SECURITIES AND EXCHANGE COMMISSION
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by Registrant [x]
Filed by a Party Other than Registrant [ ]
Check the Appropriate Box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only as listed by Rule 14a-6(e)(2)0
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Exchange Act rule 14a-11(c) or 14a-12
WORLDWIDE ENTERTAINMENT & SPORTS CORP.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing fee (Check the appropriate box)
[x] No Fee Required
[ ] Fee computed on table below
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 the 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 is 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:
---------------------------------
Copies of all communications to:
John D'Angelo, Esq.
Worldwide Entertainment & Sports Corp.
29 Northfield Avenue, Suite 200
West Orange, New Jersey 07502
973-325-3244
WORLDWIDE ENTERTAINMENT & SPORTS CORPORATION
29 Northfield Avenue, Suite 200
West Orange, New Jersey 07052
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 17, 1999
To the Stockholders of
WORLDWIDE ENTERTAINMENT & SPORTS CORPORATION
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of WORLDWIDE ENTERTAINMENT & SPORTS CORPORATION, a Delaware
corporation (the "Company"), will be held on December 17, 1999 at the hour of
3:00 p.m. at the Sheraton Parsippany Hotel, 199 Smith Road, Parsippany, NJ
07054, for the following purposes:
Proposal 1: To elect seven members to the Board of Directors of the
Company;
Proposal 2: To consider and vote upon a proposal to adopt the
Company's 1999 Stock Option Plan;
Proposal 3: To consider and vote upon a proposal to amend the
Company's Certificate of Incorporation to (i) increase
the number of authorized shares of the Company's Common
Stock from 20,000,000 to 60,000,000 shares and (ii) to
increase the number of authorized shares of the
Company's "blank check" Preferred Stock from 5,000
shares to 5,000,000 shares;
Proposal 4: To consider and vote upon (i) a proposal to authorize
the Company to sell an additional 2,400,000 shares of
Common Stock in the second stage of a private placement
of up to 5,000,000 shares in the aggregate, in order to
raise up to $6,000,000 to finance the Company's Internet
subsidiary, Sportcut.com, Inc. and for general corporate
purposes; and (ii) certain compensation payable to the
Placement Agent in connection therewith;
Proposal 5: To ratify the selection of Friedman Alpren & Green
LLP as the Company's independent auditors for the fiscal
year ending December 31, 1999; and
To transact such other business as may properly come before the Meeting
or any postponement or adjournment thereof.
The Board of Directors of the Company has fixed October 25, 1999
as the record date (the "Record Date") for the determination of
Stockholders entitled to notice of, and to vote at, the Meeting or any
postponement or adjournment thereof. Accordingly, only Stockholders of
record at the close of business on the Record Date are entitled to
notice of, and shall be entitled to vote at, the Meeting or any
postponement or adjournment thereof.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. YOUR VOTE IS
IMPORTANT. TO ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE COMPLETE, SIGN
AND PROMPTLY MAIL YOUR PROXY IN THE RETURN ENVELOPE PROVIDED. YOUR FAILURE TO
EXERCISE YOUR VOTE WILL HAVE THE EFFECT OF A VOTE AGAINST THE PROPOSED
AMENDMENTS OF THE CERTIFICATE OF INCORPORATION. Submitting a proxy will not
prevent you from voting in person, should you so desire, but will help to secure
a quorum and will avoid added solicitation costs. You may revoke your proxy at
any time before it is voted at the Meeting.
By Order of the Board of Directors,
/s/Marc Roberts /s/ Herbert F. Kozlov
- - - ---------------------------- --------------------------------
Marc Roberts Herbert F. Kozlov, Secretary
Chairman of the Board
and Chief Executive Officer
November 10, 1999
WORLDWIDE ENTERTAINMENT & SPORTS CORPORATION
29 Northfield Avenue, Suite 200
West Orange, New Jersey 07052
PROXY STATEMENT
This Proxy Statement is being mailed on or about November 10, 1999 to all
Stockholders of record at the close of business on October 25, 1999 in
connection with the solicitation by the Board of Directors of Proxies for the
Annual Meeting of Stockholders (the "Meeting") to be held on December 17, 1999
at 3:00 p.m. at the Sheraton Parsippany Hotel, 199 Smith Road, Parsippany,
NJ 07054.
A proxy card is enclosed. Whether or not you plan to attend the Meeting in
person, please date, sign and return the enclosed proxy card as promptly as
possible in the postage prepaid envelope provided to ensure that your shares
will be voted at the Meeting.
Proxies will be solicited by mail, and the Company will pay all expenses of
preparing and soliciting such proxies. The person designated as proxy in any
duly executed proxy card received, will vote on all matters presented at the
Meeting in accordance with the specifications given therein by the person
executing such Proxy or, in the absence of specified instructions, will vote for
the named nominees to the Company's Board of Directors and in favor of each of
the proposals indicated on such Proxy. The Board of Directors does not know of
any other matter that may be brought before the Meeting but, in the event that
any other matter should come before the Meeting, or any nominee should not be
available for election, the persons named as proxy will have authority to vote
all Proxies not marked to the contrary in their discretion as they deem
advisable.
Any Stockholder may revoke his Proxy at any time before the Meeting by
written notice to such effect received by the Company at the address set forth
above, attn: Corporate Secretary, by delivery of a subsequently dated Proxy or
by attending the Meeting and voting in person.
Abstentions and broker non-votes will be counted for purposes of
determining the presence or absence of a quorum for the transaction of business
at the Meeting. Abstentions will be counted in tabulations of the votes cast on
each of the proposals presented at the Meeting, whereas broker non-votes will
not be counted for purposes of determining whether a proposal has been approved.
The total number of shares of the Company's Common Stock outstanding as of
October 25, 1999 was 14,228,320. There are no shares of Preferred Stock
outstanding. Each share of Common Stock is entitled to one non-cumulative vote.
Only Stockholders of record as of the close of business on October 25, 1999 will
be entitled to vote. A majority of the shares of Common Stock outstanding and
entitled to vote, or 7,114,161 shares, must be present at the Meeting in person
or by proxy in order to constitute a quorum for the transaction of business. The
majority of the votes present in person or by proxy and entitled to vote are
needed to pass each of the proposals to be made at the Meeting, except the
proposal to amend the Company's Certificate of Incorporation which requires a
majority of all votes entitled to be exercised by all of the Company's
outstanding Common Stock.
A list of Stockholders entitled to vote at the Meeting will be
available at the Company's offices, 29 Northfield Avenue, Suite 200, West
Orange, New Jersey 07052 for a period of ten days prior to the Meeting and at
the Meeting itself for examination by any Stockholder.
THE MEETING
TIME AND PLACE OF ANNUAL MEETING
The Meeting is scheduled to be held at 3:00 p.m., local time, on December
17, 1999 at the Sheraton Parsippany Hotel, 199 Smith Road, Parsippany, NJ 07504.
PURPOSE OF THE MEETING
At the Meeting, the Company's Stockholders will be asked (a) to elect seven
members to the Board for the ensuing year, (b) to consider and vote upon the
adoption of the Company's 1999 Stock Option Plan, (c) to consider and vote on a
proposal to amend the Company's Certificate of Incorporation to (i) increase the
number of authorized shares of the Company's Common Stock from 20,000,000 shares
to 60,000,000 shares and to (ii) increase the number of authorized shares of the
Company's "blank check" Preferred Stock from 5,000 shares to 5,000,000 shares,
(d) to consider and vote upon (i) a proposal to authorize the Company to sell up
to an additional 2,400,000 shares of Common Stock, bringing the total offered
for sale to 5,000,000 shares, in a private placement in order to raise at least
$6,000,000 to finance the operations of the Company's Internet subsidiary,
Sportcut.com, Inc. and for general corporate purposes; and (ii) the payment of
certain compensation payable to the Placement Agent in connection therewith,
(e) to ratify Friedman Alpren & Green LLP as the Company's independent auditors
for the fiscal year ending December 31, 1999 and (f) to transact any such other
business as may properly come before the Meeting or any postponement or
adjournment thereof.
VOTING AND SOLICITATION OF PROXIES
All shares of Common Stock represented at the Meeting by properly executed
proxies received prior to the vote at the Meeting, unless previously revoked (as
described immediately below), will be voted in accordance with the instructions
thereon. Where a properly signed proxy is returned and no instructions are
given, proxies will be voted FOR (i) the election of the nominees named herein
as members of the Board, (ii) the adoption of the Company's 1999 Stock Option
Plan, (iii) the proposed amendment to the Company's Certificate of
Incorporation, (iv) the proposed authorization for the Company to issue
up to an additional 2,400,000 shares of Common Stock, bringing the aggregate
total to up to 5,000,000 shares, in a private placement in order to raise at
least $6,000,000 and the proposed payment of certain compensation to the
Placement Agent in connection therewith, and (v) the ratification of
Friedman Alpren & Green LLP as the Company's independent certified public
accountants. No matters other than those referred to above are presently
scheduled to be considered at the Meeting. A broker who holds shares in street
name will not be entitled to vote on the proposal to amend the Certificate of
Incorporation without instructions from the beneficial owner of such shares.
This inability to vote is referred to as a broker non-vote. Stockholder
abstentions and broker non-votes will be counted for purposes of determining the
existence of a quorum at the Meeting. Pursuant to the General Corporation Law of
the State of Delaware and the Company's Certificate of Incorporation and
by-laws, a proposal to amend the Certificate of Incorporation must be approved
by the vote of a majority of the votes eligible to be cast by the Company's
Stockholders at the Meeting, and, as a result, abstentions and broker non-votes
will have the same effect as a vote against such proposals.
Stockholders giving proxies may revoke them at any time before it is voted.
A proxy may be revoked by filing with the Secretary of the Company at 29
Northfield Avenue, Suite 200, West Orange, New Jersey 07052 either (i) a written
notice of revocation bearing a date later than the date of such proxy or (ii) a
subsequent proxy relating to the same shares; or by attending the Meeting and
voting in person (although attendance at the Meeting will not, in and of itself,
constitute a revocation of a proxy).
Proxies are being solicited by and on behalf of the Company. The Company
will solicit proxies by mail, and the directors, officers and employees of the
Company may also solicit proxies by telephone, telegram or personal interview.
Those persons will receive no additional compensation for these services but
will be reimbursed for reasonable out-of-pocket expenses. The Company will bear
the costs of preparing and mailing the proxy materials to fiduciaries,
custodians and brokerage houses for forwarding to beneficial owners of shares of
Common Stock. Such persons will be paid reasonable out-of-pocket expenses.
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SHARES ENTITLED TO VOTE
The close of business on October 25, 1999 has been fixed as the record date
(the "Record Date") for determining the Stockholders entitled to notice of and
to vote at the Meeting. As of the Record Date, there were 14,228,320 shares of
Common Stock issued and outstanding and entitled to vote.
Each share of Common Stock entitles the holder thereof to one vote.
Accordingly a total of 14,228,320 votes may be cast at the Meeting. The holders
of shares of Common Stock representing a majority of all votes entitled to be
cast at the Meeting, present in person or represented by proxy at the Meeting,
shall constitute a quorum. Abstentions and broker non-votes are counted as
present in determining whether the quorum requirement is satisfied.
