SCHEDULE 14C
(RULE 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
<TABLE>
<S><C>
[ ] Preliminary Information Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14c-5(d)(2))
[x] Definitive Information Statement
</TABLE>
@ Entertainment, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant As Specified in Charter)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
o-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>
@ ENTERTAINMENT, INC.
ONE COMMERCIAL PLAZA
24TH FLOOR
HARTFORD, CT 06102
INFORMATION STATEMENT
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY
This Information Statement has been filed with the Securities and
Exchange Commission (the "SEC") and transmitted on or about April 10, 1998 to
the holders of record on March 30, 1998 (the "Record Date") of shares of common
stock, par value $.01 per share (the "Common Stock"), of @ Entertainment, Inc.,
a Delaware corporation ("@ Entertainment" or the "Company"). This Information
Statement is being furnished pursuant to Section 14(c) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), in connection with the
following action:
AMENDING THE @ ENTERTAINMENT, INC. 1997 STOCK OPTION PLAN (THE
"1997 PLAN") FOR THE PURPOSE OF (1) INCREASING TO 4,436,000
THE NUMBER OF SHARES OF COMMON STOCK RESERVED FOR ISSUANCE
PURSUANT TO THE 1997 PLAN, (2) INCLUDING DIRECTORS AS ELIGIBLE
OPTIONEES, AND (3) PERMITTING TRANSFERS OF OPTIONS TO FAMILY
MEMBERS OF OPTIONEES UNDER CERTAIN CIRCUMSTANCES (THE "1997
PLAN AMENDMENTS").
VOTING SECURITIES
This Information Statement is being mailed on or about April 10, 1998
to all shareholders of record as of the Record Date.
The Company's Board of Directors on November 18, 1997 approved the 1997
Plan Amendments, subject to stockholder approval.
As of the close of business on March 30, 1998, the Company had
33,310,000 shares of Common Stock issued and outstanding, each entitled to one
vote with respect to the actions to be taken.
Stockholders who hold a majority of the issued and outstanding shares
of Common Stock have executed a written consent in favor of the 1997 Plan
Amendments, which vote was sufficient to approve the increase.
Stockholders of the Company as of the Record Date are entitled to
notice of the corporate action taken by written consent of holders of the issued
and outstanding shares of Common Stock. Such action will be effective twenty
(20) days following the mailing of this Information Statement.
1
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of @ Entertainment's common stock as of the Record Date by
(i) each person known by @ Entertainment to own beneficially 5% or more of any
class of @ Entertainment's voting stock, (ii) each director and executive
officer of the Company, and (iii) all directors and executive officers of the
Company as a group. All percentages in this section were calculated on the basis
of outstanding securities plus securities deemed outstanding under Rule 13d-3 of
the Exchange Act.
<TABLE>
<CAPTION>
Percentage of
Shares of Common Stock
Name of Beneficial Owner Common Stock Outstanding(1)
- ------------------------ ------------ --------------
<S><C>
FIVE PERCENT STOCKHOLDERS:
Arnold L. Chase(2)
One Commercial Plaza
Hartford, Connecticut 06103......................................... 10,303,000 29.4%
Chase Polish Enterprises, Inc(2)
One Commercial Plaza
Hartford, Connecticut 06103......................................... 10,303,000 29.4%
Cheryl A. Chase(2)(3)
One Commercial Plaza
Hartford, Connecticut 06103......................................... 11,036,000 31.5%
Polish Investments Holding L.P.(2)
One Commercial Plaza
Hartford, Connecticut 06103......................................... 10,303,000 29.4%
ECO Holdings III Limited Partnership(4)
c/o Advent International Corp.
