief
Executive Officer of, and a member of the Board of Directors of, the Company.
In December 1998, the Company sold an aggregate of 640,000 shares of
Common Stock to ELP and GLP for $500,000.
In December 1998, the Company and Mr. Murray entered into a Trust
Agreement pursuant to which Mr. Murray, as trustee, was to hold in trust certain
shares of Common Stock issued by the Company, until such time as a registration
statement covering such shares was declared effective by the Securities and
Exchange Commission, at which time the shares were to be released to the
beneficial owners. The shares were released to the beneficial owners in 1999.
Mr.
Murray did not receive any compensation as trustee.
In May 1999, the Company sold an aggregate of 833,334 shares of Common
Stock to ELP and GLP for $1,000,000. In May 1999, the Company sold an aggregate
of 250,000 shares of Common Stock to Peter Engel for $300,000. In connection
with such stock purchase, the Company and Mr. Engel entered into a registration
rights agreement.
The Company entered into a Publishing Agreement with Affinity
Communications Corp. ("Affinity") pursuant to which the Company published "The
Libido Breakthrough: A Doctor's Guide to Restoring Sexual Vigor and Peak Health"
by Stuart W. Fine, M.D. and Brenda Adderly, M.H.A. At the time of the agreement,
Peter Engel, the Company's President of the publishing division, controlled and
maintained a significant ownership interest in Affinity. In addition, Mr. Engel
is married to Ms. Adderly. The terms of the publishing agreement are similar to
those contained in publishing agreements the Company enters into with unrelated
parties, except as follows: Affinity entered into an agreement with Rexall
Sundown pursuant to which Rexall was to purchase 33,000 copies of the book from
Affinity. The Company agreed that Affinity would purchase such 33,000 copies
from the Company at cost plus $25,000. As of September 30, 1999 the Company is
due $25,000, net of royalties, from Affinity.
On or about September 30, 1999, the Company sold excess inventory
valued on the Company's books at approximately $1,250,000 to The Lakeside Group,
Inc. for cash in the amount of $278,000 and barter credits in an aggregate
amount valued at approximately $976,000, to be applied to future purchase of
media advertising. The terms of the agreement are similar to those contained in
agreements of this type that would be entered into between unrelated parties.
Fred Tarter is the President and a significant owner of The Lakeside Group, Inc.
Mr. Tarter was a partner with Mr. Engel in Affinity Communications Corporation.
As of November 15, 1999, the Company has not received full payment of the cash
portion of the purchase price.
During the quarter ended September 30, 1999, MEI instituted an
arbitration proceeding against the Former Principals. The Company's in-house
legal staff provided legal services for MEI in connection with such proceedings.
16
<PAGE>
The Company has entered into various employment agreements and
severance agreements with, and granted stock options to, various employees,
officers and Directors. See "EXECUTIVE COMPENSATION" herein.
PROPOSAL TWO
INDEPENDENT ACCOUNTANTS
KPMG LLP have been the Company's principal accountants since September
18, 1995 and functioned as the Company's independent certified public
accountants for the fiscal year ended December 31, 1998.
Upon recommendation of the Board, the Company has appointed KPMG LLP as
the Company's independent certified public accountants for the fiscal year
ending December 31, 1999.
Services provided to the Company by KPMG LLP during fiscal years
1995-1998 included the examination of the Company's consolidated financial
statements, tax return preparation and certain additional accounting services
provided in connection with acquisitions and securities matters.
In the event shareholders do not approve the appointment of KPMG LLP as
the Company's independent accountants for the fiscal year ending December 31,
1999, such appointment will be reconsidered by the Board.
Representatives of KPMG LLP will be present at the Annual Meeting to
respond to appropriate questions and to make such statements as they may desire.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS.
PROPOSAL THREE
ADOPTION OF THE 1999 STOCK INCENTIVE PLAN
On July 21, 1999, the Board approved the adoption of the NewStar Media
Inc. 1999 Stock Incentive Plan (the "Plan"). Adoption of the Plan is subject to
the affirmative approval by holders of a majority of the shares of Common Stock
and Equivalent Common Stock outstanding on the Record Date.
The Company currently maintains a stock incentive plan (the "1994
Plan"), designed to encourage executive officers, other key employees and
certain third parties to acquire a proprietary interest in the Company and
thereby align their interests with those of the shareholders, to continue their
employment or work with the Company and to render superior performance during
such period. At November 1, 1999, the 1994 Plan had 750,000 shares available for
grant thereunder, of which 724,000 had been granted and were outstanding. The
Board adopted the Plan, instead of amending the 1994 Plan, in order to increase
the number of shares available to be granted and to update the 1994 Plan to
reflect recent changes in the law and executive compensation plans in general.
If the adoption of the Plan is approved by the shareholders, no further awards
will be granted pursuant to the 1994 Plan (although awards previously granted
will remain outstanding). The Plan has 5,000,000 shares available for grant
thereunder. The Board adopted the Plan to increase the number of authorized
shares available to be granted to employees because it believes that a stock
incentive program is an important factor in attracting, retaining and motivating
key employees and certain third parties who will dedicate their maximum
productive efforts toward the advancement of the Company. The Board believes
that the Plan furthers these objectives by assuring continuing availability of
stock incentives in the appropriate circumstances and permitting flexibility in
compensation awards.
Each Director and executive officer of the Company who is eligible to
receive awards under the Plan can be considered to have an interest in the vote
on this proposal. The text of the Plan is set forth in Exhibit A to this Proxy
Statement. Shareholders are urged to read Exhibit A carefully. The description
of the Plan in this Proxy Statement is qualified in its entirety by reference to
Exhibit A. The principal aspects of the Plan are summarized below.