VOTE REQUIRED
A quorum being present at the meeting, a plurality of the votes cast shall
be required for the election of the Company's slate of directors, the approval
of the Company's 1999 Stock Option Plan, the approval of the Company's proposal
to (i) privately place up to an additional 2,400,000 shares of its Common Stock,
bringing the aggregate total up to 5,000,000 shares, in order to raise up to
$6,000,000 and (ii) pay certain proposed compensation to the Placement Agent in
connection therewith, and the ratification of Friedman Alpren & Green LLP as the
Company's independent certified public accountants shall require the affirmative
vote of a majority of the votes cast. A majority of all votes entitled to be
exercised by all of the Company's outstanding shares of Common Stock will be
necessary for the approval of the proposal to amend the Certificate of
Incorporation. Abstentions and broker non-votes will be counted as votes against
such proposal to amend the Certificate of Incorporation. A broker non-vote
occurs when a nominee holding shares for a beneficial owner does not vote on a
proposal because the nominee does not have discretionary voting power and has
not received instructions from the beneficial owner.
SHARES COMMITTED
The Company has been advised by various members of management and the Board
who, in the aggregate, hold or otherwise have voting power with respect to
2,946,772 shares of Common Stock (representing approximately 20.7% of the shares
of Common Stock outstanding) that they intend to vote such shares in favor of
each of the proposals to be presented for consideration and approval at the
Meeting, including the election of each of the candidates nominated to serve on
the Board.
NO APPRAISAL RIGHTS
Under the General Corporation Law of the State of Delaware, Stockholders of
the Company do not have appraisal rights in connection with any of the proposals
upon which a vote is scheduled to be taken at the Meeting.
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PROPOSAL 1
ELECTION OF DIRECTORS
Seven directors are to be elected at the Meeting to serve for a term of one
year or until their respective successors are elected and qualified.
INFORMATION CONCERNING NOMINEES
The following table sets forth the positions and offices presently held
with the Company by each nominee, his age, his tenure as a director and the
number of shares of the Company's Common Stock beneficially owned as of October
25, 1999:
Positions Number
Presently Held of Shares Approximate
with the Director Beneficially Percentage
Name Age Company Since Owned(1) of Class(1)
- - - ---- --- --------------- ------- -------- ----------
Marc Roberts 40 Chairman of the Board and 1995 1,964,966(2) 13.5%
Chief Executive Officer
Allan Cohen, M.D 56 Director 1996 161,667(3) 1.1%
Herbert F. Kozlov 46 Secretary and Director 1996 579,000(4) 4.0%
Harvey Silverman 57 Director 1996 410,834(5) 2.9%
Charles A. Koppelman 59 Director, Chairman of the Board 1999 500,000(6) 3.5%
of Sportcut.com, Inc.
Jordan Schlachter 31 Director and Chief Executive 1999 0 0%
Officer of Sportcut.com, Inc.
John D'Angelo 42 In-House General Counsel 1999 219,791(7) 1.5%
and Director
(1) Marc Roberts, Allan Cohen, Harvey Silverman, Herbert Kozlov and John
D'Angelo have agreed with the Company to refrain from exercising their
currently exercisable options until after the filing of the Amendment to
the Certificate of Incorporation discussed in Proposal 3. Except as
otherwise indicated, the persons named herein have sole voting and
dispositive power with respect to the shares beneficially owned.
(2) Includes 380,000 shares that may be acquired upon the exercise of
currently exercisable options and warrants.
(3) Includes 145,000 shares that may be acquired upon the exercise of
currently exercisable options and warrants.
(4) Includes 285,500 shares that may be acquired upon the exercise of
currently exercisable options and warrants and includes 8,000 shares held
under the NYGUMA for the benefit of his minor children. Does not include
shares and warrants to acquire additional shares held by members of a law
firm of which Mr. Kozlov is a member. Mr. Kozlov disclaims beneficial
ownership of such shares.
(5) Includes 235,500 shares that may be acquired upon the exercise of currently
exercisable options and warrants.
(6) Such shares vest pro-rata over a three-year period, conditioned upon Mr.
Koppelman's serving a three year term as a member of the Board of Directors
of the Company.
(7) Includes 200,000 shares that may be acquired upon the exercise of currently
exercisable options and includes 16,666 shares owned by the A.R. D'Angelo
Trust, a family trust of which Mr. D'Angelo is a co-trustee and a
beneficiary.
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MARC ROBERTS has been President and Chief Executive Officer of the Company
since its inception in August 1995. Mr. Roberts has principally been involved in
the day-to-day operations of the Company since that time. Since 1992, originally
through predecessors of the Company and, subsequent to August 1995, through the
Company itself, Mr. Roberts has also been directly engaged in the management of
the Company's boxers. Mr. Roberts is involved in various real estate, restaurant
and business ventures as a passive investor, none of which occupies a
significant portion of his business time.
ALLAN COHEN, M.D. has been a director of the Company since July 1996. Dr.
Cohen is engaged in the practice of medicine, specializing in gastroenterology,
and has been President of Gastroenterology Associates, a professional
corporation, since 1974 and President of the Medical Staff at Muhlenburg
Hospital in Plainfield, New Jersey. Dr. Cohen is Marc Robert's uncle.
HERBERT F. KOZLOV has been a director and secretary of the Company since
July 1996. Mr. Kozlov is a member of Parker Duryee Rosoff & Haft, counsel to the
Company. Mr. Kozlov is also a director of HMG Worldwide Corporation, Alpha
Hospitality Corporation and a number of privately held companies. He has been a
practicing attorney for more than twenty years.
HARVEY SILVERMAN, has been a director of the Company since July 1996. Mr.
Silverman is a Senior Managing Director of Spear Leeds & Kellog in New York,
where he has been employed since 1963. Mr. Silverman is a Governor on the
American Stock Exchange and is a director of Intermarket Clearing Corp.
CHARLES A. KOPPELMAN has been a director of the Company since June 1999. He
is Chairman and Chief Executive Officer of CAK Universal Credit Corp., a leading
entertainment finance company. He is also a director of Steven Madden, Ltd., and
the Rock and Roll Hall of Fame. He is also on the arts board at Tufts University
and is a Trustee of North Shore Hospital. He is also on the Board of Governors
of New York Hospital and sits on the Dean's Council at Hofstra Law School. On
October 12, 1999 Mr. Koppelman accepted appointment to serve as the Chairman of
the Board of Sportcut.com, Inc. the Company's 91.5% owned Internet subsidiary
that is developing a sports themed electronic commerce Internet business
scheduled to launch in the late Fall of 1999.
JORDAN SCHLACHTER is the Chief Executive Officer of Sportcut.com, Inc., a
91.5% owned subsidiary of the Company. He previously was the Director of
Financial Planning and Analysis for the National Basketball Association where he
had been employed since 1991. He received a B.A. from Harvard University and an
MBA from New York University.
JOHN D'ANGELO has been In-House General Counsel of the Company since April
1998. He is a graduate of Cornell University and the University of Virginia
School of Law where he was a member of the Law Review. His previous legal
experience spans over ten years, principally as a corporate attorney with the
firm of Davis Polk & Wardwell.
All directors will hold office until the next annual meeting of
Stockholders and the election and qualification of their successors. Executive
officers are elected annually by the Board of Directors to hold office until the
first meeting of the Board following the next annual meeting of Stockholders and
until their successors are chosen and qualified.
INFORMATION CONCERNING THE BOARD
The Board of Directors held 4 meetings, including actions taken by
unanimous written consent, during the year ended December 31, 1998. All of the
then incumbent directors were present at each such meeting either in person or
through teleconference.
The Board of Directors is responsible for oversight and administration of
executive compensation and also reviews and implements appropriate action with
respect to all matters pertaining to stock options granted under the Company's
1996 stock option plan.
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The Audit Committee of the Board is charged with the review of the
activities of the Company's independent auditors, including, but not limited to,
fees, services and scope of audit. In 1998 the Audit Committee was composed of
Messrs. Kozlov and Silverman. The Audit Committee is presently composed of
Messrs. Koppelman and Silverman. The Audit Committee met once during the year
ended December 31, 1998.
SECTION 16(a) - REPORTING DELINQUENCIES
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than 10% of the
Company's Common Stock, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission ("SEC"). Officers, directors and
greater than 10% Stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that through December 31, 1998,
all filing requirements applicable to its officers, directors and greater than
10% beneficial owners were complied with.
Stockholder Vote Required. A quorum being present, the election of the
Directors will require the affirmative vote of the holders, present in person or
represented by proxy at the Meeting, of shares entitled to cast a plurality of
the votes cast at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION TO THE BOARD OF
DIRECTORS OF THE COMPANY OF EACH OF THE NOMINEES.
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PROPOSAL 2
PROPOSAL TO APPROVE 1999 STOCK OPTION PLAN
The Company's Board of Directors adopted the Company's 1999 Stock Option
Plan (the "1999 Plan") on September 14, 1999, subject to Stockholder approval of
the Plan within one year thereafter, and subject to Stockholder approval of the
amendment to the Certificate of Incorporation set forth as Proposal 3 hereof, to
increase the number of authorized shares of Common Stock. The following summary
of the provisions of the 1999 Plan is qualified in its entirety by express
reference to the text of the 1999 Plan attached as Appendix A hereto.
PURPOSE
The purpose of the 1999 Plan is to advance the interests of the Company by
inducing persons of outstanding ability and potential to join and remain with
the Company, by encouraging and enabling employees, directors and consultants to
acquire proprietary interests in the Company and by providing the participating
employees, directors and consultants with additional incentive to promote the
success of the Company.
The 1999 Plan provides for its administration by the Board of Directors or
by a committee consisting of at least two persons chosen by the Board of
Directors (the "Committee"). The Committee has discretionary authority (subject
to certain restrictions) to determine the individuals to whom, the times at
which, and the exercise price for which Options will be granted. The Committee
also interprets the 1999 Plan and prescribes rules, regulations and forms
relating to its administration. The receipt of options by directors shall not
preclude their vote on any matters in connection with the administration or
interpretation of the 1999 Plan.
SHARES SUBJECT TO THE 1999 PLAN
A total of 2,000,000 shares of Common Stock of the Company shall be
reserved for issuance under the 1999 Plan, subject to Stockholder approval of
Proposal 3 hereof. The 1999 Plan provides for appropriate adjustments in the
event of stock dividends, stock splits, recapitalizations and other changes in
the Company's capital structure. No Options have been granted under the 1999
Plan as of the date hereof.
NATURE OF OPTIONS
The Committee may grant Options under the 1999 Plan ("Incentive Stock
Options") which are intended to meet the requirements of Section 422A of the
Internal Revenue Code of 1986, as amended ("the Code"). In addition, the
Committee may grant Options under the 1999 Plan which are not intended to meet
the requirements of Section 422A of the Code ("Nonstatutory Stock Options"). The
Federal income tax consequences of both Incentive Stock Options and Nonstatutory
Stock Options are described below under "Federal Income Tax Consequences".
ELIGIBILITY
Subject to certain limitations as set forth in the 1999 Plan, Options to
purchase shares may be granted thereunder to persons, including Committee
members, who, in the case of Incentive Stock Options, are full time employees
(including officers and directors) of either the Company or any subsidiary of
the Company, or, in the case of Nonstatutory Stock Options, are employees of or
non-employee directors of, or consultants to, the Company or any subsidiary of
the Company.