101 Federal Street
Boston, MA 02110.................................................... 9,524,000 27.2%
DIRECTORS AND EXECUTIVE OFFICERS:
David T. Chase........................................................ -- --
Robert E. Fowler, III(5)(6)........................................... 1,286,000 3.7%
Arnold L. Chase(7).................................................... 10,303,000 29.4%
Scott A. Lanphere(8).................................................. -- --
Jerzy Z. Swirski(9)................................................... -- --
Samuel Chisholm(10)................................................... -- --
David Chance(11)...................................................... -- --
Agnieszka Holland..................................................... -- --
John S. Frelas(6)(12)................................................. 48,000 *
George Makowski(6)(13)................................................ 385,000 1.1%
Przemyslaw Szmyt(6)(14)............................................... -- --
David Warner(6)(15)................................................... -- --
ALL DIRECTORS AND OFFICERS AS A GROUP (13 PERSONS(16)):............... 13,451,000 38.4%
</TABLE>
- --------------
* less than 1%.
(1) Based on a total number of outstanding shares of 35,029,000, which
includes 33,310,000 shares outstanding at March 30, 1997 and 1,719,000
shares subject to options which were exercisable within sixty days of
the Record Date.
(2) Pursuant to Schedules 13G filed on February 13, 1998 by Polish
Investments Holding L.P. ("PIHLP"), Chase Polish Enterprises, Inc.
("CPEI"), Arnold L.Chase and Cheryl A. Chase, as a result of their
control over management of PIHLP, Arnold L. Chase, CPEI and Cheryl A.
Chase may be deemed to share the power to direct the vote and
disposition of the 10,303,000 shares of Common Stock owned by PIHLP.
CPEI is the sole general partner of PIHLP. As general partner, CPEI
manages PIHLP, which includes directing the voting and disposition of
shares of Common Stock owned by PIHLP. Arnold L. Chase and Cheryl A.
Chase each own 50% of the outstanding capital stock of CPEI and are its
sole directors and executive officers.
2
<PAGE>
(3) Pursuant to Schedules 13G filed on February 13, 1998 by Arnold L. Chase
and Cheryl A. Chase, The Cheryl Anne Chase Martial Trust, a trust of
which Cheryl A. Chase and Kenneth N. Musen are joint trustees, owns
733,000 shares of Common Stock or 2.2% of the shares of Common Stock
outstanding. Cheryl A. Chase and Kenneth N. Musen are the beneficial
owners, as defined by Rule 13d-3(a) of the Exchange Act, of the shares
of Common Stock owned by the Cheryl Anne Chase Marital Trust.
(4) The general partner of ECO Holdings III Limited Partnership ("ECO") is
Advent ECO III LLC. Certain members of Advent ECO III LLC are venture
capital funds managed by Advent International Corporation. In its
capacity as manager of these funds, Advent International Corporation
exercises sole voting and investment power with respect to all shares
of Common Stock held on behalf of these funds.
(5) Mr. Fowler has been granted options to purchase 1,286,000 shares of
Common Stock at a price of $3.707 per share, subject to the terms and
conditions of a stock option agreement. All of Mr. Fowler's options are
exercisable.
(6) Messrs. Fowler, Frelas, Makowski, Szmyt and Warner, in connection with
@ Entertainment's initial public equity offering ("Initial Public
Equity Offering"), entered into an agreement with Goldman, Sachs & Co.
and Merrill Lynch, Pierce, Fenner & Smith Incorporated that during the
two year period beginning July 30, 1997, such individuals will not
offer, sell, contract to sell or otherwise dispose of any securities of
@ Entertainment which are substantially similar to shares of Common
Stock or which are convertible into or exchangeable for securities
which are substantially similar to shares of Common Stock without the
prior written consent of Goldman, Sachs & Co. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
(7) Includes 10,303,000 shares of Common Stock owned by PIHLP which may be
deemed to be beneficially owned by Arnold Chase.
(8) Mr. Lanphere disclaims beneficial ownership of the shares held by ECO.
(9) Mr. Swirski disclaims beneficial ownership of the shares held by ECO.