17
<PAGE>
GENERAL PROVISIONS
The Plan authorizes the granting of awards to employees, officers,
directors, consultants and advisors of the Company and certain related companies
in the form of any combination of (1) options to purchase shares of Common
Stock, (2) shares of restricted Common Stock ("restricted stock"), (3) stock
appreciation rights, and (4) deferred stock.
ADMINISTRATION
The Plan is administered by a committee of the Board of Directors of
the Company ("Board") designated by the Board to administer the Plan, or if no
committee is designated, by the Board (the "Committee"). The Committee has
authority to grant and amend awards, adopt, alter and repeal administrative
rules, guidelines and practices governing the Plan, interpret the terms and
provisions of the Plan and any award granted under the Plan and to otherwise
supervise the administration of the Plan. In particular, the Committee has the
authority to (i) determine whether and to what extent any award or combination
of awards will be granted under the Plan, (ii) select the individuals to whom
awards will be granted from among those eligible, (iii) determine the number of
shares of stock to be covered by each award granted, (iv) determine the terms
and conditions of any award granted, including vesting or other restrictions
based on such performance objectives and such other factors as the Committee may
establish, and to determine whether the performance objectives and/or terms and
conditions of the award are satisfied, (v) amend the terms of any award,
prospectively or retroactively (provided that no amendment may impair the rights
of the award holder without his or her consent) and (vi) substitute new stock
options for previously granted stock options, or for options granted under other
plans or agreements, in each case including previously granted options having
higher options prices.
ELIGIBILITY
The Committee may make awards under the Plan to employees, officers,
directors, consultants, and advisors of the Company or of any entity in which
the Company owns at least a 50% interest ("Related Company"). The participants
in the Plan are selected from among those eligible in the sole discretion of the
Committee.
LIMITATIONS ON AWARDS
The total number of shares of common stock of the Company which may be
issued under the Plan is 5,000,000. Such shares will consist of authorized but
unissued shares. The exercise of a stock appreciation right for cash or the
payment of any award in cash will not count against this share limit. Shares
subject to lapsed, forfeited or canceled awards will not count against this
limit and can be regranted under the Plan. If the exercise price of an option is
paid in Common Stock or if shares are withheld from payment of an award to
satisfy tax obligations with respect to the award, such shares also will not
count against the above limit.
No employee may be granted stock options and/or stock appreciation
rights under the Plan with respect to more than 2,500,000 shares of common stock
in any fiscal year. The Plan does not limit awards which may be made under other
plans of the Company.
AWARDS TO ELIGIBLE PARTICIPANTS
The Plan authorizes the Committee to grant the following types of
awards to eligible participants:
18
<PAGE>
1. Stock Options. The Committee is authorized to grant incentive stock
options ("ISOs") and non-qualified stock options to purchase such number of
shares of Common Stock as the Committee determines. An option will be
exercisable at such times, over such term and subject to such terms and
conditions as the Committee determines, and at an exercise price determined by
the Committee, which may be less than the fair market value of the Common Stock
at the date of grant of the option. ISOs are subject to additional restrictions
as to exercise period and exercise price as required by the Internal Revenue
Code of 1986, as amended (the "Code"). Payment of the exercise price of an
option may be made in such manner as the Committee may provide, including cash,
delivery of shares of Common Stock already owned or subject to an award under
the Plan, "cashless exercise" (an arrangement with a brokerage firm whereby
shares issuable upon exercise of an option would be sold by the broker and the
proceeds used to pay the exercise price) or in any other manner specified by the
Committee. The Committee is authorized to specify the period, if any, over which
options become exercisable, and to accelerate the exercisability of options on a
case by case basis at any time. The Committee is also authorized to specify the
period during which options may be exercised following an employee's termination
of employment, and to extend such period on a case by case basis. The Committee
may permit an option to be exercised for an additional period after the
optionee's death, even if such period extends beyond the original option term.
Unless otherwise provided by the Committee, options will not be transferable
except by will or by the laws of descent and distribution.
2. Restricted Stock. The Committee is authorized to award restricted
stock subject to such terms and conditions as the Committee may determine in its
sole discretion. The Committee has authority to determine the number of shares
of restricted stock to be awarded, the price, if any, to be paid by the
recipient of the restricted stock, and the date or dates on which the restricted
stock will vest. The grant and/or vesting of restricted stock may be conditioned
upon the completion of a specified period of service with the Company or a
Related Company, upon the attainment of specified performance objectives, or
upon such other criteria as the Committee may determine. The Committee also has
authority to determine whether the employee will have the right to vote and/or
receive dividends on shares of restricted stock, and whether the certificates
for such shares will be held by the Company or delivered to the employee bearing
legends to restrict their transfer. The Committee has authority to waive, in
whole or in part, any or all of the conditions to receipt of or restrictions
with respect to, any or all of a holder's restricted stock.
Stock certificates representing the restricted stock granted to an
award recipient will be registered in the recipient's name. However, no share of
restricted stock may be sold, transferred, assigned or pledged by the recipient
until such share has vested in accordance with the terms of the restricted stock
award. In the event of a recipient's termination of employment before all of his
or her restricted stock has vested, or in the event other conditions to the
vesting of restricted stock have not been satisfied prior to any deadline for
the satisfaction of such conditions set forth in the award, the shares of
restricted stock which have not vested will be forfeited and any purchase price
paid by the recipient generally will be returned to the recipient. At the time
restricted stock vests, a certificate for such vested shares will be delivered
to the recipient (or the beneficiary designated by the recipient, in the event
of death), free of all restrictions.