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OPTION PRICE
The Option price of the shares of Common Stock subject to an Incentive
Stock Option under the 1999 Plan may not be less than the fair market value of
the shares on the date upon which such option is granted. In addition, in the
case of an Option holder of an Incentive Stock Option who owns, at the time the
Option is granted, more than 10% of the total combined voting power of all
classes of stock of the Company or of a subsidiary of the Company (a "10%
Stockholder"), the purchase price of the shares may not be less than 110% of the
fair market value of the shares on the date upon which such Option is granted.
Under the 1999 Plan, the Option price may be paid for in full by the
surrender of shares of Common Stock of the Company. In such case, the Committee
shall determine the fair market value of the surrendered shares as of the date
of their exercise in the same manner as the value is determined upon the grant
of an Incentive Stock Option.
The Committee in its sole discretion shall determine the Option price of
the shares of Common Stock subject to Nonstatutory Stock Options.
NON-TRANSFERABILITY
Incentive Stock Options granted under the 1999 Plan are not transferable
other than by will or the laws of descent and distribution and such Options are
exercisable, during a holder's lifetime, only by such holder.
RESTRICTIONS ON EXERCISE
No Incentive Stock Option granted under the 1999 Plan will be exercisable
after the expiration of ten years from the date of its grant. However, if an
Incentive Stock Option is granted to a 10% Stockholder, such Option shall not be
exercisable after the expiration of five years from the date of its grant.
DEATH, DISABILITY OR TERMINATION OF EMPLOYMENT
If the employment of an Option holder under the 1999 Plan shall be
terminated voluntarily by the employee or if such termination shall be made for
cause, or if the services of a non-employee director shall be terminated
voluntarily by the director or for cause, such Option may be exercised at any
time within ninety (90) days after such termination (but in no event after the
expiration of the Option). For the purposes of the 1999 Plan, the retirement of
an individual either pursuant to a pension or retirement plan adopted by the
Company or at the normal retirement date prescribed from time to time by the
Company shall be deemed to be a termination of such individual's employment
other than voluntarily by the employee or for cause.
If an Option holder under the 1999 Plan (i) dies or becomes permanently or
totally disabled while employed by the Company or while serving as a
non-employee director of the Company or (ii) dies within three months after the
termination of his employment of service other than voluntarily or for cause,
then such Options may be exercised by the Option holder or his legatee,
legatees, his personal representatives or distributees at any time within one
year after his death or termination of employment due to disability.
EFFECT OF CHANGES IN THE CAPITALIZATION OF THE COMPANY
In the event of any merger, reorganization or other recapitalization of the
Company, an Option holder under the Plan would be entitled to receive, upon the
exercise of his Option, the same consideration that he would have been entitled
to receive upon the happening of such corporate event, as if the Option holder
had been, immediately prior to the event, the holder of the total number of
shares underlying his Option.
Notwithstanding the foregoing, if the Company's Common Stock should cease
to be publicly traded at any time in the future, an option holder under the 1999
Plan who exercises his Option at any time thereafter would be entitled to
8
receive only such number of shares or other consideration to the extent that his
Option had vested on the date of the cessation of such public trading.
Management is neither planning nor aware of any merger, reorganization or
other recapitalization or potential merger, reorganization or recapitalization
of the Company.
AMENDMENT AND TERMINATION
The 1999 Plan (but not Options previously granted thereunder) shall
terminate on September 30, 2009. Subject to certain limitations, the 1999 Plan
may be amended or terminated at an earlier date by the Company's Board of
Directors or by a majority of the outstanding shares entitled to vote thereon.
FEDERAL INCOME TAX CONSEQUENCES
The following material summarizes the principal anticipated federal
income tax consequences of grants under the 1999 Plan to participants and the
Company.
CONSEQUENCES TO PARTICIPANTS
INCENTIVE STOCK OPTIONS. No income results to the holder of an Incentive
Stock Option upon the grant of the Option or issuance of shares. The amount
realized on the sale or taxable exchange of such shares in excess of the Option
price will be considered a capital gain, except that, if a disposition occurs
within one year after exercise of the Option or two-years after the grant of the
Option, the Option holder will realize compensation, for federal income tax
purposes, on the amount by which the lesser of (i) the fair market value on the
date of exercise or (ii) the amount realized on the sale of the shares, exceeds
the Option price. For the purpose of determining alternative minimum taxable
income, an Incentive Stock Option is treated as a non-qualified option. The fair
market value of shares for which an Option holder may be granted Incentive Stock
Options that are exercisable for the first time during any year may not exceed
$100,000.
NONSTATUTORY OPTIONS. In connection with the exercise of a Nonstatutory
Option, an Option holder will generally realize compensation, for federal income
tax purposes, on the difference between the Option price and the fair market
value of the shares acquired.
PAYMENT OF OPTION PRICE IN SHARES. If an Option is exercised and payment is
made by means of previously held shares, there is no gain or loss recognized to
the Option holder on the previously held shares. In the case of a Nonstatutory
Option, the Option holder's basis and holding period of the previously held
shares will be carried over to an equivalent number of shares received upon
exercise of the Option. Any additional shares received under the Option will
have a basis equal to the compensation realized by the Option holder for federal
income tax purposes plus the amount of any additional cash paid.
DISQUALIFYING DISPOSITION. Exercising a Nonstatutory Option with shares
that were originally acquired on the exercise of an Incentive Stock Option will
not constitute a "disqualifying disposition" of such previously held shares. If,
however, the new shares are not held for the balance of the required holding
period, there will be a disqualifying disposition for federal income tax
purposes, resulting in recognition of compensation to the Option holder in an
amount equal to the excess of the fair market value over the Option price at the
time such incentive shares were originally acquired (but not in excess of the
Option holder's gain). However, exercising an Incentive Stock Option with shares
acquired on the exercise of an Incentive Stock Option will constitute a
disqualifying disposition of such previously held shares if the one and two-year
holding periods described above have not been met before such exercise.
TAX WITHHOLDING RIGHTS. Upon delivery to the Company of previously-held
shares to satisfy withholding or other tax obligations of a participant pursuant
to tax withholding rights, the difference between the fair market value of, and
the participant's basis for, such shares would be a capital gain or loss to the
participant for federal income tax purposes.
9
CONSEQUENCES TO THE COMPANY
To the extent individual Option holders qualify for capital gains tax
treatment, neither the Company nor its affiliates will generally be entitled to
a deduction for federal income tax purposes. In other cases, the Company or its
affiliates will generally receive a federal income tax deduction at the same
time as and in the same amount as the amount which is taxable to the employee as
compensation, except as provided below.
The Board has unanimously approved the 1999 Plan, subject to Stockholder
approval and subject to Stockholder approval of the Amendment to the Certificate
of Incorporation described in Proposal 3 hereof, and unanimously recommends to
the Stockholders that the same be approved and ratified by them.
Stockholder Vote Required. Adoption of the 1999 Plan requires the
affirmative vote (a quorum being present) of the holders, present in person or
represented by proxy at the Meeting, of shares entitled to cast a majority of
the votes at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE OR
RATIFY THE ADOPTION OF THE 1999 STOCK OPTION PLAN.
10
PROPOSAL 3
AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO
INCREASE THE AMOUNT OF AUTHORIZED CAPITAL STOCK
At the Meeting, Stockholders will be asked to approve or ratify an
amendment to the Company's Certificate of Incorporation (the "Certificate")
proposed by resolution of the Board which (i) would increase the number of
authorized shares of Common Stock by forty million (40,000,000) shares and (ii)
would increase the number of authorized shares of the Company's "blank check"
Preferred Stock by four million nine hundred ninety five thousand (4,995,000)
shares.
The Company's authorized capital stock currently consists of 20,000,000
shares of Common Stock and, as of the Record Date, there were issued and
outstanding 14,228,320 shares of Common Stock. Additionally, there are currently
issued and outstanding options and/or warrants that, upon exercise, would call
for the issuance of an additional 6,419,858 shares of Common Stock. Certain
directors and officers of the Company have agreed to refrain from exercising
options to purchase, in the aggregate, up to 1,520,000 shares of Common Stock
pending the approval by the Company's Stockholders of the Amendment to the
Company's Certificate of Incorporation described in this Proposal 3. The
Company's authorized "blank check" Preferred Stock presently consists of 5,000
shares, none of which have been designated and issued as a series of Preferred
Stock.
The additional shares of Common Stock proposed to be authorized pursuant to
this proposal would be available to the Company to fulfill its obligations with
respect to the exercise of its options and warrants, to enable the Company to
reserve a sufficient number of shares to support the 1999 Option Plan (See
Proposal 2), and to provide it with the flexibility to raise funds to meet the
future business developments and capital requirements, particularly with respect
to its current capital requirements and to fund the operations of its recently
formed Internet subsidiary, Sportcut.com, Inc. In this proxy statement, for
example (See Proposal 4), the Company is also seeking Stockholder approval to
issue up to an aggregate of 5,000,000 shares of Common Stock in a private
placement of securities in order to raise at least $6,000,000 for the operations
of Sportcut.com, Inc. Although the Company has no plans at this time for any
such transactions, the Company may also use the additional shares of Common
Stock and Preferred Stock for business or asset acquisitions in the future if
such opportunities arise and are deemed to be in the best interest of the
Company by the Board of Directors. The Company would also like to have the
flexibility afforded by the additional Common and Preferred shares to issue
stock dividends or other equity reorganizations from time to time if, in the
future, the Board of Directors should decide that it would be desirable, in
light of market conditions then prevailing and in order to take advantage of
propitious market conditions, to broaden the public ownership of, and to
enhance the market for, the Common Stock. Additional shares would also be
available for other purposes, which include other employee benefit programs
at the discretion of the Board, without the delays and expenses ordinarily
attendant upon obtaining further Stockholder approval. Likewise, the additional
increase in authorized Preferred Stock would provide the Company with additional
flexibility in meeting its future capital requirements with another type of
security in addition to its Common Stock.
To the extent required by Delaware law, Stockholder approval will be
solicited in the event shares of Common Stock are to be issued in connection
with a merger or acquisition. The Company, in compliance with the Nasdaq
SmallCap Market listing requirements, will also solicit Stockholder approval for
any transactions that may trigger such approval. In general, however, and
subject to certain Nasdaq limitations, the Board may issue the additional
authorized shares for such purposes without Stockholder approval. The issuance
of such shares would dilute the voting power, and, potentially, the liquidation
value of the currently outstanding shares.
The proposed amendment to the Certificate would amend Article Fourth
thereof to read in its entirety as follows:
FOURTH: The total number of shares of stock that the Corporation shall
have the authority to issue is sixty-five million (65,000,000), consisting
of sixty million (60,000,000) shares of Common Stock, each such share
having a par value of $.01, and five million (5,000,000) shares of
Preferred Stock, each such share having a par value of $.01. The Board of
Directors is expressly authorized to issue Preferred Stock without
Stockholder approval, on one or more series, and to fix for each such
series such voting powers, full or limited, and such designations,
preferences and relative, participant, optional or special rights and such
qualifications, limitations or restrictions thereof as shall be stated and
expressed in the resolution or resolutions adopted by the
11
Board of Director providing for the issue of such series and as may be
permitted by the Delaware General Corporation Law.
The Board has unanimously approved the foregoing proposed amendment and
unanimously recommends to the Stockholders that the same be approved or ratified
by the Stockholders.
Stockholder Vote Required. A quorum being present, the adoption of the
foregoing proposed amendment to the Certificate of Incorporation will require
the affirmative vote of a majority of all of the outstanding shares of Common
Stock as of the Record Date.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED
AMENDMENT TO THE CERTIFICATE OF INCORPORATION.
12
PROPOSAL 4
PROPOSAL TO APPROVE THE ADDITIONAL PRIVATE PLACEMENT OF UP TO 2,400,000
SHARES OF COMMON STOCK THROUGH AN EXISTING PRIVATE OFFERING TO FUND
OPERATIONS FOR THE COMPANY'S INTERNET SUBSIDIARY, SPORTCUT.COM, INC.
AND FOR GENERAL CORPORATE PURPOSES AND THE PAYMENT OF CERTAIN COMPENSATION
TO THE PLACEMENT AGENT IN CONNECTION THEREWITH
The Company, subject to the approval by the Stockholders of the Proposal to
Amend the Company's Certificate of Incorporation described in Proposal 3, above,
seeks Stockholder approval to privately place up to an additional 2,400,000
shares of Common Stock in its current private offering in order to raise an
additional approximately $2,880,000 in capital to fund the operations of its
91.5% owned Internet subsidiary, Sportcut.com, Inc. ("Sportcut.com"), and for
general corporate purposes through December 31, 2000.
Placement of Additional Shares
On September 15, 1999 the Company engaged Janssen Partners, Inc.
("Janssen") to serve as the Placement Agent for the private placement of the
Company's Common Stock. The Company retained Janssen to raise from a minimum of
$1,000,000 to a maximum of $6,000,000 with the proceeds to be used for the
development of Sportcut.com and for general corporate purposes (the "Janssen
Private Placement"). In order to raise the maximum amount of $6,000,000 in the
Janssen Private Placement, the Company anticipates it will have to issue up to
5,000,000 shares of Common Stock, assuming the shares are sold at the minimum
per share price of $1.20 allowed by the Janssen Private Placement Agreement. The
actual price of the Common Stock in the offering will be the average price of
the Common Stock for ten business days preceding any closing less a twenty
percent (20%) discount with a maximum share price of $2.00 per share and a
minimum share price of $1.20 per share, however, so the actual number of shares
issued may vary. All shares of Common Stock sold in the Janssen Private
Placement will be restricted subject to their registration by the Company on or
before the expiration of six months from their dates of issuance.
NASDAQ SmallCap Corporate Governance requirements require a company listed
on NASDAQ to obtain the approval of its stockholders before consummating a
transaction for "the sale or issuance by the company of common stock...equal to
20% or more of the common stock or 20% or more of the voting power outstanding
before the issuance for less than...the market value of the stock." To be in
accordance with the NASDAQ Small Cap Market listing requirements, therefore, the
Company is currently entitled to issue up to approximately 2,600,000 shares of
its Common Stock in the Janssen Private Placement without obtaining Stockholder
approval (the "Shares Not Subject To Stockholder Approval"). Assuming the
minimum share price of $1.20, the Company will be able to sell 2,600,000 shares
of Common Stock and raise approximately $3,120,000 in gross proceeds from the
Janssen Private Placement without obtaining Stockholder approval. On October 14,
1999, the Company closed upon the first sale of 1,138,057 shares at $1.34 per
share and on October 29, 1999 it closed on the second sale of the private
placement placing 1,181,100 shares at $1.27 per share. The Company anticipates
one or more additional closings for the sale of additional common stock up to
the aggregate limit of 2,600,000 shares.
In this Proposal 3 the Company seeks Stockholder approval to issue the
remaining 2,400,000 shares (the "Shares Subject to Stockholder Approval")
anticipated to be necessary to be sold in the Janssen Private Placement in order
to reach the $6,000,000 goal (assuming, for purposes of discussion, the minimum
per share price of $1.20). If the Company sells 2,400,000 shares at the minimum
per share price of $1.20, the Company will raise additional gross proceeds of
$2,880,000 in this second part of the Janssen Private Placement thereby reaching
the $6,000,000 aggregate goal for the funding of Sportcut.com's operations.
Sportcut.com is in its development stages and continues to require capital
to implement its business plan to become a sports themed e-commerce Internet
business operating an interactive web site at http:// www.sportcut.com through
which it will disseminate sports related information and retail sports related
merchandise. Sportcut.com was formed in April 1999 and is presently projected to
launch in the late fall 1999. The Company anticipates that it is likely that
Sportcut.com will continue to need additional funding to maintain its operations
and to fully integrate its business during the year 2000. The Company has not
presently engaged a placement agent for any additional private placement
13
beyond the Janssen Private Placement. In the event the full $6,000,000 is raised
from the Janssen Private Placement, the Company intends to use the net proceeds
from the Janssen Private Placement, which it estimates at approximately
$5,195,000, primarily to fund the operations of Sportcut.com, and to a lesser
extent for general corporate purposes. The Company intends to primarily use the
proceeds of such Janssen Private Placement within the next six to twelve months
to finance the design, implementation, and launch of Sportcut.com, including
general business expenses such as payroll, advertising and marketing, and
equipment purchases and licenses.
Certain Compensation of the Placement Agent
The Company is also seeking in this Proposal 3, Stockholder approval for
the stock and warrant compensation to be paid to Janssen for both the Shares
Not Subject To Stockholder Approval and the Shares Subject To Stockholder
Approval. The Company has agreed to compensate Janssen for serving as the
Placement Agent in the Janssen Private Placement as follows: (i) as of September
15, 1999, the date on which the Placement Agreement was signed, the Company
agreed to issue Janssen (a) a total of 300,000 restricted shares of Common Stock
and 300,000 warrants to acquire Common Stock at an exercise price of $1.50 per
share, which was the closing price of the Common Stock on September 15, 1999 as
reported by the NASDAQ SmallCap Market, such warrants to be exercisable for a
five year term, and (b) the sum of $100,000; (ii) upon Janssen's raising
aggregate proceeds of at least $1,000,000, Janssen shall receive a monthly
consulting fee of $10,000 per month for six months; a ten percent (10%) selling
commission and a three (3 %) percent non-accountable expense allowance on
aggregate proceeds raised in the Janssen Private Placement; (iii) upon Janssen's
raising aggregate proceeds of at least $3,000,000, Janssen shall receive an
additional 300,000 restricted shares of Common Stock and 300,000 warrants to
acquire Common Stock at an exercise price of $1.50 per share, exercisable for a
five year term and the monthly consulting fee shall increase from $10,000 per
month to $20,000 per month for a three year term; and (iv) upon Janssen's
raising the aggregate proceeds of $6,000,000 Janssen shall receive an additional
300,000 restricted shares of Common Stock and 300,000 warrants to acquire Common
Stock at an exercise price of $1.50 per share, exercisable for a five year term
and shall also receive 250 shares of common stock of Sportcut.com, which is 5%
of Sportcut.com's current outstanding shares of common stock.
In connection with the October 14, 1999 closing of the sale of 1,138,057
shares of the Shares Not Subject To Stockholder Approval at $1.34 per share,
the Company raised gross proceeds of approximately $1,525,000. The Company paid
Janssen a 10% commission on such amount and a 3% non-accountable expense
allowance. The Company has also paid Janssen the aforementioned $100,000 sum.
Closing on the $1,525,000 triggered the commencement of the $10,000 monthly
consulting fee as well. The Company and Janssen have agreed that Janssen's
receipt of the aforementioned stock and warrant compensation as well as any
subsequent stock and warrant compensation to which Janssen may be entitled,
however, is and shall be subject to Stockholder approval, although the cash
compensation paid to Janssen in connection with the October 14, 1999 closing
is not subject to Stockholder approval.
The Company's proposal herein shall not be interpreted as precluding the
Company from engaging in alternative forms of financing for Sportcut.com and for
the Company for which Stockholder approval is not required, including but not
limited to, a private placement of Sportcut.com securities or an initial public
offering of Sportcut.com's securities.
Stockholder Vote Required. A quorum being present, the approval of the
foregoing proposal requires the affirmative vote of the holders, present in
person or represented by proxy at the Meeting, of shares entitled to cast a
plurality of the votes cast at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL TO AUTHORIZE:
(I) THE ISSUANCE OF UP TO AN ADDITIONAL 2,400,000 SHARES OF COMMON STOCK
TO BE OFFERED FOR SALE THROUGH AN EXISTING PRIVATE OFFERING TO FUND
OPERATIONS FOR THE COMPANY'S INTERNET SUBSIDIARY, SPORTCUT.COM, INC. AND
FOR GENERAL CORPORATE PURPOSES; AND (II) THE PAYMENT OF
CERTAIN COMPENSATION TO BE PAID TO THE PLACEMENT AGENT IN CONNECTION
THEREWITH. EXECUTIVE COMPENSATION
14
Set forth below is the aggregate compensation for services rendered in all
capacities to the Company during its fiscal years ended December 31, 1998, 1997
and 1996 by its Chief Executive Officer and each of its executive officers whose
compensation exceeded $100,000 during its fiscal year ended December 31, 1998:
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
-------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------- ------------------- -----------------------
OTHER NUMBER OF ALL
NAME AND ANNUAL RESTRICTED SECURITIES LONGTERM OTHER
PRINCIPAL COMPEN- STOCK UNDERLYING INCENTIVE COMPEN-
POSITION YEAR SALARY BONUS SATION(1) AWARDS OPTIONS PAYOUTS SATION
- - - --------- ---- ------ ----- --------- ------ ------- --------- --------------
Marc Roberts 1998 $215,000 -- -- -- 65,000 -- --
Chief Executive 1997 $215,000 -- -- 140,000 -- --
Officer 1996 $195,000 -- -- -- -- -- --
Roy Roberts (2) 1998 $120,000 -- -- -- 125,000 -- --
Chief Financial 1997 $120,000 -- -- -- 40,000 -- --
Officer 1996 $120,000 -- -- -- -- -- --
Joel Segal(3) 1998 $140,000 -- -- 200,000 100,000 -- --
Chief Executive 1997 $ 94,230 75,000 -- -- -- -- --
Officer WWFM 1996 -- -- -- -- -- -- --
(1) Personal benefits provided to Messrs. Marc Roberts, Roy Roberts and Joel
Segal did not exceed the disclosure thresholds established under SEC rules,
and therefore are not included in this table.
(2) Roy Roberts is the father of Marc Roberts.
(3) Mr. Segal did not become Chief Executive Officer of Worldwide Football
Management, Inc., a wholly owned subsidiary of the Company ("WWFM") until
April, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Set forth below is information with respect to options to purchase the
Company's Common Stock granted in the year ended December 31, 1998 and prior
years under the Company's 1996 Stock Option Plan.
