<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/X/ Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
All American Communications, 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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
ALL AMERICAN COMMUNICATIONS, INC.
808 WILSHIRE BOULEVARD
SANTA MONICA, CALIFORNIA 90401-1810
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 16, 1996
------------------------
To the Stockholders of All American Communications, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of All
American Communications, Inc.
(the "Company") will be held at the Miramar Sheraton, Santa Monica, California
on July 16, 1996, at 10:00 a.m., local time, to consider and vote upon the
following matters:
1. The election of Class II and Class III Directors;
2. An amendment to the Company's Restated Certificate of Incorporation
to permit the holders of Common Stock to convert into Class B Common Stock
on a one for one basis;
3. The ratification of the amendment to the Company's 1994 Stock
Incentive Plan, including authorization of awards in either Common Stock or
Class B Common Stock, and an increase of 2,250,000 shares of Common Stock
or Class B Common Stock reserved for issuance;
4. The approval of a certain award to Anthony J. Scotti previously
granted under such Plan;
5. The approval of certain awards to Thomas Bradshaw and certain other
executive officers previously granted under such Plan;
6. The approval of the appointment of Price Waterhouse LLP as the
Company's independent accountants for the fiscal year ending December 31,
1996; and
7. Such other business as may properly come before the meeting or any
adjournment(s) thereof.
Information concerning these matters, including the names of the nominees
for the Company's Board of Directors, is set forth in the attached Proxy
Statement, which is a part of this Notice.
The Board of Directors has fixed June 17, 1996 as the record date for
determination of stockholders entitled to notice of and to vote at the Annual
Meeting. Accordingly, only those stockholders of record at the close of business
on that date are entitled to vote at the Annual Meeting or any adjournment(s)
thereof.
The Company's Board of Directors urges that all stockholders of record
exercise their right to vote at the meeting personally or by proxy.
Your proxy will continue in full force and effect unless and until you
revoke such proxy prior to the vote to which such proxy pertains. You may revoke
your proxy by a writing delivered to the Company stating that the proxy is
revoked, by a subsequent proxy executed by you, or by attending the meeting and
voting in person. The dates contained on the forms of proxy presumptively
determine the date of execution, regardless of the postmark dates on the
envelopes in which they are mailed.
By Order of the Board of Directors
Anthony J. Scotti
Chairman and Chief Executive Officer
June , 1996
TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE COMPLETE, SIGN
(DO NOT PRINT) YOUR NAME AND DATE THE ENCLOSED PROXY CARD(S) AS PROMPTLY AS
POSSIBLE AND RETURN IT (THEM) IN THE ENCLOSED PRE-ADDRESSED ENVELOPE. IF YOU
RECEIVE MORE THAN ONE PROXY CARD BECAUSE YOU OWN SHARES REGISTERED IN DIFFERENT
NAMES OR AT DIFFERENT ADDRESSES, EACH PROXY CARD SHOULD BE COMPLETED AND
RETURNED.
<PAGE> 3
ALL AMERICAN COMMUNICATIONS, INC.
808 WILSHIRE BOULEVARD
SANTA MONICA, CALIFORNIA 90401-1810
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement is furnished to stockholders in connection with the
solicitation by the Board of Directors (the "Board") of All American
Communications, Inc., a Delaware corporation (the "Company"), of proxies for use
at the Annual Meeting of Stockholders of the Company to be held at the Miramar
Sheraton, Santa Monica, California, on July 16, 1996, at 10:00 A.M., local time,
and any postponement(s) and adjournment(s) thereof (the "Annual Meeting").
The Company's principal executive offices are located at 808 Wilshire
Boulevard, Santa Monica, California 90401-1810, and its telephone number is
(310) 656-1100.
This Proxy Statement, Notice of Annual Meeting and the accompanying proxy
card(s) and Annual Report to Stockholders are being first mailed to stockholders
on or about June 26, 1996. The Company will bear the costs of soliciting
proxies. The Company may use the services of its Directors, officers and other
regular employees to solicit proxies personally or telephonically. Such
Directors, officers and employees will not be additionally compensated for such
solicitation but may be reimbursed for reasonable out-of-pocket expenses
incurred in connection therewith.
The proxy will be voted in accordance with the instructions therein. In the
absence of such instructions, the persons designated as proxies in the
accompanying proxy card(s) will vote: for the election of the Director nominees
listed in the Proxy Statement (the "Nominees"), for the approval of the
amendment (the "Amendment") to the Company's Restated Certificate of
Incorporation, for the ratification of the amendment to the Company's 1994 Stock
Incentive Plan, for the approval of a certain award to Anthony J. Scotti, for
the approval of certain awards to Thomas Bradshaw and certain other executive
officers, for the approval of the appointment of Price Waterhouse LLP as the
Company's independent accountants for the fiscal year ending December 31, 1996
(the "Appointment of Accountants") and in their discretion as to any other
business that may properly come before the Annual Meeting. The Board of
Directors does not know of any other business to be brought before the Annual
Meeting.
The proxy will continue in full force and effect unless and until revoked
by the person executing it prior to the vote pursuant thereto. Such revocation
may be effected by a writing delivered to the Company to the attention of the
Corporate Secretary at the address indicated above, stating that the proxy is
revoked, by a subsequent proxy executed by the person executing the prior proxy
and presented at the meeting, or by attendance at the meeting and voting in
person. The dates contained on the forms of proxy presumptively determine the
order of execution, regardless of the postmark dates on the envelopes in which
they are mailed.
GENERAL INFORMATION
The Board of Directors has fixed June 17, 1996 as the record date (the
"Record Date") for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting. At the end of business on the Record Date,
shares of the Company's common stock, $.0001 par value per share (the
"Common Stock"), were outstanding and entitled to vote at the meeting. The
Common Stock is the only class of stock of the Company entitled to vote at the
Annual Meeting.
Stockholders who own shares registered in different names or at different
addresses will receive more than one proxy card. A stockholder must sign and
return each of the proxy cards received to ensure that all of the shares owned
by such stockholder are represented at the Annual Meeting.
<PAGE> 4
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of Common Stock entitled to vote at the Annual Meeting
will constitute a quorum. With respect to the election of Directors, the four
Nominees with respect to Class II and the three Nominees with respect to Class
III receiving the highest number of affirmative votes for each respective class
will be elected. Abstentions and broker non-votes (which occur if a broker or
other nominee does not have discretionary authority and has not received voting
instructions from the beneficial owner with respect to the particular item) are
counted for purposes of determining the presence or absence of a quorum for the
transaction of business. The affirmative vote of a majority of the shares of
Common Stock outstanding on the Record Date will be necessary for the approval
of the remaining matters to be voted upon. Abstentions are counted in
tabulations of the votes cast on proposals presented to the stockholders and
have the same legal effect as a vote against a particular proposal. Broker
non-votes are not taken into account for purposes of determining whether a
proposal has been approved by the requisite stockholder vote.
Stockholders do not have dissenters' rights of appraisal with respect to
any of the matters to be acted upon at the Annual Meeting.
Each share of Common Stock entitles the holder thereof to one vote on each
matter to be voted on at the Annual Meeting. The holders in excess of a majority
of the outstanding shares of Common Stock on the Record Date have notified the
Company that they intend to vote their shares at the Annual Meeting in favor of
all of the matters set forth above.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of June 6, 1996 concerning
the beneficial ownership of certain securities of the Company by (i) each person
who is known to the Company to be a beneficial owner of more than 5% of the
outstanding Common Stock or Class B Common Stock of the Company, (ii) each of
the current Directors of the Company, and (iii) all current Directors, the Chief
Executive Officer and the four most highly compensated officers of the Company
who served in such capacities during the 1995 fiscal year (the "Named Officers")
of the Company, as a group. Unless otherwise specified, the address of each
beneficial owner listed below is 808 Wilshire Boulevard, Santa Monica,
California 90401-1810.
<TABLE>
<CAPTION>
PERCENT OF CLASS B PERCENT OF CLASS B
COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK
BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY
OWNED (1) OWNED OWNED (1) OWNED
------------ ------------ ------------ ------------------
<S> <C> <C> <C> <C>
Anthony J. Scotti(2)........................... 3,240,229 48.05% -- --
Benjamin J. Scotti(3).......................... 1,441,995 23.89% -- --
Myron I. Roth(4)............................... 440,850 7.19% -- --
Thomas Bradshaw(5)............................. 385,850 6.33% -- --
Sydney D. Vinnedge(6).......................... 153,975 2.55% -- --
Lawrence E. Lamattina (7)...................... 105,000 1.72% -- --
Gordon C. Luce(8).............................. 2,800 * -- --
David A. Mount(8).............................. 1,800 * -- --
R. Timothy O'Donnell(9)........................ 97,400 1.60% --
Jefferson Capital Group, Ltd.
One James Center
901 East Cary Street
Suite 1400
Richmond, Virginia 23219
Eugene P. Beard(10)............................ -- -- -- --
The Interpublic Group of
Companies, Inc.
1271 Avenue of the Americas
New York, New York 10020
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
PERCENT OF CLASS B PERCENT OF CLASS B
COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK
BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY
OWNED (1) OWNED OWNED (1) OWNED
------------ ------------ ------------ ------------------
<S> <C> <C> <C> <C>
The Interpublic Group of
Companies, Inc. ("IPG")(11)(12).............. 630,000 10.45% 2,520,000 44.06%
1271 Avenue of the Americas
New York, New York 10020
FMR Corp.(13).................................. 628,403 9.48% -- --
82 Devonshire Street
Boston, Massachusetts 02109
Franklin Resources, Inc.(14) 366,957 5.74% -- --
777 Mariners Island Boulevard
San Mateo, California 94404
Janus Capital Corp.(15) -- -- 500,000 8.74%
100 Fillmore Street, Suite 300
Denver, Colorado 80206
All Directors and Executive.................... 4,831,574 70.99% -- --
Officers as a group (10 persons)
</TABLE>
- ---------------
* less than 1%
(1) Amounts include options and other securities exercisable or
convertible into shares of Common Stock or Class B Common Stock, as
the case may be, held by such beneficial owner, unless such securities
are not convertible or exercisable within 60 days. Does not include
options granted to Mr. Scotti, to Mr. Bradshaw and to certain other
executive officers in February 1996 which cannot be exercised within 6
months from the date of grant or, if applicable, stockholder approval
of the amendment to the 1994 Stock Incentive Plan.
(2) Includes 1,275,538 shares beneficially owned by Messrs. Roth,
Bradshaw, Vinnedge, Lamattina and certain other employees which
Anthony J. Scotti has a proxy to vote. See "Certain Relationships and
Related Transactions." Includes vested performance options to purchase
200,000 shares of Common Stock. Further includes 8,696 shares of
Common Stock issuable upon conversion of the Company's convertible
subordinated notes registered under a registration statement.
(3) Includes 6,000 time vesting options which have vested. Excludes 14,000
time vesting options not yet vested nor subject to vesting in the next
60 days. Does not include unvested options granted to Mr. Scotti in
February 1996. See "-- Employment Agreements."
(4) 415,850 of such shares are subject to a voting proxy granted to
Anthony J. Scotti. Includes vested performance options to purchase
100,000 shares of Common Stock.
(5) 385,850 of such shares are subject to a voting proxy granted to
Anthony J. Scotti. Includes vested performance options to purchase
70,000 shares of Common Stock. Does not include options granted to Mr.
Bradshaw in February 1996 which are not exercisable within 60 days.
See "-- Employment Agreements."
(6) 120,225 of such shares are subject to a voting proxy granted to
Anthony J. Scotti. Includes vested performance options to purchase
12,000 shares of Common Stock.
(7) Mr. Lamattina owns 30,000 shares of restricted Common Stock which vest
in July 1998, is vested in time vested options to purchase 25,000
shares of Common Stock and is vested in performance options to
purchase 50,000 shares of Common Stock. All such shares are subject to
a voting proxy granted to Anthony J. Scotti. Excludes 100,000 time
vesting options not yet vested or subject to vesting in the next 60
days.
(8) Includes 1,800 time vesting options which have vested. Excludes 4,200
time vesting options not yet vested or subject to vesting in the next
60 days.
3
<PAGE> 6
(9) Mr. O'Donnell owns 33,100 shares of Common Stock, and his affiliate,
Jefferson Capital Group, Ltd., owns warrants to purchase 62,500
shares. Includes 1,800 time vesting options which have vested.
Excludes 4,200 time vesting options not yet vested nor subject to
vesting in the next 60 days.
(10) Mr. Beard was appointed to the Board of Directors on October 12, 1994
to fill a vacancy. Mr. Beard does not own any shares directly and
disclaims beneficial ownership of the 630,000 shares of Common Stock
and the 2,520,000 shares of Class B Common Stock owned by IPG.
(11) As disclosed on a Schedule 13D, dated August 12, 1994.
(12) Represents approximately 26.3% (approximately 19% on a fully-diluted
basis) of common stock when Common Stock and Class B Common Stock are
aggregated as one class.
(13) As disclosed on a Schedule 13G, dated January 10, 1996; includes
600,003 shares of Common Stock issuable upon conversion of the
Company's convertible subordinated notes registered under a
registration statement.
(14) As disclosed on a Schedule 13G, dated February 13, 1996.
(15) As disclosed on a Schedule 13G, dated February 8, 1996.
ELECTION OF DIRECTORS
In accordance with the Restated Certificate of Incorporation and Bylaws of
the Company, the Board of Directors of the Company is divided into three
classes. Anthony J. Scotti, Thomas Bradshaw, Myron Roth and R. Timothy O'Donnell
were elected by the Company's stockholders as Class II Directors, with terms
expiring at the Annual Meeting for 1995; Sydney D. Vinnedge, Gordon C. Luce and
Lawrence E. Lamattina were elected by the Company's stockholders as Class III
Directors, with terms expiring at the Annual Meeting for 1996; Benjamin J.
Scotti, David A. Mount and Eugene P. Beard were elected by the Company's
stockholders as Class I Directors, with terms expiring at the Annual Meeting for
1997. All Nominees have consented to being named herein and have indicated their
intention to serve as Directors of the Company, if elected.
The Board of Directors proposes the election of the following Nominees as
Class III members of the Board of Directors:
Sydney D. Vinnedge
Gordon C. Luce
Lawrence E. Lamattina
If elected, the Nominees for Class III Directors are expected to serve
until the Annual Meeting for 1999 or until their successors are duly elected and
qualified.
The Company did not hold an Annual Meeting for Stockholders in 1995. As a
result, each of the Class II Directors has continued to serve as Directors. The
Board of Directors proposes the election of the following Nominees as Class II
members of the Board of Directors:
Anthony J. Scotti
Thomas Bradshaw
Myron Roth
R. Timothy O'Donnell
If elected, the Nominees for Class II Directors are expected to serve until
the Annual Meeting for 1998 or their successors are duly elected and qualified.
Unless otherwise marked, proxies received will be voted FOR the election of
each of the Nominees named above. If such person is unable or unwilling to serve
as a Nominee for the office of Director at the date of the Annual Meeting, the
proxies may be voted for a substitute nominee, designated by the proxy holders
or by the present Board of Directors to fill such vacancy. The Board of
Directors has no reason to believe that such Nominee will be unwilling or unable
to serve if elected a Director.
4
<PAGE> 7
INFORMATION WITH RESPECT TO DIRECTORS AND NOMINEES
The following table sets forth certain information with respect to the
continuing Directors and Nominees of the Company as of June 6, 1996.