3. Stock Appreciation Rights. A stock appreciation right entitles the
holder thereof to receive, for each share as to which the award is granted,
payment of an amount, in cash, shares of Common Stock, or a combination thereof,
as determined by the Committee, equal in value to the excess of the fair market
value of a share of Common Stock on the date of exercise over an amount
specified by the Committee. Any award of a stock appreciation right under the
Plan will specify the number of shares as to which the stock appreciation right
is granted and will have such terms and conditions as the Committee may
determine.
4. Deferred Stock Award. All awards of deferred stock will be in such
form and have such terms as the Committee may determine. The deferred stock
award will specify the number of shares of deferred stock to be awarded and the
duration of the period ("Deferral Period") during which, and the conditions
under which, receipt of the Common Stock will be deferred. The Committee may
condition the grant or vesting of deferred stock, or receipt of Common Stock or
cash at the end of the Deferral Period, upon attainment of specified performance
objectives to other criteria. The Committee is authorized to waive, in whole or
in part, any or all of the conditions to receipt of, or restriction with respect
to, Common Stock or cash under a deferred stock award.
OTHER PROVISIONS
Tax Withholding.
----------------
The Plan permits award recipients to satisfy all or a portion of their
federal, state, local or other tax liability with respect to awards under the
Plan by delivering previously-owned shares or by having the Company withhold
from the shares otherwise deliverable to such award recipients shares having a
value equal to the tax liability to be so satisfied.
19
<PAGE>
Adjustments.
------------
In the event of any merger, reorganization, consolidation, sale of
substantially all assets, recapitalization, stock dividend, stock split,
spin-off, split-up, split-off, distribution of assets or other change in
corporate structure affecting the Common Stock, the Committee will, in such a
manner as it may deem equitable in its sole discretion, substitute or adjust any
or all of (i) the aggregate number and kind of shares reserved for issuance
under the Plan, (ii) the number and kind of shares as to which awards may be
granted to any individual in any fiscal year, (iii) the number and kind of
shares subject to outstanding awards, and (iv) the exercise price of outstanding
stock options and any other amounts to be paid by award holders or the Company,
as the case may be, with respect to outstanding awards; provided, however, that
no such adjustment will increase the aggregate value of any outstanding award.
In addition, upon the dissolution or liquidation of the Company or upon
any reorganization, merger, or consolidation as a result of which the Company is
not the surviving corporation (or survives as a wholly-owned subsidiary of
another corporation), or upon a sale of substantially all the assets of the
Company, the Committee may take such action as in its discretion it deems
appropriate to (i) accelerate the time when stock options may be exercised, (ii)
cash out such stock options at or immediately prior to the date of such event,
or (iii) provide for the assumption of outstanding stock options by surviving,
successor or transferee corporations.
Amendments.
-----------
The Board of Directors may amend or discontinue the Plan without
shareholder approval, unless such approval is required to satisfy Nasdaq, stock
exchange or regulatory requirements. Amendment or discontinuation of the Plan
cannot adversely affect any award previously granted without the holder's
written consent.
Loans.
------
The Committee may provide that the Company will make, or arrange for, a
loan to an award recipient with respect to the exercise of any stock option
granted under the Plan, with respect to the payment of the purchase price, if
any, of any restricted stock awarded under the Plan, with respect to any taxes
arising from an award under the Plan, or any combination thereof, provided that
the Company will not loan to any award recipient more than (i) the excess of the
purchase or exercise price of an award over the par value of any shares of
Common Stock awarded, plus (ii) the amount of any taxes arising from such award.
The Committee will determine the terms of any such loan.
Tax Offset Payments.
--------------------
The Committee may provide for a tax offset payment to an award
recipient in cash, not in excess of the amount necessary to pay the federal,
state, local and other taxes payable with respect to any award and the receipt
of the tax offset payment, assuming the employee is taxed at the maximum tax
rate applicable to such income.
Deferrals of Awards.
--------------------
The Committee may permit an award recipient to elect to defer receipt
of any award for a specified period or until a specified event.
20
<PAGE>
BENEFITS UNDER THE PLAN
If the shareholders approve the adoption of the Plan, it is anticipated
that the Committee will make grants under the Plan to eligible participants
(including employees, officers and Directors) from time to time. The size of
future awards and the identity of recipients cannot be determined at this time.
At the time of adoption of the Plan by the Board, and subject to approval of the
adoption of the Plan by the Company's shareholders, the Committee awarded the
following stock options to its executive officers and Directors:
Name Dollar Value Number of Units
- ---- ------------ ---------------
Terrence A. Elkes, Chairman and Chief * 100,000 (1)
Executive Officer
- ---------------------------------------- ----------------- ----------------
Kenneth F. Gorman, Vice-Chairman * 100,000 (1)
- ---------------------------------------- ----------------- ----------------
Ronald Lightstone, Director * 400,000 (1)
- ---------------------------------------- ----------------- ----------------
Bruce Maggin, Director * 50,000 (1)
- ---------------------------------------- ----------------- ----------------
John T. Healy, Director * 50,000 (1)
- ---------------------------------------- ----------------- ----------------
Steven Mayer, Director * 50,000 (1)
- ---------------------------------------- ----------------- ----------------
Lee Masters, Director * 50,000 (1)
- ---------------------------------------- ----------------- ----------------
John T. Brady, Vice-President and Chief * 125,000 (1)(2)
Financial Officer
- ---------------------------------------- ----------------- ----------------
Robert C. Murray, Vice-President, * 120,000 (1)(2)
Secretary and General Counsel
- ---------------------------------------- ----------------- ----------------
All current executive officers as a group * 445,000
(four persons)
- ---------------------------------------- ----------------- ----------------
All employees * 40,000 (3)
- ---------------------------------------- ----------------- ----------------
All current officers (five persons) * 445,000
- ---------------------------------------- ----------------- ----------------
* The dollar value is deemed to be $0 because the market price of the underlying
security is less than the exercise price of the option.