(10) Mr. Chisholm has been granted options to purchase 500,000 shares of
Common Stock (subject to stockholder approval), vesting ratably over a
two year period, at an exercise price of $12.00 per share. None of Mr.
Chisholm's options are exercisable within 60 days of the Record Date.
(11) Mr. Chance has been granted options to purchase 500,000 shares of
Common Stock (subject to stockholder approval), vesting ratably over a
two year period, at an exercise price of $12.00 per share. None of Mr.
Chance's options are exercisable within 60 days of the Record Date.
(12) Mr. Frelas has been granted options to purchase 241,000 shares of
Common Stock at a price of $1.99170 per share, subject to the terms and
conditions of a stock option agreement, which options vest ratably over
a five year period. As of the Record Date, options to purchase 48,000
shares have vested.
(13) Mr. Makowski has been granted options to purchase 385,000 shares of
Common Stock at a price of $3.70808 per share, subject to the terms and
conditions of a stock option agreement. All of Mr. Makowski's options
are exercisable.
(14) Mr. Szmyt has been granted options to purchase 131,000 shares of Common
Stock at a price of $15.24 per share, subject to the terms and
conditions of a stock option agreement dated June 1997, which options
vest ratably over a three year period. Additionally, on January 26,
1998, Mr. Szmyt was granted options to purchase 75,000 shares of Common
Stock (subject to stockholder approval) at a price of $12.2375 per
share, which options vest ratably over a three year period. None of Mr.
Szmyt's options are exercisable within 60 days of the Record Date.
(15) Mr. Warner has been granted options to purchase 131,000 shares of
Common Stock at a price of $15.24 per share, subject to the terms and
conditions of a stock option agreement, which options vest ratably over
a five year period. Additionally, on January 26, 1998, Mr. Warner was
granted options to purchase 75,000 shares of Common Stock (subject to
stockholder approval) at a price of $12.2375 per share, which options
vest ratably over a three year period. None of Mr. Warner's options are
exercisable within 60 days of the Record Date.
(16) Includes 1,429,000 shares held by the Steele LLC and owned beneficially
by Richard B. Steele, who resigned as President of Poland
Communications, Inc. ("PCI") on June 23, 1997.
DIRECTORS' COMPENSATION
Messrs. Chisholm and Chance serve as Business Independent Directors of
the Company and Ms. Holland serves as an Artistic Independent Director of the
Company. Each Business Independent Director receives $5,000 for attendance at
each of
3
<PAGE>
the five regular meetings of the Board of Directors, and an additional $5,000
for attendance at any special meetings of the Board of Directors. Each Artistic
Independent Director receives $5,000 for attendance at each of the five regular
meetings of the Board of Directors. Additionally, directors are eligible for
grants of options under the 1997 Plan. See Approval of Certain Amendments to the
1997 Stock Option Plan.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding all
compensation awarded to, earned by or paid to the Company's Chief Executive
Officer, each of the other four most highly compensated executive officers of
the Company and a former executive officer who would have been one of the four
most highly compensated executive officers at the end of the fiscal year 1997
(collectively, the "Named Executive Officers") for services rendered in all
capacities to the Company for the last three fiscal years, to the extent that
those officers were in the employ of the Company. Columns relating to long-term
compensation have been omitted from the table as the Company did not have
capital stock-related award plans and there has been no compensation arising
from long-term incentive plans during the years reflected in the table.
