Section 240.14a-101 Schedule 14A.
Information required in proxy statement.
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X] Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
PARADISE MUSIC & ENTERTAINMENT, INC.
.................................................................
(Name of Registrant as Specified In Its Charter)
.................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
............................................................
(2) Aggregate number of securities to which transaction applies:
.......................................................
<PAGE>
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
.......................................................
(4) Proposed maximum aggregate value of transaction:
.......................................................
(5) Total fee paid:
.......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date of its
filing.
(1) Amount Previously Paid:
.......................................................
(2) Form, Schedule or Registration Statement No.:
.......................................................
(3) Filing Party:
.......................................................
(4) Date Filed:
.......................................................
<PAGE>
PARADISE MUSIC & ENTERTAINMENT, INC.
53 West 23rd Street
New York, New York 10010
---------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on February 10, 1998
---------------------------
Notice is Hereby Given to the stockholders of Paradise Music &
Entertainment, Inc., a Delaware corporation (the "Company"), that the Annual
Meeting of Stockholders (the Meeting) will be held at the Company's offices at
53 West 23rd Street, 11th Floor, New York, NY 10010, at 10:00 a.m., New York
time, on February 10, 1998 for the following purposes:
1. To elect a board of six (6) directors to serve until the next Annual
Meeting of Stockholders or until their respective successors are elected and
qualified;
2. To ratify the selection of Rothstein, Kass & Company, P.C. as the
Company's independent public accountants for the fiscal year ending June 30,
1998; and
3. To transact such other and further business as may properly come before
the Meeting or any postponement or adjournment thereof.
Only stockholders of the Company of record at the close of business on
January 2, 1998 are entitled to notice of and to vote at the Meeting or any
postponement or adjournment thereof. The stock transfer books will not be
closed.
A copy of the annual report on Form 10-KSB for the fiscal year ended June
30, 1997 accompanies this notice.
By Order of the Board of Directors,
Richard Flynn
Secretary
New York, New York
January 9, 1998
RETURN OF PROXIES
A PROXY AND SELF-ADDRESSED ENVELOPE ARE ENCLOSED FOR YOUR USE IF YOU DO
NOT PLAN TO ATTEND THE MEETING IN PERSON. WE URGE EACH STOCKHOLDER WHO IS UNABLE
TO ATTEND THE MEETING TO VOTE BY PROMPTLY SIGNING AND RETURNING HIS OR HER
PROXY, REGARDLESS OF THE NUMBER OF SHARES OF STOCK HELD BY SUCH STOCKHOLDER. ANY
PROXY GIVEN BY A STOCKHOLDER MAY BE REVOKED BY THE STOCKHOLDER AT ANY TIME PRIOR
TO THE VOTING OF THE PROXY.
1
<PAGE>
PARADISE MUSIC & ENTERTAINMENT, INC.
PROXY STATEMENT
GENERAL
The enclosed proxy ("Proxy") is solicited by the Board of Directors (the
"Board") of PARADISE MUSIC & ENTERTAINMENT, INC., a Delaware corporation (the
Company), for use at the Annual Meeting of Stockholders to be held at the
Company's offices at 53 West 23rd Street, 11th Floor, New York, NY 10010, on
February 10, 1998 at 10:00 a.m., New York time, or at any postponement or
adjournment thereof (the "Meeting"). The matters to be considered and acted upon
at the Meeting are described in the foregoing Notice of Annual Meeting of
Stockholders and this Proxy Statement. This Proxy Statement and the related form
of Proxy are being mailed on or about January 9, 1998 to all of the stockholders
of the Company of record on January 2, 1998. Any proxy given by a stockholder
may be revoked by the stockholder at any time prior to the voting of the proxy
by delivering a written notice to the Secretary of the Company, by executing and
delivering a later dated proxy or by attending the Meeting and voting in person.
The Management of the Company knows of no business other than that
specified in Items 1 through 2 of the Notice of Annual Meeting of Stockholders
which will be presented for consideration at the Meeting. If any other matter is
properly presented, it is the intention of the persons named in the enclosed
Proxy to vote in accordance with their best judgment.