(1) The stock options have an exercise price of $1.20 per share.
(2) On October 19, 1999 the Board approved the repricing of such stock
options to $.50 per share with a concomitant reduction in the number of
stock options. Each award recipient that received stock options with an
exercise price of $1.20 may elect to retain such stock options or agree
to accept the lesser amount of stock options with the adjusted exercise
price.
(3) On October 19, 1999, the Board approved the issuance of 40,000 stock
options with an exercise price of $0.875 per share to an employee, with
such stock options being subject to the repricing described in note (2)
above.
THE BOARD OF DIRECTORS STRONGLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE APPROVAL OF THE ADOPTION OF THE COMPANY'S 1999 STOCK INCENTIVE PLAN.
21
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SHAREHOLDERS' PROPOSALS FOR THE 1999 ANNUAL MEETING OF SHAREHOLDERS
A proper proposal submitted by a shareholder for presentation at the
Company's 2000 Annual Meeting and received at the Company's executive offices no
later than July 14, 2000 will be included in the Company's proxy statement and
form of proxy relating to the 2000 Annual Meeting, unless the Company shall hold
its 2000 Annual Meeting prior to July 14, 2000, in which case a proper proposal
must be submitted for presentation and received at the Company's executive
offices a reasonable time before the Company prints and mails its proxy
materials for such meeting.
OTHER MATTERS
The Board is not aware of any matter to be acted upon at the Annual
Meeting other than those described in this Proxy Statement. Unless otherwise
directed, all shares represented by the persons named in the accompanying proxy
will vote in favor of the proposals described in this Proxy Statement. If any
other matter properly comes before the meeting, however, the proxy holders will
vote thereon in accordance with their best judgment.
MISCELLANEOUS
SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934 BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires executive officers and directors, and persons who beneficially own more
than (10%) of the Company's stock, to file initial reports of ownership and
reports of changes in ownership with the SEC. Executive officers, directors and
greater than ten percent (10%) beneficial owners are required by SEC regulations
to furnish the Company with copies of all Section 16(a) forms they file.
Based solely upon the Company's review of Forms 3 and 4 and amendments
thereto furnished to the Company under the Rule 16a-3(e) during the fiscal year
ended December 31, 1998 and Form 5 and amendments thereto furnished to the
Company during the fiscal year ended December 31, 1998 and/or written
representations relating thereto, the Company believes that during fiscal year
ended December 31, 1998: Messrs. Maggin and Healy and Media Equities
International, LLC, H.A.M. Media Group, LLC and Apollo Partners, LLC each filed
three late reports, two of which related to one transaction each, and one of
which related to three transactions; Messrs. Elkes and Gorman each filed three
late reports, one of which related to one transaction, one of which related to
four transactions and one of which related to three transactions; Elkes Limited
Partnership and Gorman Limited Partnership each filed four late reports, two of
which related to two transactions each, one of which related to one transaction
and one of which was such entity's Form 3 filing; Mr. Murray filed one late
report relating to initial filing on Form 3; and Mr. Lightstone filed seven late
reports, six of which related to one transaction each and one of which related
to three transactions.
ANNUAL REPORT TO SECURITIES AND EXCHANGE COMMISSION
THE COMPANY FILES EACH YEAR WITH THE SEC AN ANNUAL REPORT ON FORM
10-KSB AS PRESCRIBED BY THE RULES OF THE SEC AND FOR THE FISCAL YEAR DECEMBER
31, 1998, ALSO FILED AN AMENDMENT TO THE ANNUAL REPORT ON FORM 10-KSB/A. COPIES
OF THE FORMS 10-KSB AND 10KSB/A WILL BE PROVIDED, WITHOUT CHARGE, TO ANY
SHAREHOLDER OF THE COMPANY. WRITTEN REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED
TO NEWSTAR MEDIA INC., 8955 BEVERLY BOULEVARD, LOS ANGELES, CALIFORNIA 90048,
ATTENTION: CORPORATE SECRETARY.
22
<PAGE>
EXHIBIT A
NEWSTAR MEDIA INC.
1999 STOCK INCENTIVE PLAN
SECTION 1. Purpose and Types of Awards
1.1 The purposes of the NewStar Media Inc. 1999 Stock
Incentive Plan (the "Plan") are (i) to enable NewStar Media Inc. (the "Company")
and its Related Companies to attract and retain employees and directors, and
strengthen the mutuality of interests between such persons and the Company's
stockholders by offering such employees and directors an equity interest in the
Company and thereby enabling them to participate in the long-term success and
growth of the Company, and (ii) to enable the Company to pay for the services of
consultants and advisors using stock of the Company.
1.2 Awards under the Plan may be in the form of (i) Stock
Options; (ii) Stock Appreciation Rights; (iii) Restricted Stock; and (iv)
Deferred Stock. Awards may be free-standing or granted in tandem. If two awards
are granted in tandem, the award holder may exercise (or otherwise receive the
benefit of) one award only to the extent he or she relinquishes the tandem
award.
SECTION 2. Definitions
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Committee" means the committee of the Board designated by the
Board to administer the Plan, or if no committee is designated, the entire
Board.
