<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by Party other than the Registrant / /
Check the appropriate box:
/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 Rule 14a-11(c) or Rule 14a-12
The Producers Entertainment Group Ltd.
- - - --------------------------------------------------------------------------------
(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), 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 identfy 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
THE PRODUCERS ENTERTAINMENT GROUP LTD.
9150 WILSHIRE BOULEVARD
BEVERLY HILLS, CALIFORNIA 90212
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER ____, 1995
PLEASE TAKE NOTICE that the Annual Meeting of Stockholders of the
Producers Entertainment Group Ltd., a Delaware corporation (the "Corporation"),
will be held at the Wilshire Room of the Radisson Beverly Pavilion Hotel, 9360
Wilshire Boulevard, Beverly Hills, California, at 9:30 A.M., California time, on
December ____, 1995 for the following purposes:
1. To elect 4 directors to hold office until the next Annual Meeting of
Stockholders and until their successors shall have been duly elected and
qualified.
2. To consider and vote upon a proposal to approve the Corporation's
1995 Stock Option Plan.
3. To consider and vote upon a proposed amendment to the Corporation's
Certificate of Incorporation to effect a reverse split of the Corporation's
issued and outstanding Common Stock, $.001 par value per share, whereby each
three (3) shares of Common Stock issued as of the effective date of the reverse
split will be converted into one (1) share of Common Stock, $.001 par value,
and, in that connection, to effect a proportionate reduction in the
Corporation's stated capital.
4. To transact such other business as may properly come before the
Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on November
____, 1995 as the record date for the determination of Stockholders of the
Corporation entitled to notice of and to vote at the Meeting.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY. ANY STOCKHOLDER WHO HAS GIVEN A PROXY MAY REVOKE IT
BY WRITTEN NOTICE ADDRESSED TO AND RECEIVED BY THE SECRETARY OF THE CORPORATION
PRIOR TO ITS EXERCISE, OR BY SUBMITTING A DULY EXECUTED PROXY BEARING A LATER
DATE OR BY ELECTING TO VOTE IN PERSON AT THE MEETING. THE MERE PRESENCE AT THE
MEETING OF THE PERSON APPOINTING A PROXY DOES NOT REVOKE THE PRIOR GRANT OF A
PROXY.
Beverly Hills, California
November ____, 1995
By Order of the Board of Directors
Arthur Bernstein, Secretary
<PAGE> 3
THE PRODUCERS ENTERTAINMENT GROUP LTD.
9150 WILSHIRE BOULEVARD
BEVERLY HILLS, CALIFORNIA 90212
PROXY STATEMENT
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of The Producers Entertainment
Group Ltd., a Delaware corporation (the "Corporation"), for use at the Annual
Meeting of Stockholders of the Corporation to be held on December ____, 1995 at
the Wilshire Room of the Radisson Beverly Pavilion Hotel, 9360 Wilshire
Boulevard, Beverly Hills, California, at 9:30 A.M., California time, and at any
adjournments thereof (the "Meeting"). Stockholders of record as of the close of
business on November ____, 1995 (the "Record Date") will be entitled to notice
of and to vote at the Meeting and at any adjournments thereof. As of the Record
Date, the Corporation had [14,020,996]1 shares of Common Stock, par value
$.001 per share (the "Common Stock"), issued and outstanding and entitled to
vote. Each outstanding share of Common Stock is entitled to one vote with
respect to any matter presented to the Meeting.
If proxies in the accompanying form are properly executed and
returned, unless contrary instructions are indicated thereon, the shares of
Common Stock represented thereby will be voted: (a) for the election of the 4
nominees named below as directors; (b) for the adoption of the Corporation's
1995 Stock Option Plan (the "1995 Plan"); (c) for the adoption of an amendment
to the Certificate of Incorporation of the Corporation effecting a reverse split
of the Common Stock on the basis of one (1) new share of Common Stock for each
three (3) shares of Common Stock issued as of the effective date of such
amendment (the "Reverse Split"); and (d) in the discretion of the persons named
in the enclosed form of Proxy on any other proposals to properly come before the
Meeting or any adjournments thereof. Abstentions and broker non-votes are not
counted as votes cast on any matter to which they relate.
The presence in person or by proxy of a majority of the
outstanding shares of Common Stock entitled to vote at the Meeting will be
necessary to constitute a quorum. Directors shall be elected by a plurality of
the votes cast by the shares of Common Stock present in person or represented by
Proxy at the Meeting. The approval of the 1995 Plan requires the affirmative
vote of a majority of the shares of Common Stock present in person or
represented by Proxy at the Meeting. The approval of the amendment to the
Corporation's Certificate of Incorporation effecting the Reverse Split requires
the affirmative vote of a majority of the outstanding shares of Common Stock
entitled to vote at the Meeting.
Information with respect to beneficial ownership of Common Stock by
directors and officers of the Corporation is set forth under the captions
"Principal Stockholders" and "Security Ownership of Management."
The approximate date of mailing of this Proxy Statement is
expected to be November ____, 1995.
- - - ---------------
1 Reflects the issuance and sale of 3,600,000 shares of Common
Stock of the Corporation which the Corporation has agreed to
sell, subject to approval by the Corporation certain directors
and executive officers of the Corporation or their affiliates,
as described elsewhere in this Proxy Statement. "See Executive
Compensation -- Stock Purchases."
<PAGE> 4
MATTERS TO BE BROUGHT BEFORE THE MEETING
PROPOSAL NO. 1: ELECTION OF DIRECTORS
Four (4) directors are to be elected at the Meeting to hold office
until the next Annual Meeting of Stockholders and until their successors shall
have been duly elected and qualified. It is the intention of the persons named
in the enclosed form of Proxy to vote the shares of Common Stock represented
thereby for the election as directors of the persons named in the table below
unless otherwise specified in the Proxy. In the event that any of the nominees
named below should become unavailable or unable to serve as a director, it is
intended that the persons named in the Proxy will vote for the election, in his
place and stead, of any substitute nominee who shall be designated by the Board.
The Board has no reason to believe that it will be necessary to designate any
substitute nominees.
The following table contains information regarding all nominees for
election as directors of the Corporation:
<TABLE>
<CAPTION>
Principal Occupation(s) or Director of the
Name/Age Employment During Past Five Years Corporation Since
- - - -------- --------------------------------- -----------------
<S> <C> <C>
Irwin Meyer/60 Director of the Corporation since its inception in 1989
1989 and President and Chief Executive Officer
since February 1995. In February 1990, Mr. Meyer
became Co-Chairman of the Board of the Corporation
and, in January 1991, he became Chairman of the
Board of the Corporation, a position he held until
June 1992. From 1988 to July 1994, Mr. Meyer was a
director of Ventura Entertainment Group Ltd., the
Corporation's former parent ("Ventura"), and, from
May 1988 to December 1990, he was President of
Ventura. Mr. Meyer was an executive producer of the
Corporation's movies The Price She Paid and The
Secret Passion of Robert Clayton and its television
series Hollywood Babylon. He was also executive
producer of the made-for-television movie Against
the Wall which was produced by the Corporation for
Home Box Office. Mr. Meyer was nominated for the
Producer of the Year by the Producers Guild of
America for being executive director of this movie.
In 1977, he co-produced the musical Annie for which
he received the Antoinette Perry ("Tony") Award,
the New York Drama Critics Circle Award, the Drama
Desk Award, the Outer Critics Circle Award and the
Cue Magazine Golden Apple Award. Mr. Meyer holds a
B.S. from New York University.
</TABLE>
2
<PAGE> 5
<TABLE>
<S> <C> <C>
Ronald Lightstone/56 Chairman of the Board and a director of the June 1995
Corporation since June 1995. From 1988 to 1994, Mr.
Lightstone was affiliated with Spelling
Entertainment Group, most recently as Chief
Operating Officer, a producer and distributor of
television series, mini- series,
made-for-television movies and theatrical motion
pictures. Previously, he was Senior Vice President
of Viacom International Inc. Mr. Lightstone holds
an A.B. from Columbia University and a J.D. from
New York University School of Law.