SOLICITATION OF PROXIES
The persons named as proxies are John Loeffler, Chief Executive Officer,
President and Chairman of the Board of the Company, and Richard Flynn, Executive
Vice President and member of the Board of the Company. Stock represented at the
Meeting by the enclosed Proxy will be voted in the manner specified by the
stockholder. In the absence of specification, the stock will be voted FOR (i)
the election of each of the six persons nominated by the Board of the Company to
serve as directors, FOR (ii) the ratification of the selection of Rothstein,
Kass & Company, P.C. as the Company's independent public accountants for the
fiscal year ending June 30, 1998, and, (iii) in the discretion of the proxies,
on other business which may properly come before the meeting. The cost of
preparing, assembling and mailing the Proxy, this Proxy Statement and the other
material enclosed will be borne by the Company. In addition to the solicitation
of proxies by use of the mails, officers and employees of the Company, without
extra remuneration, may solicit proxies personally or by telephone, telegram or
other means of communication. The Company may also request brokerage houses,
banking institutions, and other custodians, nominees and fiduciaries, with
respect to shares held of record in their names or in the names of their
nominees, to forward the proxy material to the beneficial owners of such shares
and may reimburse them for their reasonable expenses in forwarding the proxy
material.
VOTING RIGHTS
Only stockholders of record at the close of business on January 2, 1998
(the Record Date) will be entitled to notice of and to vote at the Meeting or
any postponement or adjournment thereof. On the Record Date, the issued and
outstanding securities of the Company entitled to vote at the Meeting consisted
of 2,229,225 shares of common stock, par value $.01 per share (Common Stock).
There was no other class of voting securities outstanding on the Record Date.
Each outstanding share is entitled to one vote which may be cast in person or by
proxy duly authorized in writing. No shares have cumulative voting rights.
The presence in person or by properly executed proxy of the holders of a
majority of the outstanding shares of Common Stock entitled to vote at the
Meeting shall constitute a quorum for the transaction of business. Directors are
elected by a majority of the votes present in person or by proxy at the Meeting.
The affirmative vote of the holders of a majority of the votes cast at the
Meeting and entitled to vote will be required to act on all other matters before
or to come before the Meeting.
The stockholders vote at the Meeting by casting ballots (in person or by
proxy) which are tabulated by a person who is appointed by the Board before the
Meeting to serve as the inspector of election at the Meeting and who has
executed and verified an oath of office. Abstentions and broker non-votes are
included in the determination of the number of shares present at the Meeting for
quorum purposes. Abstentions and broker non-votes are not counted in the
tabulations of the votes cast on proposals presented to stockholders at the
Meeting.
2
<PAGE>
With regard to the proposals to be acted upon at the Meeting, dissenting
stockholders do not have appraisal rights.
The stock transfer books will not be closed. Stockholders who do not
expect to attend the Meeting, but wish to have their shares of stock voted at
the Meeting, are urged to complete, sign, date and return the enclosed Proxy as
promptly as possible.
SECURITY OWNERSHIP
The following table sets forth certain information as of the Record Date
regarding (i) the share ownership of the Company by each person who is known to
the Company to be the record or beneficial owner of more than five percent (5%)
of the Company's outstanding Common Stock, (ii) the share ownership of the
Company of each director of the Company, each person nominated herein to serve
as a director of the Company, and the share ownership of each named executive
officer of the Company and (iii) the share ownership of the Company of all
director nominees and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Amount and Nature Percentage of
of Beneficial Outstanding Shares
Name and Address of Beneficial Owner (1) Ownership(2) Owned(3)
- ---------------------------------------- ------------ --------
<S> <C> <C>
John Loeffler 348,400 (4) (9) 15.6%
Jon Small 291,000 (4) 13.0%
Brian Doyle 145,500 6.5%
Richard Flynn 145,500 6.5%
Paul Thomas Cohen 19,779 (5) (7) *
Thomas J. Edelman 34,779 (6) (7) 1.5%
All officers and directors as a group 984,958 (8) (9) (10) 43.3%
</TABLE>
* Denotes less than 1%
(1) The address of each beneficial owner identified is c/o Paradise Music &
Entertainment, Inc., 53 West 23rd Street, New York, NY 10010, except for
Thomas J. Edelman, c/o Patina Oil & Gas Corporation, 667 Madison Avenue,
New York, NY 10021.