"Company" means NewStar Media Inc. and its successors.
"Related Company" means any corporation, partnership, joint
venture or other entity in which the Company owns, directly or indirectly, at
least a 50% beneficial ownership interest.
"Rule 16b-3" means Rule 16b-3 under the Securities Exchange
Act of 1934, or any successor rule.
"Stock" means the common stock of the Company.
SECTION 3. Administration
3.1 The Plan shall be administered by the Committee.
3.2 The Committee shall have the following authority with
respect to awards under the Plan: to grant and amend awards, subject to any
limitations set forth in the Plan; to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall
deem advisable; to interpret the terms and provisions of the Plan and any award
granted under the Plan; and to otherwise supervise the administration of the
Plan. In particular, and without limiting its authority and powers, the
Committee shall have the authority:
(a) to determine whether and to what extent any award
or combination of awards will be granted hereunder, including whether
any awards will be granted in tandem with each other;
(b) to select the individuals to whom awards will be
granted from among those eligible;
(c) to determine the number of shares of Stock to be
covered by each award granted hereunder subject to the limitations
contained herein;
A-1
<PAGE>
(d) to determine the terms and conditions of any
award granted hereunder, including, but not limited to, any vesting or
other restrictions based on such performance objectives and such other
factors as the Committee may establish, and to determine whether the
performance objectives and/or other terms and conditions of the award
are satisfied;
(e) to determine the treatment of awards upon an
employee's retirement, disability, death, termination for cause or
other termination of employment, or upon a director's or consultant's
termination of service;
(f) to determine pursuant to a formula or otherwise
the fair market value of the Stock on a given date; provided, however,
that if the Committee fails to make such a determination, fair market
value of the Stock on a given date shall be the average of the closing
prices of the Stock as reported on the Nasdaq SmallCap Market for the
five trading days prior to such date.
(g) to determine that amounts equal to the amount of
any dividends declared with respect to the number of shares covered by
an award (i) will be paid to the award holder currently or (ii) will be
deferred and deemed to be reinvested or (iii) will otherwise be
credited to the award holder, or that the award holder has no rights
with respect to such dividends;
(h) to determine whether, to what extent, and under
what circumstances Stock and other amounts payable with respect to an
award will be deferred either automatically or at the election of an
award holder, including providing for and determining the amount (if
any) of deemed earnings on any deferred amount during any deferral
period;
(i) to provide that the shares of Stock received as a
result of an award shall be subject to a right of first refusal,
pursuant to which the award holder shall be required to offer to the
Company any shares that such person wishes to sell, subject to such
terms and conditions as the Committee may specify;
(j) to amend the terms of any award, prospectively or
retroactively; provided, however, that no amendment shall impair the
rights of the award holder without his or her written consent; and
(k) to substitute new Stock Options for previously
granted Stock Options, or for options granted under other plans or
agreements, in each case including previously granted options having
higher option prices.
3.3 Determinations by the Committee under the Plan relating to
the form, amount, and terms and conditions of awards need not be uniform, and
may be made selectively among persons who receive or are eligible to receive
awards under the Plan, whether or not such persons are similarly situated. All
determinations made by the Committee pursuant to the provisions of the Plan
shall be within the absolute discretion of the Committee and shall be final and
binding on all persons, including the Company and Plan participants.
3.4 Action of the Committee under the Plan shall be taken
pursuant to a majority vote at a meeting or telephonic meeting, or by unanimous
written consent.
3.5 No member of the Committee, nor any officer or employee of
the Company acting on behalf of the Committee, shall be personally liable for
any action, determination or interpretation taken or made with respect to the
Plan, and all members of the Committee and all officers or employees 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.
A-2
<PAGE>
SECTION 4. Stock Subject to Plan
4.1 The total number of shares of Stock which may be issued
under the Plan shall be 5,000,000, subject to adjustment as provided below. Such
shares shall be authorized but unissued shares. The exercise of a Stock
Appreciation Right for cash or the payment of any award in cash shall not count
against this share limit.
4.2 To the extent a Stock Option terminates without having
been exercised, or an award terminates without the holder having received
payment of the award, or shares awarded are forfeited, the shares subject to
such award shall again be available for distribution in connection with awards
under the Plan. Shares of Stock equal in number to the shares surrendered in
payment of the option price, and shares of Stock which are withheld in order to
satisfy federal, state or local tax liability, shall not count against the above
limit, and shall again be available for distribution in connection with awards
under the Plan.
4.3 No employee shall be granted Stock Options, and/or Stock
Appreciation Rights with respect to more than 2,500,000 shares of Stock in any
fiscal year subject to adjustment as provided in Section 4.4.
4.4 In the event of any merger, reorganization, consolidation,
sale of substantially all assets, recapitalization, Stock dividend, Stock split,
spin-off, split-up, split-off, distribution of assets or other change in
corporate structure affecting the Stock, the Committee shall, in such a manner
as it may deem equitable in its sole discretion, substitute or adjust any or all
of (i) the aggregate number and kind of shares reserved for issuance under the
Plan, (ii) the number and kind of shares as to which awards may be granted to
any individual in any fiscal year, (iii) the number and kind of shares subject
to outstanding awards, and (iv) the exercise price of outstanding Stock Options
and any other amounts to be paid by award holders or the Company, as the case
may be, with respect to outstanding awards; provided, however, that no such
adjustment shall increase the aggregate value of any outstanding award.