<TABLE>
<CAPTION>
NAME POSITION AGE
- ----------------------------- ---------------------------------------------------------- ---
<S> <C> <C>
Anthony J. Scotti**.......... Chairman and Chief Executive Officer 56
Myron I. Roth**.............. President, Chief Operating Officer and Director 63
Thomas Bradshaw**............ Chief Financial Officer, Senior Executive Vice President 53
and Director
Sydney D. Vinnedge........... Senior Executive Vice President, Executive Vice 52
President -- All American Television Production, Inc. and
Director
Benjamin J. Scotti........... Senior Executive Vice President, Executive Vice 58
President -- All American Music Group and Director
Lawrence E. Lamattina........ Chief Executive Officer, President -- All 50
American/Fremantle Television Group and Director
Gordon C. Luce*+............. Director 70
R. Timothy O'Donnell*+++..... Director 40
David A. Mount*+++........... Director 52
Eugene P. Beard.............. Director 61
</TABLE>
- ---------------
* Member of Stock Option Committee
** Member of Executive Committee
+ Member of Compensation Committee
++ Member of Audit Committee
Each of the persons listed above (other than Messrs. Lamattina, O'Donnell,
Mount and Beard) assumed their respective position listed above on February 25,
1991, the date on which Scotti Brothers Entertainment Industries, Inc. ("SBEI")
merged (the "Merger") into All American Television, Inc., the legal predecessor
to the Company. Prior to such date, Anthony J. Scotti and Mr. Vinnedge were
already directors of such predecessor.
ANTHONY J. SCOTTI is a co-founder of the Company and has been a Director of
the Company since its inception in 1982. He became Chairman and Chief Executive
Officer on February 25, 1991. Mr. Scotti served as a consultant to Carolco
Pictures Inc. (motion picture production) and was a director of LIVE
Entertainment, Inc. (entertainment software) from November 1988 until his
resignation in May 1996. Mr. Scotti was the non-executive Chairman of the Board
of LIVE Entertainment from November 1992 until his resignation from such
position in March 1996.
MYRON I. ROTH joined SBEI in December 1990 as President and Chief Operating
Officer, and he assumed the same titles and became a Director of the Company on
February 25, 1991. Mr. Roth is a member of the Board of Directors of the Record
Industry Association of America.
THOMAS BRADSHAW was a director, Senior Executive Vice President and Chief
Financial Officer of SBEI from 1985 and, on February 25, 1991, he assumed the
same positions at the Company. In addition, Mr. Bradshaw was a director of LIVE
Entertainment, Inc. from December 1988 to November 1993.
SYDNEY D. VINNEDGE is a co-founder of the Company and has been a Director
of the Company since its inception in 1982. Since February 25, 1991, Mr.
Vinnedge has served as Senior Executive Vice President of the Company.
BENJAMIN J. SCOTTI co-founded the predecessor to SBEI in 1974 and served as
Co-Chairman of SBEI until February 25, 1991. Since February 25, 1991, Mr. Scotti
has been Senior Executive Vice President of the Company, Senior Executive Vice
President of All American Music Group (a subsidiary of the Company) and a
Director of the Company. He is the brother of Anthony J. Scotti.
5
<PAGE> 8
LAWRENCE E. LAMATTINA became Chief Executive Officer and President of All
American/Fremantle Television Group (an operating division of the Company) on
August 3, 1994 and a Director of the Company on October 12, 1994. Since May
1989, he has been Chairman of the Board of Fremantle International, Inc. and
Chairman and Chief Executive Officer of EC TV, a division of The Interpublic
Group of Companies, Inc. ("IPG"). Mr. Lamattina also continues to act as a
consultant to IPG with respect to areas that are not competitive with the
Company.
GORDON C. LUCE is a senior advisor to Eastman & Benirschke Financial Group
(financial planning and insurance brokerage), a position that he has held from
July 1990 to the present. Mr. Luce is a member of the Board of Directors of PS
Group (a diversified investment company) and Molecular Biosystems, Inc. (a
medical research enterprise) and is currently a member of the Board of Trustees
of the University of Southern California and the Chairman of Scripps Health. He
became a Director of the Company on February 25, 1991. Mr. Luce was a director
of Carolco Pictures, Inc. until his resignation in November 1995; on November
10, 1995, Carolco Pictures filed a voluntary petition under Chapter 11 of the
U.S. Bankruptcy Code.
R. TIMOTHY O'DONNELL was elected to the Company's Board of Directors
effective January 2, 1992. He is President of Jefferson Capital Group, Ltd., a
privately held investment banking group co-founded by Mr. O'Donnell in September
1989. Mr. O'Donnell has been a director of Shorewood Packaging Corporation
(packager for records, videos and cassettes) since October 1991 and a director
of Cinergi Pictures Entertainment Inc. (motion picture production) since March
1994. Mr. O'Donnell also served as a director of LIVE Entertainment Inc. from
1985 through his resignation in February 1996.
DAVID A. MOUNT was appointed to the Board of Directors on May 5, 1994. In
March 1995, Mr. Mount was named Chairman and Chief Executive Officer of Warner
Media Manufacturing and Distribution. Prior to that time, Mr. Mount had been
President and Chief Executive Officer of Warner/Elektra/Atlantic Corporation, a
division of Time Warner, Inc., since October 1993. Mr. Mount was President and
Chief Executive Officer of LIVE Entertainment Inc. from August 1988 through
September 1993. In addition, Mr. Mount served as a director of LIVE
Entertainment in 1989 and from January 1992 to the present. On February 2, 1993,
LIVE Entertainment filed a voluntary petition under Chapter 11 of the U.S.
Bankruptcy Code and emerged pursuant to a plan of reorganization on March 17,
1993. From August 1989 to June 1993, Mr. Mount was President of LIVE Home Video
Inc., a subsidiary of LIVE Entertainment. He was Chief Executive Officer of LIVE
Home Video from August 1989 to October 1993.
EUGENE P. BEARD became a member of the Board of Directors on October 12,
1994. Mr. Beard has been the Vice Chairman -- Finance and Operations of IPG
since October 1995, was Executive Vice President -- Finance and Operations of
IPG prior to that time and has served as a director of IPG since 1982. Mr. Beard
is a member of the Board of Directors of Brown Brothers Harriman 59 Wall Street
Fund, Inc. (diversified investment fund) and Micrografx, Inc. (computer
software).
IPG has entered into a voting agreement with certain management
stockholders of the Company (including Anthony J. Scotti) to vote for the
election of one member of the Company's Board of Directors nominated by IPG.
DIRECTORS' REMUNERATION
The Company does not pay any compensation to any person serving as a member
of the Board of Directors of the Company if such person is also an employee of
the Company. All outside Directors of the Company are paid an annual fee of
$25,000 for serving as a Director, except that Mr. Beard serves as a director
without compensation for such services. Non-employee Directors receive automatic
stock option grants of 3,000 shares per year, with the exception of Mr. Beard
who has waived his right to such grants.
COMMITTEES OF THE BOARD OF DIRECTORS; ATTENDANCE
During the year ended December 31, 1995, there were six meetings of the
Board of Directors, and all members participated. To assist in carrying out its
duties and responsibilities, the Board of Directors of the Company has appointed
a Stock Option Committee to administer the Company's Incentive Stock Option
6
<PAGE> 9
Plan, as amended (the "1991 Plan"). For the year ended December 31, 1995, the
members of the Stock Option Committee were R. Timothy O'Donnell, Gordon C. Luce
and David A. Mount. During the year ended December 31, 1995, the Stock Option
Committee had one meeting, and all members were present. The Board of Directors
of the Company has appointed an Executive Committee to assist the Board in the
overall management of the business and affairs of the Company. The members of
the Executive Committee are Anthony J. Scotti, Myron Roth and Thomas Bradshaw.
During the year ended December 31, 1995, the Executive Committee had no formal
meetings. The Company has an Audit Committee, the members of which are R.
Timothy O'Donnell and David A. Mount. For the year ended December 31, 1995, the
Audit Committee held one meeting, and both members participated. In 1994, the
Board of Directors established a Compensation Committee to assist in the
establishing of executive compensation and the performance goals of the Company
and the executive officers. The Company's 1994 Stock Incentive Plan (the "1994
Plan") is also administered by the Compensation Committee. The members of the
Compensation Committee are Gordon C. Luce, R. Timothy O'Donnell and David A.
Mount. During the year ended December 31, 1995, there was one meeting of the
Compensation Committee, and all members were present. In connection with the
Company's Class B Common Stock offering in December 1995, the Board of Directors
appointed a Pricing Committee, consisting of Anthony J. Scotti and R. Timothy
O'Donnell, to assist in the pricing of such stock. During the year ended
December 31, 1995, the Pricing Committee met once, and both members
participated.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE FOR THE ELECTION OF ALL OF THE CLASS II DIRECTORS
AND THE CLASS III DIRECTORS NOMINATED HEREIN.
7
<PAGE> 10
EXECUTIVE COMPENSATION
SUMMARY OF EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued by
the Company to the Named Officers for services rendered during each of the last
three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION AWARDS
------------------------------------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
-------------------------- RESTRICTED UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS STOCK AWARDS OPTIONS/SARS(#) SATION(1)
- -------------------------------- ---- -------- -------- ------------ --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Anthony J. Scotti 1995 $813,000 $ -- $ -- 100,000 $ --
Chairman and 1994 719,000 -- -- 100,000 --
Chief Executive Officer 1993 547,000 -- -- -- --
Myron I. Roth 1995 $425,000 $ 79,000 $ -- 50,000 $ --
President and Chief 1994 408,000 79,000 -- 50,000 --
Operating Officer 1993 389,000 79,000 -- -- --
Thomas Bradshaw 1995 $419,000 $ 43,000 $ -- 35,000 $ --
Chief Financial Officer 1994 399,000 43,000 -- 35,000 --
and Senior Executive Vice 1993 380,000 43,000 -- -- --
President
Sydney D. Vinnedge 1995 $396,000 $ 13,000 $ -- 6,000 $ --
Senior Executive Vice 1994 371,000 13,000 -- 6,000 --
President 1993 350,000 13,000 -- -- --
Lawrence E. Lamattina(2) 1995 $561,000 $550,000 $ -- 25,000 $ --
Chief Executive Officer and 1994 229,000 229,000 218,000(3) 150,000 --
President, All American/ 1993 -- -- -- -- --
Fremantle Television Group
</TABLE>
- ---------------
(1) The Named Officers received compensation in the form of personal benefits,
including automobile allowances and premiums for health, disability and life
insurance, which did not exceed the lesser of $50,000 or 10% of the total
annual salary and bonus reported for each year.
(2) Mr. Lamattina's employment with the Company commenced on August 3, 1994.
(3) In accordance with his employment agreement dated August 3, 1994, Mr.
Lamattina was granted restricted stock awards under the 1994 Plan, as of
July 6, 1994, for 30,000 shares of Common Stock with a vesting date of July
5, 1998. The shares have been valued using the closing bid price on July 6,
1994 of $7.25. Mr. Lamattina would be entitled to any dividends on such
shares.
8
<PAGE> 11
OPTION GRANTS IN 1995(4)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------------------
NUMBER OF
SHARES OF PERCENT OF
COMMON TOTAL
STOCK OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES BASE PRICE PRESENT
NAME GRANTED(#) IN 1995 ($/SH)(1) EXPIRATION DATE VALUE(2)
- ------------------------------ ---------- ---------- ----------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Anthony J. Scotti............. 100,000(3) 21.91% $ 9.125 April 24, 2005 $479,874
Myron I. Roth................. 50,000(3) 10.95% $ 9.125 April 24, 2005 $239,937
Thomas Bradshaw............... 35,000(3) 7.67% $ 9.125 April 24, 2005 $167,956
Sydney D. Vinnedge............ 6,000(3) 1.31% $ 9.125 April 24, 2005 $ 28,792
Lawrence E. Lamattina......... 25,000(3) 5.48% $ 9.125 April 24, 2005 $119,969
</TABLE>
- ---------------
(1) Exercise price is based upon the closing bid price of the Company's Common
Stock on the date of grant.
(2) Grant date value is determined using the Black-Scholes option valuation
model.
(3) Each of these options vests in varying percentages based upon the
satisfaction of certain performance targets. None of these options had
vested as of December 31, 1995. All of these options became fully vested
subsequent to December 31, 1995 upon the Company's achievement of the
specified performance targets.
(4) Excludes all options granted in 1996 in connection with amendments to the
employment contracts of certain Named Officers. See "-- Employment
Agreements."
OPTION EXERCISES IN 1995 AND YEAR-END OPTION VALUES
The following table provides certain information concerning the exercise of
stock options and shows the number of shares covered by both exercisable and
non-exercisable stock options held as of the end of 1995. Also shown are values
for "in-the-money" options, which represent the positive difference between the
exercise price of such options and the price of the Common Stock at year end.
AGGREGATED OPTION EXERCISES DURING 1995 AND
OPTION VALUES ON DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS AT IN-THE-MONEY OPTIONS AT
ON VALUE DECEMBER 31, 1995 DECEMBER 31, 1995
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------------------- -------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Anthony J. Scotti................ -- -- --/200,000 $ --/$237,500
Myron I. Roth.................... -- -- --/100,000 $ --/$118,750
Thomas Bradshaw.................. -- -- --/ 70,000 $ --/ $83,125
Sydney D. Vinnedge............... -- -- --/ 12,000 $ --/ $14,250
Lawrence E. Lamattina............ -- -- 25,000/150,000 $ 59,375/$318,750
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1994, the Company established a Compensation Committee whose
members are Gordon C. Luce, R. Timothy O'Donnell and David A. Mount. For
information concerning certain transactions between the Company and certain
Directors, see "Certain Relationships and Related Transactions."
9
<PAGE> 12
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee has furnished the following report on executive
compensation:
COMPENSATION OVERVIEW
The Company uses a combination of salary and incentive compensation,
including cash bonus and periodic grants of stock options under the Company's
1991 Plan or the 1994 Plan (collectively, the "Plans") or pursuant to other
option plans or arrangements adopted by the Board of Directors, to compensate
its executive officers. Additional benefits, including insurance benefits, are
provided to executives and other key employees that the Company believes are
similar to those provided by other companies in the entertainment industry. The
Company draws most of its executives and other key employees from the
entertainment industry where creative talent is crucial and commands a
significant premium, and where decisions made by a relatively small number of
employees with an in-depth knowledge of creative businesses can have a major
impact on the performance of the Company. Persons with such unique
qualifications are rare and are being pursued by other companies both in and out
of the entertainment industry, many of whom have greater available resources
than the Company. Except as otherwise described below, each of the Company's
executive officers is currently employed pursuant to a multi-year employment
agreement, the purpose of which is to retain the services of such executive
officer for an extended period. The Company believes that its compensation
program for executive officers benefits the Company through the continuation of
expansion and new opportunities designed to enhance stockholder value.
In May 1994, the Company amended certain of its employment agreements with
its executives following the recommendation of Towers Perrin, Inc. ("Towers"),
an executive compensation consultant retained by the Company. Towers assessed
the Company's current compensation levels for its executive officers and
reviewed the annual incentive and the long-term incentive compensation plans.
Towers compared such compensation and plans to 13 entertainment or entertainment
related companies for which data were publicly available (the "Proxy Group").
This review was undertaken by the Company to establish consistent yet
competitive compensation arrangements that also reflect the financial
performance of the Company. Such review compared financial performance of the
Company and each of the members of the Proxy Group and cash compensation and
long-term incentives of comparable positions between such companies. The Company
had the highest return on equity and the second highest average three-year rate
of growth in the Proxy Group. Towers recommended that the Company should target
executive compensation at levels above Proxy Group averages as an incentive to
continue such level of performance. Overall, Towers determined that the
Company's cash compensation was below the Proxy Group's median for the Chief
Operating Officer and Chief Executive Officer and above the Proxy Group's median
for the Executive Vice Presidents and Chief Financial Officer. Towers noted,
however, that the Chief Financial Officer's extensive involvement in Company
operations warranted the higher base level pay. Towers also determined that the
Company fell below the competitive norms for long-term incentive compensation.
Towers recommended maintaining base salaries (except for an increase in the
Chief Executive Officer's salary) and, for the short term, annual incentives at
current levels while adopting a long-term incentive plan, such as the 1994 Plan,
that emphasizes both standard stock options and performance-based stock options.
Towers was also retained by the Company in 1996 to review certain option
awards to the Chief Executive Officer and Chief Financial Officer. See
"-- Employment Agreements." Towers concluded that such option awards were within
the competitive norm for awards granted by entertainment related companies.