NUMBER OF SECURITIES
NUMBER OF UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED DECEMBER 31, 1998 AT DECEMBER 31, 1998
ON VALUE ----------------------------- -----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - - ---- -------- -------- ----------- ------------- ----------- -------------
Marc Roberts -- -- 205,000 -- $0 --
Roy Roberts -- -- 165,000 -- $0 --
Joel Segal -- -- 100,000 100,000 $0 --
15
EMPLOYMENT AGREEMENTS
The Company maintains a five-year employment agreement ("Roberts Employment
Agreement") with Marc Roberts, Chairman of the Board and Chief Executive
Officer, commencing January 1, 1996 that provides for a base annual salary of
$190,000 with annual minimum guaranteed increases of $25,000. Mr. Roberts shall
also be paid an annual bonus of an amount equal to a minimum of 10% of the
pretax operating income of the Company before income taxes, depreciation and
amortization. The Company's Board of Directors or its executive compensation
committee, if any, shall determine bonuses in excess of that amount. Mr. Roberts
shall also be entitled to participate in the Company's incentive stock option
plan and shall be granted a minimum of 30% of the stock options to be issued by
the plan at an exercise price of 110% of the fair market value of the stock, as
determined by the board of Directors, on the date of grant. The agreement
provides that upon termination of Mr. Roberts' employment without cause or upon
certain changes in control of the Company resulting in Mr. Roberts' termination,
he will be entitled to receive any accrued but unpaid amounts due him under the
agreement from the period prior to his termination. In addition, the Company is
obligated to pay Mr. Roberts(i) within five (5) days of notice of termination,
an amount equal to sixty percent (60%) of the present value of the sum of (x)
all salary which would have been earned but for such termination for a period of
2.99 years commencing on the date of such termination based on Mr. Roberts' then
current salary, plus (y) the present value of an amount determined by
multiplying the amount of incentive compensation earned by Mr. Roberts for the
last fiscal year of the Company preceding termination by 2.99 (the "Severance
Compensation"). The remaining forty percent (40%) of the Severance Compensation
shall be paid to Mr. Roberts in twelve (12) equal monthly installments
commencing on the first month after the month in which he was terminated. In the
event of Mr. Roberts' termination for cause, or if Mr. Roberts voluntarily
terminates the agreement within its first two years, the Company is under no
obligation to pay him his compensation beyond the date of termination. If Mr.
Roberts voluntarily resigns from the Company after the second anniversary of his
agreement, he shall be entitled to receive all of the compensation and benefits
he would be afforded if he had been terminated without cause. Mr. Roberts'
agreement provides that Mr. Roberts will not compete with the Company for a one
(1) year period after the termination of his employment. The Company has
obtained a $2,000,000 key person life insurance policy on Mr. Roberts' life
naming the Company as beneficiary.
In connection with the formation of WWFM as a separate entity, the Company
entered into an employment agreement with Joel Segal, a registered NFL player's
agent, effective as of April 16, 1997, pursuant to which Mr. Segal assigned the
rights and interests to the revenue generated by any individual with whom Mr.
Segal signs to a valid representation agreement, or with whom material
discussions regarding entering a representation agreement are had by Mr. Segal,
the Company or its employees or affiliates. Mr. Segal's base salary shall be
$140,000 during the term of the employment agreement, with a signing bonus of
$75,000. Pursuant to his employment agreement Mr. Segal was a 20% owner of WWFM
but if he remained employed by the Company on December 31, 1998 either he or the
Company had the right to cause a merger between WWFM and the Company. Such a
merger would require the Company to issue 200,000 shares of the Company's Common
Stock to Mr. Segal in exchange for his 20% stake in WWFM. WWFM would then become
a wholly owned subsidiary of the Company. The Company affected such exchange
with Mr. Segal in December 1998, thereby making WWFM a wholly owned subsidiary
of the Company.
Certain other executive officers of the Company have employment agreements.
Mr. Jay Schulthess executed a five-year employment agreement with the Company
in April 1998, becoming President of the Motorsports Division of the Company.
Mr. Schulthess' base salary is $90,000 during the term of the agreement with
additional incentives in the form of bonuses and stock options based upon Mr.
Schulthess' achieving certain objective financial results. The Company also
granted Mr. Schultess an option to acquire 25,000 shares of Common Stock of the
Company at an exercise price of $2.00, with such option being exercisable over a
five-year term upon execution of such employment agreement.
On June 23, 1999, the Company also entered into a one year employment
agreement with Mr. Laurence Gottlieb as Executive Vice President at an annual
salary of $185,000 and issued Mr. Gottlieb 20,000 shares of restricted Common
Stock of the Company and granted Mr. Gottlieb options to purchase up to 20,000
shares of Common Stock of the Company at an exercise price of $2.00 with such
option being exercisable over a five year term.
16
COMPENSATION OF DIRECTORS
The Company does not compensate its directors. The Company's policy,
however, is to reimburse directors for travel and out-of-pocket expenses
incurred, if any, to attend its directors' meetings. See "Compensation Committee
Interlocks and Insider Participation".
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
The Company does not have a Compensation Committee and the Board as a whole
rather than the Compensation Committee has set compensation for its executive
officers for each of the past three years. Two of such directors received cash
compensation as executive officers of the Company. One of such directors
received cash compensation as chief executive officer of Sportcut.com.
Compensation levels afforded to Marc Roberts, Roy Roberts, John D'Angelo
and to the Company's other executive officers are based in substantial part upon
a comparative evaluation by the Company's Board of Directors of each such
person's functional responsibility and performance in that particular segment of
the Company's operations for which each is responsible and, where discernable,
the profitability of that segment.
During 1998 and 1999, the Board approved the grant of stock options, to a
number of employees, including executive officers. The grant of options were
approved after considering the significant transactions initiated and
consummated by the executive officers on behalf of the Company during the past
year. The Board noted that the Company's executive officers accomplishments
included (i) the arranging of a heavyweight championship boxing match for
Shannon Briggs against Lennox Lewis; (ii) the closing of a secondary offering of
the Company's Common Stock in the aggregate amount of $6,500,000, which
secondary offering was oversubscribed by investors; (iii) the formation of
Sportcut.com, Inc. and selection of Charles Koppelman as Chairman and Jordan
Schlachter as Chief Executive Officer of Sportcut.com, Inc.; (iv) the continued
growth of the Company's WWFM subsidiary in terms of representing an increasing
number of NFL football players in excess of 40 players; (v) the Company's
entering into a joint venture arrangement with Munisteri Sports & Entertainment
Inc. whereby the Company received partial management interests in seven
heavyweight boxers; and (vi) the growth of the Company's Motorsports Division,
including the Company's representation of Brewco Motorsports NASCAR Busch Cup
racing team in procuring a multi-million dollar sponsorship from Castrol North
America for Brewco Motorsports racing team.
November 10, 1999
Marc Roberts - Chairman Charles A. Koppelman
Herbert Kozlov John D'Angelo
Harvey Silverman Jordan Schlachter
Allan Cohen
17
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the Company's
cumulative total Stockholder return on its Common Stock (based on the market
price of the Company's Common Stock) with the cumulative total return of U.S.
companies on The Nasdaq Stock Market and non-financial companies on The Nasdaq
Stock Market.
COMPARISON OF 26 MONTH CUMULATIVE TOTAL RETURN*
AMONG WORLDWIDE ENTERTAINMENT & SPORTS CORP.,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ NON-FINANCIAL INDEX
[Performance Graph]
- - - - $100 INVESTED ON 10/24/96 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
CUMULATIVE TOTAL RETURN
---------------------------------------
10/24/96 12/96 12/97 12/98
WORLDWIDE ENTERTAINMENT & SPORTS CORP. 100 69 25 26
NASDAQ STOCK MARKET (U.S.) 100 106 129 182
NASDAQ NON-FINANCIAL 100 107 125 183
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Each member of the Board of Directors participated in the determination of
the level of compensation of the Company's executive officers. Three of such
directors are officers of the Company, i.e., Marc Roberts, Chief Executive
Officer, John D'Angelo, In-House General Counsel, and Herbert F. Kozlov -
Secretary. Mr. Jordan Schlachter is the Chief Executive Officer of Sportcut.com,
which company is 91.5% owned by the Company. Charles Koppelman is a 5% owner of
and Chairman of the Board of Sportcut.com.
In April 1999, the Company entered into an agreement with Bsquared
Communications, Inc. ("Bsquared") to provide creative, marketing, technical and
business development consulting services to implement its Sportcut.com business
plan and to create the type of web environment the Company envisions as the
basis for its Internet business. In consideration for such services, Bsquared
has received 3.5% of the outstanding common stock of Sportcut.com with a right
to receive up to a total of 12.5% of the common stock of Sportcut.com upon the
attainment by Sportcut.com of certain financial and business benchmarks.
Herbert F. Kozlov, a director of the Company, is a member of Parker Duryee
Rosoff & Haft, counsel to the Company. Fees paid to such firm by the Company for
the year ended December 31, 1998 were approximately $263,000.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of October 25, 1999, based on the
information obtained from the persons named below, with respect to the
beneficial ownership of shares of the Company's Common Stock by (i) each
director of the Company, (ii) certain executive officers of the Company, (iii)
each person known by the Company to be the owner of more than 5% of its
outstanding shares of Common Stock, and (iv) all executive officers and
directors as a group:
NAME AND ADDRESS OF NUMBER OF APPROXIMATE
BENEFICIAL HOLDER SHARES (1) PERCENTAGE OF CLASS
- - - ------------------- ---------- --------------------
Marc Roberts 1,964,966(2) 13.5%
29 Northfield Avenue
West Orange, New Jersey 07052
Allan Cohen 161,667(3) 1.1%
18
29 Northfield Avenue
West Orange, New Jersey
Roy Roberts 360,834(4) 2.5%
29 Northfield Avenue
West Orange, New Jersey 07052
Harvey Silverman 410,834(5) 2.8%
120 Broadway
New York, New York 10018
Herbert F. Kozlov 579,000(6) 4.0%
529 Fifth Avenue
New York, New York 10017
Charles A. Koppelman 500,000(7) 3.5%
1330 Avenue of the Americas
New York, New York 10019
John D'Angelo 219,971(8) 1.5%
1350 Avenue of the Americas
New York, New York 10019
Jordan Schlachter 0 0.0%
Joel Segal 350,000(9) 2.4%
29 Northfield Avenue
West Orange, New Jersey 07052
Laurence Gottlieb 40,000(10) 0.3%
29 Northfield Avenue
West Orange, New Jersey
All executive officers 4,587,272(11) 20.6%
and directors as a group
(10 persons)
(1) Includes shares issuable pursuant to currently exercisable options and
options which will be exercisable within 60 days of October 25, 1999. Marc
Roberts, Allan Cohen, Harvey Silverman, Herbert Kozlov and John D'Angelo
have agreed with the Company to refrain from exercising their currently
exercisable options until after stockholder approval of and the subsequent
filing of the Amendment to the Certificate of Incorporation discussed in
Proposal 3. Except as otherwise indicated, the persons named herein have
sole voting and dispositive power with respect to the shares beneficially
owned.
(2) Includes 380,000 shares issuable upon exercise of options that are for
these purposes deemed currently exercisable
(3) Includes 145,000 shares that may be acquired upon the exercise of currently
exercisable options and warrants.
(4) Includes 277,500 shares issuable upon exercise of currently exercisable
options.
(5) Includes 232,500 shares issuable upon exercise of currently exercisable
options.
(6) Does not include shares and warrants to acquire additional shares held by
members of a law firm of which Mr. Kozlov is a member. Mr. Kozlov disclaims
beneficial ownership of such shares. Includes 8,000 shares held under the
NYUGMA for the benefit of his minor children and 285,500 shares that may be
acquired upon the exercise of currently exercisable options.
(7) Such shares vest pro-rata over a three-year period, conditioned upon Mr.
Koppelman's serving a three-year term on the Board of Directors.
(8) Includes 200,000 shares upon exercise of options and includes 16,666 shares
owned by family trust of which Mr. D'Angelo is a co- trustee and
beneficiary.