In addition, upon the dissolution or liquidation of the
Company or upon any reorganization, merger, or consolidation as a result of
which the Company is not the surviving corporation (or survives as a
wholly-owned subsidiary of another corporation), or upon a sale of substantially
all the assets of the Company, the Committee may take such action as it in its
discretion deems appropriate to (i) accelerate the time when Stock Options may
be exercised, (ii) cash out such Stock Options at or immediately prior to the
date of such event, or (iii) provide for the assumption of outstanding Stock
Options by surviving, successor or transferee corporations.
The Committee's determination as to which adjustments shall be
made and the extent thereof shall be final, binding and conclusive.
SECTION 5. Eligibility
5.1 The persons who are eligible for awards under the Plan are
employees, officers, directors, consultants, and advisors of the Company or any
Related Company. The participants under the Plan shall be selected from time to
time by the Committee, in its sole discretion, from among those eligible.
SECTION 6. Stock Options
6.1 The Stock Options awarded to employees under the Plan may
be of two types: (i) Incentive Stock Options within the meaning of Section 422
of the Code or any successor provision thereto; and (ii) Non-Qualified Stock
Options. To the extent that any Stock Option granted to an employee does not
qualify as an Incentive Stock Option, it shall constitute a Non-Qualified Stock
Option. All Stock Options awarded to non-employee directors, consultants or
advisors shall be Non-Qualified Stock Options.
6.2 Subject to the following provisions, Stock Options awarded
under the Plan shall be in such form and shall have such terms and conditions as
the Committee may determine.
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(a) Option Price. The option price per share of Stock
purchasable under a Stock Option shall be determined by the Committee,
and may be less than the fair market value of the Stock on the date of
the award of the Stock Option, but not less than the par value.
(b) Option Term. The term of each Stock Option shall
be fixed by the Committee.
(c) Exercisability. Stock Options shall be
exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee. The Committee may
waive such exercise provisions or accelerate the exercisability of the
Stock Option at any time in whole or in part.
(d) Method of Exercise. Stock Options may be
exercised in whole or in part at any time during the period the option
is exercisable by giving written notice of exercise to the Company
specifying the number of shares to be purchased, accompanied by payment
of the purchase price. Payment of the purchase price shall be made in
such manner as the Committee may provide in the award, which may
include cash (including cash equivalents), delivery of shares of Stock
already owned by the optionee or subject to awards hereunder, "cashless
exercise", any other manner permitted by law determined by the
Committee, or any combination of the foregoing.
(e) No Stockholder Rights. An optionee shall have
neither rights to dividends or other rights of a stockholder with
respect to shares subject to a Stock Option until the optionee has
exercised the Stock Option and become the record owner of the shares.
(f) Surrender Rights. The Committee may provide that
options may be surrendered for cash upon any terms and conditions set
by the Committee.
(g) Non-transferability. Unless otherwise provided by
the Committee, (i) Stock Options shall not be transferable by the
optionee other than by will or by the laws of descent and distribution,
and (ii) during the optionee's lifetime, all Stock Options shall be
exercisable only by the optionee or by his or her legal representative.
However the Committee, in its sole discretion, may permit Stock Options
to be transferred on terms and conditions specified by it.
(h) Termination of Employment or Service. Following
the termination of an optionee's employment or service with the Company
or a Related Company, the Stock Option shall be exercisable to the
extent determined by the Committee. The Committee may provide different
post-termination exercise provisions with respect to termination of
employment or service for different reasons. The Committee may provide
that, notwithstanding the option term fixed pursuant to Section 6.2(b),
a Stock Option which is outstanding on the date of an optionee's death
shall remain outstanding for an additional period after the date of
such death.
6.3 Notwithstanding the provisions of Section 6.2, no
Incentive Stock Option shall (i) have an option price which is less than 100% of
the fair market value of the Stock on the date of the award of the Incentive
Stock Option, (ii) be exercisable more than ten years after the date such
Incentive Stock Option is awarded, or (iii) be awarded more than ten years after
July 21, 1999, the date of adoption of the Plan. In addition, no Incentive Stock
Option granted to an employee who owns more than 10% of the total combined
voting power of all classes of stock of the Company or any of its parent or
subsidiary corporations, as defined in Section 424 of the Code, shall (i) have
an option price which is less than 110% of the fair market value of the Stock on
the date of award of the Incentive Stock Option or (ii) be exercisable more than
five years after the date such Incentive Stock Option is awarded.
SECTION 7. Stock Appreciation Rights
7.1 A Stock Appreciation Right shall entitle the holder
thereof to receive, for each share as to which the award is granted, payment of
an amount, in cash, shares of Stock, or a combination thereof, as determined by
the Committee, equal in value to the excess of the fair market value of a share
of Stock on the date of exercise over an amount specified by the Committee. Any
such award shall be in such form and shall have such terms and conditions as the
Committee may determine. The grant shall specify the number of shares of Stock
as to which the Stock Appreciation Right is granted.
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7.2 The Committee may provide that a Stock Appreciation Right
may be exercised only within the 60-day period following occurrence of a change
of control (as defined in the applicable letter granting the award) (such Stock
Appreciation Right being referred to herein as a Limited Stock Appreciation
Right). The Committee may also provide that in the event of a change of control
the amount to be paid upon exercise of a Stock Appreciation Right shall be based
on the Change of Control Price. "Change of Control Price" means the highest
price per share paid in any transaction reported in the Nasdaq SmallCap Market
or on any national market or securities exchange where the Stock is traded, or
paid or offered in any transaction related to a change of control at any time
during the 90-day period ending with the change of control. Notwithstanding the
foregoing sentence, in the case of Stock Appreciation Rights granted in tandem
with Incentive Stock Options, the Change of Control Price shall be the highest
price paid on the date on which the Stock Appreciation Right is exercised.