SALARY
The base salary to which each of the Company's executive officers is
entitled is specified in such person's employment agreement (see "Employment
Agreements" below) and was established pursuant to arm's-length negotiations
with each executive officer, in part based on the subjective assessment of the
Company, which included a number of factors, including experience, tenure and
responsibility, and external factors, including similarly situated executives,
geographic and economic conditions, based on information drawn from a variety of
sources, including published survey data, information obtained from the media,
and the Company's own experience in recruiting and retaining executives,
although complete information is not easily
10
<PAGE> 13
obtainable. Most of the employment agreements were entered into at the time of
the Merger and were subject to the review and approval of the financial advisors
to the parties in the Merger and ECD Corporation, an outside investor in the
Company in the Merger. Subsequent modifications to such employment agreements
have been made following negotiations with the underwriter of the Company's
Common Stock or following the report of Towers.
CASH BONUS
Arrangements for bonus compensation for the Company's executive officers
are also negotiated individually with each executive officer and are generally
fixed by contract. Bonus arrangements take various forms and may be determined
based on factors such as the Company's or a specific segment of the Company's
operations, financial performance or project developments. In 1994, each of
Anthony J. Scotti, Myron I. Roth, Thomas Bradshaw, Sidney D. Vinnedge and
Benjamin J. Scotti agreed to an amendment to their employment agreements to
eliminate bonus provisions tied to the achievement of certain financial
objectives by the Company in connection with the March 1992 public offering of
the Company's Common Stock at the request of the underwriter. The Company's
executive officers, however, are eligible to receive discretionary bonuses as
may be determined by the Board of Directors. Except for Messrs. Bradshaw,
Lamattina, Roth and Vinnedge, who are discussed below, the Chief Executive
Officer develops individual bonus recommendations following the end of each
fiscal year based on the subjective assessment of the Company's overall
performance and each executive officer's contribution to such performance. No
specific formula is used; however, factors may include improved competitive
position, project development, long-term objectives and such executive officer's
leadership role in any of the foregoing factors. Such factors are not
necessarily linked to any specific performance related targets or given any
particular weight. Messrs. Bradshaw, Roth and Vinnedge are eligible for a bonus
in the discretion of the Board of Directors. Mr. Lamattina's employment
agreement provides for an annual incentive compensation payment of up to
$550,000 per year (prorated in the case of 1994) based on the operating income
of the All American/Fremantle Television Group as compared to the operating
income targets established by the Compensation Committee. No discretionary
bonuses were paid to the executive officers for 1994 or 1995.
OPTION GRANTS
The Company uses incentive and non-qualified stock options and other
available forms of compensation under the Plans which are intended to provide
additional long-term incentives to key employees, including the Company's
executive officers. The Board of Directors believes that stock ownership,
through options or otherwise, aligns the executive officers' interests with the
stockholders' interest. The Plans have been approved by the Company's
stockholders. Grants under the Plans generally require the executive to be
employed by the Company on the exercise date and vest over a period of years
(time vesting options) or the Company's achievement of certain performance
criteria (performance options) following the date of grant. The exercise price
of such grants is generally equal to the market price of the Company's Common
Stock or Class B Common Stock (if the amendment to the 1994 Plan is approved by
stockholders) on the grant date; therefore, option grants will only benefit an
executive if the market price of the Company's Common Stock is greater than on
the date of the option grant. No specific formula is used to determine grants
made to any particular employee, including executive officers, but grants are
generally based on factors such as employment agreements and competitive norms
and subjective factors, such as promotion, contribution to performance and
individual performance related criteria. The Chief Executive Officer makes
recommendations regarding option grants and vesting to the Stock Option
Committee with respect to grants under the 1991 Plan and to the Compensation
Committee with respect to grants under the 1994 Plan. While time vesting options
typically vest equally over a five-year period, options granted to certain
executive officers may have shorter or longer vesting periods. Performance
options typically vest upon the achievement of certain performance criteria of
the operations of the Company, its subsidiaries or divisions over a certain
period of time established by the Compensation Committee. In April 1995, the
executive officers each received stock option grants of 226,000 shares in
accordance with the Towers report which found such grants to be within
competitive norms and recommended such grants to balance pay for performance and
integrate total compensation with long-term stockholder returns. In June 1994,
five of the executive officers (including Mr. Anthony J. Scotti) each received
stock option grants of 226,000 shares. In July 1994, the Company granted Mr.
Lamattina options to
11
<PAGE> 14
acquire an aggregate of 150,000 shares and 30,000 shares of restricted Common
Stock pursuant to the 1994 Plan.
CHIEF EXECUTIVE OFFICER COMPENSATION
Anthony J. Scotti, Chairman and Chief Executive Officer of the Company, is
compensated pursuant to an employment agreement described under "-- Employment
Agreements" below. His original employment agreement had an initial term of five
years and was negotiated in connection with the Merger and amended at the
request of the underwriters in connection with the Company's 1992 offering of
Common Stock. Mr. Scotti's employment agreement established an annual base
salary of $500,000, increasing by five percent on each anniversary date of such
agreement. The employment agreement also permits an annual bonus in the
discretion of the Board of Directors. The term of Mr. Scotti's employment
agreement was extended in May 1994 to February 1999. In connection with such
extension and as recommended by the Towers report, Mr. Scotti's annual base
salary was increased to $750,000, increasing by ten percent on each anniversary
date. Mr. Scotti's employment agreement was also amended, upon the
recommendation of Towers, to provide for the annual grant of options to acquire
100,000 shares of Common Stock, commencing in 1994, in an effort to bring Mr.
Scotti's long-term incentive compensation within the competitive norms of the
Proxy Group. These options have now vested upon the satisfaction of certain
performance criteria of the Company as established by the Compensation
Committee. These recommendations were based on the strategic importance of Mr.
Scotti to the Company, the dilutive effect of the 1994 Plan on Mr. Scotti's
ownership in the Company and the review by Towers of competitive norms for
companies in the Proxy Group. The term of Mr. Scotti's employment agreement was
extended in February 1996 to February 2001. Towers also reviewed the award of
stock options granted to Mr. Scotti as a portion of the inducement for him to
extend his employment Agreement. See "-- Employment Agreements."
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code (the "Code"), enacted in 1993,
generally limits tax deductions to public companies for compensation over
$1,000,000 paid to the corporation's chief executive officer and four other most
highly compensated executive officers. Qualifying performance based compensation
will not be subject to the deduction limit if certain requirements are met. The
Company intends to consider the provisions of Section 162(m) in connection with
the performance based portion of the compensation of its executives (which
currently consists of stock option grants and annual bonuses described above).
However, the Board of Directors does not necessarily intend to structure
compensation to its executives to avoid disallowance of any tax deductions in
the future in light of available tax deductions to the Company and the
requirements imposed by Section 162(m) and the proposed regulations thereunder
for compensation to be fully deductible for income tax purposes.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with all of the Named
Officers: Anthony J. Scotti, Thomas Bradshaw, Sydney D. Vinnedge, Lawrence
Lamattina and Myron I. Roth. The employment agreement with Mr. Scotti,
originally entered into in February 1991 and amended most recently in February
1996, provides that Mr. Scotti shall serve as Chief Executive Officer of the
Company through February 25, 2001 (unless earlier terminated in accordance with
the terms of such agreement), commencing at a base salary of $907,500 in 1996
and increasing by 10% per year (subject to a maximum base salary of $1,000,000
per year). Mr. Scotti is required to render his services on a full-time basis to
the Company, provided that he may devote such reasonable amount of time, as he
determines, to other business activities which may be conducted in the
entertainment industry. The term of the agreement may be terminated by the
Company for "good cause" (as defined) or by Mr. Scotti in the event of the
"Company's Material Breach" (as defined) or a "Change in Control" or other
"Event" (as defined in the 1994 Plan).
The employment agreement with Mr. Bradshaw, originally entered into in
February 1991 and amended most recently in February 1996, provides that Mr.
Bradshaw shall serve as Senior Executive Vice President, Finance and Chief
Financial Officer of the Company through February 25, 2001 (unless earlier
terminated), commencing at a base salary of $476,650 in 1996 and increasing by a
minimum of six percent per year. The
12
<PAGE> 15
five-year term employment agreement with Mr. Vinnedge, originally entered into
in February 1991, which provides that he will serve as a Senior Executive Vice
President of the Company, has been extended through August 25, 1997, commencing
at a base compensation of $250,000 per year, plus contingent compensation of up
to $250,000 per year at the Company's discretion. The employment agreement with
Mr. Lamattina, entered into in August 1994, provides that Mr. Lamattina shall
serve as the Chief Executive Officer and President of the All American/Fremantle
Television Group through August 3, 1999 (unless earlier terminated), commencing
at a base salary of $550,000 and increasing by five percent per year. His
current salary is $577,500. Mr. Lamattina is also entitled to receive annual
incentive compensation up to $550,000 per year if certain operating income
targets are achieved by the All American/Fremantle Television Group. Under Mr.
Lamattina's employment agreement, he is entitled to annual grants of options to
purchase 25,000 shares of Common Stock. See "Security Ownership of Certain
Beneficial Owners and Management" for a description of the vesting of Mr.
Lamattina's stock options. The five-year term employment agreement for Mr. Roth,
originally entered into in February 1991, has expired, but he continues his
employment with the Company as President and Chief Operating Officer without an
employment agreement under substantially the same terms as those in effect in
the last year of his employment agreement. Mr. Roth's current salary is $425,000
per year. Each of the Named Officers is provided with an automobile expense
reimbursement allowance and an annual allowance to cover premiums for life,
health and disability insurance.
Under his employment agreement prior to its amendment in February 1996, Mr.
Scotti was entitled to receive, as long-term incentive compensation, 100,000
annual stock option grants (from 1994 to 1999). In February 1996, subject to Mr.
Scotti relinquishing his remaining contractual right to future grants under his
employment agreement, the Company granted to Mr. Scotti options (under the 1994
Plan) to purchase 250,000 shares of Common Stock at the market price ($9.875 per
share) on the date of grant and options (under the 1991 Plan) to purchase 50,000
shares of Common Stock at 110% of the fair market value ($10.8625 per share) on
the date of grant. All such stock options vested on the date of grant in
February 1996.
In addition, in connection with the extension of Mr. Scotti's employment
agreement, the Compensation Committee granted to Mr. Scotti, subject to
stockholder ratification, options (under the 1994 Plan) to purchase 1,200,000
shares of the Company's Class B Common Stock at an exercise price equal to the
market price ($7.875 per share) on the date of grant. These options vest subject
to Mr. Scotti's staying in the continuous employment of the Company for a period
of 9 years and 9 months from the date of grant, subject to accelerated vesting
in four equal annual tranches upon the achievement of certain operating income
targets set annually by the Compensation Committee or the Board of Directors or
earlier upon the occurrence, with certain exceptions, of a "Change in Control"
or other "Event" (as defined in the 1994 Plan). The Company has also agreed to
reimburse Mr. Scotti for any federal, state or local excise tax ("Excise Tax"),
and any additional taxes to which he may be subject, on any payments to Mr.
Scotti from the Company as a result of accelerated vesting of this option grant
upon a "Change in Control" or otherwise, up to a maximum reimbursement equal to
twice the amount of such Excise Tax.
As part of the amendment of Mr. Bradshaw's employment agreement, the
Company granted to Mr. Bradshaw options to purchase 250,000 shares of the
Company's Class B Common Stock at the market price ($7.875 per share) on the
date of grant. One hundred thousand of such stock options vested on the date of
grant in February 1996. The remainder vests in a substantially similar manner to
the vesting provisions described above with respect to Mr. Scotti's stock
options to purchase Class B Common Stock.
The award of options to both Mr. Scotti and Mr. Bradshaw were reviewed by
Towers, which concluded that such awards were within competitive norms for
entertainment or entertainment related companies.
THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS:
Gordon C. Luce
R. Timothy O'Donnell
David A. Mount
13
<PAGE> 16
CORPORATE PERFORMANCE
The following graph compares the stock price of the Company's Common Stock
with the performance of the Standard and Poor's ("S&P") 500 Composite Index and
the S&P Entertainment Index as of February 26, 1991, the date of the Merger, and
as of the last trading date for each of 1991, 1992, 1993, 1994 and 1995. The
graph assumes that $100 was invested on February 26, 1991 in the Company's
Common Stock, and that all dividends were reinvested. No dividends have been
declared or paid on the Company's Common Stock other than to holders of record
of Common Stock of the Company at February 25, 1991, who were paid an
extraordinary dividend in the amount of $10.00 per share in connection with the
Merger. The S&P 500 Composite and S&P Entertainment Indices set forth below have
been revised to reflect corrected information regarding the same indices
presented in the Company's 1994 proxy statement as provided by S&P. The
historical price performance data shown on the graph are not necessarily
indicative of future price performance.
TOTAL STOCKHOLDER RETURNS -- DIVIDENDS REINVESTED
<TABLE>
<CAPTION>
ALL AMERICAN
MEASUREMENT PERIOD COMMUNICATIONS S&P 500 COMPOS- S&P ENTERTAIN-
(FISCAL YEAR COVERED) INC. ITE MENT INDEX
<S> <C> <C> <C>
2/26/91 100 100 100
DEC 91 154.84 118.05 92.31
DEC 92 147.58 127.04 132.01
DEC 93 179.03 139.85 152.57
DEC 94 120.97 141.69 145.52
DEC 95 193.55 194.94 174.83
</TABLE>
Notwithstanding anything to the contrary set forth in the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the Report on Executive
Compensation beginning on page 10 and the graph on page 14 shall not be
incorporated by reference into any such filings.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1995, the Company entered into a domestic distribution
agreement for recorded music with Warner/Elektra/Atlantic Corporation, a
division of Time Warner, Inc. ("WEA"). A member of the Company's Board of
Directors is currently Chairman and Chief Executive Officer of Warner Media
Manufacturing and Distribution and was previously President and Chief Executive
Officer of WEA.
In October 1995, in order to further strengthen its position in the game
show business, the Company formed a 50/50 joint venture (the "LLC") with The
Interpublic Group of Companies, Inc. ("IPG"), the holder of more than 5% of the
Company's Common Stock, and the LLC acquired substantially all of the
14
<PAGE> 17
assets of Mark Goodson Productions, L.P. and a related entity, including
ownership of rights to approximately 45 Goodson game show formats, including The
Price Is Right, and a tape library of approximately 17,000 hours of programming
and 30,000 broadcast episodes. IPG and the Company, effective January 1, 1996,
entered into an agreement pursuant to which the Company purchased IPG's 50%
interest in the LLC for: (i) $12.4 million plus accrued interest thereon at a
rate of 7% per annum from January 1, 1996 to April 17, 1996 (the "Closing
Date"); (ii) the issuance of a subordinated note in the amount of $12.5 million
due 12 months from the Closing Date, subject to acceleration upon either a
"Change of Control" (as defined) or the acceleration of the term loan (the "Term
Loan") provided under the Company's credit facility with its primary lender,
plus accrued interest thereon at a rate of 7% per annum from January 1, 1996;
and (iii) the issuance of a subordinated note in the amount of $2.8 million,
yielding interest at the rate of 7% per annum from January 1, 1996 representing
IPG's 50% share of the LLC's earnings through December 31, 1995, as defined,
with $.7 million due 30 days from the Closing Date and the balance due 30 days
after maturity of the Term Loan (December 31, 1998) and subject to acceleration
upon a "Change of Control" (as defined), or the acceleration of the Term Loan.
As of January 1995, the Company entered into an agreement to engage the
services of Jefferson Capital Group, Ltd. ("JCG") to provide investment banking
services to the Company for the term of one year, with automatic one year
extensions but with both parties retaining the right to terminate such services
upon 30 days' written notice. R. Timothy O'Donnell, a member of the Company's
Board of Directors, is the President and a significant stockholder of JCG. The
agreement is further subject to termination upon the resignation or non-election
of Mr. O'Donnell as a Director of the Company. It provides for annual
compensation of $25,000 per year, prorated for any partial year. The Company has
also agreed to indemnify JCG against any liabilities incurred by it in
connection with the services provided, except due to JCG's gross negligence or
willful misconduct. JCG's services for 1995 were provided solely with respect to
the Company's Class B Common Stock offering, including advice regarding
valuation and pricing of the transaction.
In October 1994, the Company provided a loan of $250,000 to Thomas
Bradshaw. Such loan is secured by a pledge of shares of Common Stock owned by
Mr. Bradshaw, bears interest at a rate equal to a market rate determined by
reference to the Company's working capital line (currently 8%) and has been
extended to mature upon the expiration of Mr. Bradshaw's current employment
agreement (February 2001).
SBEI currently leases, from month to month, a building from Anthony J.
Scotti and Benjamin J. Scotti at a cost to SBEI of approximately $4,300 per
month, which the Company believes is a market rate. This building is used for
office and warehouse space for the Company's recorded music operations.
The Company believes that the terms of the transactions described above are
substantially comparable to those that would have been obtainable in similar or
analogous transactions with unaffiliated parties.
MANAGEMENT STOCKHOLDERS AGREEMENT
In 1991, the Company entered into a stockholders' agreement with Anthony J.
Scotti, Benjamin J. Scotti, Myron I. Roth, Thomas Bradshaw, George Back, Joseph
E. Kovacs and Sydney D. Vinnedge (the "Management Stockholders Agreement"),
pursuant to which (i) each of Messrs. Roth, Bradshaw and Vinnedge granted (a) to
Anthony J. Scotti and Benjamin J. Scotti a right of first refusal on all shares
of Common Stock owned by Messrs. Roth and Bradshaw immediately after the Merger
and the 108,225 shares received by Mr. Vinnedge in the Merger for shares of SBEI
common stock owned by him and a right to purchase all such shares upon
termination of their employment for a reason other than "cause" (as defined in
their respective employment agreements), and (b) to Anthony J. Scotti an
irrevocable proxy to vote substantially all such shares until August 25, 1996;
and (ii) each of the individuals was granted certain registration rights for
such shares owned by him. As a result of such rights, in the event of any public
offering, each of such individuals could cause the Company to register all of
such shares of Common Stock owned by him, which would permit each such
individual to sell his shares in the public market. The proxy granted to Anthony
J. Scotti gives him the ability to control the voting of 2,235,920 shares of the
6,029,653 shares (or approximately 37%) of the voting Common Stock outstanding.
Additionally, Messrs. Roth, Bradshaw and
15
<PAGE> 18
Vinnedge have granted to Anthony J. Scotti an irrevocable proxy to vote all
shares of Common Stock acquired upon exercise of their options to purchase an
aggregate of 182,000 shares of Common Stock.
Lawrence E. Lamattina, David Champtaloup and Doug C. Gluck have granted to
Anthony J. Scotti an irrevocable proxy to vote all shares of Common Stock
acquired upon exercise of their options to purchase an aggregate of 236,500
shares of Common Stock and, in Mr. Lamattina's case, 30,000 shares of restricted
stock granted pursuant to the 1994 Plan.
AMENDMENT TO THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION
GENERAL
The Board of Directors has authorized, subject to stockholder approval and
the approval of the National Association of Securities Dealers, Inc. Automated
Quotation System ("Nasdaq") Stock Market, an amendment to the Company's Restated
Certificate of Incorporation (the "Amendment") to enable holders of the
Company's Common Stock to convert each share of Common Stock held by such holder
into one share of Class B Common Stock. The text of the Amendment is set forth
on Exhibit A to this Proxy Statement. If this amendment is not approved by
Nasdaq, such amendment will be abandoned.
DESCRIPTION OF AMENDMENT
If the Amendment is approved, the holders of the Common Stock, of which
shares were outstanding on the Record Date, will have the right to
convert the Common Stock into Class B Common Stock on a one for one basis at
such time as the holder determines. No additional consideration or inducement
will be given to any holder upon such conversion. When the Company cancels the
surrendered Common Stock certificate and issues the certificates for Class B
Common Stock, the holder will be considered for all purposes to be the holder of
Class B Common Stock. The Class B Common Stock is identical to the Common Stock
except that the Class B Common Stock does not confer any voting rights other
than in situations provided for by law.
PURPOSES AND REASONS FOR THE AMENDMENT
The Company has proposed the Amendment in order to provide the holders of
Common Stock with greater liquidity. It is anticipated that the Company's
December 1995 public offering of Class B Common Stock will create a large public
market in such stock. The Amendment will allow holders of the Common Stock to
participate in that anticipated market. The members of the Board of Directors,
with the exception of Eugene Beard, may be deemed to have an interest in the
outcome of the vote on the Amendment to the extent that they individually and
beneficially own shares of Common Stock.
The affirmative vote of a majority of the outstanding shares of Common
Stock, as of the Record Date, is required to approve the Amendment. The Board
believes that stockholder approval of the Amendment is in the best interests of
the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
VOTE "FOR" APPROVAL OF THE AMENDMENT
AMENDMENT TO THE COMPANY'S 1994
STOCK INCENTIVE PLAN
GENERAL
The Company's 1994 Stock Incentive Plan (the "1994 Plan" or "Plan") was
designed to encourage executive officers, other key employees and certain third
parties to acquire a proprietary interest in the
16
<PAGE> 19
Company and thereby align their interests with those of the stockholders, to
continue their employment or work with the Company and to render superior
performance during such period.
On February 26, 1996, the Company's Board of Directors adopted an amendment
to the Plan which requires stockholder approval. The changes to the Plan
include: (i) an increase in the number of shares of the Company's capital stock
issuable pursuant to the 1994 Plan from 1,250,000 shares to 3,500,000 shares,
(ii) authorization for the issuance of awards under the 1994 Plan ("Awards") in
either Common Stock or Class B Common Stock (collectively, the "Stock"), and
(iii) a one-time exemption of a certain Award, on February 26, 1996, to Anthony
J. Scotti of 1,200,000 shares of Class B Common Stock from the 1994 Plan's limit
on the maximum number of options or stock appreciation rights which may be
granted to a participant in one calendar year.
The Board took such action under the 1994 Plan because it believes that a
stock incentive program is an important factor in attracting, retaining and
motivating key employees and certain third parties who will dedicate their
maximum productive efforts towards the advancement of the Company. The Board
believes that the proposed amendment furthers these objectives by assuring
continuing availability of stock incentives in the appropriate circumstances.
To the extent that the Directors and executive officers of the Company will
benefit from the changes to the 1994 Plan contemplated in the amendment, each of
such Directors and executive officers can be considered to have an interest in
the outcome of the stockholder vote on the proposed amendment.
PLAN SUMMARY
The 1994 Plan authorized the granting of Awards to qualified officers,
employee Directors, key employees and third parties providing valuable services
to the Company (e.g., independent contractors, consultants and advisors to the
Company). At June , 1996, there were approximately persons eligible to
receive Awards. A total of 1,250,000 shares (or 3,500,000 shares, if the
proposed amendment is approved by stockholders) of Common Stock (or Class B
Common Stock if such amendment is approved), subject to adjustment, are issuable
pursuant to Awards under the 1994 Plan. As of June , 1996, options to purchase
shares of the Company's Common Stock, shares of restricted
stock and, subject to stockholder ratification of the amendment,
shares of Class B Common Stock have been granted under the 1994 Plan. Not
including the Awards of Class B Common Stock and the additional shares available
upon amendment of the 1994 Plan, shares were available for issuance or
transfer pursuant to Awards as of June , 1996. The 1994 Plan will terminate
June 21, 2004 and is in addition to the Company's 1991 Incentive Stock Option
Plan.
The principal aspects of the 1994 Plan, incorporating the proposed
amendment, are summarized below. The full text of the 1994 Plan, including such
amendment, is annexed hereto as Exhibit B. Stockholders are urged to read
Exhibit B carefully. The description of the 1994 Plan in this Proxy Statement is
qualified in its entirety by reference to Exhibit B.
The 1994 Plan is administered by a committee appointed by the Board of
Directors and consisting of two or more members, each of whom must be
disinterested or, in the absence of a committee, the Board of Directors (the
"Committee"). The Committee determines the number of shares to be covered by an
Award, the term and exercise price, if any, of the Award and other terms and
provisions of Awards. Members of the Board of Directors who are not also
employees of the Company receive non-discretionary annual Awards of stock
options to purchase 3,000 shares of Stock at the fair market value on the date
on which the stock option is granted.
Awards can be stock options ("Options"), Stock Appreciation Rights
("SARs"), Performance Share Awards ("PSAs") and Restricted Stock Awards
("RSAs"). The number and kind of shares available under the 1994 Plan are
subject to adjustment in certain events. Shares relating to Options or SARs
which are not exercised, shares relating to RSAs which do not vest and shares
relating to PSAs which are not issued will again be available for issuance under
the 1994 Plan.
17
<PAGE> 20
An Option may be an incentive stock option ("ISO") or a non-qualified
Option. The exercise price for Options is to be determined by the Committee but,
in the case of an ISO, is not to be less than fair market value on the date on
which the Option is granted (110% of fair market value in the case of an ISO
granted to any person who owns more than 10% of the combined voting power of all
classes of stock of the Company). The purchase price is payable in any
combination of cash, shares of Stock already owned by the participant for at
least six months or, if authorized by the Committee, a promissory note secured
by the Stock issuable upon exercise. In addition, the Award agreement may
provide for "cashless" exercise and payment. Subject to early termination or
acceleration provisions, an Option is exercisable, in whole or in part, from the
date specified in the related Award agreement (which must be at least six months
after the date of grant) until the expiration date determined by the Committee.
The aggregate fair market value (determined on the date of grant) of the shares
of Stock for which ISOs may be granted to any participant under the 1994 Plan
and any other plan by the Company or its affiliates which are exercisable for
the first time by such participant during any calendar year may not exceed
$100,000.
The Options granted under the 1994 Plan become exercisable on such dates as
the Committee determines in the terms of each individual Option. Options become
immediately exercisable in full in the event of a disposition of all or
substantially all of the assets or capital stock of the Company by means of a
sale, merger, consolidation, reorganization, liquidation or otherwise, unless
the Committee arranges for the optionee to receive new Options covering shares
of the corporation purchasing or acquiring the assets or stock of the Company in
substitution of the Options granted under the Plan (which Options shall
thereupon terminate). The Committee in any event may, on such terms and
conditions as it deems appropriate, accelerate the exercisability of Options
granted under the Plan. An ISO to a holder of more than 10% of the total
combined voting power of all classes of stock of the Company must expire no
later than five years from the date of grant. A non-qualified Option must expire
no later than ten years from the date of the grant.
The Options granted under the 1994 Plan are not transferable other than by
will or the laws of descent and distribution. Unexercised Options generally
lapse three months after termination of employment other than by reason of
retirement, disability or death in which case it terminates one year thereafter.
An SAR is the right to receive payment based on the appreciation in the
fair market value of Stock from the date of grant to the date of exercise. In
its discretion, the Committee may grant an SAR concurrently with the grant of an
Option. An SAR is only exercisable at such time, and to the extent, that the
related Option is exercisable. Upon exercise of an SAR, the holder receives for
each share with respect to which the SAR is exercised an amount equal to the
difference between the exercise price under the related Option and the fair
market value of a share of such Stock on the date of exercise of the SAR. The
Committee in its discretion may pay the amount in cash, shares of Stock, or a
combination thereof.
An RSA is an award of a fixed number of shares of Stock subject to
restrictions. The Committee specifies the prices, if any, which the recipient
must pay for such shares. Shares included in an RSA may not be sold, assigned,
transferred, pledged or otherwise disposed of or encumbered until they have
vested. These restrictions may not terminate earlier than six months after the
Award date. The recipient is entitled to dividend and voting rights pertaining
to such RSA shares even though they have not vested, so long as such shares have
not been forfeited.
A PSA is an award of a fixed number of shares of Stock, the issuance of
which is contingent upon the attainment of such performance objectives, and the
payment of such consideration, if any, as is specified by the Committee.
Issuance shall in any case not be earlier than six months after the Award date.
The 1994 Plan also provides for certain stock depreciation protections, tax
offset bonuses and tax withholding using shares of Stock instead of cash.
Under the 1994 Plan, the maximum number of shares of Stock underlying
Options and SARs granted to a participant in any calendar year is 250,000
shares. The award to Anthony J. Scotti of 1,200,000 shares of Class B Common
Stock on February 26, 1996 is the sole exception to this limitation currently
provided for in the 1994 Plan under the amendment.
18
<PAGE> 21
Upon the date when a participant is no longer employed by the Company for
any reason, shares subject to the participant's RSAs which have not become
vested by that date or shares subject to the participant's PSAs which have not
been issued shall be forfeited in accordance with the terms of the related Award
agreements. Options which have become exercisable by the date of termination of
employment or of service on the Committee must be exercised within certain
specified periods of time from the date of termination, with the period of time
depending on the reason for termination. Options which have not yet become
exercisable on the date when the participant terminates employment or service on
the Committee for a reason other than retirement, death or total disability
shall terminate on that date.
The exercisability of all outstanding Awards may be accelerated, subject to
the discretion of the Committee, upon the occurrence of an "Event," defined in
the 1994 Plan to include approval by the stockholders of the dissolution or
liquidation of the Company, certain mergers, consolidations, sale of
substantially all of the Company's business and/or assets and a "change in
control." The 1994 Plan defines a change in control to have occurred (i) if a
"person," as defined in Section 13(d) and 14(d) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act'), has acquired 35% or more of the
voting power of the then outstanding securities of the Company, and (ii) if
during any two consecutive year periods there has been a change of a majority of
the members of the Board of Directors, unless the election or nomination of the
new Directors has been approved by at least three-fourths of the members still
in office from the beginning of the two year period.
The 1994 Plan provides for anti-dilution adjustments in the event of a
reorganization, merger, combination, recapitalization, reclassification, stock
dividend, stock split or reverse stock split; however, no such adjustment need
be made if it is determined that the adjustment may result in the receipt of
federally taxable income to optionees or the holders of Common Stock or other
classes of the Company's securities. Upon the dissolution or liquidation of the
Company, or upon a reorganization, merger or consolidation of the Company as a
result of which the Company is not the surviving entity, the Plan shall
terminate, and any outstanding Awards shall terminate and be forfeited unless
assumed by the successor corporation.
The Board of Directors may, at any time, terminate or suspend the 1994
Plan. The Plan currently provides that the Board of Directors or the Committee
may amend the 1994 Plan at any time; provided, however, that no amendment may
operate to increase the maximum number of aggregate shares issuable, materially
increase the benefits accruing to participants or change the classes of eligible
persons under the 1994 Plan without the approval of the holders of a majority of
the shares of Common Stock.
The following table sets forth certain Awards which have already been
granted or may accrue in 1996 to the Named Officers and groups under the 1994
Plan, to the extent currently determinable, if the proposed amendment is
approved by the stockholders of the Company. Although granted, such Awards may
vest in subsequent years according to the terms of the respective Award
agreements. The value to the optionee of the Options granted depends on the
market price of the Company's Class B Common Stock on the date of exercise, and,
accordingly, cannot be ascertained at this time.
<TABLE>
<CAPTION>
OPTIONS
NAME AND POSITION GRANTED
---------------------------------------------------------------- ---------
<S> <C>
NAMED OFFICERS(1)
Anthony J. Scotti, Chairman and Chief Executive Officer....... 1,500,000 (2)
Thomas Bradshaw, Chief Financial Officer
and Senior Executive Vice President........................ 250,000 (3)
Lawrence E. Lamattina, Chief Executive Officer and President,
All American/Fremantle Television Group.................... 25,000 (4)
Executive Officer Group......................................... [ ](5)
Non-Executive Director Group.................................... [ ]
Non-Executive Officer Employee Group............................ [ ]
</TABLE>
19
<PAGE> 22
- ---------------
(1) Any Awards in 1996 to the remaining Named Officers are not presently
determined.
(2) Includes Options for (i) 1,200,000 shares of Class B Common Stock at an
exercise price of $7.875 per share, (ii) 250,000 shares of Common Stock at
an exercise price of $9.875 per share, and ISOs for 50,000 shares of Common
Stock at an exercise price of $10.8625 per share.
(3) Options for shares of Class B Common Stock at an exercise price of $7.875
per share.
(4) Options for shares of Common Stock at an exercise price based upon the
closing market price of the Common Stock on August 3, 1996, the anniversary
date of Mr. Lamattina's employment agreement.
(5) Includes, in addition to the aforementioned Awards to Messrs. Scotti,
Bradshaw and Lamattina, Awards of Options for (i) 100,000 shares to Benjamin
J. Scotti, (ii) 50,000 shares to Leonard Breijo, (iii) 50,000 shares to Fred
Scotti, and (iv) 75,000 shares to Joseph Scotti, each Award for shares of
Class B Common Stock at an exercise price of $7.875 per share.
CERTAIN FEDERAL INCOME TAX MATTERS
The tax consequences with respect to Awards are quite complex and subject
to change. Thus, the following discussion is general in nature and does not
purport to be complete. Options granted under the 1994 Plan will not result in
the recognition of income by the recipient at the time of grant; however, upon
the exercise of an Option, the recipient will recognize ordinary income in an
amount equal to the difference between the exercise price and the fair market
value of the Stock purchased upon such exercise, and the Company will generally
be entitled to a deduction of a like amount. Recipients of RSAs will not
ordinarily recognize income upon receipt of the Award absent an election under
the Code to recognize income upon the date of grant. Income will be recognized
in an amount equal to the difference between the purchase price of the Stock and
the fair market value of the Stock on the date of vesting (or grant, if the
above-referenced election has been made), and the Company will generally be
entitled to a deduction of a like amount. For a discussion of the impact of
Section 162(m) of the Code, see "Report on Executive Compensation -- Compliance
with Internal Revenue Code Section 162(m)."
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
VOTE "FOR" APPROVAL OF THE AMENDMENT TO THE
1994 STOCK INCENTIVE PLAN
APPROVAL OF A CERTAIN AWARD TO ANTHONY J. SCOTTI
UNDER THE 1994 STOCK INCENTIVE PLAN
The Company is requesting that stockholders approve an outstanding Award of
1,200,000 shares of Class B Common Stock to Anthony J. Scotti on February 26,
1996 at an exercise price of $7.875 per share. The Options granted under this
Award vest at such time as Mr. Scotti has been in the continuous employment of
the Company for 9 years and 9 months from the date on which the Award was
granted, subject to accelerated vesting upon achievement of certain operating
income targets set annually by the Committee. Such Awards are subject to
accelerated vesting in the event of a "Change in Control" (as defined in the
Plan) unless the Change in Control occurs within six months of the later of the
date of Award or date of stockholder approval of the Award. The value to Mr.
Scotti of the Options granted depends on the market price of the Company's Class
B Common Stock on the date of exercise, and, accordingly, cannot be ascertained
at this time. The Award to Mr. Scotti expires on February 26, 2006. See "Report
on Executive Compensation -- Employment Agreements."
As Mr. Scotti is the beneficiary of this Award, he can be considered to
have an interest in the vote on such Award. Accordingly, Mr. Scotti has
indicated that he will vote such shares of Common Stock as he beneficially owns
(as of June 6, 1996, approximately 1,964,691 shares) in an equal proportion for
and against this proposal as are voted for and against by the remaining
stockholders of the Company. In addition, Mr. Scotti has indicated that he will
vote the shares of Common Stock which he holds under proxy (as of June 6, 1996,
approximately 1,275,538 shares) in accordance with the wishes of the holders of
record thereof.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" APPROVAL OF THE STOCK OPTION GRANT TO ANTHONY J. SCOTTI
20
<PAGE> 23
APPROVAL OF AWARDS TO THOMAS BRADSHAW AND
CERTAIN OTHER EXECUTIVE OFFICERS
The Company is requesting that stockholders approve the other outstanding
Awards of Class B Common Stock. The following table sets forth the Awards of
Class B Common Stock granted under the Company's 1994 Plan to the persons and
groups listed below (other than to Anthony J. Scotti). All such Awards were made
on February 26, 1996. The information set forth below with respect to Thomas
Bradshaw is also included in the "Report on Executive Compensation -- Employment
Agreements" section. To date, no other Named Officers, except Anthony J. Scotti
and Thomas Bradshaw, have received Awards of Class B Common Stock under the 1994
Plan. The options granted to Thomas Bradshaw and certain other executives who
are not Named Officers (the "Other Executives") expire on February 26, 2006. The
Awards to Mr. Bradshaw and each of the Other Executives are in lieu of
cancellation of each executive's existing contractual rights to future Option
grants of Common Stock. The value to the optionee of the Options granted depends
on the market price of the Company's Class B Common Stock on the date of
exercise, and, accordingly, cannot be ascertained at this time.
<TABLE>
<CAPTION>
NAME AND POSITION OPTIONS GRANTED EXERCISE PRICE DOLLAR VALUE
----------------- --------------- -------------- ------------
<S> <C> <C> <C>
Thomas Bradshaw, Chief Financial Officer and
Senior Executive Vice President............. 250,000(1) $7.875 --
Other Executives (4 persons).................. 275,000(2) $7.875 --
</TABLE>
- ---------------
(1) Includes 100,000 Options which vested on date of grant, and 150,000 Options
which vest at such time as participant has been in the continuous employment
of the Company for 9 years and 9 months from date on which the Award was
granted, subject to accelerated vesting upon achievement of certain
operating income targets set annually by the Committee. Such Awards are
subject to accelerated vesting in the event of a "Change in Control" (as
defined in the Plan) unless the Change in Control occurs within six months
of the later of date of Award or date of stockholder approval of the Award.
(2) Vests at such time as the participant has been in the continuous employment
of the Company for 9 years and 9 months from date on which the Award was
granted, subject to accelerated vesting upon achievement of certain
operating income targets set annually by the Committee. Such Awards are
subject to accelerated vesting in the event of a "Change in Control" (as
defined in the Plan) unless the Change in Control occurs within six months
of the later of date of Award or date of stockholder approval of the Award.
Each Director and executive officer of the Company who has received an
Award of Class B Common Stock, subject to stockholder approval, can be
considered to have an interest in the vote on such Awards.
In the event that the proposed amendment to the 1994 Plan permitting Awards
of Class B Common Stock is not approved by the stockholders, the Options granted
thereunder shall be null and void. The obtaining of stockholder approval is
intended to provide the benefits to each of the participants under the Plan the
benefits of the provisions of Rule 16b-3 under the Exchange Act, pursuant to
which option grants are not considered "purchases" for purposes of the short
swing profit provisions of Section 16 of the Exchange Act. If stockholder
approval is not obtained, the Compensation Committee may consider alternative
means of compensating and incentivizing the officers and employees of the
Company, which may include grants of equity or other rights not subject to
stockholder vote, or other forms of compensation. No understanding, agreement or
commitment for any such alternative compensation exists.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
VOTE "FOR" APPROVAL OF THE STOCK OPTION GRANTS TO
THOMAS BRADSHAW AND CERTAIN OTHER EXECUTIVE OFFICERS
INDEPENDENT ACCOUNTANTS
Upon unanimous recommendation of the Board of Directors, the Company
appointed Ernst & Young LLP as the Company's independent accountants for the
fiscal year ended December 31, 1995. Ernst & Young LLP served as the Company's
independent accountants since 1985. Services provided to the Company by
21
<PAGE> 24
Ernst & Young LLP during the 1995 fiscal year included the examination of the
Company's consolidated financial statements and consultations on various tax
matters.
On June 7, 1996, the Company, as authorized by the Audit Committee of its
Board of Directors, engaged Price Waterhouse LLP as its independent accountants
for the fiscal year ending December 31, 1996, replacing Ernst & Young LLP,
effective upon .
The report of Ernst & Young LLP on the financial statements of the Company
for the fiscal years ended December 31, 1994 and 1995 contained no adverse
opinion or disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope or accounting principles. During the fiscal years ended
December 31, 1994 and 1995, and during the interim period in 1996 in which Ernst
& Young LLP served as the Company's independent accountant, there were no
disagreements between the Company and Ernst & Young LLP on any matter of
accounting principles or practices, financial disclosure or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of Ernst &
Young LLP, would have caused them to make reference to the subject matter of the
disagreement in connection with any such report.
If stockholders do not approve the appointment of Price Waterhouse LLP as
the Company's independent accountants for the forthcoming fiscal year, such
appointment will be reconsidered by the Board of Directors.
Representatives of Ernst & Young LLP and Price Waterhouse LLP will be
present at the Annual Meeting to respond to appropriate questions and to make
such statements as they may desire.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
STOCKHOLDERS VOTE "FOR" APPROVAL OF THE APPOINTMENT OF
PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS
FOR THE FISCAL YEAR ENDING DECEMBER 31, 1996
PROPOSALS OF STOCKHOLDERS
A proper proposal submitted by a stockholder for presentation at the
Company's next Annual Meeting of Stockholders and received at the Company's
executive offices a reasonable time in advance of such meeting will be included
in the Company's proxy statement and form of proxy relating to such Annual
Meeting.
OTHER MATTERS
The Board of Directors is not aware of any matter to be acted upon at the
Annual Meeting other than described in this Proxy Statement. Unless otherwise
directed, all shares represented by the persons named in the accompanying proxy
will be voted in favor of the proposals described in this Proxy Statement. If
any other matter properly comes before the meeting, however, the proxy holders
will vote thereon in accordance with their best judgment.
MISCELLANEOUS
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires executive officers and directors
and persons who beneficially own more than 10% of the Company's stock to file
initial reports of ownership and reports of changes in ownership with the
Securities and Exchange Commission ("SEC"). Executive officers, directors and
greater than 10% beneficial owners are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms filed by them.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the executive officers and Directors,
the Company believes that all Section 16(a) filing requirements applicable to
its executive officers, Directors and greater than 10% beneficial owners were
complied with, except that the following Directors: Timothy O'Donnell, David
Mount and Gordon Luce, failed to file a Form 5 for the year ended December 31,
1995 relating to the vesting of 600 stock options in June 1995 held,
respectively, by each of them and Benjamin Scotti, a Director and Senior
Executive Vice
22
<PAGE> 25
President, failed to file a Form 5 for the year ended December 31, 1995 relating
to the vesting of 2,000 stock options in June 1995 held by him.
DOCUMENT INCORPORATED BY REFERENCE
The Company's Form 10-K, as amended, for the year ended December 31, 1995
and Form 10-Q for the quarter ended March 31, 1996 are hereby incorporated
herein by this reference. A copy of the Company's Annual Report to Stockholders,
which includes the Form 10-K and Form 10-Q, accompanies this proxy statement but
shall not constitute proxy soliciting material. Copies of the Form 10-K will be
provided, without charge, to any stockholder of the Company. Written requests
for a copy of the Form 10-K should be directed to Paul A. Pavlis, Corporate
Secretary, at All American Communications, Inc., 808 Wilshire Boulevard, Santa
Monica, California 90401-1810.
23
<PAGE> 26
EXHIBIT A
AMENDMENT NO. 1 TO RESTATED CERTIFICATE
OF INCORPORATION OF ALL AMERICAN COMMUNICATIONS, INC.
Capitalized terms used but undefined herein shall have the meanings
ascribed to them in the Restated Certificate of Incorporation.
1. Article FOURTH B of the Restated Certificate be amended to add the following
provision:
5. The holders of the Common Stock shall be entitled to convert each share
of Common Stock held by such holder into one share of the Class B Common Stock
at the option of the holder. To effect such a conversion, the holder shall
surrender the Common Stock certificate or certificates therefor, duly endorsed,
at the office of the Corporation or of any transfer agent for such stock, and
shall give written notice to the Corporation at such office that such holder
wishes to receive certificates for the Class B Common Stock, the number of
shares to be converted and the name or names in which such holder wishes the
certificate or certificates to be issued. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder, a
certificate or certificates for the number of shares converted into Class B
Common Stock and a certificate or certificates for any Common Stock not
converted. The person or persons entitled to receive the shares of Class B
Common Stock shall be treated for all purposes as the holder of record of Class
B Common Stock on the date when the Class B Common Stock certificate or
certificates are issued, and on that date shall surrender any rights particular
to Common Stock. Each share of Common Stock converted will be cancelled after it
has been converted as provided herein.
2. Article FOURTH C of the Restated Certificate be amended to add the following
provision:
6. Upon conversion of the Common Stock into the Class B Common Stock
pursuant to Section B5 of this Article FOURTH, the holder of converted shares
will accrue thereafter all rights of holders of Class B Common Stock to
dividends, stock dividends or stock splits, combinations of stock, or
distribution of assets, including upon voluntary or involuntary liquidation or
dissolution, but shall have no voting rights, except as otherwise provided by
law.
3. As amended hereby, the Restated Certificate of Incorporation remains in full
force and effect.
A-1
<PAGE> 27
EXHIBIT B
1994 STOCK INCENTIVE PLAN OF
ALL AMERICAN COMMUNICATIONS, INC.
<PAGE> 28
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
I. DEFINITIONS....................................................................... B-1
1.1 Definitions................................................................ B-1
II. THE PLAN.......................................................................... B-3
2.1 Purpose.................................................................... B-3
2.2 Administration............................................................. B-3
2.3 Participation.............................................................. B-4
2.4 Stock Subject to the Plan.................................................. B-4
2.5 Grant of Awards............................................................ B-4
2.6 Exercise of Awards......................................................... B-4
III. OPTIONS........................................................................... B-5
3.1 Grants..................................................................... B-5
3.2 Option Price............................................................... B-6
3.3 Option Period.............................................................. B-6
3.4 Exercise of Options........................................................ B-7
3.5 Limitations on Grant of Incentive Stock Options............................ B-7
3.6 Additional Rights.......................................................... B-7
IV. STOCK APPRECIATION RIGHTS......................................................... B-7
4.1 Grants..................................................................... B-7
4.2 Exercise of Stock Appreciation Rights...................................... B-8
4.3 Payment.................................................................... B-8
V. RESTRICTED STOCK AWARDS........................................................... B-9
5.1 Grants..................................................................... B-9
5.2 Restrictions............................................................... B-9
VI. PERFORMANCE SHARE AWARDS.......................................................... B-9
6.1 Grants..................................................................... B-9
VII. OTHER PROVISIONS.................................................................. B-9
7.1 Rights of Eligible Persons, Participants and Beneficiaries................. B-9
7.2 Adjustments Upon Changes in Capitalization................................. B-10
7.3 Termination of Employment.................................................. B-11
7.4 Acceleration of Awards..................................................... B-12
7.5 Government Regulations..................................................... B-12
7.6 Tax Withholding............................................................ B-12
7.7 Amendment, Termination and Suspension...................................... B-13
7.8 Privileges of Stock Ownership; Nondistributive Intent...................... B-13
7.9 Effective Date of the Plan................................................. B-13
7.10 Term of the Plan........................................................... B-13
7.11 Governing Law.............................................................. B-14
AMENDMENT NO. 1 TO ALL AMERICAN COMMUNICATIONS, INC.
1994 STOCK INCENTIVE PLAN................................................................ B-15
</TABLE>
-i-
<PAGE> 29
ALL AMERICAN COMMUNICATIONS, INC.
1994 STOCK INCENTIVE PLAN
I. DEFINITIONS.
1.1 Definitions.
(a) "Award" shall mean an Option, which may be designated as a
Nonqualified Stock Option or an Incentive Stock Option, a Stock
Appreciation Right, a Restricted Stock Award or Performance Share Award, in
each case granted under this Plan.
(b) "Award Agreement" shall mean a written agreement setting forth the
terms of an Award.
(c) "Award Date" shall mean the date upon which the Committee took the
action granting an Award or such later date as is prescribed by the
Committee.
(d) "Award Period" shall mean the period beginning on an Award Date
and ending on the expiration date of such Award.
(e) "Beneficiary" shall mean the person, persons, trust or trusts
entitled by will or the laws of descent and distribution to receive the
benefits specified under this Plan in the event of a Participant's death.
(f) "Board" shall mean the Board of Directors of the Corporation.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(h) "Commission" shall mean the Securities and Exchange Commission.
(i) "Committee" shall mean either a committee appointed by the Board
and consisting of two or more members, each of whom is a director and
Disinterested or the entire Board, if each member is Disinterested (except
as otherwise permitted under Rule 16b-3 promulgated under the Exchange
Act). If there are two or more members of the Board who are "outside
directors" within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder, then the Committee shall consist only
of such members. Notwithstanding anything to the contrary herein, no member
of the Committee shall be eligible to receive Awards hereunder for the
period one year prior to serving on the Committee or while serving on the
Committee, other than in accordance with Section 3.1(b).
(j) "Common Stock" shall mean the Common Stock of the Corporation.
(k) "Company" shall mean, collectively, the Corporation and its
Subsidiaries.
(l) "Corporation" shall mean All American Communications, Inc., a
Delaware corporation, and its successors.
(m) "Disinterested" shall mean disinterested within the meaning of the
applicable regulatory requirements promulgated under Section 16 of the
Exchange Act.
(n) "Eligible Person" shall mean an employee, director, officer, key
employee of the Company or any other person who, in the opinion of the
Committee, is rendering valuable services to the Company, including without
limitation an independent contractor, outside consultant or advisor to the
Company.
(o) "Event" shall mean any of the following:
(1) Approval by the shareholders of the Corporation of the
dissolution or liquidation of the Corporation;
(2) Approval by the shareholders of the Corporation of an agreement
to merge or consolidate, or otherwise reorganize, with or into one or
more entities which are not Subsidiaries, as a result of which less than
50% of the outstanding voting securities of the surviving or resulting
entity are, or are to be, owned by former shareholders of the
Corporation;
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(3) Approval by the shareholders of the Corporation of the sale of
substantially all of the Corporation's business and/or assets to a
person or entity which is not a Subsidiary; or
(4) A Change in Control. A "Change in Control" shall be deemed to
have occurred if (A) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing 35% or more of
the combined voting power of the Corporation's then outstanding
securities; or (B) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board
cease for any reason to constitute at least a majority thereof, unless
the election, or the nomination for election by the Corporation's
shareholders, of each new Board member was approved by a vote of at
least three-fourths of the Board members then still in office who were
Board members at the beginning of such period.
(p) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(q) "Fair Market Value" shall mean (i) if the stock is listed or
admitted to trade on a national securities exchange, the closing price of
the stock on the Composite Tape, as published in The Wall Street Journal,
of the principal national securities exchange on which the stock is so
listed or admitted to trade, on such date, or, if there is no trading of
the stock on such date, then the closing price of the stock as quoted on
such Composite Tape on the next preceding date on which there was trading
in such shares; (ii) if the stock is not listed or admitted to trade on a
national securities exchange, the last price for the stock on such date, as
furnished by the National Association of Securities Dealers, Inc. ("NASD")
through the NASDAQ National Market Reporting System or a similar
organization if the NASD is no longer reporting such information; (iii) if
the stock is not listed or admitted to trade on a national securities
exchange and is not reported on the National Market Reporting System, the
mean between the closing bid and asked price for the stock on such date, as
furnished by the NASDAQ; (iv) if the stock is not listed or admitted to
trade on a national securities exchange, is not reported on the National
Market Reporting System and if bid and asked prices for the stock are not
furnished by the NASDAQ or a similar organization, the values established
by the Committee for purposes of granting Options under the Plan.
(r) "Incentive Stock Option" shall mean an option which is designated
as an incentive stock option within the meaning of Section 422 of the Code,
the award of which contains such provisions as are necessary to comply with
that section.
(s) "Nonqualified Stock Option" shall mean an option which is
designated a Nonqualified Stock Option.
(t) "Option" shall mean an option to purchase Common Stock under this
Plan. An option shall be designated by the Committee as a Nonqualified
Stock Option or an Incentive Stock Option.
(u) "Participant" shall mean an Eligible Person, who has been awarded
an Award.
(v) "Performance Share Award" shall mean an award of shares of Common
Stock, issuance of which is contingent upon attainment of performance
objectives specified by the Committee.
(w) "Personal Representative" shall mean the person or persons who,
upon the disability or incompetence of a Participant, shall have acquired
on behalf of the Participant by legal proceeding or otherwise the power to
exercise the rights and receive the benefits specified in this Plan.
(x) "Plan" shall mean All American Communications, Inc. 1994 Stock
Incentive Plan.
(y) "Restricted Stock" shall mean those shares of Common Stock issued
pursuant to a Restricted Stock Award which are subject to the restrictions
set forth in the related Award Agreement.
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(z) "Restricted Stock Award" shall mean an award of a fixed number of
shares of Common Stock to the Participant subject, however, to payment of
such consideration, if any, and such forfeiture provisions, as are set
forth in the Award Agreement.
(aa) "Retirement" shall mean retirement as defined in termination of
employment with the Company pursuant to the Company's retirement policy, as
in effect from time to time.
(ab) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(ac) "Stock Appreciation Right" shall mean a right to receive a number
of shares of Common Stock or an amount of cash, or a combination of shares
and cash, determined as provided in Section 4.3(a).
(ad) "Subsidiary" shall mean any corporation or other entity a
majority or more of whose outstanding voting stock or voting power is
beneficially owned directly or indirectly by the Corporation.
(ae) "Tax-Offset Bonus" shall mean a bonus payable pursuant to a
disqualifying disposition of Common Stock acquired pursuant to the exercise
of an Incentive Stock Option, determined as provided in Section 3.6.
(af) "Total Disability" shall mean a "permanent and total disability"
within the meaning of Section 22(e)(3) of the Code.
II. THE PLAN.
2.1 Purpose.
The purpose of this Plan is to promote the success of the Company by
providing an additional means to attract and retain key personnel through
added long term incentives for high levels of performance and for
significant efforts to improve the financial performance of the Company by
granting Awards.
2.2 Administration.
(a) This Plan shall be administered by the Committee. Action of the
Committee with respect to the administration of this Plan shall be taken
pursuant to a majority vote or the written consent of a majority of its
members. In the event action by the Committee is taken by written consent,
the action shall be deemed to have been taken at the time specified in the
consent or, if none is specified, at the time of the last signature. The
Committee may delegate administrative functions (other than functions which
are required to be performed by the Committee pursuant to requirements
promulgated under Section 16 of the Exchange Act and Section 162(m) of the
Code) to individuals who are officers or employees of the Company.
(b) Subject to the express provisions of this Plan, the Committee
shall have the authority to construe and interpret this Plan and any
agreements defining the rights and obligations of the Company and
Participants under this Plan, to further define the terms used in this
Plan, to prescribe, amend and rescind rules and regulations relating to the
administration of this Plan, to determine the duration and purposes of
leaves of absence which may be granted to Participants without constituting
a termination of their employment for purposes of this Plan and to make all
other determinations necessary or advisable for the administration of this
Plan. The determinations of the Committee on the foregoing matters shall be
conclusive.
(c) Any action taken by, or inaction of, the Corporation, any
Subsidiary, the Board or the Committee relating to this Plan shall be
within the absolute discretion of that entity or body and shall be
conclusive and binding upon all persons. No member of the Board or
Committee, or officer of the Corporation or Subsidiary, shall be liable for
any such action or inaction of the entity or body, of another person or,
except in circumstances involving bad faith, of himself or herself. Subject
only to compliance with the express provisions hereof, the Board and
Committee may act in their absolute discretion in matters related to this
Plan.
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(d) Subject to the requirements of Section 1.1(i), the Board, at any
time it so desires, may increase or decrease the number of members of the
Committee, may remove from membership on the Committee all or any portion
of its members, and may appoint such person or persons as it desires to
fill any vacancy existing on the Committee, whether caused by removal,
resignation or otherwise.
2.3 Participation.
Awards may be granted only to Eligible Persons. An Eligible Person who
has been granted an Award may, if otherwise eligible, be granted additional
Awards if the Committee shall so determine. Members of the Committee shall
not be eligible to receive Awards, other than in accordance with Section
3.1(b).
2.4 Stock Subject to the Plan.
The stock to be offered under this Plan shall be shares of the
Corporation's authorized but unissued Common Stock. The aggregate amount of
Common Stock that may be issued or transferred pursuant to Awards granted
under this Plan shall not exceed 1,250,000 shares, subject to adjustment as
set forth in Section 7.2. The maximum number of shares of Common Stock
which may be the subject of Options and Stock Appreciation Rights granted
to any individual in any calendar year shall not exceed 250,000 shares. If
an Option and any Stock Appreciation Right shall lapse or terminate without
having been exercised in full, or any Common Stock subject to a Restricted
Stock Award shall not vest or any Common Stock subject to a Performance
Share Award shall not have been transferred, the unpurchased or
nontransferred shares subject thereto shall again be available for purposes
of this Plan; provided, however, that the counting of shares subject to
Awards granted under the Plan against the number of shares available for
further Awards shall in all cases conform to the requirements of Rule 16b-3
under the Exchange Act; and provided, further, that with respect to any
Option and any Stock Appreciation Right granted to any Eligible Person who
is a "covered employee" as defined in Section 162(m) of the Code and the
regulations promulgated thereunder that is canceled, the number of shares
subject to such Option and Stock Appreciation Right shall continue to count
against the maximum number of shares which may be the subject of Options
and Stock Appreciation Rights granted to such Eligible Person. For purposes
of the preceding sentence, if, after grant, the exercise price of an Option
and/or the base amount of any Stock Appreciation Right is reduced, such
reduction shall be treated as a cancellation of such Option and Stock
Appreciation Right and the grant of a new Option and Stock Appreciation
Right (if any), and both the cancellation of the Option and Stock
Appreciation Right and the new Option and Stock Appreciation Right shall
reduce the maximum number of shares for which Options and Stock
Appreciation Rights may be granted to the holder of such Option and Stock
Appreciation Right.
2.5 Grant of Awards.
Subject to the express provisions of the Plan, the Committee shall
determine from the class of Eligible Persons those individuals to whom
Awards under the Plan shall be granted, the terms of Awards (which need not
be identical) and the number of shares of Common Stock subject to each
Award. Each Award shall be subject to the terms and conditions set forth in
the Plan and such other terms and conditions established by the Committee
as are not inconsistent with the purpose and provisions of the Plan. The
grant of an Award is made on the Award Date.
2.6 Exercise of Awards.
An Option or Stock Appreciation Right shall be deemed to be exercised
when the Secretary of the Corporation receives written notice of such
exercise from the Participant, together with payment of the purchase price
made in accordance with Section 3.2(a), except to the extent payment may be
permitted to be made following delivery of written notice of exercise in
accordance with Section 3.2(b). Notwithstanding any other provision of this
Plan, the Committee may impose, by rule and in Award Agreements, such
conditions upon the exercise of Awards (including, without limitation,
conditions limiting the time of exercise to specified periods) as may be
required to satisfy applicable regulatory requirements, including without
limitation Rule 16b-3 (or any successor rule) promulgated by the Commission
pursuant to the Exchange Act.
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III. OPTIONS.
3.1 Grants.
(a) One or more Options may be granted to any Eligible Person other
than members of the Committee. Each Option so granted shall be designated
by the Committee as either a Nonqualified Stock Option or an Incentive
Stock Option. Members of the Committee shall be granted Options in
accordance with Section 3.1(b).
(b) Notwithstanding any other provision of the Plan, effective on June
21, 1994 and on each subsequent date a director who is not also an employee
of the Company is appointed, elected or, commencing in 1995, re-elected to
the Board, such director will automatically be granted a Nonqualified Stock
Option, having a duration of ten years, to purchase 3,000 shares of Common
Stock for a purchase price per share equal to the Fair Market Value of the
Common Stock on the date of grant, to vest over four years commencing on
the first anniversary of the grant. The purchase price of any shares
purchased pursuant to any such Option shall be paid in full at the time of
each purchase in cash or by certified or cashier's check payable to the
order of the Corporation. Notwithstanding anything to the contrary
contained in Section 7.2 or 7.4, each such Option shall be adjusted and
shall accelerate, respectively, in the following events:
(i) If the outstanding shares of Common Stock are increased,
decreased or changed into, or exchanged for, a different number or kind
of shares or securities of the Corporation through a reorganization or
merger in which the Corporation is the surviving entity, or through a
combination, recapitalization, reclassification, stock split, stock
dividend, stock consolidation or otherwise, an appropriate adjustment
shall be made in the number and kind of shares that may be issued
pursuant to each Option. Any such adjustment, however, shall be made
without change in the total payment, if any, applicable to the portion
of the Option not exercised but with a corresponding adjustment in the
price for each share.
(ii) Upon the dissolution or liquidation of the Corporation, or
upon a reorganization, merger or consolidation of the Corporation with
one or more corporations as a result of which the Corporation is not the
surviving corporation, any such Option then outstanding shall terminate
and be forfeited. In the event the Options terminate as aforesaid in
connection with such a dissolution, liquidation, reorganization, merger
or consolidation, the holder of any such Option shall be entitled to
receive from the Corporation cash in an amount equal to the excess of
(A) the Fair Market Value (determined on the basis of the amount
received by shareholders in connection with such transaction) of the
shares of Common Stock subject to the portion of the Option not
theretofore exercised (whether or not the Option is then exercisable
pursuant to its terms or otherwise), over (B) the aggregate purchase
price which would be payable for such shares upon the exercise of the
Option.
(iii) In adjusting Options to reflect the changes described in this
Section 3.1(b) or in determining that no such adjustment is necessary,
the Committee shall make only such adjustment as shall be necessary to
maintain the proportionate interest of the holder and preserve the value
of the respective Option and may rely upon the advice of independent
counsel and accountants of the Corporation, and the determination of the
Committee shall be conclusive. No fractional shares of stock shall be
issued under this Plan on account of any such adjustment.
(iv) Upon the occurrence of an Event, each such Option shall become
immediately exercisable to the full extent theretofore not exercisable.
Acceleration of Awards shall comply with applicable regulatory
requirements, including without limitation Rule 16b-3 promulgated by the
Commission pursuant to the Exchange Act.
All or any part of any remaining unexercised Options granted pursuant
to this Section 3.1(b) may be exercised (after approval of the Plan by
shareholders of the Corporation but in no event during the six-month period
commencing on the later of the date of grant or the date of such
shareholder approval) in the event of the holder's cessation of service as
a director of the Company due to the holder's death, during the period
beginning on the date of death and ending 12 months thereafter, but in no
event after
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the expiration of the term of the Option. Any Option granted pursuant to
this Section 3.1(b), to the extent unexercised, shall terminate immediately
upon the holder's ceasing to serve as a director of the Company due to
Total Disability, except that the holder or the holder's Personal
Representative shall have 12 months following such cessation of service to
exercise any unexercised Option that the holder could have exercised on the
day on which such service terminated; provided that such exercise must be
accomplished prior to the expiration of the term of such Option. Any Option
granted pursuant to this Section 3.1(b), to the extent unexercised, shall
terminate immediately upon the holder's ceasing to serve as a director of
the Company (for reasons other than Total Disability or death), except that
the holder shall have three months from the date of such cessation of
service to exercise any unexercised Option that he or she could have
exercised on the day on which such service terminated; provided that such
exercise must be accomplished prior to the expiration of the term of such
Option. Notwithstanding the preceding, if the service as a director of any
holder of an Option granted pursuant to this Section 3.1(b) shall be
terminated because of the holder's (a) fraud or intentional
misrepresentation, or (b) embezzlement, misappropriation or conversion of
assets or opportunities of the Company, then all such unexercised Options
of the holder shall terminate immediately upon such holder's ceasing to
serve as a director.
Subject to the limitations of Section 7.7, this award formula may be
amended from time to time by the Board with respect to timing and amount;
provided that such formula will not be modified to provide an award in
excess of Options to acquire 5,000 shares of Common Stock per year; and
provided, further, that the provisions of this Section 3.1(b) shall not be
amended more than once every six months, other than to comport with changes
in the Code or the Employee Retirement Income Security Act of 1974, as
amended (and to such extent, if any, as it may be applicable to the Plan)
or the rules and regulations thereunder.
3.2 Option Price.
(a) The purchase price per share of the Common Stock covered by each
Option shall be determined by the Committee, but in the case of Incentive
Stock Options shall not be less than 100% (110% in the case of a
Participant who owns more than 10% of the total combined voting power of
all classes of stock of the Company) of the Fair Market Value of the Common
Stock on the date the Incentive Stock Option is granted. The purchase price
of any shares purchased shall be paid in full at the time of each purchase
in one or a combination of the following methods: (i) in cash, or by
certified or cashier's check payable to the order of the Corporation; (ii)
if authorized by the Committee or specified in the Option being exercised,
by a promissory note made by the Participant in favor of the Corporation,
upon the terms and conditions determined by the Committee but at a rate of
interest at least equal to the imputed interest specified under Section 483
or Section 1274, whichever is applicable, of the Code, and secured by the
Common Stock issuable upon exercise in compliance with applicable law
(including, without limitation, state corporate law and federal margin
requirements); or (iii) by shares of Common Stock of the Corporation
already owned by the Participant; provided, however, the Committee may in
its absolute discretion limit the Participant's ability to exercise an
Option by delivering shares, and any shares delivered which were initially
acquired upon exercise of a stock option must have been owned, or deemed to
have been owned, by the Participant at least six months as of the date of
delivery. Shares of Common Stock used to satisfy the exercise price of an
Option shall be valued at their Fair Market Value on the date of exercise.
(b) In addition to the payment methods described in subsection (a),
the Option may provide that the Option can be exercised and payment made by
delivering a properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Corporation the amount
of sale or loan proceeds necessary to pay the exercise price and, unless
otherwise disallowed by the Committee, any applicable tax withholding under
Section 7.6. The Corporation shall not be obligated to deliver certificates
for the shares unless and until it receives full payment of the exercise
price therefor.
3.3 Option Period.
Each Option and all rights or obligations thereunder shall expire on
such date as shall be determined by the Committee, but not later than 10
years after the Award Date of an Incentive Stock Option or
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10 years and one day after the Award Date of a Nonqualified Stock Option,
and shall be subject to earlier termination as hereinafter provided.
3.4 Exercise of Options.
Except as otherwise provided in Section 7.4, an Option may become
exercisable, in whole or in part, on the date or dates specified in the
Award Agreement which date(s) shall not be earlier than six months after
the later of (i) the Award Date, or (ii) the date of shareholder approval
of the Plan pursuant to Section 7.9, and thereafter shall remain
exercisable until the expiration or earlier termination of the
Participant's Option. The Committee may, at any time after grant of the
Option and from time to time, increase the number of shares purchasable at
any time so long as the total number of shares subject to the Option is not
increased. No Option shall be exercisable except in respect of whole
shares, and fractional share interests shall be disregarded. Not less than
100 shares of Common Stock may be purchased at one time unless the number
purchased is the total number at the time available for purchase under the
terms of the Option.
3.5 Limitations on Grant of Incentive Stock Options.
(a) The aggregate Fair Market Value (determined as of the Award Date)
of the Common Stock for which Incentive Stock Options may first become
exercisable by any Participant during any calendar year under this Plan
(other than as a result of acceleration pursuant to Section 7.4 or 7.2),
together with that of common stock subject to incentive stock options first
exercisable by such Participant under any other plan of the Corporation or
any Subsidiary, shall not exceed $100,000; to the extent such limitation is
exceeded as a result of acceleration, Options shall be treated as
Nonqualified Stock Options.
(b) There shall be imposed in the Award Agreement relating to
Incentive Stock Options such terms and conditions as are required in order
that the Option be an "incentive stock option" as that term is defined in
Section 422 of the Code.
(c) No Incentive Stock Option may be granted to any person who, at the
time the Incentive Stock Option is granted, owns shares of stock possessing
more than 10% of the total combined voting power of all classes of stock of
the Corporation or any Subsidiary, unless the exercise price of such Option
is at least 110% of the Fair Market Value of the stock subject to the
Option and such Option by its terms is not exercisable after the expiration
of five years from the date such Option is granted.
(d) No Incentive Stock Option may be granted to any person who is not
an employee of the Company.
3.6 Additional Rights.
In its discretion the Committee may, in the Award Agreement, provide
for a Tax-Offset Bonus to any Participant who elects to make a
disqualifying disposition (as defined in Section 422(a)(1) of the Code) of
Common Stock acquired pursuant to the exercise of an Incentive Stock
Option. The Tax-Offset Bonus shall be in the form of a cash payment equal
to a percentage of the difference between the exercise price and the lesser
of (i) the Fair Market Value on the date of exercise of the Common Stock
with respect to which the disqualifying disposition occurs, or (ii) the
amount realized from such disqualifying disposition. Such percentage shall
be set out in the Award Agreement and shall be designed to offset the
impact of additional taxes which result from the disqualifying disposition.
Notwithstanding the preceding sentence, the Committee may reserve the right
to from time to time change the percentage applicable with respect to the
Award Agreement.
IV. STOCK APPRECIATION RIGHTS.
4.1 Grants.
In its discretion, the Committee may grant Stock Appreciation Rights
concurrently with the grant of Options. A Stock Appreciation Right shall
extend to all or a portion of the shares covered by the related Option. A
Stock Appreciation Right shall entitle the Participant who holds the
related Option, upon
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exercise of the Stock Appreciation Right and surrender of the related
Option, or portion thereof, to the extent the Stock Appreciation Right and
related Option each were previously unexercised, to receive payment of an
amount determined pursuant to Section 4.3. Any Stock Appreciation Right
granted in connection with an Incentive Stock Option shall contain such
terms as may be required to comply with the provisions of Section 422 of
the Code and the regulations promulgated thereunder. In its discretion, the
Committee may also grant Stock Appreciation Rights independently of any
Option subject to such conditions as the Committee may in its absolute
discretion provide.
4.2 Exercise of Stock Appreciation Rights.
(a) A Stock Appreciation Right granted concurrently with an Option
shall be exercisable only at such time or times, and to the extent, that
the related Option shall be exercisable and only when the Fair Market Value
of the stock subject to the related Option exceeds the exercise price of
the related Option.
(b) In the event that a Stock Appreciation Right granted concurrently
with an option is exercised, the number of shares of Common Stock subject
to the related Option shall be charged against the maximum amount of Common
Stock that may be issued or transferred pursuant to Awards under this Plan.
The number of shares subject to the Stock Appreciation Right and the
related Option of the Participant shall be reduced by such number of
shares.
(c) If a Stock Appreciation Right granted concurrently with an Option
extends to less than all the shares covered by the related Option and if a
portion of the related Option is thereafter exercised, the number of shares
subject to the unexercised Stock Appreciation Right shall be reduced only
if and to the extent that the remaining number of shares covered by such
related Option is less than the remaining number of shares subject to such
Stock Appreciation Right. The number of shares subject to unexercised Stock
Appreciation Rights may also be reduced proportionately.
(d) A Stock Appreciation Right granted independently of any Option
shall be exercisable pursuant to the terms of the Award Agreement but in no
event earlier than six months after the later of (i) the Award Date, or
(ii) the date of shareholder approval of the Plan pursuant to Section 7.9.
(e) In order to achieve the Plan's objective of encouraging ownership
of the Common Stock, the Committee may require that Stock Appreciation
Rights can only be exercised if the Participant uses all or a portion of
any cash received upon exercise of the Stock Appreciation Right to
concurrently exercise all or a portion of the Option he or she holds.
4.3 Payment.
(a) Upon exercise of a Stock Appreciation Right and surrender of an
exercisable portion of the related Option, the Participant shall be
entitled to receive payment of an amount determined by multiplying
(i) the difference obtained by subtracting the exercise price per
share of Common Stock under the related Option from the Fair Market
Value of a share of Common Stock on the date of exercise of the Stock
Appreciation Right, by
(ii) the number of shares with respect to which the Stock
Appreciation Right shall have been exercised.
(b) The Committee, in its sole discretion, may settle the amount
determined under paragraph (a) above solely in cash, solely in shares of
Common Stock (valued at Fair Market Value on the date of exercise of the
Stock Appreciation Right), or partly in such shares and partly in cash,
provided that the Committee shall have determined that such exercise and
payment are consistent with applicable law. In any event, cash shall be
paid in lieu of fractional shares. Absent a determination to the contrary,
all Stock Appreciation Rights shall be settled in cash as soon as
practicable after exercise. Notwithstanding the foregoing, the Committee
may, in the Award Agreement, determine the maximum amount of cash or stock
or a combination thereof which may be delivered upon exercise of a Stock
Appreciation Right.
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(c) Upon exercise of a Stock Appreciation Right granted independently
of any Option, the Participant shall be entitled to receive payment in cash
of an amount based on a percentage, specified in the Award Agreement, of
the difference obtained by subtracting the Fair Market Value per share of
Common Stock on the Award Date from the Fair Market Value per share of
Common Stock on the date of exercise of the Stock Appreciation Right.
V. RESTRICTED STOCK AWARDS.
5.1 Grants.
Subject to Section 2.4, the Committee may, in its discretion, grant
one or more Restricted Stock Awards to any Eligible Person. Each Restricted
Stock Award Agreement shall specify the number of shares of Common Stock to
be issued to the Participant, the date of such issuance, the price, if any,
to be paid for such shares by the Participant and the restrictions imposed
on such shares, which restrictions shall not terminate earlier than six
months after the later of (i) the Award Date, or (ii) the date of
shareholder approval of the Plan pursuant to Section 7.9. Shares of
Restricted Stock shall be evidenced by a stock certificate registered only
in the name of the Participant, which stock certificate shall bear a legend
making appropriate reference to the restrictions imposed and shall be held
by the Corporation until the restrictions on such shares shall have lapsed
and those shares shall have thereby vested.
5.2 Restrictions.
(a) Shares of Common Stock included in Restricted Stock Awards may not
be sold, assigned, transferred, pledged or otherwise disposed of or
encumbered, either voluntarily or involuntarily, until such shares have
vested.
(b) Participants receiving Restricted Stock shall be entitled to
voting rights for the shares issued even though they are not vested;
provided that such rights shall terminate immediately as to any forfeited
Restricted Stock; and provided further that any dividends declared and paid
on the shares issued but not yet vested shall be retained for the benefit
of the Participant, to be paid to the Participant when and if such shares
vest or returned to the Corporation immediately as to any forfeited
Restricted Stock.
(c) In the event that the Participant shall have paid cash in
connection with the Restricted Stock Award, the Award Agreement shall
specify whether and to what extent such cash shall be returned upon a
forfeiture (with or without an earnings factor).
VI. PERFORMANCE SHARE AWARDS.
6.1 Grants.
The Committee may, in its discretion, grant Performance Share Awards
to Eligible Persons based upon such factors as the Committee shall
determine. A Performance Share Award Agreement shall specify the number of
shares of Common Stock subject to the Performance Share Award, the price,
if any, to be paid for such shares by the Participant and the conditions
upon which issuance to the Participant shall be based, which issuance shall
not be earlier than six months after the later of (i) the Award Date, or
(ii) the date of shareholder approval of the Plan pursuant to Section 7.9.
VII. OTHER PROVISIONS.
7.1 Rights of Eligible Persons, Participants and Beneficiaries.
(a) Status as an Eligible Person shall not be construed as a
commitment that any Award will be made under this Plan to an Eligible
Person or to Eligible Persons generally.
(b) Nothing contained in this Plan (or in Award Agreements or in any
other documents related to this Plan or to Awards) shall confer upon any
Eligible Person or Participant any right to continue in the employ of the
Company or constitute any contract or agreement of employment, or interfere
in any way with the right of the Company to reduce such person's
compensation or to terminate the employment of
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such Eligible Person or Participant, with or without cause, but nothing
contained in this Plan or any document related thereto shall affect any
other contractual right of any Eligible Person or Participant.
(c) Amounts payable pursuant to an Award shall be paid only to the
Participant or, in the event of the Participant's death, to the
Participant's Beneficiary or, in the event of the Participant's Total
Disability, to the Participant's Personal Representative or, if there is
none, to the Participant. Other than by will or the laws of descent and
distribution, or pursuant to a "qualified domestic relations order" as
defined by the Code, no benefit payable under, or interest in, this Plan or
in any Award shall be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance or charge and any such
attempted action shall be void and no such benefit or interest shall be, in
any manner, liable for, or subject to, debts, contracts, liabilities,
engagements or torts of any Eligible Person, Participant or Beneficiary.
The Committee shall disregard any attempted transfer, assignment or other
alienation prohibited by the preceding sentence and shall pay or deliver
such cash or shares of Common Stock in accordance with the provisions of
this Plan.
(d) No Participant, Beneficiary or other person shall have any right,
title or interest in any fund or in any specific asset (including shares of
Common Stock) of the Company by reason of any Award granted hereunder.
Neither the provisions of this Plan (or of any documents related hereto),
nor the creation or adoption of this Plan, nor any action taken pursuant to
the provisions of this Plan shall create, or be construed to create, a
trust of any kind or a fiduciary relationship between the Company and any
Participant, Beneficiary or other person. To the extent that a Participant,
Beneficiary or other person acquires a right to receive an Award hereunder,
such right shall be no greater than the right of any unsecured general
creditor of the Company.
7.2 Adjustments Upon Changes in Capitalization.
(a) If the outstanding shares of Common Stock are increased, decreased
or changed into, or exchanged for, a different number or kind of shares or
securities of the Corporation through a reorganization or merger in which
the Corporation is the surviving entity, or through a combination,
recapitalization, reclassification, stock split, stock dividend, stock
consolidation or otherwise, an appropriate adjustment shall be made in the
number and kind of shares that may be issued pursuant to Awards. A
corresponding adjustment to the consideration payable with respect to
Awards granted prior to any such change and to the price, if any, paid in
connection with Restricted Stock Awards or Performance Share Awards shall
also be made. Any such adjustment, however, shall be made without change in
the total payment, if any, applicable to the portion of the Award not
exercised but with a corresponding adjustment in the price for each share.
Corresponding adjustments shall be made with respect to Stock Appreciation
Rights based upon the adjustments made to the Options to which they are
related or, in the case of Stock Appreciation Rights granted independently
of any Option, based upon the adjustments made to Common Stock.
Corresponding adjustments may also be made in particular stock grants with
respect to extraordinary cash dividends.
(b) Upon the dissolution or liquidation of the Corporation, or upon a
reorganization, merger or consolidation of the Corporation with one or more
corporations as a result of which the Corporation is not the surviving
corporation, the Plan shall terminate, and any outstanding Awards shall
terminate and be forfeited. Notwithstanding the foregoing, the Committee
may provide in writing in connection with, or in contemplation of, any such
transaction for any or all of the following alternatives (separately or in
combinations): (i) for the assumption by the successor corporation of the
Awards theretofore granted or the substitution by such corporation for such
Awards of awards covering the stock of the successor corporation, or a
parent or subsidiary thereof, with appropriate adjustments as to the number
and kind of shares and prices; (ii) for the continuance of the Plan by such
successor corporation in which event the Plan and the Awards shall continue
in the manner and under the terms so provided; or (iii) for the payment in
cash or shares of Common Stock in lieu of and in complete satisfaction of
such Awards.
(c) In adjusting Awards to reflect the changes described in this
Section 7.2, or in determining that no such adjustment is necessary, the
Committee may rely upon the advice of independent counsel and
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<PAGE> 39
accountants of the Corporation, and the determination of the Committee
shall be conclusive. No fractional shares of stock shall be issued under
this Plan on account of any such adjustment.
7.3 Termination of Employment.
(a) If the Participant's employment by the Company terminates for any
reason other than Retirement, death or Total Disability, the Participant
shall have, subject to earlier termination pursuant to or as contemplated
by Section 3.3, three months (or up to one year if so determined by the
Committee in the grant or otherwise) from the date of termination of
employment to exercise any Option to the extent it shall have become
exercisable on that date, and any Option not exercisable on that date shall
terminate. Notwithstanding the preceding sentence, in the event the
Participant is discharged for cause as determined by the Committee in its
sole discretion, all Options shall lapse immediately upon such termination
of employment.