(9 ) Includes 100,000 shares issuable upon exercise of currently exercisable
options.
(10) Includes 20,000 shares issuable upon exercise of currently exercisable
options.
(11) Includes 1,601,500 shares issuable upon the exercise of currently
exercisable options.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In April 1999, the Company entered into an agreement with Bsquared
Communications, Inc. ("Bsquared") to provide creative, marketing, technical and
business development consulting services to implement its Sportcut.com business
plan and to create the type of web environment the Company envisions as the
basis for its Internet business. In consideration for such services, Bsquared
has received 3.5% of the outstanding common stock of Sportcut.com with a right
to receive up to a total of 12.5% of the common stock of Sportcut.com upon the
attainment by Sportcut.com of certain financial and business benchmarks.
Herbert F. Kozlov, a director of the Company, is a member of Parker Duryee
Rosoff & Haft, counsel to the Company. Fees paid to such firm by the Company for
the year ended December 31, 1998 were approximately $263,000.
Pursuant to an Agreement dated as of October 12, 1999 among Charles
Koppelman ("Koppelman), the Company and Sportcut.com, Inc, Koppelman agreed to
serve as Chairman of Sportcut.com for a minimum three-year term through October
31, 2002. Sportcut.com is a 91.5% owned subsidiary of the Company and is
developing an Internet electronic commerce business dedicated to providing
viewers with information and various products and services related to sports and
entertainment and is projected to launch in the late fall of 1999. As
compensation for Koppelman's services as chairman, the Company and Sportcut.com
agreed to compensate Koppelman as follows: (A) Sportcut.com shall issue 250
shares of Sportcut.com common stock representing 5% of Sportcut.com's
outstanding capital stock to Koppelman (the "Koppelman Equity Interest"), which
shall not be diluted except in the event of either (1) an underwritten public
offering of Sportcut.com shares or (2) a merger, sale or acquisition transaction
involving Sportcut.com (except if such transaction is with the Company or an
affiliate of the Company); (B) the Company shall issue Koppelman a warrant to
purchase up to an aggregate of 375,000 shares of Common Stock at an exercise
price of $2.00 per share subject to the following conditions: (1) a warrant to
purchase 125,000 shares of the Common Stock of the Company will be issued the
event that either the Company or Sportcut.com shall have closed upon at least
a $5,000,000 investment on or before the expiration of six months from the date
of such Agreement; (2) a warrant to purchase 125,000 shares of the Company's
Common Stock will be issued in the event that either the Company or Sportcut.com
shall have closed upon at least a $7,500,000 investment on or before the
expiration of twelve months from the date of such Agreement; and (3) a warrant
to purchase 125,000 shares of the Company's Common Stock will be issued in the
event that either the Company or Sportcut.com shall have closed upon at least
a $10,000,000 investment on or before the expiration of eighteen months from
the date of such Agreement, provided that Koppelman shall be entitled to
aggregate the cumulative amount of any investment made in the Company or
Sportcut.com for purposes of determining his eligibility for the issuance of
the warrants described in (2) and (3) above. The issuance of such warrants is
further conditioned upon the Company's obtaining Stockholder approval to
increase the number of authorized shares of the Company's Common Stock. The
Company is seeking to obtain such Stockholder approval in Proposal 3 herein.
On June 23, 1999, the Company also entered into a one year employment
agreement with Mr. Laurence Gottlieb as Executive Vice President at an annual
salary of $185,000 and issued Mr. Gottlieb 20,000 shares of restricted Common
Stock of the Company and granted Mr. Gottlieb options to purchase up to 20,000
shares of Common Stock of the Company at an exercise price of $2.00 with such
option being exercisable over a five year term.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Friedman Alpren & Green LLP to audit
the financial statements of the Company for the fiscal year ending December 31,
1999. Such firm, which has served as the Company's independent auditors since
1997, has reported to the Company that none of its members has any direct
financial interest or material indirect financial interest in the Company.
Unless instructed to the contrary, the persons named in the enclosed proxy
intend to vote the same in favor of the ratification of Friedman Alpren & Green
LLP as the Company's independent auditors.
20
A representative of Friedman Alpren & Green LLP is expected to attend the
meeting and will be afforded the opportunity to make a statement and/or respond
to appropriate questions from Stockholders.
Stockholder Vote Required. Ratification of Friedman Alpren & Green LLP as
the Company's independent accounting firm for the year ended December 31, 1999
requires the affirmative vote (a quorum being present) of a majority of all
votes cast at the Meeting.
THE BOARD OF DIRECTORS RECOMENDS A VOTE FOR RATIFICATION
OF THE APPOINTMENT OF FRIEDMAN ALPREN & GREEN AS THE
COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the Company's 1999 Annual
Meeting of Stockholders pursuant to the provisions of Rule 14a-8 of the
Securities and Exchange Commission, promulgated under the Exchange Act, must be
received by the Company's offices in West Orange, New Jersey by September 30,
2000 for inclusion in the Company's proxy statement and form of proxy relating
to such meeting.
21
APPENDIX A
WORLDWIDE ENTERTAINMENT & SPORTS CORPORATION
1999 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN. The purpose of the Worldwide Entertainment & Sports
Corporation 1999 Stock Option Plan (the "Plan") is to encourage key employees of
Worldwide Entertainment & Sports Corp., a Delaware corporation (the "Company")
and of any present or future parent or subsidiary of the Company (collectively,
"Related Corporations") and other individuals who render services to the Company
or a Related Corporation, by providing opportunities to participate in the
ownership of the Company and its future growth through (a) the grant of options
which qualify as "incentive stock options" ("ISOs") under Section 422(b) of the
Internal Revenue Code of 1986, as amended (the "Code"); and (b) the grant of
options which do not qualify as ISOs ("Non-Qualified Options"). Both ISOs and
Non-Qualified Options are referred to hereafter individually as an "Option" and
collectively as "Options." As used herein, the terms "parent" and "subsidiary"
mean "parent corporation" and "subsidiary corporation," respectively, as those
terms are defined in Section 424 of the Code.
2. ADMINISTRATION.
(1) BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be administered
by the Board of Directors of the Company (the "Board of Directors" or the
"Board") or by a committee appointed by the Board (the "Committee") provided
that the Plan shall be administered: (i) to the extent required by applicable
regulations under Section 162(m) of the Code, by two or more "outside directors"
(as defined in applicable regulations thereunder) and (ii) to the extent
required by Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended, or any successor provision ("Rule 16b-3"), by a disinterested
administrator or administrators within the meaning of Rule 16b-3. All references
in this Plan to the "Committee" shall mean the Board if no Committee has been
appointed. Subject to ratification of the grant or authorization of each Option
by the Board (if so required by applicable state law), and subject to the terms
of the Plan, the Committee shall have the authority to (i) determine to whom
(from among the class of employees eligible under paragraph 4 to receive ISOs)
ISOs shall be granted, and to whom (from among the class of individuals and
entities eligible under paragraph 4 to receive Non-Qualified Options)
Non-Qualified Options may be granted; (ii) determine the time or times at which
Options shall be granted; (iii) determine the purchase price of shares subject
to each Option, which prices shall not be less than the minimum price specified
in paragraph 6; (iv) determine whether each Option granted shall be an ISO or a
Non-Qualified Option; (v) determine (subject to paragraph 7) the time or times
when each Option shall become exercisable and the duration of the exercise
period; (vi) extend the period during which outstanding Options may be
exercised; (vii) determine whether restrictions are to be imposed on shares
subject to Options and the nature of such restrictions, if any, and (viii)
interpret the Plan and prescribe and rescind rules and regulations relating to
it. If the Committee determines to issue a Non-Qualified Option, it shall take
whatever actions it deems necessary, under Section 422 of the Code and the
regulations promulgated thereunder, to ensure that such Option is not treated as
an ISO. The interpretation and construction by the Committee of any provisions
of the Plan or of any Option granted under it shall be final unless otherwise
determined by the Board. The Committee may from time to time adopt such rules
and regulations for carrying out the Plan, as it may deem advisable. No member
of the Board or the Committee shall be liable for any action or determination
made in good faith with respect to the Plan or any Option granted under it.
(2) COMMITTEE ACTIONS. The Committee may select one of its members as
its chairman, and shall hold meetings at such time and places as it may
determine. A majority of the Committee shall constitute a quorum and acts of a
majority of the members of the Committee at a meeting at which a quorum is
present, or acts reduced to or approved in writing by all the members of the
Committee (if consistent with applicable state law), shall be the valid acts of
the Committee. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan.
(3) GRANT OF OPTIONS TO BOARD MEMBERS. Subject to the provisions of
the first sentence of paragraph 2(1) above, if applicable, Options may be
granted to members of the Board. All grants of Options to members
of the Board shall in all other respects be made in accordance with the
provisions of this Plan applicable to other eligible persons. Consistent with
the provisions of the first sentence of Paragraph 2(1) above, members of the
Board who either (i) are eligible to receive grants of Options pursuant to the
Plan or (ii) have been granted Options may vote on any matters affecting the
administration of the Plan or the grant of any Options pursuant to the Plan,
except that no such member shall act upon the granting to himself or herself of
Options, but any such member may be counted in determining the existence of a
quorum at any meeting of the Board during which action is taken with respect to
the granting to such member of Options.
(4) EXCULPATION. No member of the Board shall be personally liable for
monetary damages for any action taken or any failure to take any action in
connection with the administration of the Plan or the granting of Options under
the Plan, provided that this subparagraph 2(4) shall not apply to (i) any breach
of such member's duty of loyalty to the Company or its Stockholders, (ii) acts
or omissions not in good faith or involving intentional misconduct or a knowing
violation of law, (iii) acts or omissions that would result in liability under
Section 174 of the General Corporation Law of the State of Delaware, as amended,
and (iv) any transaction from which the member derived an improper personal
benefit.
(5) INDEMNIFICATION. Service on the Committee shall constitute service
as a member of the Board. Each member of the Committee shall be entitled without
further act on his or her part to indemnity from the Company to the fullest
extent provided by applicable law and the Company's Certificate of Incorporation
and/or By-laws in connection with or arising out of any action, suit or
proceeding with respect to the administration of the Plan or the granting of
Options thereunder in which he or she may be involved by reason of his or her
being or having been a member of the Committee, whether or not he or she
continues to be a member of the Committee at the time of the action, suit or
proceeding.
3. SHARES SUBJECT TO THE PLAN. The stock subject to grant under the Plan
shall be shares of the Company's common stock, $.01 par value (the "Common
Stock"), whether authorized but unissued or held in the Company's treasury or
shares purchased from Stockholders expressly for use under the Plan. The maximum
number of shares of Common Stock which may be issued pursuant to Options granted
under the Plan shall not exceed two million (2,000,000) shares, subject to
adjustment in accordance with the provisions of Section 13 hereof. The Company
shall at all times while the Plan is in force reserve such number of shares of
Common Stock as will be sufficient to satisfy the requirements of all
outstanding Options granted under the Plan. In the event any Option granted
under the Plan shall expire or terminate for any reason without having been
exercised in full or shall cease for any reason to be exercisable in whole or in
part, the unpurchased shares subject thereto shall again be available for
Options under the Plan.