<TABLE>
<CAPTION>
Other Annual Securities All Other
Salary Bonus Compensation Underlying Compensation
Name and Principal Position Year ($) ($) ($) Options/SA ($)
- --------------------------- ---- ------ ----- ------------ ---------- ------------
<S><C>
Robert E. Fowler, III............ 1997 337,500 381,250 25,872(1) 1,268,000 --
Chief Executive Officer and 1996 66,000(2) 66,000(2) -- -- --
Director 1995 66,000(2) 66,000(2) -- -- --
Richard B. Steele(3)............. 1997 207,595 -- -- -- 156,000(4)
1996 356,000(2) 250,000(2) -- -- 5,000(5)
1995 356,000(2) -- -- -- 7,500(5)
John S. Frelas................... 1997 155,746 350,000(6) 39,000(7) -- --
Chief Financial Officer, Vice 1996 46,153(8) -- 6,000(7) --
President, Treasurer 1995 -- -- -- 241,000 --
George Z. Makowski............... 1997 156,000 175,000(6) 68,400(9) -- --
Chief Operating Officer - 1996 -- -- -- 385,000 --
Cable 1995 -- -- -- -- --
1997 120,708 248,500(6) -- -- --
David Warner..................... 1996 -- -- -- 131,000 --
Chief Operating Officer - 1995 -- -- -- -- --
DTH 1997 146,667 70,000(6) -- -- --
1996 -- -- -- 131,000 --
Przemyslaw Szmyt................. 1995 -- -- -- -- --
Vice President, General --
Counsel,
Secretary
</TABLE>
- ---------------------
(1) Represents amounts paid or reimbursed by the Company for personal
travel related expenses.
(2) Represents only that portion of annual compensation attributable to
services performed on behalf of the Company. Additional compensation
may have been provided by companies that are affiliated with @
Entertainment and beneficially owned by the Chase Family for services
rendered to those companies.
(3) Mr. Steele was the President of PCI. He resigned on June 23, 1997.
(4) Represents amounts earned as deferred compensation.
(5) Represents portion of 401(k) plan paid pursuant to matching
contribution.
(6) Represents one-time bonus paid upon completion of @ Entertainment's
Initial Public Equity Offering.
(7) Represents amounts paid pursuant to housing allowance.
(8) Represents compensation for partial year of service beginning in
September 1996.
(9) Represents amounts paid pursuant to housing and tuition allowances.
4
<PAGE>
COMPENSATION PLANS
EMPLOYMENT AGREEMENTS
@ Entertainment has employment agreements with each of Messrs. Fowler,
Frelas, Makowski, Szmyt and Warner. PCI has employment agreements with each of
Mr. Keefe and Ms. Hansberry. @ Entertainment has entered into consultancy
arrangements with Messrs. Chisholm and Chance and Ms. Holland.
Mr. Fowler entered into a three-year employment agreement with PCI
effective at January 1, 1997. The employment agreement was assigned to @
Entertainment in June 1997 in connection with the Company's reorganization in
June 1997 (the "Reorganization"). Pursuant to such agreement, Mr. Fowler serves
as the Chief Executive Officer of @ Entertainment. Mr. Fowler receives a base
annual salary of $325,000, plus a travel allowance of approximately $30,000 per
annum and an unspecified annual incentive bonus. Pursuant to Mr. Fowler's
employment contract, and in part to induce Mr. Fowler to move closer to the
Company's operations in Europe, @Entertainment purchased Mr. Fowler's house in
Connecticut for approximately $354,000 in June 1997 (including payments of
$295,000 to extinguish the mortgages relating to the house), and sold the house
shortly thereafter to a third party for approximately $267,000. @ Entertainment
is obligated to pay Mr. Fowler the difference between the mortgage amounts of
$295,000 and the purchase price of $354,000. Mr. Fowler may terminate the
employment agreement at any time upon three months' written notice, and @
Entertainment may terminate the agreement at any time upon one month's written
notice (with an obligation to pay Mr. Fowler an additional two months' base
salary). In addition, @ Entertainment may terminate the agreement immediately
without further obligation to Mr. Fowler for cause (as defined in the employment
agreement).
Mr. Frelas entered into a five-year employment agreement with PCI
commencing on September 1, 1996. The employment agreement was assigned to @
Entertainment in June 1997 in connection with the Reorganization. Pursuant to
such agreement, Mr. Frelas serves as the Chief Financial Officer, Vice President
and Treasurer of @ Entertainment. Mr. Frelas receives a base annual salary of
$150,000, allowances for living and travel of approximately $40,000 per annum
and annual incentive bonuses of up to $50,000 if certain mutually agreed
objectives are met. He is eligible to receive a bonus of $50,000 for the
successful completion of a bank line of credit of $75 million or more. Mr.