(b) If the Participant's employment by the Company terminates as a
result of Retirement or Total Disability, the Participant or Participant's
Personal Representative, as the case may be, shall have, subject to earlier
termination pursuant to or as contemplated by Section 3.3, 12 months from
the date of termination of employment (or 3 months from the date of
termination of employment as a result of Retirement, with respect to an
Incentive Stock Option) to exercise any Option to the extent it shall have
become exercisable by that date, and any Option not exercisable on that
date shall terminate.
(c) If the Participant's employment by the Company terminates as a
result of death while the Participant is employed by the Company or during
the 12 month period referred to in subsection (b) above, the Participant's
Option shall be exercisable by the Participant's Beneficiary, subject to
earlier termination pursuant to or as contemplated by Section 3.3, during
the 12-month period or such shorter period as is provided in the Award
Agreement following the Participant's death, as to all or any part of the
shares of Common Stock covered thereby including all shares as to which the
Option would not otherwise be exercisable.
(d) Each Stock Appreciation Right granted concurrently with an Option
shall have the same termination provisions and exercisability periods as
the Option to which it relates. The termination provisions and
exercisability periods of any Stock Appreciation Right granted
independently of an Option shall be established in accordance with Section
4.2(d). The exercisability period of a Stock Appreciation Right shall not
exceed that provided in Section 3.3 or in the related Award Agreement and
the Stock Appreciation Right shall expire at the end of such exercisability
period.
(e) In the event of termination of employment with the Company for any
reason, (i) shares of Common Stock subject to the Participant's Restricted
Stock Award shall be forfeited in accordance with the provisions of the
related Award Agreement to the extent such shares have not become vested on
that date; and (ii) shares of Common Stock subject to the Participant's
Performance Share Award shall be forfeited in accordance with the
provisions of the related Award Agreement to the extent such shares have
not been issued or become issuable on that date.
(f) In the event of termination of employment with the Company for any
reason, other than discharge for cause, the Committee may, in its
discretion, increase the portion of the Participant's Award available to
the Participant, or Participant's Beneficiary or Personal Representative,
as the case may be, upon such terms as the Committee shall determine.
(g) If an entity ceases to be a Subsidiary, such action shall be
deemed for purposes of this Section 7.3 to be a termination of employment
of each employee of that entity.
(h) Upon forfeiture of a Restricted Stock Award pursuant to this
Section 7.3, the Participant, or his or her Beneficiary or Personal
Representative, as the case may be, shall transfer to the Corporation the
portion of the Restricted Stock Award not vested at the date of termination
of employment, without payment of any consideration by the Company for such
transfer unless the Participant paid a purchase price in which case
repayment, if any, of that price shall be governed by the Award Agreement.
Notwithstanding any such transfer to the Corporation, or failure, refusal
or neglect to transfer, by the
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<PAGE> 40
Participant, or his or her Beneficiary or Personal Representative, as the
case may be, such nonvested portion of any Restricted Stock Award shall be
deemed transferred automatically to the Corporation on the date of
termination of employment. The Participant's original acceptance of the
Restricted Stock Award shall constitute his or her appointment of the
Corporation and each of its authorized representatives as
attorney(s)-in-fact to effect such transfer and to execute such documents
as the Corporation or such representatives deem necessary or advisable in
connection with such transfer.
7.4 Acceleration of Awards.
Unless prior to an Event the Committee determines that, upon its
occurrence, there shall be no acceleration of Awards or determines those
Awards which shall be accelerated and the extent to which they shall be
accelerated, upon the occurrence of an Event (i) each Option and each Stock
Appreciation Right shall become immediately exercisable to the full extent
theretofore not exercisable, (ii) Restricted Stock shall immediately vest
free of restrictions and (iii) the number of shares covered by each
Performance Share Award shall be issued to the Participant; provided,
however, that Awards shall not in any event be so accelerated to a date
less than six months after the later of (i) the Award Date, or (ii) the
date of shareholder approval of the Plan pursuant to Section 7.9.
Acceleration of Awards shall comply with applicable regulatory
requirements, including without limitation Rule 16b-3 promulgated by the
Commission pursuant to the Exchange Act and Section 422 of the Code.
7.5 Government Regulations.
This Plan, the granting of Awards under this Plan and the issuance or
transfer of shares of Common Stock (and/or the payment of money) pursuant
thereto are subject to all applicable federal and state laws, rules and
regulations and to such approvals by any regulatory or governmental agency
(including, without limitation, interpretive letters of the Commission)
which may, in the opinion of counsel for the Corporation, be necessary or
advisable in connection therewith. Without limiting the generality of the
foregoing, no Awards may be granted under this Plan, and no shares shall be
issued by the Corporation, nor cash payments made by the Corporation,
pursuant to or in connection with any such Award, unless and until, in each
such case, all legal requirements applicable to the issuance or payment
have, in the opinion of counsel to the Corporation, been complied with. In
connection with any stock issuance or transfer, the person acquiring the
shares shall, if requested by the Corporation, give assurances satisfactory
to counsel to the Corporation in respect of such matters as the Corporation
may deem desirable to assure compliance with all applicable legal
requirements.
7.6 Tax Withholding.
(a) Upon the disposition by a Participant or other person of shares of
Common Stock acquired pursuant to the exercise of an Incentive Stock Option
prior to satisfaction of the holding period requirements of Section 422 of
the Code, or upon the exercise of a Nonqualified Stock Option or a Stock
Appreciation Right, the vesting of a Restricted Stock Award, the payment of
a Performance Share Award, payment pursuant to a Stock Appreciation Right
or payment of a Tax-Offset Bonus, the Company shall have the right to (i)
require such Participant or other person to pay by cash, or certified or
cashier's check payable to the Company, the amount of any taxes which the
Company may be required to withhold with respect to such transactions or
(ii) deduct from amounts paid in cash the amount of any taxes which the
Company may be required to withhold with respect to such cash amounts. The
above notwithstanding, in any case where a tax is required to be withheld
in connection with the issuance or transfer of shares of Common Stock under
this Plan, the Participant may elect, pursuant to such rules as the
Committee may establish, to have the Company reduce the number of such
shares issued or transferred by the appropriate number of shares to
accomplish such withholding; provided, the Committee may impose such
conditions on the payment of any withholding obligation as may be required
to satisfy applicable regulatory requirements, including without
limitation, Rule 16b-3 promulgated by the Commission pursuant to the
Exchange Act.
(b) The Committee may, in its discretion, permit a loan from the
Company to a Participant (other than a member of the Committee) in the
amount of any taxes which the Company may be required to
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<PAGE> 41
withhold with respect to shares of Common Stock received pursuant to a
transaction described in subsection (a) above. Such a loan will be for a
term, at a rate of interest and pursuant to such other terms and rules as
the Committee may establish.
7.7 Amendment, Termination and Suspension.
(a) The Board may, at any time, terminate or, from time to time,
amend, modify or suspend this Plan (or any part hereof). In addition, the
Committee may, from time to time, amend or modify any provision of this
Plan and, with the consent of the Participant, make such modifications of
the terms and conditions of such Participant's Award as it shall deem
advisable. The Committee, with the consent of the Participant, may also
amend the terms of any Option to provide that the Option price of the
shares remaining subject to the original Award shall be reestablished at a
price not less than 100% of the Fair Market Value of the Common Stock on
the effective date of the amendment. No modification of any other term or
provision of any Option which is amended in accordance with the foregoing
shall be required, although the Committee may, in its discretion, make such
further modifications of any such Option as are not inconsistent with or
prohibited by the Plan. No Awards may be granted during any suspension of
this Plan or after its termination.
(b) If an amendment would (i) materially increase the benefits
accruing to Participants within the meaning of Rule 16b-3(a) under the
Exchange Act or any successor thereto, (ii) increase the aggregate number
of shares which may be issued under this Plan or to any individual, or
(iii) modify the requirements of eligibility for participation in this
Plan, the amendment shall be approved by the Board or the Committee and by
a majority of the shareholders.
(c) In the case of Awards issued before the effective date of any
amendment, suspension or termination of this Plan, such amendment,
suspension or termination of the Plan shall not, without specific action of
the Board or the Committee and the consent of the Participant, in any way
modify, amend, alter or impair any rights or obligations under any Award
previously granted under the Plan.
7.8 Privileges of Stock Ownership; Nondistributive Intent.
A Participant shall not be entitled to the privilege of stock
ownership as to any shares of Common Stock not actually issued to him. Upon
the issuance and transfer of shares to the Participant, unless a
registration statement is in effect under the Securities Act, relating to
such issued and transferred Common Stock and there is available for
delivery a prospectus meeting the requirements of Section 10 of the
Securities Act, the Common Stock may be issued and transferred to the
Participant only if he represents and warrants in writing to the
Corporation that the shares are being acquired for investment and not with
a view to the resale or distribution thereof. No shares shall be issued and
transferred unless and until there shall have been full compliance with any
then applicable regulatory requirements (including those of exchanges upon
which any Common Stock of the Corporation may be listed).
7.9 Effective Date of the Plan.
This Plan is conditioned upon its approval by the shareholders of the
Corporation on or before June 21, 1995 by the vote of the holders of a
majority of the stock of the Corporation voting at such meeting in person
or by proxy; except that this Plan is adopted and approved by the Board
effective June 21, 1994 to permit the grant of Awards prior to the approval
of the Plan by the shareholders of the Corporation as aforesaid. In the
event that this Plan is not approved by the shareholders of the Corporation
as aforesaid, this Plan and any Awards granted hereunder shall be void and
of no force or effect.
7.10 Term of the Plan.
Unless previously terminated by the Board, this Plan shall terminate
at the close of business on June 21, 2004, and no Awards shall be granted
under it thereafter, but such termination shall not affect any Award
theretofore granted.
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<PAGE> 42
7.11 Governing Law.
Except as required by Delaware corporate law, this Plan and the
documents evidencing Awards and all other related documents shall be
governed by, and construed in accordance with, the laws of the State of
California. If any provision shall be held by a court of competent
jurisdiction to be invalid and unenforceable, the remaining provisions of
this Plan shall continue to be fully effective.
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<PAGE> 43
AMENDMENT NO. 1
TO
1994 STOCK INCENTIVE PLAN
OF
ALL AMERICAN COMMUNICATIONS, INC.
Capitalized terms used but undefined herein shall have the meanings
ascribed to them in the Plan.
1. The definition of "Common Stock" in Section 1.1(j) of the Plan is
hereby amended and restated in its entirety to read as follows:
(j) "Common Stock" shall mean the Common Stock of the
Corporation or Class B Common Stock of the Corporation.
2. Section 2.4 of the Plan is hereby amended and restated in its entirety
to read as follows:
2.4 Stock Subject to the Plan. The stock to be offered under
this Plan shall be shares of the Corporation's authorized but
unissued Common Stock. The aggregate amount of Common Stock that
may be issued or transferred pursuant to Awards granted under
this Plan shall not exceed 3,500,000 shares, subject to
adjustment as set forth in Section 7.2. The maximum number of
shares of Common Stock which may be the subject of Options and
Stock Appreciation Rights granted to any individual in any
calendar year shall not exceed 250,000 shares; provided,
however, that the block grant, dated as of February 26, 1996, of
an option to purchase 1,200,000 shares of Class B Common Stock
to Anthony J. Scotti shall be exempted from such limitations. If
an Option and any Stock Appreciation Rights shall lapse or
terminate without having been exercised in full, or any Common
Stock subject to a Restricted Stock Award shall not vest or any
Common Stock subject to a Performance Share Award shall not have
been transferred, the unpurchased or nontransferred shares
subject thereto shall again be available for the purposes of
this Plan; provided, however, that the counting of shares
subject to Awards granted under the Plan against the number of
shares available for further Awards shall in all cases conform
to the requirements of Rule 16b-3 under the Exchange Act; and
provided, further, that with respect to any Option and any Stock
Appreciation Right granted to any Eligible Person who is a
"covered employee" as defined in Section 162(m) of the Code and
the regulations promulgated thereunder that is canceled, the
number of shares subject to such Option and Stock Appreciation
Rights granted to such Eligible Person. For purposes of the
preceding sentence, if, after grant, the exercise price of an
Option and/or the base amount of any Stock Appreciation Right is
reduced, such reduction shall be treated as a cancellation of
such Option and Stock Appreciation Right and the grant of a new
Option and Stock Appreciation Right (if any), and both the
cancellation of the Option and Stock Appreciation Right and the
grant of the new Option and Stock Appreciation Right shall
reduce the maximum number of shares for which Options and Stock
Appreciation Rights may be granted to the holder of such Option
and Stock Appreciation Right.
3. As amended hereby, the Plan remains in full force and effect.
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<PAGE> 44
FORM OF PROXY CARD
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF
ALL AMERICAN COMMUNICATIONS, INC. FOR
JULY 16, 1996 ANNUAL MEETING OF STOCKHOLDERS
The undersigned, revoking any previous proxies for such stock, hereby
appoints each of ANTHONY J. SCOTTI, BENJAMIN J. SCOTTI and MYRON I. ROTH, as
attorney and agent, acting individually or by a majority of those present, with
full power of substitution, to vote as proxy in the name, place and stead of the
undersigned at the annual meeting of stockholders of ALL AMERICAN
COMMUNICATIONS, INC. to be held on July 16, 1996 and at any adjournment(s) or
postponement(s) thereof, according to the number of votes that the undersigned
would be entitled to vote if personally present. Without limiting the generality
hereof, each of such persons is authorized to vote (1) as hereinafter specified
upon the proposals listed below and on the reverse side and described in the
Proxy Statement for the meeting, and (2) in his discretion upon any other matter
that may properly come before the meeting.
The shares represented by this proxy shall be voted as specified. If no
specification is made, the shares shall be voted on the specified matters as
recommended by the Board of Directors.
The Board of Directors unanimously recommends a vote FOR the items below.
1. Approval of the following Class II nominees to the Board of Directors:
Anthony J. Scotti FOR / / WITHHOLD / /
Thomas Bradshaw FOR / / WITHHOLD / /
Myron I. Roth FOR / / WITHHOLD / /
R. Timothy O'Donnell FOR / / WITHHOLD / /
2. Approval of the following Class III nominees to the Board of Directors:
Sydney D. Vinnedge FOR / / WITHHOLD / /
Gordon C. Luce FOR / / WITHHOLD / /
Lawrence E. Lamattina FOR / / WITHHOLD / /
(continued and to be signed on reverse side)
<PAGE> 45
<TABLE>
<S> <C>
3. Approval of the amendment to the Company's Restated Certificate of
Incorporation to enable holders of the Company's Common Stock to convert
each share of Common Stock held by such holder into one share of Class B
Common Stock. FOR / / AGAINST / / ABSTAIN / /
4. Ratification of the amendment to the Company's 1994 Stock Incentive Plan
and the approval of certain awards previously granted under such plan. FOR / / AGAINST / / ABSTAIN / /
5. Approval of certain award granted to Anthony J. Scotti under the 1994
Stock Incentive Plan. FOR / / AGAINST / / ABSTAIN / /
6. Approval of certain awards granted to Thomas Bradshaw and certain other
executive officers under the 1994 Stock Incentive Plan. FOR / / AGAINST / / ABSTAIN / /
7. Approval of the appointment of Price Waterhouse LLP as the Company's
independent accountants for the fiscal year ending December 31, 1996. FOR / / AGAINST / / ABSTAIN / /
</TABLE>
----------------------------
Signature
----------------------------
Signature
Date: , 1996
-----------------
IMPORTANT: PLEASE SIGN YOUR
NAME OR NAMES EXACTLY AS
STENCILED ON THIS PROXY.
WHEN SIGNING AS ATTORNEY,
EXECUTOR OR ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE
GIVE YOUR FULL TITLE AS
SUCH.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY.
A STAMPED AND ADDRESSED ENVELOPE HAS BEEN PROVIDED FOR YOUR USE.