4. PARTICIPATION. The class of persons that shall be eligible to receive
Options under the Plan shall be (i) with respect to ISOs described in Section 6
hereof, any employees (including officers) of either the Company or any related
corporation, and (ii) with respect to Non-Qualified Options described in Section
6 hereof, any key employee (including any officer) of, any non-employee Director
of, or any non-employee consultant to, either the Company or any Related
Corporation. The Committee may take into consideration a recipient's individual
circumstances in determining whether to grant an Option. The granting of any
Option to any individual or entity shall neither entitle that individual or
entity to, nor disqualify such individual or entity from, participation in any
other grant of Options.
5. GRANTING OF OPTIONS. Options may be granted under the Plan at any time
on or after October 1, 1999 and prior to October 1, 2009. The date of grant of
an Option under the Plan will be the date specified by the Committee at the time
it grants the Option; provided, however, that such date shall not be prior to
the date on which the Committee acts to approve the grant. Options granted under
the Plan are intended to qualify as performance based compensation to the extent
required under proposed Treasury Regulation Section 1.162-27. Each Option
granted under the Plan shall be authorized by the Board of Directors or the
Committee and shall be evidenced by a Stock Option Agreement that shall be
executed by the Company and by the person to whom such Option is granted. The
Stock Option Agreement shall specify the number of shares of Common Stock as to
which any Option is granted, the period during which the Option is exercisable
and the option price per share thereof.
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6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
(1) PRICE FOR NON-QUALIFIED OPTIONS. The exercise price per share
specified in the agreement relating to each Non-Qualified Option granted under
the Plan shall in no event be less than the minimum legal consideration required
therefor under the laws of any jurisdiction in which the Company or its
successors in interest may be organized. Non-Qualified Options granted under the
Plan, with an exercise price less than the fair market value per share of Common
Stock on the date of grant, are intended to qualify as performance based
compensation under Section 162(m) of the Code and any applicable regulations
thereunder. Any such Non-Qualified Options granted under the Plan shall be
exercisable only upon the attainment of a preestablished, objective performance
goal established by the Committee.
(2) PRICE FOR ISOS. The exercise price per share specified in the
agreement relating to each ISO granted under the Plan shall not be less than the
fair market value per share of Common Stock on the date of such grant. In the
case of an ISO to be granted to an employee owning stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or any Related Corporation, the price per share specified in the
agreement relating to such ISO shall not be less than one hundred ten percent
(110%) of the fair market value per share of Common Stock on the date of grant.
For purposes of determining stock ownership under this paragraph, the rules of
Section 424(d) of the Code shall apply.
(3) $100,000 ANNUAL LIMITATION ON ISO VESTING. Each eligible employee
may be granted Options treated as ISOs only to the extent that, in the aggregate
under this Plan and all incentive stock option plans of the Company and any
Related Corporation, ISOs do not become exercisable for the first time by such
employee during any calendar year with respect to stock having a fair market
value (determined at the time the ISOs were granted) in excess of $100,000. The
Company intends to designate any Options granted in excess of such limitation as
Non-Qualified Options.
(4) DETERMINATION OF FAIR MARKET VALUE. If, at the time an Option is
granted under the Plan, the Company's Common Stock is publicly traded, "fair
market value" shall be determined as of the date of grant or, if the prices or
quotes discussed in this sentence are unavailable for such date, the last
business day for which such prices or quotes are available prior to the date of
grant and shall mean (i) the average (on that date) of the high and low prices
of the Common Stock on the principal national securities exchange on which the
Common Stock is traded, if the Common Stock is then traded on a national
securities exchange; or (ii) the last reported sale price (on that date) of the
Common Stock on the Nasdaq National Market, if the Common Stock is not then
traded on a national securities exchange; or (iii) the closing bid price (or
average of bid prices) last quoted (on that date) by an established quotation
service for over-the-counter securities, if the Common Stock is not reported on
the Nasdaq National Market. If the Common Stock is not publicly traded at the
time an Option is granted under the Plan, "fair market value" shall mean the
fair value of the Common Stock as determined by the Committee after taking into
consideration all factors which it deems appropriate, including, without
limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10, or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee owning
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, as determined
under paragraph 6(b). Subject to earlier termination as provided in paragraphs 9
and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO, except with respect to any part of such ISO that
is converted into a Non-Qualified Option pursuant to paragraph 12.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9 through
12, each Option granted under the Plan shall be exercisable as follows:
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(1) VESTING. The Option shall either be fully exercisable on the date
of grant or shall become exercisable thereafter in such installments as the
Committee may specify.
(2) FULL VESTING OF INSTALLMENTS. Once an installment becomes
exercisable, it shall remain exercisable until expiration or termination of the
Option, unless otherwise specified by the Committee.
(3) PARTIAL EXERCISE. Each Option or installment may be exercised at
any time or from time to time, in whole or in part, for up to the total number
of shares with respect to which it is then exercisable.
(4) ACCELERATION OF VESTING. The Committee shall have the right to
accelerate the date that any installment of any Option becomes exercisable;
provided that the Committee shall not, without the consent of an optionee,
accelerate the permitted exercise date of any installment of any Option granted
to any employee as an ISO (and not previously converted into a Non-Qualified
Option pursuant to paragraph 12) if such acceleration would violate the annual
vesting limitation contained in Section 422(d) of the Code, as described in
paragraph 6(c).
9. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the agreement
relating to such ISO, if an ISO optionee ceases to be employed by the Company
and all Related Corporations other than by reason of death or disability or as
otherwise specified in paragraph 10, no further installments of his or her ISOs
shall become exercisable, and his or her ISOs shall terminate on the earlier of
(a) ninety (90) days after the date of termination of his or her employment, or
(b) their specified expiration dates, except to the extent that such ISOs (or
unexercised installments thereof) have been converted into Non-Qualified Options
pursuant to paragraph 12. For purposes of this paragraph 9, employment shall be
considered as continuing uninterrupted during any bona fide leave of absence
(such as those attributable to illness, military obligations or governmental
service) provided that the period of such leave does not exceed 90 days or, if
longer, any period during which such optionee's right to reemployment is
guaranteed by statute. A bona fide leave of absence with the written approval of
the Committee shall not be considered an interruption of employment under this
paragraph 9, provided that such written approval contractually obligates the
Company or any Related Corporation to continue the employment of the optionee
after the approved period of absence. ISOs granted under the Plan shall not be
affected by any change of employment within or among the Company and Related
Corporations, so long as the optionee continues to be an employee of the Company
or any Related Corporation. Nothing in the Plan shall be deemed to give any
grantee of any Option the right to be retained in employment or other service by
the Company or any Related Corporation for any period of time.
10. DEATH; DISABILITY; BREACH.
(1) DEATH. If an ISO optionee ceases to be employed by the Company and
all Related Corporations by reason of his or her death, any ISO owned by such
optionee may be exercised, to the extent otherwise exercisable on the date of
death, by the estate, personal representative or beneficiary who has acquired
the ISO by will or by the laws of descent and distribution, until the earlier of
(i) the specified expiration date of the ISO or (ii) one (1) year from the date
of the optionee's death.
(2) DISABILITY. If an ISO optionee ceases to be employed by the
Company and all Related Corporations by reason of his or her disability, such
optionee shall have the right to exercise any ISO held by him or her on the date
of termination of employment, for the number of shares for which he or she could
have exercised it on that date, until the earlier of (i) the specified
expiration date of the ISO or (ii) one (1) year from the date of the termination
of the optionee's employment. For the purposes of the Plan, the term
"disability" shall mean "permanent and total disability" as defined in Section
22(e)(3) of the Code or any successor statute.
(3) BREACH. If an ISO optionee ceases to be employed by the Company
and all Related Corporation by reason of a finding by the Committee, after full
consideration of the facts presented on behalf of both the Company and the
Optionee, that the ISO optionee has breached his or her employment or service
contract with the Company or any Related Corporation, or has been engaged in
disloyalty to the Company or any Related Corporation, then, in such event, in
addition to immediate termination of the Option, the ISO optionee shall
automatically forfeit all shares for which the Company has not yet delivered
share certificates upon refund by the Company of the exercise price
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of such Option. Notwithstanding anything herein to the contrary, the Company may
withhold delivery of share certificates pending the resolution of any inquiry
that could lead to a finding resulting in a forfeiture.
11. ASSIGNABILITY. No Option shall be assignable or transferable by the
grantee except by will, by the laws of descent and distribution or, in the case
of Non-Qualified Options only, pursuant to a valid domestic relations order.
Except as set forth in the previous sentence, during the lifetime of a grantee
each Option shall be exercisable only by such grantee.
12. TERMS AND CONDITIONS OF OPTIONS. Each Option granted under the Plan
shall be a Non-qualified Stock Option unless the Option shall be specifically
designated at the time of grant to be an ISO for federal income tax purposes. If
any Option designated as an ISO is determined for any reason not to qualify as
an incentive stock option within the meaning of Section 422 of the Code, such
Option shall be treated as a Non-qualified Stock Option for all purposes under
the provisions of the Plan. Options shall be evidenced by instruments (which
need not be identical) in such forms as the Committee may from time to time
approve. Such instruments shall conform to the terms and conditions set forth in
paragraphs 6 through 11 hereof and may contain such other provisions as the
Committee deems advisable which are not inconsistent with the Plan, including
restrictions applicable to shares of Common Stock issuable upon exercise of
Options. The Committee may specify that any Non-Qualified Option shall be
subject to the restrictions set forth herein with respect to ISOs, or to such
other termination and cancellation provisions as the Committee may determine.
The Committee may from time to time confer authority and responsibility on one
or more of its own members and/or one or more officers of the Company to execute
and deliver such instruments. The proper officers of the Company are authorized
and directed to take any and all action necessary or advisable from time to time
to carry out the terms of such instruments. Such instruments shall comply with
and be subject to the following terms and conditions and such other terms and
conditions as the Committee shall from time to time require which are not
inconsistent with the terms of the Plan.
(1) NUMBER OF OPTION SHARES. Each Option shall state the number of
Shares to which it pertains. As Optionee may receive more than one Option, which
may include Options which are intended to be ISO's and Options which are not to
be ISO's, but only on the terms and subject to the conditions and restrictions
of the Plan.
(2) OPTION PRICE. Each Option Document shall state the Option Price
which, for a Non- Qualified Stock Option, may be less than, equal to, or greater
than the Fair Market Value of the Shares on the date the Option is granted and,
for an ISO, shall be at least 100% of the Fair Market Value of the Shares on the
date the Option is granted as determined by the Committee in accordance with
this Subsection 12(2); provided, however, that if an ISO is granted to an
Optionee who then owns, directly or by attribution under Section 424(d) of the
Code, shares possessing more than ten percent of the total combined voting power
of all classes of stock of the Company or an Affiliate, then the Option Price
shall be at least 110% of the Fair Market Value of the Shares on the date the
Option is granted. If the Common Stock is traded in a public market, then the
Fair Market Value per share shall be, if the Common Stock is listed on a
national securities exchange or included in the NASDAQ National Market System,
the last reported sale price thereof on the relevant date, or, if the Common
Stock is not solicited or included, the mean between the last reported "bid" and
"asked" prices thereof on the relevant date, as reported on NASDAQ or, if not so
reported, as reported by the National Daily Quotation Bureau, Inc. or as
reported in a customary financial reporting service, as applicable and as the
Committee determines.