Frelas or @ Entertainment may terminate the agreement at any time upon six
month's written notice. In addition, @ Entertainment may terminate the agreement
immediately without further obligation to Mr. Frelas for cause (as defined in
the employment agreement).
Mr. Makowski entered into a five-year employment agreement with PCI
commencing on January 21, 1997. The employment agreement was assigned to @
Entertainment in June 1997 in connection with the Reorganization. Pursuant to
such agreement, Mr. Makowski serves as the Chief Operating Officer--Cable
Operations of PCI. Mr. Makowski receives a base annual salary of $156,000,
allowances for living, family travel and education for his children of
approximately $105,000 per annum and annual incentive bonuses of up to $60,000
if certain mutually agreed objectives are met. Mr. Makowski or @ Entertainment
may terminate the agreement at any time upon six month's written notice. In
addition, @ Entertainment may terminate the agreement immediately without
further obligation to Mr. Makowski for cause (as defined in the employment
agreement).
Mr. Szmyt entered into a three-year agreement with PCI effective at
February 7, 1997, which was assigned to @ Entertainment in June 1997 in
connection with the Reorganization and was amended effective January 1, 1998.
Pursuant to such agreement, Mr. Szmyt serves as Vice President, General Counsel
and Secretary of @ Entertainment. Pursuant also to an employment agreement with
PTK-Warsaw and a services agreement with PCI, Mr. Szmyt receives annual
remuneration totaling $180,000. He is eligible to receive an annual
performance-based bonus of $40,000 per year. Mr. Szmyt may terminate his
contract with @ Entertainment at any time upon two months' written notice and @
Entertainment may terminate the contract at any time upon four months' written
notice. In addition, @ Entertainment may terminate the contract without further
obligation for cause (as defined in the agreement). Mr. Szmyt's employment
agreement with PTK-Warsaw may be terminated by either party upon one month's
written notice.
Mr. Warner entered into a five-year employment agreement with PCI
effective at April 7, 1997, which was assigned to @ Entertainment in June 1997
in connection with the Reorganization. Pursuant to such agreement, Mr. Warner
serves as Chief Operating Officer--DTH Operations of @EL. Mr. Warner receives an
annual salary of (pounds)95,000 (approximately $158,935, based on the exchange
rate of (pounds)1.00 =$1.673 at March 25, 1998), and receives an annual
performance-based bonus of up to (pounds)45,000 (approximately $75,285 based on
the approximate exchange rate of (pounds)1.00 = $1.673 at March 25, 1998). Mr.
Warner and @ Entertainment may terminate the contract at any time with six
months' written notice. In addition, @ Entertainment may terminate the contract
without further obligation for cause (as defined in the agreement).
5
<PAGE>
Mr. Keefe entered into a two-year employment agreement with PCI
effective at January 1, 1998. Pursuant to such agreement, Mr. Keefe serves as
the Chief Executive Officer of PCI. Mr. Keefe receives a base annual salary of
approximately $220,000, a monthly allowance for additional housing and cost of
living expenses of $5,000, an allowance for relocation expenses of up to
$20,000, and reimbursement of educational and tax planning expenses of up to an
aggregate amount of $23,000 per year. Mr. Keefe also receives a guaranteed bonus
of $100,000 in the first year of his employment and unspecified incentive
bonuses thereafter. He received an additional bonus of $200,000 upon the signing
of the employment agreement. Mr. Keefe may terminate the employment agreement at
any time upon three months' written notice, and PCI may terminate the agreement
at any time upon one month's written notice (with an obligation to pay Mr. Keefe
an additional five months' salary). In addition, PCI may terminate the agreement
immediately without further obligation to Mr. Keefe for cause (as defined in the
employment agreement). Mr. Keefe has been granted options to purchase 250,000
shares of Common Stock at a price of $12 per share, subject to the terms and
conditions of a stock option agreement with @ Entertainment. Options to purchase
31,250 shares of Common Stock shall vest at the end of each fiscal quarter on
March 31, June 30, September 30 and December 31 of 1998 and 1999, provided that
the options shall vest in full on the date of a change in control (as defined in
the employment agreement) in @ Entertainment or PCI.
Ms. Hansberry entered into a two-year agreement with PCI effective at
January 1, 1998. Pursuant to such agreement, Ms. Hansberry serves as Vice
President and General Counsel of PCI and receives an annual remuneration
totaling $150,000. She is eligible to receive annual performance-based bonuses
of up to $40,000 per year. Ms. Hansberry's initial year bonus of $40,000 is
guaranteed. Ms. Hansberry or PCI may terminate the agreement at any time upon
six months' written notice. In addition, PCI may terminate the agreement without
further obligation to Ms. Hansberry for cause (as defined in the agreement).
The Company has entered into a two-year consultancy arrangement with
Samuel Chisholm and David Chance (each individually a "Consultant"), pursuant to
which the Company will pay to a Consultant a fee of $10,000 per consultancy day,
which shall be a single day of at least seven hours during which a Consultant
provides consulting services to the Company ("Consultancy Day"), based on a
minimum, on average over each 12 month period, of a total of 4 Consultancy Days
per month, and the Company will pay an additional fee of $10,000 to a Consultant
for any additional days in any month on which a Consultant provides consulting
services to the Company. Additionally, Messrs. Chisholm and Chance were each
granted, subject to stockholder approval, options to purchase 500,000 shares of
Common Stock at an exercise price of $12 per share. The options vest ratably
over a two-year period commencing from the initial date of grant.
The Company has entered into a two-year consultancy arrangement with
Agnieszka Holland, pursuant to which the Company will pay to Ms. Holland a fee
of $25,000 per year, in 12 equal prorated amounts, for artistic consultancy
services.
1997 STOCK OPTION PLAN
1997 Plan provides for the grant to employees of the Company (including
officers, employee directors, and non-employee directors) of incentive stock
options within the meaning of Section 422 of the Code, and for the grant of
qualified stock options to employees and consultants of the Company
(collectively the "Options"). For a complete discussion of the 1997 Plan see
Approval of Certain Amendments to the 1997 Stock Option Plan.
The following table lists all grants of Options under the 1997 Plan to
the Named Executive Officers during 1997 and contains certain information about
potential value of these Options based upon certain assumptions as to the
appreciation of the Common Stock over the life of the Options.
6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
Percent of
Number of Total
Securities Options/SARS Exercise
Underlying Granted to or Grant Date
Options/SARS Employees in Base Price Expiration Present Value
Name Granted (#) Fiscal Year (%) ($) Date ($)(1)
- ---- ------------ --------------- ---------- ---------- -------------
<S><C>
Robert E. Fowler, III........... 1,286,000 55.12% 3.707 1/01/07 16,576,540
Richard B. Steele............... -- -- -- -- --
John S. Frelas.................. -- -- -- -- --
George Z. Makowski.............. 385,000 16.50% 3.70808 1/01/07 2,964,500
David Warner.................... 131,000 5.62% 15.24 6/23/07 652,380
Przemyslaw Szmyt................ 131,000 5.62% 15.24 6/23/07 652,380
</TABLE>
- -----------------
(1) Calculated based upon a variation of the Black-Scholes option pricing
model in which the following assumptions were used: the expected
volatility of the Common Stock was 39.0%; the risk-free rate of return
was 6.25%, 6.25%, 6.31%, and 6.31% for Messrs. Fowler, Makowski, Warner
and Szmyt, respectively; the dividend yield was 0.0%; and the expected
time of exercise was four (4) years from the month of the grant.
The following table provides certain information with respect to the
number of shares of Common Stock represented by outstanding Options held by the
Named Executive Officers at December 31, 1997. Also reported are the values for
"in-the-money" options which represent the position spread between the exercise
price of any such existing stock options and the price of the Common Stock at
December 31, 1997.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARS In-the-Money
Shares at Fiscal Options/SARS
Acquired on Value Year-End (#) Year-End ($)
NAME Exercise (#) Realized Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------ -------- ------------------------- -------------------------
<S><C>
Robert E. Fowler, III.................. -- -- 1,286,000/0 9,539,548/--
Richard B. Steele...................... -- -- -- --
John S. Frelas......................... -- -- 48,000/193,000 430,398/1,762,727
George Z. Makowski..................... -- -- 385,000/-- 2,855,514/--
David Warner........................... -- -- --/131,000 --
Przemyslaw Szmyt....................... -- -- --/131,000 --
</TABLE>
APPROVAL OF AMENDING THE 1997 STOCK OPTION PLAN FOR THE PURPOSES OF (1)
INCREASING TO 4,436,000 THE NUMBER OF SHARES OF COMMON STOCK RESERVED
FOR ISSUANCE PURSUANT TO THE 1997 PLAN, (2) INCLUDING DIRECTORS AS ELIGIBLE
OPTIONEES, AND (3) PERMITTING TRANSFERS OF OPTIONS TO FAMILY MEMBERS OF
OPTIONS UNDER CERTAIN CIRCUMSTANCES (THE "1997 PLAN AMENDMENTS")
The 1997 Plan previously authorized 2,436,000 shares for issuance upon
exercise of stock options and provided that all options were non-transferable,
except by will and the law of descent. Additionally, the 1997 Plan did not
previously provide that all Directors were eligible for option grants. The
Company's Board of Directors has unanimously adopted a resolution to approve
amending the 1997 Plan for the purposes of (1) increasing to 4,436,000 the
number of shares of Common Stock reserved for issuance pursuant to the 1997
Plan, (2) including directors as eligible optionees, and (3) permitting
transfers of options to family members of options under circumstances (the "1997
Plan Amendments"). Four shareholders holding approximately 58.7% of the
outstanding shares of Common Stock, have voted all of such shares in favor of
the 1997 Plan Amendments which vote was sufficient to approve the increase. The
current text of the 1997 Plan, as modified pursuant to the 1997 Plan Amendments,
is attached hereto as Exhibit A. The material features of the 1997 Plan are
discussed below, but the description is subject to, and is qualified in its
entirety by, the full text of the 1997 Plan, as amended.
7
<PAGE>
The 1997 Plan is currently administered by the Board of Directors which
selects the optionees (from among those eligible), determines the number or
shares to be subject to each Option and determines the exercise price of each
Option. The Board of Directors may also appoint a Stock Option Committee to
perform such functions in the future. Currently, approximately 11 individuals
(including Messrs. Fowler, Frelas and Makowski, whose option agreements with PCI
became subject to the 1997 Plan pursuant to Assignment and Assumption Agreements
with @ Entertainment, Messrs. Szmyt and Warner, whose option agreements became
subject to the 1997 Plan pursuant to a resolution of the Board of Directors of @
Entertainment, and Messrs. Chisholm, Chance, and Keefe) participate in the 1997
Plan. Under the 1997 Plan, as amended, Directors of the Company will also be
eligible to receive stock option grants.