(2) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock beneficially owned by them. A person is deemed to be the
beneficial owner of securities that can be acquired by such person within
60 days from January 9, 1998 upon the exercise of options, warrants or
convertible securities.
(3) Each beneficial owner's percentage ownership is determined by assuming (i)
that options, warrants or convertible securities that are held by such
person (but not those held by any other person) and which are exercisable
within 60 days of January 9, 1998 have been exercised and converted, and
(ii) 2,229,225 shares of Common Stock outstanding, before any
consideration is given to options or warrants.
(4) Includes options to purchase 5,000 shares of Common Stock.
(5) Includes options to purchase 10,000 shares of Common Stock.
(6) Includes options to purchase 25,000 shares of Common Stock.
(7) Includes 1,446 shares of Common Stock earned by the Outside Directors.
(8) Includes options to purchase 45,000 shares of Common Stock.
(9) Includes 3,600 and 3,800 shares of Common Stock purchased by Mr.
Loeffler's Pension and his wife's Keogh Plans, respectively.
3
<PAGE>
(10) Includes 2,892 shares of Common Stock earned by the Outside Directors.
Information contained in this Proxy Statement with regard to stock
ownership was obtained from the Company's stockholders' list, filings with
governmental authorities, or from the named individual nominees, directors and
officers. The persons identified in the foregoing table disclaim beneficial
ownership of shares owned or held in trust for the benefit of members of their
families or entities with which they may be associated.
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
Nominations and Election of Directors
The Board has nominated and proposes as nominees Paul Thomas Cohen, Brian
Doyle, Thomas J. Edelman, Richard Flynn, John Loeffler and Jon Small (all of
whom are members of the present Board of the Company and all of whom have been
elected for a term ending at the Meeting) to serve as directors of the Company
until the Company's 1998 Annual Meeting of Shareholders or until their
respective successors have been elected and qualified.
Unless otherwise specified, shares represented by proxies will be voted in
favor of the election of all of the nominees, except that, in the event any
nominee should not continue to be available for election, such proxies will be
voted for the election of such persons as the Board may recommend. Management
does not presently contemplate that any of the nominees will become unavailable
for any reason.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
NOMINEES.
Information Covering Nominees
The following table sets forth the names of the nominees and certain
information with regard to each nominee.
Name of Nominee Age Director Since Position with Company
- --------------- --- -------------- ---------------------
John Loeffler 46 July 1996 Chairman of the Board, President and
Chief Executive Officer
Jon Small 50 July 1996 Executive Vice President and Director
Brian Doyle 41 July 1996 Executive Vice President and Director
Richard Flynn 40 October 1996 Executive Vice President, Treasurer,
Secretary and Director
Paul Thomas Cohen 45 October 1996 Director
Thomas J. Edelman 46 October 1996 Director
JOHN LOEFFLER, has served as Chairman of the Board, President and Chief
Executive Officer of the Company since its inception in July 1996. From 1986 to
present, Mr. Loeffler has been the Chief Executive Officer of John Loeffler
Music, Inc. d/b/a Rave Music and Entertainment ("Rave"). From 1986 to 1995, Mr.
Loeffler was President of Rave. Since 1996 Rave has been a wholly-owned
subsidiary of the Company.
JON SMALL, has served as a director and Executive Vice President of the
Company since its inception in July 1996. From 1984 to present, Mr. Small has
been the President of Picture Vision, Inc. ("Picture Vision"). Since 1996
Picture Vision has been a wholly-owned subsidiary of the Company.