Charles Weber/52 Consultant to the Corporation since October 1995. Mr. February 1995
Weber served as Chief Operating Officer of the
Corporation from June 1995 to October 1995 and
currently serves as a consultant to the
Corporation. Mr. Weber been a director of the
Corporation since February 1995. He has been the
Chairman and Chief Executive Officer of Weber
Communications, Inc., an international consulting
firm specializing in professional management,
consulting, business development and strategic
alliances in the multimedia, entertainment and
communications fields. Mr. Weber holds a B.B.A.
from Manhattan College and an M.B.A. from Hofstra
University.
Michael Levy/55 A director of the Corporation since February 1995. February 1995
Mr. Levy has been engaged in various aspects of the
entertainment industry since 1964, including
production, packaging and personal management.
</TABLE>
Meetings of the Board and Committees
The Board held seven meetings during the fiscal year ended June 30,
1995. During such fiscal year, each of the incumbent directors attended at least
75% of the meetings held by the Board during the period in which he served as a
director.
The Corporation does not have a standing Audit Committee, Nominating
Committee or Compensation Committee or any committees performing similar
functions.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Under the Federal Securities laws, the Corporation's directors and
executive officers and any persons holding more than 10 percent of the
Corporation's outstanding Common Stock are required to report their ownership of
such Common Stock and any changes in that ownership, on a timely basis, to the
Securities and Exchange Commission. Based on material provided to the
Corporation, all such required reports were filed on a timely basis through June
30, 1995, except that each of Messrs. Lightstone and Weber were late in filing
3
<PAGE> 6
a Form 3 report upon becoming an executive officer of the Corporation in June
1995, and Arthur Bernstein did not timely file two Form 4 reports during the
Corporation's fiscal year ended June 30, 1995, one Form 4 report during the
current fiscal year and four Form 4 reports in prior fiscal years.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information, as of November
____, 1995, with respect to holdings of the Corporation's Common Stock by each
person known by the Corporation to be the beneficial owner of more than 5% of
the total number of shares of Common Stock outstanding as of that date. As of
such date, the Corporation had issued and outstanding [14,020,996]1 shares of
Common Stock. Each beneficial owner has sole voting and investment power with
respect to the Common Stock set forth opposite his or her name in the following
table:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent of Outstanding
Beneficial Owner Beneficial Ownership (1)(3) Common Stock (3)
- - - ---------------- --------------------------- ----------------
<S> <C> <C>
Mountaingate Productions, LLC 2,635,000(2) 18.0%
12610 Promontory Road
Los Angeles, CA 90049
Ronald Lightstone 1,500,000(3) 10.7%
9150 Wilshire Boulevard
Beverly Hills, California 90212
Bibicoff & Associates, Inc. 880,000(4) 7.8%
1990 Westwood Boulevard
Los Angeles, CA 90025
</TABLE>
(1) If stockholders approve the one-for-three Reverse Split described under
Proposal No. 3 elsewhere in this Proxy Statement, the number of shares
of Common Stock owned beneficially by each of the persons named in the
foregoing table will be adjusted accordingly upon the effectiveness of
such Reverse Split.
(2) Reflects 2,000,000 shares of Common Stock to be purchased, subject to
approval by the Corporation's Board of Directors, by Mountaingate
Productions, LLC, a California limited liability company
("Mountaingate"), in November 1995 and currently exercisable options to
purchase 317,500 shares of Common Stock held by each of Alison Meyer
and Patricia Meyer, the sole members of Mountaingate. Alison and
Patricia Meyer are the adult children of Irwin Meyer. See "Executive
Compensation -- Stock Purchases." Irwin Meyer has no direct or indirect
economic interest in any such securities and he expressly disclaims
beneficial ownership of the shares of Common Stock owned by
Mountaingate and the options held by Alison Meyer and Patricia Meyer.
(3) See "Executive Compensation -- Stock Purchases."
- - - -------------------------------
1 Reflects the issuance and sale of 3,600,000 shares of Common
Stock of the Corporation which the Corporation has agreed to
sell, subject to approval by the Corporation certain directors
and executive officers of the Corporation or their affiliates,
as described elsewhere in this Proxy Statement. See "Executive
Compensation -- Stock Purchases."
4
<PAGE> 7
(4) Reflects currently exercisable stock options.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information as of November ____,
1995 with respect to holdings of the Corporation's Common Stock beneficially
owned by each of the Corporation's directors, nominees for director and named
executive officers (including certain key independent contractors) and by all
officers and directors and key independent contractors of the Corporation as a
group. As of such date, the Corporation has issued and outstanding
[14,020,996]1 shares of Common Stock.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of
Beneficial Owner (1) Beneficial Ownership (2) Percent of Class
- - - -------------------- ------------------------ ----------------
<S> <C> <C>
Irwin Meyer 2,635,000 (3) 18.0%
Ronald Lightstone 1,500,000 (4) 10.7%
Charles Weber 100,000 (4) *
Michael Levy 25,000 (5) *
Jonathan Axelrod 400,000 (5) 2.8%
Arthur Bernstein 104,000 (5) *
Officers, directors and key 4,764,000 (6) 31.1%
independent contractors as a
group (consisting of 6
persons)
</TABLE>
- - - --------------------------
* less than 1%
(1) The address of each of Messrs. Meyer, Lightstone, Weber, Levy, Axelrod
and Bernstein is 9150 Wilshire Boulevard, Beverly Hills, California
90212.
(2) If stockholders approve the one-for-three Reverse Split described under
Proposal No. 3 elsewhere in this Proxy Statement, the number of shares
of Common Stock or options owned beneficially by each of the persons
named in the foregoing table will be adjusted accordingly upon the
effectiveness of such Reverse Split.
(3) Reflects 2,000,000 shares of Common Stock to be purchased by
Mountaingate in November 1995 and currently exercisable options to
purchase 317,500 shares of Common Stock held by each of Alison Meyer
and Patricia Meyer, the sole members of Mountaingate and the adult
children of Irwin
- - - --------------------------
1 Reflects the issuance and sale of 3,600,000 shares of Common
Stock of the Corporation which the Corporation has agreed to
sell, subject to approval by the Corporation certain directors
and executive officers of the Corporation or their affiliates,
as described elsewhere in this Proxy Statement. See "Executive
Compensation -- Stock Purchases."
5
<PAGE> 8
Meyer. See "Executive Compensation -- Stock Purchases." Mr. Meyer has
no direct or indirect economic interest in any such securities and he
expressly disclaims beneficial ownership of the shares of Common Stock
owned by Mountaingate and the options held by Alison Meyer and Patricia
Meyer.
(4) See "Executive Compensation -- Stock Purchases."
(5) Reflects currently exercisable stock options.
(6) Included (i) shares of Common Stock to be purchased by Mountaingate and
(ii) currently exercisable stock options, all as described in the
preceding footnotes.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------- ------ -------
NAME AND OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) (# OF SHARES)(12) COMPENSATION ($)
------------------ ---- ---------- ----------------- ----------------
<S> <C> <C> <C> <C>
Irwin Meyer, 1995 281,000 (9) 13,500 (6)
President and Chief 18,000 (7)
Executive Officer (1) 17,250 (8)
1994 260,000 -- 15,113 (6)
70,000 (8)
18,000 (7)
1993 345,000 185,000 12,000 (7)
52,000 (10)
Arthur Bernstein 1995 108,587(2) 100,000 6,625 (7)
Senior Vice President 1994 101,058 -- 6,000 (7)
1993 95,000 -- 6,000 (7)
Jonathan Axelrod (3) 1995 345,000 -- 18,000 (7)
Executive Producer 13,962 (8)
1994 345,000 -- 18,000 (7)
1993 331,000 -- 12,000 (7)
50,000 (10)
Harvey Bibicoff (4) 1995 141,519 300,000 --
1994 225,000 -- 9,000 (7)
1993 225,000 -- 9,000 (7)
Drew Levin 1995 100,000 -- --
President of DSL 1994 131,697 1,300,000 (11) --
Productions Ltd. (5) 1993 131,873 -- --
</TABLE>
- - - ------------------------
6
<PAGE> 9
(1) Includes $260,000 paid to AliPat Productions Ltd. ("AliPat"), which
formerly provided the Corporation with the services of Mr. Meyer and
others. See "Agreements with Executive Officers" under this caption.
Mr. Meyer became President and Chief Executive Officer of the
Corporation in February 1995 and has received compensation of $1,000
per week since that date.
(2) Includes bonus payment of $12,000.
(3) Paid to Jonathan Stanton Company which provides the Corporation with
the services of Mr. Axelrod.
(4) In February 1995, the Corporation and Mr. Bibicoff agreed to terminate
Mr. Bibicoff's employment as the Corporation's Chairman of the Board
and Chief Executive Officer and he resigned as an officer and director
of the Corporation. At such time, the Corporation entered into a
consulting agreement with Bibicoff & Associates pursuant to which the
Corporation is entitled to receive consulting services from Mr.
Bibicoff. The amounts shown on this table include compensation paid to
Mr. Bibicoff as an employee of the Corporation prior to February 1995
and compensation paid to Bibicoff & Associates as a consultant to the
Corporation subsequent to February 1995. See "Certain Relationships and
Related Transactions" elsewhere in this Proxy Statement.
(5) Includes compensation paid to Mr. Levin by DSL Productions Ltd. ("DSL
Productions") prior to the acquisition of DSL Productions by the
Corporation in May 1994. Mr. Levin resigned as an officer and director
of the Corporation and DSL Productions in February 1995. See "Certain
Relationships and Related Transactions" elsewhere in this Proxy
Statement.
(6) Participations in producer fees and net profits on projects produced.
(7) Automobile allowance.
(8) Advance against future compensation.
(9) In November 1995 the Corporation agreed to sell 2,000,000 shares of
Common Stock to Mountaingate, a limited liability company of which
Alison Meyer and Patricia Meyer, the adult daughters of Irwin Meyer,
are the sole members. See "Stock Purchases" under this caption. Mr.
Meyer has no direct or indirect economic interest in any such
securities and he expressly disclaims beneficial ownership of all
shares of Common Stock to be purchased by Mountaingate.
(10) Forgiveness of note receivable.
(11) As a result of the termination of Mr. Levin's employment with the
Corporation in February 1995, 900,000 of these options were canceled.
The remaining 400,000 options are pledged to secure a note held by the
Corporation. See "Certain Relationships and Related Transactions"
elsewhere in this Proxy Statement.
(12) If stockholders approve the one-for-three Reverse Split described under
Proposal No. 3 elsewhere in this Proxy Statement, the number of shares
of Common Stock or options owned by each of the persons named in the
foregoing table will be adjusted accordingly.
7
<PAGE> 10
AGREEMENTS WITH EXECUTIVE OFFICERS
In November 1995, the Corporation entered into an agreement, subject to
approval thereof by the Corporation's Board of Directors, with Mountaingate and
Irwin Meyer, pursuant to which Mountaingate will provide the Corporation with
the full-time services of Irwin Meyer as the Corporation's Chief Executive
Officer and the part-time services of others as producers and/or executive
producers and to perform other duties. The Corporation's agreement with
Mountaingate supersedes in its entirety the prior agreement between AliPat and
the Corporation pursuant to which AliPat provided the Corporation with the
services of Mr. Meyer and others. The agreement with Mountaingate provides for
annual compensation to Mountaingate of $262,000 plus a $1,500 monthly automobile
allowance and annual compensation to Mr. Meyer of $50,000. The agreement's term
expires on June 30, 1998. The agreement is terminable by the Corporation in the
event of Mr. Meyer's death or disability. In such event, the Corporation shall
pay the guarantee fee of $262,000 for one year. The Corporation may also
terminate this agreement for Cause (as defined in the agreement). AliPat may
terminate this agreement in the event of a material breach by the Corporation or
for Good Reason (as defined in the agreement). In such event, the Corporation
shall be obligated to pay all amounts due thereunder for the balance of its
term. In the event that the Corporation materially breaches the agreement after
a Change in Control (as defined in the Agreement), Mountaingate shall be
entitled to a lump sum payment equal to three times its then current total
compensation. In November 1995, the Corporation also agreed to sell 2,000,000
shares of its Common Stock to Mountaingate. See "Stock Purchases" under this
caption and "Certain Relationships and Related Transactions" elsewhere in this
Proxy Statement. Irwin Meyer has no direct or indirect economic interest in any
such securities and he expressly disclaims beneficial ownership of any shares of
Common Stock to be owned by Mountaingate.
In November 1995, the Corporation entered into an agreement, subject to
approval thereof by the Corporation's Board of Directors, with Mr. Lightstone
providing for annual compensation of $250,000 plus a $1,000 monthly automobile
allowance. The term of this agreement terminates on June 30, 1998. The agreement
is terminable by the Corporation in the event of Mr. Lightstone's death or
Disability (as defined in the agreement). In the event of his death, the
Corporation is obligated to pay to his estate an amount equal to one year's base
salary. The Corporation may also terminate the employment agreement for Cause
(as defined in the agreement). Mr. Lightstone may terminate this agreement for
Good Reason (as defined in the agreement). If Mr. Lightstone's employment is
terminated prior to a Change in Control (as defined in the agreement) of the
Corporation by him for Good Reason or by the Corporation other than as a result
of his death or Disability or for Cause, he is entitled to a severance payment
equal to his Base Salary and bonus (averaged for the past three years) through
the remaining term of the Agreement, but in no event less than one year. If Mr.
Lightstone's employment is terminated following a Change in Control of the
Corporation by him for Good Reason or by the Corporation other than as a result
of his death or Disability or for Cause, he is entitled to severance pay equal
to approximately three times his Base Salary and bonus (averaged for the past
three years). In November 1995, the Corporation also agreed to sell 1,500,000
shares of its Common Stock to Mr. Lightstone. See "Stock Purchases" under this
caption.
Arthur Bernstein is employed as Senior Vice President of the
Corporation pursuant to an employment agreement, as amended, which expires on
June 30, 1996. Mr. Bernstein's annual compensation is $105,000 plus a $750
monthly automobile allowance. In connection with the amendment of his employment
agreement, Mr. Bernstein received a $12,000 bonus. The agreement is terminable
by the Corporation in the event of Mr. Bernstein's death or disability. In such
event, the Corporation is obligated to pay the aforesaid compensation for one
year. The Corporation may also terminate the employment agreement for Cause (as
defined in the agreement). Mr. Bernstein may terminate the agreement in the
event of a material breach by the Corporation or for Good Reason (as defined in
the agreement). In such event, the Corporation will be obligated to pay him all
amounts due thereunder for the balance of its term and all
8
<PAGE> 11
unvested stock options held by him shall vest. In the event of a Change in
Control of the Corporation (as defined in the Agreement), all stock options
issued to Mr. Bernstein shall vest and the Corporation shall, at Mr. Bernstein's
option, purchase shares of Common Stock owned by him at the then market price
and shall acquire all of his stock options for the difference between the
exercise price of such options and the greater of the price at which the new
controlling entity acquired its interest in the Corporation or the then market
price of the Common Stock.
Jonathan Axelrod is employed by the Corporation pursuant to an
agreement, as amended, with Jonathan Stanton Company, his loan-out company
("JSC"). This Agreement expires on June 30, 1996 and provides for annual base
compensation of $345,000 plus a $1,500 monthly automobile allowance. JSC is also
entitled to receive a portion of the Corporation's profit participation from a
television series. The agreement is terminable by the Corporation in the event
of Mr. Axelrod's death or disability. In such event the Corporation is obligated
to pay the base compensation and automobile allowance for one year. The
Corporation may also terminate this agreement for Cause (as defined in the
agreement). JSC may terminate this agreement in the event of a material breach
by the Corporation or for Good Reason (as defined in the agreement). In such
event, the Corporation will be obligated to pay JSC all amounts due thereunder
for the balance of its term. In the event that the Corporation materially
breaches the agreement after a Change in Control of the Corporation (as defined
in the Agreement), JSC shall be entitled to a lump sum payment equal to three
times its then current total compensation.
STOCK PURCHASES
In November 1995, the Corporation agreed to sell, subject to approval
of the Corporation's Board of Directors and subject further to the vesting
requirements described below, 3,600,000 shares of its Common Stock, at a
purchase price of $.50 per share, to certain directors and executive officers of
the Corporation or their affiliates named below:
<TABLE>
<CAPTION>
Purchase Price ($)
--------------------------------------------------
Number of Shares
Name of Common Stock Recourse Non-Recourse Total
---- --------------- -------- ------------ -----
<S> <C> <C> <C> <C>
Mountaingate 2,000,000 250,000 750,000 1,000,000
Productions,
LLC(1)
Ronald
Lightstone 1,500,000 187,500 562,500 750,000
Charles J. Weber 100,000 12,500 37,500 50,000
TOTALS 3,600,000 450,000 1,350,000 1,800,000
</TABLE>
(1) Mountaingate is a California limited liability company of which Alison
Meyer and Patricia Meyer, the adult daughters of Irwin Meyer, are the
sole members. See "Executive Compensation -- Stock Purchases." Irwin
Meyer has no direct or indirect economic interest in any such
securities and he expressly disclaims beneficial ownership of the
shares of Common Stock to be purchased by Mountaingate.
9
<PAGE> 12
The purchase price for these shares of Common Stock will be paid by the
above-named purchasers by delivery of a promissory note (a "Note") by each such
purchaser to the Corporation. Each Note will bear interest at the rate of 7% per
annum, compounded semiannually. Twenty five percent (25%) of the amounts due
under each Note will be with recourse to the purchaser and the remaining seventy
five percent (75%) of the amounts due thereunder will be without personal
recourse against the purchaser. The entire amount of principal and accrued
interest under each Note will be secured by a pledge to the Company of the
Common Stock to be purchased with the proceeds of such borrowing. Twelve and
one-half percent (12.5%) of the principal amount of each Note, together with
interest thereon, will be due and payable on April 1, 1997; twelve and one-half
percent (12.5%) of the original principal amount of each Note, together with
interest thereon, will be due and payable on October 1, 1998; and the balance of
the principal of and interest on each Note will be due and payable on October 1,
2000.
The shares of Common Stock to be acquired by Mountaingate, Mr.
Lightstone and Mr. Weber are subject to forfeiture to the Company (with a
corresponding reduction in the applicable Note) in the event the employment of
Mr. Meyer or Mr. Lightstone or the consulting agreement with Mr. Weber,
respectively, is terminated (other than termination as a result of such person's
death or disability or termination by the Company without cause) prior to the
applicable vesting date of such shares. The Common Stock purchased by
Mountaingate, Mr. Lightstone and Mr. Weber will vest as follows: 50%
(aggregating 1,800,000 shares) on April 1, 1996, 25% (aggregating 900,000
shares) on June 30, 1996, and 25% (aggregating 900,000 shares) on June 30, 1997.
Notwithstanding such vesting schedule, the purchasers thereof shall be entitled
to vote all of such shares immediately upon the issuance thereof.
If the Corporation's stockholders approve the one-for-three Reverse
Split described under Proposal No. 3 elsewhere in this Proxy Statement, the
number of shares of Common Stock or options to be owned by each of the persons
named in the foregoing table will be adjusted accordingly upon the effectiveness
of such Reverse Split.
OPTION/SAR GRANTS IN FISCAL 1995
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term
------------------------------------------------------------------- -----------------------------
(a) (b) (c) (d) (e) (f) (g)
% of Total
Options
Options Granted in Exercise Expiration
Name Granted (2) Fiscal Yr. Price (2) Date 5% 10%
---- ----------- ---------- --------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Arthur
Bernstein 100,000 7% $.50 6/1/98 $13,810 $30,530
Harvey
Bibicoff(1) 300,000 22% $1.00 2/27/99 $82,885 $183,153
</TABLE>
10
<PAGE> 13
(1) The exercise price of these options is subject to reduction in the
event that options with a lower exercise price are granted to certain
individuals. In February 1995, the Corporation and Mr. Bibicoff agreed
to terminate Mr. Bibicoff's employment as the Corporation's Chairman of
the Board and Chief Executive Officer and he resigned as an officer and
director of the Corporation. See "Certain Relationships and Related
Transactions" elsewhere in this Proxy Statement.
(2) If stockholders approve the one-for-three Reverse Split described under
Proposal No. 3 elsewhere in this Proxy Statement, the number of shares
of Common Stock subject to options and the exercise price of such
options will be adjusted accordingly.
OPTION EXERCISES AND FISCAL YEAR-END (JUNE 30, 1995)
OPTION VALUES
No stock options were exercised by the named executive officers during
fiscal 1995. The following table sets forth certain information concerning the
outstanding options held by such named executive officers.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY
ACQUIRED ON VALUE FY-END OPTIONS AT
NAME EXERCISE (5) REALIZED($) # OF SHARES(5) FY-END - $
<S> <C> <C> <C> <C> <C>
Irwin Meyer (1) 0 0 635,000 Exercisable 0
0 Unexercisable 0
Arthur Bernstein 3,500 4,594 54,000 Exercisable 0
100,000 Unexercisable 18,750
Jonathan Axelrod (2) 0 0 400,000 Exercisable 0
0 Unexercisable 0
Harvey Bibicoff (3) 0 0 880,000 Exercisable 0
0 Unexercisable 0
</TABLE>
(1) Owned by Alison and Patricia Meyer, the adult daughters of Mr. Meyer.
All of these option are pledged to secure an advance made by the
Corporation to AliPat which formerly provided the Corporation with the
services of Irwin Meyer and others. See "Certain Relationships and
Related Transactions." Mr. Meyer has no direct or indirect economic
interest in any such securities and he expressly disclaims beneficial
ownership of the options and underlying shares of Common Stock held by
Alison and Patricia Meyer.
(2) Pledged to secure a note receivable held by the Corporation. Mr. Levin
resigned as an officer and director of the Corporation and DSL
Productions in February 1995. See "Certain Relationships and Related
Transactions" elsewhere in this Proxy Statement.
(3) Owned by Jonathan Stanton Company which provides the Corporation with
the services of Jonathan Axelrod.
11
<PAGE> 14
(4) The exercise price of 300,000 options owned by Bibicoff & Associates,
Inc. is subject to reduction in the event that options with a lower
exercise price are granted to certain individuals. In February 1995,
the Corporation and Mr. Bibicoff agreed to terminate Mr. Bibicoff's
employment as the Corporation's Chairman of the Board and Chief
Executive Officer and he resigned as an officer and director of the
Corporation.
(5) If stockholders approve the one-for-three Reverse Split described under
Proposal No. 3 elsewhere in this Proxy Statement, the number of options
to purchase Common Stock owned by each of the persons named in the
foregoing table and the exercise price of such options will be adjusted
accordingly.
COMPENSATION OF DIRECTORS
No fees are paid to members of the Board of Directors of the
Corporation for their services as members of the Board of Directors. It is the
policy of the Corporation to reimburse directors for reasonable travel and
lodging expenses incurred in attending meetings of the Board of Directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 12, 1994, the Corporation acquired DSL Productions in exchange
for 130,000 shares of its Common Stock. At the date of acquisition, DSL
Productions owed Mr. Joseph Cayre, one of its former shareholders, an aggregate
of $2,687,000, of which an aggregate of $1,887,000 has been repaid by the
Corporation. Mr. Cayre is entitled to receive payments (up to an aggregate of
$800,000) solely out of revenues, as defined, received by the Corporation from
certain completed projects. The payment of this amount is the subject of a legal
action brought by Mr. Cayre against the Corporation.
The Corporation had guaranteed the repayment of $270,000 loan due Mr.
Cayre from Mr. Drew Levin, the former President of DSL Productions. In December
1994, the Corporation loaned Mr. Levin $270,000 for the purpose of repaying this
loan. The Corporation's loan to Mr. Levin is nonrecourse to him, bears interest
at prime plus 1% and is due on December 31, 1997. This loan is secured by stock
options previously granted to Mr. Levin which entitle him to purchase an
aggregate of 400,000 shares of the Corporation's Common Stock at a price of
$2.72 per share through December 31, 1997. Due to the market price of the Common
Stock being substantially below the exercise price of these stock options, the
Corporation established an allowance for the entire amount of this note during
the year ended June 30, 1995.
Prior to its acquisition by the Corporation, DSL Productions made loans
to Mr. Levin in the aggregate amount of approximately $388,000 which bear
interest at 4.5% per year. The Corporation has filed a lawsuit against Mr. Levin
for, among other things, repayment of these loans and interest thereon.
In February 1995, the Corporation and Mr. Levin entered into an
agreement which, among other things, resulted in the termination of Mr. Levin's
employment agreement and his resignation as an officer and director of the
Corporation. In connection with this agreement, the Corporation transferred
certain of its projects in development to a new corporation formed by Mr. Levin
("DEG") in exchange for a 19.9% interest in DEG. Mr. Levin owns the remaining
80.1% of DEG. The carrying amount of the projects transferred to DEG was
approximately $174,000. The Corporation will receive 5% of the gross revenues,
as defined, from DEG's exploitation of these transferred projects. The
Corporation also agreed to transfer to DEG one of its projects that was in
production at the time of this agreement in exchange for 5% of future gross
revenues, as
12
<PAGE> 15
defined, from this project. This agreement is the subject of a legal action
brought by Mr. Levin against the Corporation.
In February 1995, the Corporation and Harvey Bibicoff agreed to
terminate Mr. Bibicoff's employment as the Corporation's Chief Executive Officer
and he resigned as an officer and director of the Corporation. At such time, the
Corporation entered into a consulting agreement with Bibicoff & Associates,
Inc., which is owned by Harvey Bibicoff, pursuant to which the Corporation is
entitled to receive consulting and advisory services from Mr. Bibicoff.
Compensation under this agreement, which expires on June 30, 1999, consists of
annual compensation of $80,000 and an annual bonus of not less than 2% of all
qualified offerings, as defined, that he arranges for the Corporation.
In January 1994, AliPat received a payment of $70,000 as an advance
against compensation to be paid to AliPat in the future pursuant to a services
agreement. This advance bears interest at 8% and was due on December 31, 1994.
During the year ended June 30, 1995, this advance was reduced by application of
the participations earned by AliPat in the amount of $13,500. The Corporation
may exercise the stock options held by AliPat and certain individuals, sell the
underlying shares and apply the proceeds received in excess of the exercise
price of the options to repayment of this advance and accrued interest thereon.
At June 30 1995, the aggregate market value of the shares of Common Stock
issuable upon the exercise of these stock options was substantially below the
$64,900 balance (including accrued interest) of this advance.
In October 1995, Charles Weber resigned as Chief Operating Officer of
the Corporation and entered into a one year consulting agreement with the
Corporation. Pursuant to such agreement, Mr. Weber will provide certain
consulting and advisory services to the Corporation. The agreement provides for
the payment to Mr. Weber of consulting fees of $15,000 per month through
December 1995 and $10,000 per month thereafter. Mr. Weber is also entitled to
certain additional fees in the event certain transactions are consummated by the
Corporation. In addition, in November 1995, Mr. Weber agreed, subject to
approval by the Corporation's Board of Directors, to purchase from the
Corporation 100,000 shares of its Common Stock at a purchase price of $.50 per
share. See "Executive Compensation -- Stock Purchases" elsewhere in this Proxy
Statement.
PROPOSAL NO. 2: RATIFICATION AND APPROVAL OF 1995 STOCK OPTION PLAN
The Corporation's 1995 Stock Option Plan (the "1995 Plan") was adopted
by the Board in June 1995, subject to approval by the stockholders of the
Corporation. Under the 1995 Plan, a total of 3,000,000 shares of Common Stock
have been reserved for issuance upon the exercise of stock options and related
stock appreciation rights ("SARs").
The 1995 Plan provides that the number of shares of Common Stock
subject thereto and the number of outstanding stock options and their exercise
prices are to be appropriately adjusted in the event of a reorganization,
consolidation, reclassification, recapitalization, combination or exchange of
Common Stock, stock split, reverse split, stock dividend or rights offering.
Shares of Common Stock allocated to options and/or SARs which have expired or
been terminated may be reallocated to other options and/or SARs under such plan.
Accordingly, in the event that the Corporation's stockholders approve the
one-for-three Reverse Split described under Proposal No. 3, the number of shares
of Common Stock reserved under the 1995 Plan shall be reduced to 1,000,000
shares.
Pursuant to the 1995 Plan, the Corporation may grant (i) incentive
stock options ("ISOs"), as that term is defined in the Internal Revenue Code of
1986, as amended (the "Code"), (ii) nonqualified stock
13
<PAGE> 16
options ("NSOs"), and (iii) SARs to officers directors and key employees of the
Corporation. The 1995 Plan provides for administration by the Board of the
Corporation or by a Committee of the Board which selects the optionees,
authorizes the grant of options and determines the exercise price and other
terms of the options, including the vesting schedule thereof, if any. Currently,
the 1995 Plan is administered by the Board.
The per share exercise price of each ISO granted under the 1995 Plan
must be at least 100% of the fair market value of a share of Common Stock (and
not less than 110% of the fair market value in the case of any optionee of an
ISO who beneficially owns more than 10% of the total combined voting power of
the Corporation) on the date such option is granted. The 1995 Plan provides that
the per share exercise price of an NSO must be at least 25% of the fair market
value of a share of Common Stock on the date such option is granted. Each option
granted under the 1995 Plan may be exercisable for a period determined by the
Board or the committee administering the plan, not to exceed ten years (or five
years in the case of any optionee of an ISO who beneficially owns more than 10%
of the total combined voting power of the Corporation) from the date of grant.
Options issued under the 1995 will be exercisable as the Committee administering
such plan may determine, but in no event shall an option be exercisable prior to
the later of (a) six months after the date of grant, or (b) six months after the
date on which stockholder approval of the 1995 Plan has been obtained. If
stockholders of the Corporation do not approve the 1995 Plan within twelve
months of its adoption, then such plan shall automatically terminate and all
options and SARs granted thereunder shall terminate.
Incentive stock options granted under the 1995 Plan are
non-transferrable, except upon death, by will or by operation of the laws of
descent and distribution, and may by exercised during the employee's lifetime
only by the optionee. There is no limit on the number of shares with respect to
which options may be granted under the 1995 Plan to any participating employee.
However, under the terms of the 1995 Plan, the aggregate fair market value of
the stock with respect to which ISOs are exercisable for the first time by an
employee during any calendar year (under all such plans of the Corporation and
any parent and subsidiary corporations of the Corporation) may not exceed
$100,000. To the extent that the aggregate fair market value of the stock
subject to such options exceeds $100,000 during any such calendar year, such
options shall be treated as NSOs under the Code.
Options granted under the 1995 Plan may be exercised within twelve
months after the date of an optionee's termination of employment by reason of
his death or disability, or within ninety days after the date of termination by
reason of retirement, voluntary termination approved by the Board or involuntary
termination by the Corporation other than for Cause (as defined in the 1995
Plan), but, in any such case, not later than the expiration date of such option
and only to the extent the option was otherwise exercisable at the date of
termination. In the event an optionee's employment is terminated by the
Corporation for Cause or voluntarily terminated by the optionee without the
approval of the Board, such optionee's option shall terminate immediately upon
the date of such termination of employment.
The 1995 Plan also provides for the grant of SARs, which may be granted
on a stand-alone basis or in tandem with stock options, which may be surrendered
to the Corporation in exchange for cash, Common Stock or a combination thereof,
as determined by the committee administering the 1995 Plan, having a value equal
to the dollar amount obtained by multiplying (x) the number of shares subject to
the surrendered SAR or option by (y) the amount by which the fair market value
per share of Common Stock exceeds the exercise price per share specified in the
agreement governing the surrendered SARs or options.
The 1995 Plan expires on May 31, 2005 unless terminated earlier by the
Board. The 1995 Plan is subject to amendment by the Board without stockholder
approval, except that no amendment which increases the maximum aggregate number
of shares which may be issued under the 1995 Plan or changes the class of
14
<PAGE> 17
eligible participants in the 1995 Plan would be allowed without the approval of
the stockholders of the Corporation. The Board may terminate the 1995 Plan at
any time.
As of the date of this Proxy Statement, no options have been granted
under the 1995 Plan.
VOTE REQUIRED
Unless otherwise directed by a stockholder, all shares of Common Stock
represented by a duly executed Proxy will be voted in favor of approval of the
adoption of the 1995 Plan. Approval of the 1995 Plan requires the affirmative
vote of the holders of a majority of the Corporation's outstanding Common Stock
present and voting at the Meeting.
The Board unanimously recommends that the stockholders vote FOR
adoption of the 1995 Plan.
PROPOSAL NO. 3: AMENDMENT OF CERTIFICATE OF INCORPORATION TO
EFFECT A ONE-FOR-THREE REVERSE STOCK SPLIT
GENERAL
The Board has unanimously approved, subject to approval by
stockholders, an amendment to the Corporation's Certificate of Incorporation, in
the form of Exhibit A attached to this Proxy Statement (the "Amendment"),
effecting a one-for-three Reverse Split of all issued shares of Common Stock
pursuant to which each three (3) shares of Common Stock (the "Old Common Stock")
issued as of the effective date of the Amendment (the "Effective Date") will be
automatically converted into one (1) new share of Common Stock (the "New Common
Stock").
The Certificate of Incorporation, as amended to date, provides for
50,000,000 authorized shares of Common Stock, par value $.001 per share,
[14,020,996] of which were issued and outstanding as of the Record Date, and
20,000,000 shares of Preferred Stock, par value $.001 per share, 1,000,000 of
which were issued and outstanding as of the Record Date.
EFFECTS OF THE REVERSE SPLIT
If the Amendment is approved by the Corporation's Stockholders and the
Reverse Split is effected, the consequences to the authorized, issued and
outstanding shares of Common Stock will be as follows:
(1) The 50,000,000 shares of Common Stock and 20,000,000 shares
of Preferred Stock currently authorized by the Corporation's Certificate of
Incorporation, and their par value of $.001 per share, will remain unchanged.
(2) The total number of shares of Common Stock issued to and held
of record by each Stockholder immediately prior to the Effective Date will be
reduced by such Old Common Stock being automatically converted into the number
of whole shares of New Common Stock determined by dividing the number of shares
of Old Common Stock so owned by such holder by three. It is estimated that,
following the
15
<PAGE> 18
completion of the Reverse Split, approximately [4,723,666]1 shares of New Common
Stock will be issued and outstanding and approximately [45,260,334] shares of
Common Stock will authorized and unissued, of which, approximately [4,067,147]
shares will be reserved for issuance upon the exercise of outstanding warrants
and options and the conversion of the Corporation's outstanding Series A
Preferred Stock.
(3) The Corporation's stated capital (defined generally under
Delaware General Corporation Law ("GCL") as the aggregate sum of the par value
of all issued shares with par value) will be reduced from approximately $14,171,
based upon the Corporation's stated capital as of the Record Date, to
approximately $4,723. A reduction in stated capital will, under the GCL, result
in a corresponding increase in capital surplus.
(4) By reason of the antidilution provisions contained in the
instruments governing the Corporation's outstanding options, warrants and
convertible securities, the number of shares of Common Stock issuable upon the
exercise or conversion, as the case may be, of such securities and the number of
shares of Common Stock reserved for issuance under such securities or the plans
pursuant to which such securities were granted or issued will, as a result of
the Reverse Split, be reduced by a factor of three, and there will be a
corresponding increase in the exercise or conversion price per share of Common
Stock thereunder.
(5) The Corporation will not issue fractional shares resulting
from the Reverse Split. In lieu thereof, the Corporation will pay each holder of
any such fractional share, upon delivery to the exchange agent for the shares of
Common Stock (the "Exchange Agent") of a certificate or certificates
representing each such Old Common Stock, together with the letter of transmittal
described below, cash equal to the fair market value of such fractional share as
of the Effective Date. Fair market value of each whole share of New Common Stock
shall be equal to the highest bid price for the shares of New Common Stock on
the NASDAQ Small Cap Market as of the close of business on the Effective Date.
Each fractional share will have a fair market value equal to the fair market
value of a whole share of New Common Stock multiplied by the applicable
fraction. Accordingly, after consummation of the Reverse Split, any stockholder
holding less than one share of New Common Stock will retain only the right to
receive cash in lieu of such fractional share and his rights and interests as a
stockholder, including voting rights and the right to share in the assets and
future earnings of the Corporation, will be terminated. Each stockholder who
continues to own one or more shares of New Common Stock will continue to be a
stockholder of the Corporation and to share in its future growth and earnings,
if any, to the extent of such stockholder's ownership of New Common Stock.
(6) Holders of the Corporation's outstanding shares of Common
Stock will not have dissenters' rights of appraisal or any similar rights by
reason of the Reverse Split.
PURPOSES OF THE REVERSE SPLIT
The primary purposes underlying the unanimous determination by the
Board to effect the Reverse Split include the following:
- - - ----------------------
(1) All share numbers under this caption reflect the issuance and sale
of 3,600,000 shares of Common Stock of the Corporation which the
Corporation has agreed to sell, subject to approval by the
Corporation's Board of Directors, to certain directors and
executive officers of the Corporation or their affiliates, as
described elsewhere in this Proxy Statement. See "Executive
Compensation -- Stock Purchases."
16
<PAGE> 19
(1) A reduction in the number of issued and outstanding shares of
Common Stock will increase proportionately the Corporation's future earnings per
share, in the event such earnings are realized. Such an increase in earnings per
share, if any, may render its shares of Common Stock more attractive to a
broader group of investors or for issuance in connection with future potential
acquisitions by the Corporation of other businesses or properties. However,
stockholders should be aware that a reduction in the number of issued and
outstanding shares of Common Stock resulting from the Reverse Split could
increase proportionately the Corporation's losses per share if it continues to
sustain net losses in the future, with potentially adverse consequences to the
future market value of the shares of Common Stock.
(2) The Board believes that an additional positive effect of the
Reverse Split will be the Corporation's enhanced ability to undertake future
public or private financings to fund the growth of its operations. There can,
however, be no assurance that such positive consequences will result from the
Reverse Split.
(3) By reason of the Reverse Split, the market value of a share
of Common Stock may increase above to a level above the current market value of
such a share. The quoted high and low bid prices of the Common Stock on the
NASDAQ Small Cap Market during the past 8 fiscal quarters are summarized as
follows:
<TABLE>
<CAPTION>
Dates Low Bid High Bid
----- ------- --------
<S> <C> <C>
Fiscal Quarter Ended:
December 31, 1993 3.125 3.875
March 31, 1994 2.500 3.500
June 30, 1994 2.438 3.375
September 30, 1994 1.125 2.938
December 31, 1994 0.688 2.000
March 31, 1995 0.500 0.813
June 30, 1995 0.375 0.813
September 30, 1995 0.688 0.75
</TABLE>
As of the Record Date, the per share bid price for the shares of Common
Stock on the NASDAQ Small Cap Market was $______.
While the Board believes that the shares of Common Stock will, as a
result of the Reverse Split, trade at higher prices than those which have
prevailed in recent fiscal quarters, there can be no assurance that such
increase in the market value will occur or, if such an increase occurs, that it
will equal or exceed the direct arithmetical result of the Reverse Split since
there are numerous factors and contingencies which could effect such value,
including the status of the market for the shares of Common Stock at the time,
the Corporation's reported results of operations in future fiscal periods and
general stock market conditions. THEREFORE, THERE CAN BE NO ASSURANCE THAT THE
SHARES OF COMMON STOCK WILL NOT, DESPITE THE REVERSE SPLIT, TRADE AT PRICES
WHICH ARE LESS THAN THE ARITHMETICAL EQUIVALENT SHARE PRICE RESULTING FROM THE
REVERSE SPLIT.
17
<PAGE> 20
PROCEDURES FOR EXCHANGE OF STOCK CERTIFICATES - LETTERS OF TRANSMITTAL
As soon as practicable after the Effective Date, the Corporation will
forward a letter of transmittal to each holder of record of shares of Old Common
Stock outstanding as of the Effective Date. The letter of transmittal will set
forth instructions for the surrender of certificates representing shares of Old
Common Stock to the Exchange Agent in exchange for certificates representing the
number of whole shares of New Common Stock into which the shares of Old Common
Stock have been converted as a result of the Reverse Split. CERTIFICATES SHOULD
NOT BE SENT TO THE CORPORATION OR THE EXCHANGE AGENT PRIOR TO RECEIPT OF SUCH
- - - ---
LETTER OF TRANSMITTAL FROM THE CORPORATION.
Until a stockholder forwards a completed letter of transmittal together
with certificates representing his shares of Old Common Stock to the Exchange
Agent and receives a certificate representing shares of New Common Stock, such
stockholder's Old Common Stock shall be deemed equal to the number of whole
shares of New Common Stock to which each stockholder is entitled as a result of
the Reverse Split.
In addition, each holder of any fractional share resulting from the
Reverse Split, will, upon forwarding a completed letter of transmittal and
certificates representing his shares of Old Common Stock to the Exchange Agent,
receive cash equal to the fair market value of such fractional share as of the
Effective Date. As noted above under "Effects of the Reverse Split," the fair
market value of each fractional share will be equal to the highest bid price per
share of New Common Stock on the NASDAQ Small Cap Market as of the close of
business on the Effective Date, multiplied by the applicable fraction.
FEDERAL INCOME TAX TREATMENT OF THE REVERSE SPLIT
THE TAX DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL INFORMATION
ONLY. THE TAX TREATMENT OF THE REVERSE SPLIT MAY VARY DEPENDING UPON, AMONG
OTHER CONSIDERATIONS, THE PARTICULAR CIRCUMSTANCES OF A STOCKHOLDER. NO
INFORMATION IS PROVIDED HEREIN AS TO THE STATE, LOCAL OR FOREIGN TAX TREATMENT
OF THE REVERSE SPLIT. THE CORPORATION MAKES NO REPRESENTATIONS CONCERNING THE
TAX TREATMENT FOR ANY OF ITS STOCKHOLDERS AND STOCKHOLDERS ARE URGED TO CONSULT
THEIR TAX ADVISORS TO DETERMINE THE PARTICULAR FEDERAL, STATE, LOCAL AND FOREIGN
TAX TREATMENT OF THE REVERSE SPLIT.
The federal income tax treatment of the Reverse Split will vary among
stockholders depending upon whether they receive, in exchange for shares of Old
Common Stock, (1) any cash in lieu of a fractional share or (2) solely shares of
New Common Stock. A stockholder who receives solely cash in lieu of a fractional
share, or both shares of New Common Stock and cash in lieu of a fractional share
in exchange for his shares of Old Common Stock should recognize gain (or loss)
to the extent that the cash received exceeds (or is less than) the basis in the
shares of Old Common Stock for which cash was received. A stockholder who
receives solely shares of New Common Stock should not recognize gain or loss on
the exchange of such shares of Old Common Stock for shares of New Common Stock.
The stockholder's basis in each of the shares of New Common Stock received in
the Reverse Split should equal the aggregate basis in the shares of Old Common
Stock that were exchanged in the Reverse Split for such shares of New Common
Stock. If such shares of Old Common Stock were held by the stockholder as a
capital asset, the respective holding periods for each of the stockholder's New
Common Stock should include the holding period of the shares of Old Common Stock
that were exchanged in the Reverse Split for such shares of New Common Stock.
18
<PAGE> 21
VOTE REQUIRED
Unless otherwise directed by a stockholder, all shares of Common Stock
represented by a duly executed proxy will be voted in favor of the Amendment
effecting the Reverse Split. Under the Delaware GCL, approval of the Reverse
Split requires the affirmative vote of the holders of a majority of all of the
outstanding shares of Common Stock entitled to vote at the Meeting.
NO COST TO BE BORNE BY STOCKHOLDERS
Stockholders will not be required to bear any expenses in connection
with the Reverse Split relating to the exchange of stock certificates, the
payment for fractional shares or this solicitation of proxies. The Corporation
will bear the cost of the solicitation of proxies and conducting the Meeting,
including the charges and expenses of brokerage firms and other custodians,
nominees and fiduciaries for forwarding proxy materials to beneficial owners.
The Corporation will request such brokers, custodians, nominees, fiduciaries and
others to forward proxy materials to their principals. Solicitations will be
made primarily by mail, but certain directors, officers and employees of the
Corporation may solicit proxies in person, or by telephone, telecopier or
telegram without receiving special compensation for these services.
BOARD RECOMMENDATION
The Board unanimously recommends that the stockholders vote FOR
approval of the Amendment to effect the Reverse Split.
FINANCIAL STATEMENTS
There is incorporated by reference in this proxy statement the
Corporation's Annual Report on Form 10-KSB filed with the Securities and
Exchange Commission for its fiscal year ended June 30, 1995.
INDEPENDENT AUDITORS
The Board has selected the firm of Kellogg & Andelson to continue to
serve as the Corporation's independent auditors for the fiscal year ending June
30, 1996. A representative of Kellogg & Andelson will be at the Meeting and will
have the opportunity to address the stockholders if he so desires and is
expected to be present at the Meeting. The representative will be available to
answer appropriate questions from stockholders.
19
<PAGE> 22
OTHER MATTERS
The Board is not aware of any matters or transactions to be
presented for action at the Meeting other than the matters referred to above and
does not intend to bring any other matters before the Meeting. However, if other
matters should come before the Meeting, it is intended that holders of the
proxies will vote thereon in their discretion.
By Order of the Board of Directors
Arthur Bernstein, Secretary
Beverly Hills, California
November ____, 1995
20
<PAGE> 23
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
THE PRODUCERS ENTERTAINMENT GROUP LTD.
______________________________
The undersigned, being the President and Secretary, respectively, of
The Producers Entertainment Group Ltd. (the "Corporation") DO HEREBY CERTIFY as
follows:
1. The name of the Corporation is The Producers Entertainment
Group Ltd.
2. The Certificate of Incorporation of the Corporation is hereby
amended to effect a one (1) for three (3) reverse split of all of the
Corporation's issued common stock, par value $.001 per share (hereinafter the
"Common Stock"), whereby, automatically upon the filing of this Amendment with
the Secretary of State, each three (3) issued shares of Common Stock shall be
changed into one (1) share of Common Stock, and, in that connection, to reduce
the stated capital of the Corporation.
3. In order to effectuate the amendment set forth in Paragraph 2
above:
(a) All of the Corporation's issued Common Stock, having a
par value of $.00l per share, is hereby changed into new Common Stock, having a
par value of $.001 per share, on the basis of one (1) new share of Common Stock
for each three (3) shares of Common Stock issued as of the date of filing of the
Amendment with the Secretary of State; provided, however, that no fractional
shares of Common Stock shall be issued pursuant to such change. Each
shareholder who would otherwise be entitled to a fractional share as a result of
such change shall have only a right to receive, in lieu thereof, a cash payment
equal to the fair market value of such fractional share;
(b) The Corporation's 50,000,000 authorized shares of
Common Stock, having a par value of $.001 per share, shall not be changed;
(c) The Corporation's 20,000,000 authorized shares of
preferred stock, having a par value of $.001 per share, shall not be changed;
and
<PAGE> 24
(d) The Corporation's stated capital shall be reduced by
an amount equal to the aggregate par value of the shares of Common Stock issued
prior to the effectiveness of this Amendment which, as a result of the reverse
split provided for herein, are no longer issued shares of Common Stock.
4. The foregoing amendments of the Certificate of Incorporation of
the Corporation have been duly adopted by Corporation's Board of Directors and
Stockholders in accordance with the provisions of Section 242 of the Delaware
General Corporation Law.