SECTION 8. Restricted Stock
Subject to the following provisions, all awards of Restricted
Stock shall be in such form and shall have such terms and conditions as the
Committee may determine:
(a) The Restricted Stock award shall specify the
number of shares of Restricted Stock to be awarded, the price, if any,
to be paid by the recipient of the Restricted Stock and the date or
dates on which, or the conditions upon the satisfaction of which, the
Restricted Stock will vest. The grant and/or the vesting of Restricted
Stock may be conditioned upon the completion of a specified period of
service with the Company or a Related Company, upon the attainment of
specified performance objectives or upon such other criteria as the
Committee may determine.
(b) Stock certificates representing the Restricted
Stock awarded under the Plan shall be registered in the award holder's
name, but the Committee may direct that such certificates be held by
the Company on behalf of the award holder. Except as may be permitted
by the Committee, no share of Restricted Stock may be sold,
transferred, assigned, pledged or otherwise encumbered by the award
holder until such share has vested in accordance with the terms of the
Restricted Stock award. At the time Restricted Stock vests, a
certificate for such vested shares shall be delivered to the award
holder (or his or her designated beneficiary in the event of death),
free of all restrictions.
(c) The Committee may provide that the award holder
shall have the right to vote and/or receive dividends on Restricted
Stock. Unless the Committee provides otherwise, Stock received as a
dividend on, or in connection with a stock split of, Restricted Stock
shall be subject to the same restrictions as the Restricted Stock.
(d) Except as may be provided by the Committee, in
the event of an award holder's termination of employment or service
before all of his or her Restricted Stock has vested, or in the event
any conditions to the vesting of Restricted Stock have not been
satisfied prior to any deadline for the satisfaction of such conditions
set forth in the award, the shares of Restricted Stock which have not
vested shall be forfeited, and the Committee may provide that (i) any
purchase price paid by the award holder shall be returned to the award
holder or (ii) a cash payment equal to the Restricted Stock's fair
market value on the date of forfeiture, if lower, shall be paid to the
award holder.
(e) The Committee may waive, in whole or in part, any
or all of the conditions to receipt of, or restrictions with respect
to, any or all of the award holder's Restricted Stock (except that the
Committee may not waive conditions or restrictions with respect to
awards intended to qualify under Section 162(m) of the Code unless such
waiver would not cause the award to fail to qualify as
"performance-based compensation" within the meaning of Section 162(m)
of the Code).
SECTION 9. Deferred Stock Awards
Subject to the following provisions, all awards of Deferred
Stock shall be in such form and shall have such terms and conditions as the
Committee may determine:
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(a) The Deferred Stock award shall specify the number
of shares of Deferred Stock to be awarded and the duration of the
period (the "Deferral Period") during which, and the conditions under
which, receipt of the Stock will be deferred. The Committee may
condition the grant or vesting of Deferred Stock, or receipt of Stock
or cash at the end of the Deferral Period, upon the attainment of
specified performance objectives or such other criteria as the
Committee may determine.
(b) Except as may be provided by the Committee,
Deferred Stock awards may not be sold, assigned, transferred, pledged
or otherwise encumbered during the Deferral Period.
(c) At the expiration of the Deferral Period, the
award holder (or his or her designated beneficiary in the event of
death) shall receive (i) certificates for the number of shares of Stock
equal to the number of shares covered by the Deferred Stock award, (ii)
cash equal to the fair market value of such Stock, or (iii) a
combination of shares and cash, as the Committee may determine.
(d) Except as may be provided by the Committee, in
the event of an award holder's termination of service before the
Deferred Stock has vested, his or her Deferred Stock award shall be
forfeited.
(e) The Committee may waive, in whole or in part, any
or all of the conditions to receipt of, or restrictions with respect
to, Stock or cash under a Deferred Stock award, (except that the
Committee may not waive conditions or restrictions with respect to
awards intended to qualify under Section 162(m) of the Code unless such
waiver would not cause the award to fail to qualify as
"performance-based compensation" within the meaning of Section 162(m)
of the Code).
SECTION 10. Loans
The Committee may provide that the Company shall make, or
arrange for, a loan or loans with respect to the exercise of any Stock Option
awarded under the Plan, with respect to the payment of the purchase price, if
any, of any Restricted Stock awarded hereunder or with respect to any taxes
arising from an award hereunder; provided, however, that any such loan shall be
made on terms that comply with all government statutes and regulations that
apply to the Company, and the Company shall not loan more than the sum of (i)
the excess of the purchase or exercise price of an award over the par value of
any shares of Stock awarded plus (ii) the amount of any taxes arising from such
award. The Committee shall have full authority to decide whether a loan will be
made hereunder and to determine the amount, term and provisions of any such
loan, including the interest rate to be charged, whether the loan will be with
or without recourse against the borrower, any security for the loan, the terms
on which the loan is to be repaid and the conditions, if any, under which the
loan may be forgiven.
SECTION 11. Tax Offset Payments
The Committee may provide for a Tax Offset Payment by the
Company with respect to one or more awards granted under the Plan. The Tax
Offset Payment shall be in an amount specified by the Committee, which shall not
exceed the amount necessary to pay the federal, state, local and other taxes
payable with respect to the applicable award and the receipt of the Tax Offset
Payment, assuming that the award holder is taxed at the maximum tax rate
applicable to such income. The Tax Offset Payment shall be paid solely in cash.