BRIAN DOYLE, has served as a director and Executive Vice President of the
Company since its inception in July 1996. In 1994 Mr. Doyle founded All Access
Entertainment Management Group, Inc. ("All Access"), and from 1994 to present he
has been the President of All Access. Since 1996, Mr. Doyle has also been the
Chief Executive Officer of All Access and since February 1997, Mr. Doyle has
also been the Chief Executive Officer of Push Records, Inc. ("Push Records").
From 1991
4
<PAGE>
to 1994, Mr. Doyle served as Chief Executive Officer and President of Horizon
Entertainment and Management Group, Inc. ("Horizon"). Since 1996 All Access has
been a wholly-owned subsidiary of the Company.
RICHARD FLYNN, has served as a director of the Company since October 1996
and as an Executive Vice President and Secretary of the Company since its
inception in July 1996. Since December 1996 he has also been Treasurer of the
Company. From September 1994 to September 1996, Mr. Flynn was the managing
co-owner of All Access. Since September 1996, Mr. Flynn has also been Vice
President and General Manager of All Access, and since February 1997 he has been
Vice President and General Manager of Push Records. From March 1990 until
September 1994. Mr. Flynn served as General Counsel to Horizon and its clients.
Since 1983 Mr. Flynn has been a practicing attorney in New York State
specializing in entertainment, corporate and public sector law.
PAUL THOMAS COHEN, has served as an outside director of the Company since
October 1996. Since 1987 Mr. Cohen has been an investment banker and a
consultant to the media and entertainment industries.
THOMAS J. EDELMAN, has served as a director of the Company since October
1996. Mr. Edelman co-founded Snyder Oil Corporation and was its President and
director from 1981 through February 1997. Since 1996, Mr. Edelman has served as
Chairman and Chief Executive Officer of Patina Oil & Gas Corporation. He is also
Chairman of the Board of Directors of Lomak Petroleum, Inc., and he is a
director of Petroleum Heat & Power Co, Star Gas Corporation and Weatherford
Enterra. Mr. Edelman is also a Trustee of The Hotchkiss School. From 1980 to
1981, Mr. Edelman was a Vice President of The First Boston Corporation.
Information Concerning the Board of Directors and Committees
The business and affairs of the Company are managed by the Board, which
met or acted by unanimous written consent eight times during the fiscal year
ended June 30, 1997. During the fiscal year ended June 30, 1997, all current
directors attended 75% or more of the meetings of the Board and the Committees
on which they served. The Board maintains three standing committees
("Committees"): the Executive Advisory Committee, the Compensation and Stock
Option Committee, and the Audit Committee.
The Executive Advisory Committee, consisting of Brian Doyle, Richard
Flynn, John Loeffler and Jon Small advises the Board on important matters
affecting the Company. The Executive Advisory Committee held 6 meetings during
the fiscal year ended June 30, 1997.
The Compensation and Stock Option Committee, consisting of Paul Thomas
Cohen and Thomas J. Edelman, makes recommendations to the Board concerning (i)
compensation, including incentive arrangements, of the Companys officers and
other key employees, including those executive officers who also serve on the
Board, and (ii) under the Company's Stock Option Plans, determination of the
persons to whom options should be granted and the number of options to be
granted to such persons. The Compensation and Stock Option Committee held 5
meetings during the fiscal year ended June 30, 1997.
The Audit Committee, consisting of Paul Thomas Cohen and Thomas J.
Edelman, reviews the engagement of the Companys independent public accountants
and the independence of the accounting firm, the audit and non-audit fees of the
independent public accountants and the adequacy of the Stock Option Plans and
the Companys internal control procedures.
The Audit Committee held one meeting during the fiscal year ended June 30, 1997.
EXECUTIVE OFFICERS
Set forth below is certain information as of the Record Date regarding the
executive officers of the Company:
<TABLE>
<CAPTION>
Position with Executive Officer
Name Age Company Since
---- --- ------- -----
<S> <C> <C> <C>
John Loeffler 46 Chairman of the Board, President and Chief July 1996
Executive Officer
Jon Small 50 Executive Vice President July 1996
Brian Doyle 41 Executive Vice President July 1996
Richard Flynn 40 Executive Vice President, Treasurer and July 1996
Secretary
</TABLE>
5
<PAGE>
Additional information with respect to John Loeffler, Jon Small, Brian
Doyle and Richard Flynn is set forth under "Information Covering Nominees".