(3) EXERCISE. No Option shall be deemed to have been exercised prior
to the receipt by the Company of written notice of such exercise and of payment
in full of the Option Price for the Shares to be purchased. Each such notice
shall specify the number of Shares to be purchased and shall (unless the Shares
are covered by a then current and effective registration statement or qualified
Offering Statement under Regulation A under the Securities Act of 1933, as
amended (the "Act"), contain the Optionee's acknowledgement in form and
substance satisfactory to the Company that: (i) such Shares are being purchased
for investment and not for distribution or resale (other than a distribution or
resale which, in the opinion of counsel satisfactory to the Company, may be made
without violating the registration provisions of the Act), (ii) the Optionee has
been advised and understands that (A) the Shares have not been registered under
the Act and are "restricted securities" within the meaning of Rule 144 under the
Act and are subject to restrictions on transfer and (B) the Company is under no
obligation to register the Shares under the Act or to take any action which
would make available to the Optionee any exemption from such registration, (iii)
such Shares may not be
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transferred without compliance with all applicable federal and state securities
law, and (iv) an appropriate legend referring to the foregoing restrictions on
transfer and any other restrictions imposed under the Option Documents may be
endorsed on the certificates.
13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company relating
to such Option:
(1) STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock
shall be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of Options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.
(2) CONSOLIDATIONS OR MERGERS. If the Company is to be consolidated
with or acquired by another entity in a merger, sale of all or substantially all
of the Company's assets or otherwise (an "Acquisition"), the Committee or the
board of directors of any entity assuming the obligations of the Company
hereunder (the "Successor Board"), shall, as to outstanding Options, either (i)
make appropriate provision for the continuation of such Options by substituting
on an equitable basis for the shares then subject to such Options either (A) the
consideration payable with respect to the outstanding shares of Common Stock in
connection with the Acquisition, (B) shares of stock of the surviving
corporation or (C) such other securities as the Successor Board deems
appropriate, the fair market value of which shall approximate the fair market
value of the shares of Common Stock subject to such Options immediately
preceding the Acquisition; or (ii) upon written notice to the optionees, provide
that all Options must be exercised, to the extent then exercisable, within a
specified number of days of the date of such notice, at the end of which period
the Options shall terminate; or (iii) terminate all Options in exchange for a
cash payment equal to the excess of the fair market value of the shares subject
to such Options (to the extent then exercisable) over the exercise price
thereof.
(3) RECAPITALIZATION OR REORGANIZATION. In the event of a
recapitalization or reorganization of the Company (other than a transaction
described in subparagraph (2) above) pursuant to which securities of the Company
or of another corporation are issued with respect to the outstanding shares of
Common Stock, an optionee upon exercising an Option shall be entitled to receive
for the purchase price paid upon such exercise the securities he or she would
have received if he or she had exercised such Option prior to such
recapitalization or reorganization.
(4) MODIFICATION OF ISOS. Notwithstanding the foregoing, any
adjustments made pursuant to subparagraphs (1), (2) or (3) with respect to ISOs
shall be made only after the Committee, after consulting with counsel for the
Company, determines whether such adjustments would constitute a "modification"
of such ISOs (as that term is defined in Section 424 of the Code) or would cause
any adverse tax consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs would constitute a
modification of such ISOs or would cause adverse tax consequences to the
holders, it may refrain from making such adjustments.
(5) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, each Option will terminate
immediately prior to the consummation of such proposed action or at such other
time and subject to such other conditions as shall be determined by the
Committee.
(6) ISSUANCES OF SECURITIES. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to Options. No adjustments shall be made for dividends paid in cash or
in property other than securities of the Company.
(7) FRACTIONAL SHARES. No fractional shares shall be issued under the
Plan and the optionee shall receive from the Company cash in lieu of such
fractional shares.
(8) ADJUSTMENTS. Upon the happening of any of the events described in
subparagraphs (1), (2) or (3) above, the class and aggregate number of shares
set forth in paragraph 3 hereof that are subject to Options which
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previously have been or subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such subparagraphs.
The Committee or the Successor Board shall determine the specific adjustments to
be made under this paragraph 13 and, subject to paragraph 5, its determination
shall be conclusive.
14. MEANS OF EXERCISING OPTIONS. An Option (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify the
number of shares as to which such Option is being exercised, accompanied by full
payment of the purchase price therefor either (a) in United States dollars in
cash or by check, (b) at the discretion of the Committee, through delivery of
shares of Common Stock having a fair market value equal as of the date of the
exercise to the cash exercise price of the Option, (c) at the discretion of the
Committee, by delivery of the grantee's personal recourse note bearing interest
payable not less than annually at no less than 100% of the lowest applicable
Federal rate, as defined in Section 1274(d) of the Code, (d) at the discretion
of the Committee and consistent with applicable law, through the delivery of an
assignment to the Company of a sufficient amount of the proceeds from the sale
of the Common Stock acquired upon exercise of the Option and an authorization to
the broker or selling agent to pay that amount to the Company, which sale shall
be at the participant's direction at the time of exercise, or (e) at the
discretion of the Committee, by any combination of (a), (b), (c) and (d) above.
If the Committee exercises its discretion to permit payment of the exercise
price of an ISO by means of the methods set forth in clauses (b), (c), (d) or
(e) of the preceding sentence, such discretion shall be exercised in writing at
the time of the grant of the ISO in question. The holder of an Option shall not
have the rights of a Stockholder with respect to the shares covered by such
Option until the date of issuance of a stock certificate to such holder for such
shares. Except as expressly provided above in paragraph 13 with respect to
changes in capitalization and stock dividends, no adjustment shall be made for
dividends or similar rights for which the record date is before the date such
stock certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board on
September 24, 1999, subject, with respect to the validation of ISOs granted
under the Plan, to approval of the Plan by the Stockholders of the Company at
the next Meeting of Stockholders or, in lieu thereof, by written consent. If the
approval of Stockholders is not obtained on or prior to September 20, 2000, any
grants of ISOs under the Plan made prior to that date will be rescinded. The
Plan shall expire at the end of the day on October 1, 2009 (except as to Options
outstanding on that date). Subject to the provisions of paragraph 5 above,
Options may be granted under the Plan prior to the date of Stockholder approval
of the Plan. The Board may terminate or amend the Plan in any respect at any
time, except that, without the approval of the Stockholders obtained within 12
months before or after the Board adopts a resolution authorizing any of the
following actions: (a) the total number of shares that may be issued under the
Plan may not be increased (except by adjustment pursuant to paragraph 13); (b)
the benefits accruing to participants under the Plan may not be materially
increased; (c) the requirements as to eligibility for participation in the Plan
may not be materially modified; (d) the provisions of paragraph 4 regarding
eligibility for grants of ISOs may not be modified; (e) the provisions of
paragraph 6(b) regarding the exercise price at which shares may be offered
pursuant to ISOs may not be modified (except by adjustment pursuant to paragraph
13); (f) the expiration date of the Plan may not be extended; and (g) the Board
may not take any action which would cause the Plan to fail to comply with Rule
16b-3. Except as otherwise provided in this paragraph 15, in no event may action
of the Board or Stockholders alter or impair the rights of a grantee, without
such grantee's consent, under any Option previously granted to such grantee.
16. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of shares pursuant to Options granted under the Plan shall be used for
general corporate purposes.
17. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO
granted under the Plan, each optionee agrees to notify the Company in writing
immediately after such optionee makes a Disqualifying Disposition (as described
in Sections 421, 422 and 424 of the Code and regulations thereunder) of any
stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.
18. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-Qualified Option for less than its fair market value, the making of a
Disqualifying Disposition (as defined in paragraph 17), the vesting or transfer
of restricted stock or securities acquired on the exercise of an Option
hereunder, or the making of a distribution or other
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payment with respect to such stock or securities, the Company may withhold taxes
in respect of amounts that constitute compensation includible in gross income.
The Committee in its discretion may condition (i) the exercise of an Option, or
(ii) the vesting or transferability of restricted stock or securities acquired
by exercising an Option, on the grantee's making satisfactory arrangement for
such withholding. Such arrangement may include payment by the grantee in cash or
by check of the amount of the withholding taxes or, at the discretion of the
Committee, by the grantee's delivery of previously held shares of Common Stock
or the withholding from the shares of Common Stock otherwise deliverable upon
exercise of a Option shares having an aggregate fair market value equal to the
amount of such withholding taxes.
19. GOVERNMENTAL REGULATION. The Company's obligation to sell and deliver
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares. Government regulations may impose reporting or other
obligations on the Company with respect to the Plan. For example, the Company
may be required to send tax information statements to employees and former
employees that exercise ISOs under the Plan, and the Company may be required to
file tax information returns reporting the income received by grantees of
Options in connection with the Plan.
20. GOVERNING LAW. The laws of Delaware shall govern the validity and
construction of the Plan and the instruments evidencing Options.
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APPENDIX 1
WORLDWIDE ENTERTAINMENT & SPORTS CORPORATION
29 Northfield Avenue
West Orange, New Jersey 07052
-----------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
-----------------------
The undersigned hereby appoints Marc Roberts and Herbert Kozlov as Proxies, each
with the power to appoint his substitute, and hereby authorizes them, and each
of them acting singly, to represent and to vote, as designated below, all the
shares of Common Stock of Worldwide Entertainment & Sports Corp. ("Worldwide")
held of record by the undersigned on October 25, 1999 at the Annual Meeting
of Stockholders to be held on December 17, 1999, or any adjournment thereof.
1. To elect the following individuals as members to the Board of Directors of
the Company:
Marc Roberts FOR ABSTAIN AGAINST
Herbert Kozlov FOR ABSTAIN AGAINST
Harvey Silverman FOR ABSTAIN AGAINST
Allan Cohen FOR ABSTAIN AGAINST
Charles Koppelman FOR ABSTAIN AGAINST
John D'Angelo FOR ABSTAIN AGAINST
Jordan Schlachter FOR ABSTAIN AGAINST
2. To consider and vote upon a proposal to adopt the 1999 Stock Option Plan.
FOR ABSTAIN AGAINST
3. To consider and vote upon a proposal to amend Worldwide's Certificate of
Incorporation to (a) increase the number of authorized shares of
Worldwide's Common Stock from 20,000,000 to 60,000,000 shares and (b)
increase the number of authorized shares of the Company's "blank check"
Preferred Stock from 5,000 shares to 5,000,000 shares.
FOR ABSTAIN AGAINST
4. To consider and vote upon a proposal to authorize Worldwide to issue in a
private placement up to an additional 2,400,000 shares of Common Stock,
bringing the total up to 5,000,000 in the aggregate, in order to raise at
least up to $6,000,000 in gross proceeds in order to finance the operations
of Sportcut.com Inc., and to approve certain compensation to be paid to the
Placement Agent in connection therewith.
FOR ABSTAIN AGAINST
5. Ratification of Friedman Alpren & Green, LLP as the Company's independent
certified public accountant.
FOR ABSTAIN AGAINST
THIS PROXY WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2, 3, 4, AND 5. A VOTE TO "ABSTAIN" WILL NOT BE COUNTED TOWARDS THE
REQUISITE AFFIRMATIVE VOTE TO APPROVE PROPOSAL 3.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as name appears below. When shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation,
please sign in full corporate name by the President or other
authorized officer. If a partnership, please sign in
partnership name by authorized person.
-----------------------------------
Signature
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Signature if held jointly
Dated: __________________, 1999