SECTION 12. Election to Defer Awards
The Committee may permit an award recipient to elect to defer
payment of an award for a specified period or until a specified event, upon such
terms as are determined by the Committee.
SECTION 13. Tax Withholding
13.1 Each award recipient shall, no later than the date as of
which the value of an award first becomes includible in such person's gross
income for applicable tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, any federal, state, local or
other taxes of any kind required by law to be withheld with respect to the
award. The obligations of the Company under the Plan shall be conditional on
such payment or arrangements,
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and the Company (and, where applicable, any Related Company), shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the employee.
13.2 To the extent permitted by the Committee, and subject to
such terms and conditions as the Committee may provide, an employee may elect to
have the withholding tax obligation, or any additional tax obligation with
respect to any awards hereunder, satisfied by (i) having the Company withhold
shares of Stock otherwise deliverable to such person with respect to the award
or (ii) delivering to the Company shares of unrestricted Stock. Alternatively,
the Committee may require that a portion of the shares of Stock otherwise
deliverable be applied to satisfy the withholding tax obligations with respect
to the award.
SECTION 14. Amendments and Termination
The Board may discontinue the Plan at any time and may amend
it from time to time. No amendment or discontinuation of the Plan shall
adversely affect any award previously granted without the award holder's written
consent. Amendments may be made without stockholder approval except as required
to satisfy NASDAQ, stock exchange, or regulatory requirements.
SECTION 15. General Provisions
15.1 Each award under the Plan shall be subject to the
requirement that, if at any time the Committee shall determine that (i) the
listing, registration or qualification of the Stock subject or related thereto
upon any securities exchange or market or under any state or federal law, or
(ii) the consent or approval of any government regulatory body or (iii) an
agreement by the recipient of an award with respect to the disposition of Stock,
is necessary or desirable in order to satisfy any legal requirements, such award
shall not be granted or exercised, in whole or in part, unless such listing,
registration, qualification, consent, approval or agreement shall have been
effected or obtained free of any conditions not acceptable to the Committee. The
application of this Section shall not extend the term of any Stock Option or
other award. The Company shall have no obligation to effect any registration or
qualification of the Stock under federal or state laws or to compensate an award
holder for any loss caused by suspension or loss of the right to exercise a
Stock Option or Stock Appreciation Right or receive any other award pursuant to
this Section.
15.2 Nothing set forth in this Plan shall prevent the Board
from adopting other or additional compensation arrangements. Neither the
adoption of the Plan nor any award hereunder shall confer upon any employee of
the Company, or of a Related Company, any right to continued employment; no
award shall confer upon any director any right to continued service as a
director, and no award shall confer on any consultant or advisor any right to
continued service in such capacity.
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FORM OF PROXY
NEWSTAR MEDIA INC.
8955 BEVERLY BOULEVARD
LOS ANGELES, CALIFORNIA 90048
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF NEWSTAR MEDIA
INC.
The undersigned hereby appoints John T. Brady and Robert C. Murray and
each of them, acting singly or jointly, as Proxies, each with the power to
appoint his substitute, and hereby authorizes each of them to represent and to
vote as designated below, all of the shares of Common Stock, $.01 par value per
share, of NewStar Media Inc. (the "Company") held of record by the undersigned
on November 1, 1999, at the Annual Meeting of Shareholders of the Company to be
held at 10:00 a.m., local time on Wednesday, December 8, 1999, and any
adjournments or postponements thereof.
Receipt of the Notice of Annual Meeting, the Proxy Statement and the
1998 Annual Report of the Company is hereby acknowledged.
The Board of Directors of the Company unanimously recommends a vote FOR
each of the items below.
<TABLE>
<CAPTION>
(1) Election of Directors for a one-year term:
<S> <C> <C> <C>
VOTE FOR all Nominees WITHHOLD AUTHORITY INSTRUCTION: To withhold
listed below (except as to vote for all to vote FOR any individual
marked to the contrary) nominees listed below nominee strike a line through that
nominee's name on the list below
[ ] [ ]
NOMINEES: Terrence A. Elkes, Ronald Lightstone, Bruce Maggin, Lee Masters and John R. Sprieser
(2) Ratification of the appointment of KPMG LLP as independent accountants for the fiscal year ending December 31,
1999.
(3) Adoption of the NewStar Media Inc. 1999 Stock Incentive Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(4) In their discretion, the Proxies are authored to vote upon such other business as may properly come before such
meeting and any and all postponements and adjournments thereof.
</TABLE>
PLEASE DATE, SIGN ON THE REVERSE SIDE AND RETURN IN THE ACCOMPANYING
ENVELOPE. THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS
INDICATED; HOWEVER, IF NO INSTRUCTIONS ARE GIVEN, THE PROXIES WILL VOTE THE
SHARES ON SPECIFIED MATTERS AS RECOMMENDED BY THE BOARD OF DIRECTORS AND IN
THEIR DISCRETION ON MATTERS DESCRIBED IN ITEM 4.
<PAGE>
THIS PROXY, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder. If no direction is made, this
proxy will be voted on specific matters as recommended by the Board of Directors
and in their discretion on matters described in Item 4.
------------------------------
Signature
------------------------------
Date
------------------------------
Signature
------------------------------
Date
IMPORTANT: Please date this card and sign
your name exactly as it appears on this Proxy.
When shares are held jointly, both holders
should sign. When as attorney, executor or
administrator, or trustee or guardian, please
give your full title as such. If a corporation,
please sign in full the corporate name by an
authorized officer. If a partnership, please
sign in the partnership's name by an authorized
person.
Do you plan to attend the meeting?
YES [ ] NO [ ]
PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY