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information for the fiscal year ended June
30, 1997 reflecting all compensation awarded to, earned by or paid by the
Company to John Loeffler, its Chief Executive Officer, Chairman of the Board and
President, and each of the most highly compensated executive officers (three
individuals), other than the Chief Executive Officer, whose annual base salary
and bonus compensation exceeded $100,000.
<TABLE>
<CAPTION>
Long Term
Annual Compensation (1) Compensation Awards
----------------------- -------------------
Securities
Year Ended All Other Underlying
Name and Principal Position June 30, Salary ($) Bonus ($) Compensation (2) Options
- --------------------------- -------- ---------- --------- ---------------- -------
<S> <C> <C> <C> <C> <C>
John Loeffler 1997 150,000 191,000 34,000 5,000
1996 218,000 71,000
1995 170,000 77,000
Jon Small 1997 150,000 189,000 36,000 5,000
1996 88,000 -- 89,000
1995 184,000 -- 172,000
Brian Doyle 1997 150,000 162,500 7,000 --
1996 101,000 -- 48,000
1995 -- -- 35,000
Richard Flynn 1997 150,000 162,500 -- --
1996 101,000 -- 48,000
1995 -- -- 35,000
</TABLE>
(1) The Company was incorporated in July 1996. Compensation for the fiscal
years ended June 30, 1996 and 1995 represent amounts paid by Rave, Picture
Vision and All Access. All Access commenced operations in September 1995.
Compensation for the fiscal year ended June 30, 1997 represent amounts
paid by Rave, Picture Vision, All Access and Push.
(2) Includes amounts paid by the Company which the Company deemed to be for
the benefit of such executive, including amounts paid for lodging,
transportation, insurance, entertainment and other perquisites.
Stock Option Table
The following table sets forth for the fiscal year ended June 30, 1997 all
grants of options to purchase Common Stock to John Loeffler, the Company's Chief
Executive Officer, Chairman of the Board and President, and each of the most
highly compensated executive officers (three individuals), other than the Chief
Executive Officer, whose annual base salary and bonus compensation exceeded
$100,000.
6
<PAGE>
<TABLE>
<CAPTION>
Individual Grants
-----------------
Percent of Total
Number of Secur- Options Grant- Exercise or
ities Underlying ed to Employees Base Price
Name Options Granted in Fiscal Year ($/share) Expiration Date
- ---- --------------- -------------- --------- ---------------
<S> <C> <C> <C> <C>
John Loeffler 5,000 50% $6.00 December 19,
2001
Jon Small 5,000 50% $6.00 December 19,
2001
Brian Doyle -- -- -- --
Richard Flynn -- -- -- --
</TABLE>
Year End Option Values Table
The following table sets forth as per the end of the fiscal year ended
June 30, 1997 information concerning outstanding options to purchase Common
Stock held by John Loeffler, the Company's Chief Executive Officer, Chairman of
the Board and President, and each of the most highly compensated executive
officers (three individuals), other than the Chief Executive Officer, whose
annual base salary and bonus compensation exceeded $100,000.
<TABLE>
<CAPTION>
Number of Securities
Shares underlying Unexercised Value of Unexercised "In-
Acquired Value Options at Fiscal the-Money" Options at
on Exercise Realized Year-End Fiscal Year-End (1)
----------- -------- -------- -------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John Loeffler -- -- 5,000 -- 0 --
Jon Small -- -- 5,000 -- 0 --
- ----------------
</TABLE>
(1) Based upon an estimated fair market value of $4 per share of Common Stock
as of June 30, 1997 less the $6 exercise price of such options.
Compensation of Directors
All directors are reimbursed for certain expenses in connection with attendance
at Board and Committee meetings. Other than with respect to such reimbursement
of expenses, Directors who are employees or officers of the Company or who are
otherwise associated with the Company do not receive compensation for service as
a director. Directors who are not employees or officers of the Company or
otherwise associated with the Company ("Outside Directors") receive $500 for
each Board and Committee meeting attended in addition to such reimbursement of
expenses.
In addition to the foregoing, Outside Directors received and will receive
the following compensation: For the period January 1, 1997 through June 30,
1997, each of the Outside Directors earned $6,000 and 1,000 shares of Common
Stock valued at $3.875 per share. For the fiscal year ending June 30, 1998 and
thereafter, Outside Directors will be paid at the rate of $18,000 per fiscal
year, payable quarterly with each such payment to be half in cash and half in
Common Stock valued on the last day of the applicable quarter.
Outside Directors also receive non-qualified options to purchase 5,000
shares of Common Stock for each year of service, payable in advance. The initial
5,000 options, exercisable at $6.00 per share, were granted to each of Paul
Thomas Cohen and Thomas J. Edelman in December 1996. Commencing on July 1, 1997
the option exercise price for annual grants is the mean of the opening and
closing prices of the Common Stock on the last day preceding the day of
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<PAGE>
grant of the options. The options granted for the fiscal year commencing July 1,
1997 are exercisable at a price of $4 per share. Such options were fully vested
upon grant, and have a term of five years.
1996 Stock Option Plan
In October 1996, the Board of Directors adopted and the stockholders
approved the 1996 Option Plan (the "Option Plan"). The Option Plan provides for
the grant of incentive stock options ("ISOs") (within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), non-qualified
stock options ("NQSOs") and/or Stock Appreciation Rights ("SARs") to certain
directors, agents and employees of, and consultants to, the Company. The Option
Plan further provides for the grant of NQSOs to directors, agents of, and
consultants to, the Company, whether or not employees of the Company. The
purpose of the Option Plan is to attract and retain exemplary employees, agents,
consultants and directors. Options and SARs granted under the Option Plan may
not be exercisable for terms in excess of 10 years from the date of grant. In
addition, no options or SARs may be granted under the Option Plan than 10 years
after the Option Plan's effective date. The total number of shares of Common
Stock with respect to which options and SARs will be granted under the Option
Plan is 185,000. The shares subject to and available under the Option Plan may
consist, in whole or in part, of authorized but unissued stock or treasury stock
not reserved for any other purpose. Any shares subject to an option or SAR that
terminates, expires or lapses for any reason, and any shares purchased pursuant
to an option and subsequently repurchased by the Company pursuant to the terms
of the option, shall again be available for grant under the Option Plan.
The Option Plan will be administered by the Compensation and Stock Option
Committee which will be composed solely of two or more "Non Employee Directors"
within the meaning of paragraph (b)(3) of Rule 16b-3 promulgated under the
Exchange Act, which will determine, in its discretion, among other things, the
recipients of grants, whether a grant will consist of ISOs, NQSOs or SARs, or a
combination thereof, and the number of shares of Common Stock to be subject to
such options or SARs. The exercise price of options granted under the Option
Plan shall not be less than the fair market value per share on the date of
grant, as determined by the Committee.
The Option Plan contains certain limitations applicable only to ISOs
granted thereunder. To the extent that the aggregate fair market value, as of
the date of grant, of the shares to which ISOs become exercisable for the first
time by an optionee during the calendar year exceeds $100,000, the ISO will be
treated as a NQSO. In addition, if an optionee owns more than 10% of the
Company's stock at the time the individual is granted an ISO, the option price
per share cannot be less than 110% of the fair market value per share and the
term of the option cannot exceed five years.
In December 1996, the Company, pursuant to the Option Plan, granted
options to purchase 5,000, 5,000 and 15,000 shares of Common Stock to Messrs.
Loeffler, Small and Edelman, respectively. Such options are fully vested, have a
term of five years and have an exercise price equal to the initial public
offering price of $6.00.
Non-Plan Options
The Company has issued options to purchase up to an aggregate of 100,000
shares of Common Stock (the "Non-Plan Options") outside of the Option Plan to
certain executive officers, non-employee directors and consultants. The Non-Plan
Options are immediately exercisable, are fully vested and have a term of five
years. During the fiscal year ended June 30, 1997 the Company issued 5,000
Non-Plan Options to each of Paul Thomas Cohen and Thomas J. Edelman, exercisable
at a price of $6 per share of Common Stock. On July 1, 1997 the Company issued
another 5,000 Non-Plan Options to each of Paul Thomas Cohen and Thomas J.
Edelman, exercisable at a price of $4.
Employment Agreements
Effective July 1, 1997, the Company entered into new employment agreements
(the "Agreements") with Messrs. Loeffler, Small , Doyle and Flynn (the
"Executives") which agreements replaced those dated October 9, 1996. Each of the
Agreements is for a period of two years and provides annual salaries of between
$300,000 to $325,000. If an Executive's subsidiary reports a pretax loss, such
related Executive's salary will be reduced, but not below $150,000 per annum, to
reflect a pretax breakeven and such reduction will be recorded as an advance
with interest payable at prime plus 1% over approximately three years. In
addition, such Executive's salary will be reduced for the subsequent year by the
amount of such reduction but not below $150,000. Pursuant to the Agreements, two
bonus plans have been established for the benefit of the Executives based upon
attainment of certain financial results.
8
<PAGE>
PROPOSAL NO. 2
RATIFICATION OF SELECTION
OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board and the Audit Committee have approved the engagement of
Rothstein, Kass & Company, P.C. as the independent public accountants of the
Company for the fiscal year ending June 30, 1998. Rothstein, Kass & Company,
P.C. has audited the Company's financial statements since its inception in July
1996. The Board believes it is appropriate to submit for ratification by the
stockholders its selection of Rothstein, Kass & Company, P.C. as the independent
public accountants of the Company.
The Company is advised that neither that firm nor any of its partners has
any material direct or indirect relationship with the Company. The Board
considers Rothstein, Kass & Company, P.C. to be well qualified for the function
of serving as the Company's independent public accountants.
Representatives of Rothstein, Kass & Company, P.C. are expected to be
present at the Meeting, will have the opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions.
Unless otherwise specified, shares represented by proxies will be voted
for the ratification of Rothstein, Kass & Company, P.C. as the independent
public accountants for the Company. If the shareholders do not so approve, the
selection of independent public accountants will be reconsidered by the Board.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF ROTHSTEIN, KASS
& COMPANY, P.C. AS THE INDEPENDENT PUBLIC ACCOUNTANTS FOR THE COMPANY.
OTHER BUSINESS
Management of the Company knows of no other business which will be
presented for consideration at the Meeting, but should any other matters be
brought before the Meeting, it is intended that the persons named in the
accompanying proxy will vote such proxy in their discretion.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On October 9, 1996, the Company entered into the Exchange Agreement with
each of John Loeffler, Jon Small, Brian Doyle and Richard Flynn, each of whom
was an executive officer and a director of the Company. Pursuant to the Exchange
Agreement, John Loeffler and Jon Small were each issued 291,000 shares of Common
Stock and Brian Doyle and Richard Flynn were each issued 145,500 shares of
Common Stock in exchange for all of the outstanding stock of each of Rave,
Picture Vision and All Access. The Company believes that this transaction was
fair from a financial point of view. This belief is based on the fact that the
Exchange Agreement, and the transactions consummated thereby, were analyzed and
approved by the Company's Board of Directors and by all of its then existing
stockholders.
On October 9, 1996, the Company issued 78,333 shares of its Common Stock
to 11 individuals in a private placement (the "Private Placement") for $3.00 per
share. There were no underwriters involved in the Private Placement. The Common
Stock in the Private Placement was issued only to accredited investors, as such
term is defined in the Securities Act. The aggregate offering price of the
Private Placement was $234,999. Messrs. Cohen and Edelman, directors of the
Company, each purchased 8,333 shares of Common Stock in the Private Placement.