In addition, the Board of Directors has the authority to interpret the
1997 Plan and to prescribe, amend and rescind rules and regulations relating to
the 1997 Plan. The Board of Directors' interpretation of the 1997 Plan and
determinations pursuant to the 1997 Plan are final and binding on all parties
claiming an interest under the 1997 Plan. The maximum number of shares of Common
Stock that may be subject to Options under the 1997 Plan, as amended, 4,436,000
shares (of which 2,000,000 remain subject to stockholder approval), subject to
adjustment in accordance with the terms of the 1997 Plan. At March 19, 1998
options for 3,724,000 shares had been granted (of which 1,288,000 remain subject
to stockholder approval) and 712,000 shares remained available for future grants
(subject to stockholder approval). The exercise price of all incentive stock
options granted under the 1997 Plan must be at least equal to the fair market
value of the Common Stock on the date of grant. With respect to any participant
who owns stock possessing more than 10% of the voting power of all classes of
stock of @ Entertainment, the exercise price of any incentive stock option
granted must equal at least 110% of the fair market value on the grant date and
the maximum term of an incentive stock option must not exceed five years.
The term of all options granted under the 1997 Plan may not exceed ten
years. Options become exercisable at such times as determined by the Board of
Directors and as set forth in the individual stock option agreements. Payment of
the purchase price of each Option will be payable in full in cash upon the
exercise of the Option. In the discretion of the Board of Directors, payment may
also be made by surrendering shares owned by the optionee which have a fair
market value on the date of exercise equal to the purchase price, by delivery of
a full recourse promissory note meeting certain requirements or in some
combination of the above payment methods.
Under the 1997 Plan, all Options are non-transferable, except by will
or by the laws of descent and distribution. Additionally, under the 1997 Plan,
as amended, the Board of Directors will have the authority to designate that the
Options may be transferred by gifts in trust for family members.
In the event of a merger of @ Entertainment with or into another
corporation, as a result of which @ Entertainment is not the surviving
corporation, the 1997 Plan requires that outstanding Options be assumed or an
equivalent option substituted by the successor corporation or a parent or
subsidiary of such successor corporation. If the successor corporation does not
assume or substitute for the Options, the optionee will have the right to
exercise the Option as to those shares which are vested for a period beginning
not less than fifteen days prior to the proposed consummation of such
transaction and ending immediately prior to the consummation of such
transaction, at which time the Options will terminate.
The number of shares covered by the 1997 Plan and the number of shares
for which each Option is exercisable shall be proportionately adjusted for any
change in the number of issued shares resulting from any reorganization of @
Entertainment. In the event of dissolution or liquidation of @ Entertainment,
each Option shall terminate immediately prior to the consummation of such
action.
No Options may be granted under the 1997 Plan after ten years from its
effective date. The Board of Directors has authority to amend or terminate the
1997 Plan subject to certain limitations set forth in the 1997 Plan.
8
<PAGE>
The following table sets forth, as of the Record Date, certain
information regarding options granted under the 1997 Plan to the persons and
groups indicated.
NEW PLAN BENEFITS TABLE
<TABLE>
<CAPTION>
Number of Shares Exercise
Subject to Options Price Dollar
Name and Position (#) ($) Value ($)(1)
- ----------------- ------------------ -------- ------------
<S><C>
Robert E. Fowler, III 1,286,000 3.707 13,397,548
Chief Executive Officer and Director
Richard B. Steele -- -- --
John S. Frelas 241,000 1.9917 2,924,125
CFO, Vice President, Treasurer
George Z. Makowski 385,000 3.70808 4,010,514
Chief Operating Officer - Cable
David Warner 131,000 15.24 --
Chief Operating Officer - DTH
75,000 12.24 141,375
Przemyslaw Szmyt 131,000 15.24 --
Vice President, General Counsel, Secretary
75,000 12.24 141,375
Executive Officers as a Group (7 persons) 2,574,000 6.02 20,862,270
Non-Employee Directors as a Group 1,000,000 12.00 2,125,000
(3 persons)
All Non-Executive Employees as a Group 150,000 15.00 --
</TABLE>
- -----------------
(1) Determined by multiplying the number of options held by the individual
times the difference between the exercise price of the option and the
market price of Company common stock at March 30, 1998 which was
$14.125.
9