The holders of these 78,333 shares have agreed not to sell, transfer or dispose
of these shares prior to January 22, 1998. John Loeffler, the President, Chief
Executive Officer and a director of the Company, is also a consultant to Grey
Advertising, which is a major client of the Company's commercial music
production division. For such consulting services, Mr. Loeffler is paid
approximately $45,000 per year by Grey Advertising. The Company derived
approximately $361,000 and $365,000 of commercial music production revenues
(approximately 40% and 44% of commercial music production revenues) from Grey
Advertising for the years ended June 30, 1997 and 1996, respectively.
9
<PAGE>
In December 1996, one of the Company's subsidiaries borrowed $100,000 from
a bank. The loan bore interest at 1.5% above the bank's prime rate, was
personally guaranteed by two officers of the Company and collateralized by all
of the assets of such subsidiary and a cross corporate guarantee by the Company.
The loan was repaid in June 1997.
In January 1997, the Company entered into a one year consulting agreement
with Mr. Cohen, a director, providing for an aggregate remuneration of Mr. Cohen
of $60,000 per year.
SECTION 16 (A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and information furnished by the reporting
person, during the fiscal year ended June 30, 1997 all Section 16(a) filing
requirements applicable to the Company's officers, directors and greater than
10% beneficial owners were complied with.
INDEPENDENT ACCOUNTANTS
The Company has engaged Rothstein, Kass & Company, P.C. as independent
public accountants for the Company's first fiscal year ended June 30, 1997.
Representatives of Rothstein, Kass & Company, P.C. are expected to be present at
the Meeting, will have the opportunity to make a statement if they desire to do
so and are expected to be available to respond to appropriate questions.
ANNUAL REPORT
The Annual Report of the Company on Form 10-KSB for the fiscal year ended
June 30, 1997, including financial statements but excluding exhibits, is being
furnished herewith to stockholders of record of the Company on the Record Date.
The Annual Report does not constitute a part of the proxy soliciting material.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Any stockholder desiring to present proposals to stockholders at the 1998
Annual Meeting of the Company must transmit such proposal to the Company in
writing and such proposal must be received by the Secretary of the Company at
its offices no later than September 8, 1998. All such proposals should be in
compliance with applicable SEC regulations.
By Order of the Board of Directors
Richard Flynn
Secretary
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PARADISE MUSIC & ENTERTAINMENT, INC.
53 West 23rd Street, New York, NY 10010
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS - FEBRUARY 10, 1998
The undersigned hereby appoints JOHN LOEFFLER and RICHARD FLYNN, as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all of the shares of Common
Stock, $.01 par value, of PARADISE MUSIC & ENTERTAINMENT, INC. held of record by
the undersigned on January 2, 1998 at the Annual Meeting of Shareholders (the
Meeting) of PARADISE MUSIC & ENTERTAINMENT, INC. , on February 10, 1998 at 10:00
a.m., New York time, or at any adjournment or postponement thereof.
(1) Election of Directors
<TABLE>
<CAPTION>
<S> <C>
[ ] FOR all nominees listed below (except as indi- [ ] WITHHOLD AUTHORITY to vote for all
cated otherwise below) nominees listed below
</TABLE>
INSTRUCTION: To withhold authority to vote for an individual nominee, write such
nominees's name in the space below.
NOMINEES: Paul Thomas Cohen, Brian Doyle, Thomas J. Edelman, Richard Flynn, John
Loeffler and Jon Small
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(2) To ratify the selection of Rothstein, Kass & Company, P.C. as independent FOR AGAINST ABSTAIN
public accountants for the Company for fiscal year 1998. [ ] [ ] [ ]
(3) In their discretion, the Proxies are authorized to vote upon such other FOR AGAINST ABSTAIN
business as may properly come before the meeting or any adjournments thereof. [ ] [ ] [ ]
</TABLE>
(To be signed below)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS GIVEN ABOVE.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please indicate the capacity in which signing. When a
ballot is given by a corporation, please give your full corporation name and
have the ballot signed by the president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Date:__________________________________, 1998
Stockholder:_________________________________
_____________________________________________
Signature
_____________________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