IN WITNESS WHEREOF, the undersigned have subscribed this document on
the date set forth below.
Dated: _______________, 1995
____________________________
Irwin Meyer, President
Attest:
____________________________
Arthur Bernstein, Secretary
<PAGE> 25
THE PRODUCERS ENTERTAINMENT GROUP LTD.
1995 STOCK OPTION PLAN
<PAGE> 26
TABLE OF CONTENTS
ARTICLE I.....................................................................1
ESTABLISHMENT.................................................................1
1.1 Establishment.................................................1
1.2 Purpose.......................................................1
1.3 Effective Date................................................1
ARTICLE II....................................................................1
DEFINITIONS...........................................................1
2.1 "Affiliate"...................................................1
2.2 "Agreement" or "Award Agreement"..............................2
2.3 "Award".......................................................2
2.4 "Board of Directors" or "Board"...............................2
2.5 "Cause".......................................................2
2.6 "Change in Control" and "Change in Control Price".............2
2.7 "Code" or "Internal Revenue Code".............................2
2.8 "Commission"..................................................2
2.9 "Committee"...................................................2
2.10 "Common Stock" or "Stock".....................................2
2.11 "Company".....................................................2
2.12 "Disability"..................................................2
2.13 "Disinterested Person"........................................3
2.14 "Effective Date"..............................................3
2.15 "Exchange Act"................................................3
2.16 "Fair Market Value"...........................................3
2.17 "Grant Date"..................................................3
2.18 "Incentive Stock Option"......................................3
2.19 "Nonqualified Stock Option"...................................3
2.20 "Option Period"...............................................4
2.21 "Option Price"................................................4
2.22 "Participant".................................................4
2.23 "Plan"........................................................4
2.24 "Representative"..............................................4
2.25 "Retirement"..................................................4
2.26 "Rule 16b-3"..................................................4
2.27 "Securities Act"..............................................4
2.28 "Stock Appreciation Right"....................................4
2.29 "Stock Option" or "Option"....................................4
2.30 "Termination of Employment"...................................4
ARTICLE III...................................................................5
ADMINISTRATION................................................................5
3.1 Committee Structure and Authority.............................5
<PAGE> 27
ARTICLE IV .................................................................. 7
STOCK SUBJECT TO PLAN ....................................................... 7
4.1 Number of Shares of Common Stock ............................ 7
4.2 Release of Shares ........................................... 7
4.3 Restrictions on Shares ...................................... 7
4.4 Shareholder Rights .......................................... 8
4.5 Anti-Dilution ............................................... 8
ARTICLE V ................................................................... 8
ELIGIBILITY ................................................................. 8
5.1 Eligibility ................................................. 8
ARTICLE VI .................................................................. 9
STOCK OPTIONS ............................................................... 9
6.1 General ..................................................... 9
6.2 Grant and Exercise .......................................... 9
6.3 Terms and Conditions ........................................ 9
(a) Option Period ....................................... 9
(b) Option Price ........................................ 10
(c) Exercisability ...................................... 10
(d) Method of Exercise .................................. 10
(e) Company Loan or Guarantee ........................... 10
(f) Non-transferability of Options ...................... 11
6.4 Termination by Reason of Death .............................. 11
6.5 Termination by Reason of Disability ......................... 11
6.6 Other Termination ........................................... 11
ARTICLE VII ................................................................. 12
STOCK APPRECIATION RIGHTS ................................................... 12
7.1 General ..................................................... 12
7.2 Grant ....................................................... 12
7.3 Terms and Conditions ........................................ 12
(a) Period and Exercise ................................. 12
(b) Amount .............................................. 13
(c) Special Rules ....................................... 13
(d) Non-transferability of Stock Appreciation Rights .... 13
(e) Termination ......................................... 13
(f) Effect on Shares Under the Plan ..................... 13
(g) Incentive Stock Option .............................. 13
ii
<PAGE> 28
ARTICLE VIII..................................................................14
CHANGE IN CONTROL PROVISIONS..................................................14
8.1 Impact of Event...............................................14
8.2 Definition of Change in Control...............................15
(c) Change in Control Price.......................................15
ARTICLE IX....................................................................16
MISCELLANEOUS.................................................................16
9.1 Amendments and Termination....................................16
9.2 Unfunded Status of Plan.......................................16
9.3 General Provisions............................................17
(a) Representation........................................17
(b) No Additional Obligation..............................17
(c) Withholding...........................................17
(d) Representation........................................17
(e) Controlling Law.......................................17
(f) Offset................................................17
(g) Limited Transfer During Offering......................17
(h) Committee Discretion..................................18
(i) No Company Obligation.................................18
(j) Transfer of Shares....................................18
9.4 Mitigation of Excise Tax......................................18
9.5 Rights with Respect to Continuation of Employment.............19
9.6 Awards in Substitution for Awards Granted by
Other Corporations..........................................19
9.7 Procedure for Adoption........................................19
9.8 Procedure for Withdrawal......................................19
9.9 Delay.........................................................19
9.10 Headings......................................................20
9.11 Severability..................................................20
9.12 Successors and Assigns........................................20
9.13 Entire Agreement..............................................20
<PAGE> 29
THE PRODUCERS ENTERTAINMENT GROUP LTD.
1995 STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT
1.1 Establishment
The Producers Entertainment Group Ltd., a Delaware corporation
(the "Company"), hereby establishes The Producers Entertainment Group Ltd. 1995
Stock Option Plan (the "Plan").
1.2 Purpose
The purpose of the Plan is to promote the interests of the
Company and its stockholders. The Plan permits the grant of stock options and
stock appreciation rights to the officers, directors, and employees of the
Company and its Affiliates in order to allow them to participate in the
Company's future long-term growth and financial success and to enable the
Company or an Affiliate to attract and retain such persons by offering them
proprietary interests in the Company. The Plan is adopted effective as of the
later of (i) the Effective Date and (ii) the date on which the Plan has been
approved by the stockholders of the Company.
1.3 Effective Date
The Plan was adopted by the Company's Board of Directors on
and as of June 1, 1995 and will become effective as of such date if approved by
the Company's stockholders in accordance with Rule 16b-3(b) promulgated under
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act"). If the Company's stockholders do
not approve the Plan on or prior to June 1, 1996, the Plan shall automatically
terminate as of the close of business on such date and any Options granted
hereunder shall thereupon terminate.
ARTICLE II
DEFINITIONS
For purposes of the Plan, the following terms are defined as
set forth below:
2.1 "Affiliate" means any corporation, partnership,
association, joint-stock company, trust, unincorporated association, subsidiary
or other entity (other than the Company) that directly, or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with the Company including, without limitation, any member of an
affiliated group of which the Company is a common parent corporation as
provided in Section 1504 of the Code.
<PAGE> 30
2.2 "Agreement" or "Award Agreement" means, individually
or collectively, any agreement entered into pursuant to the Plan pursuant to
which an Award is granted to a Participant.
2.3 "Award" means a Stock Option or Stock Appreciation
Right.
2.4 "Board of Directors" or "Board" means the Board of
Directors of the Company.
2.5 "Cause" shall mean, for purposes of whether and when
a Participant has incurred a Termination of Employment for Cause, any act or
omission which permits the Company to terminate the written agreement or
arrangement between the Participant and the Company or an Affiliate for "cause"
as defined in such agreement or arrangement, or in the event there is no such
agreement or arrangement or the agreement or arrangement does not define the
term "cause," then Cause shall mean (a) the conviction of the Participant for
committing a felony under Federal law or the law of the state in which such
action occurred or (b) the willful and deliberate failure on the part of the
Participant to perform the Participant's duties to the Company or an Affiliate
in any material respect.
2.6 "Change in Control" and "Change in Control Price"
have the meanings set forth in Section 8.2 and 8.3, respectively.
2.7 "Code" or "Internal Revenue Code" means the Internal
Revenue Code of 1986, as amended, and any subsequent Internal Revenue Code.
2.8 "Commission" means the United States Securities and
Exchange Commission or any successor agency.
2.9 "Committee" means the person or persons appointed by
the Board of Directors to administer the Plan, as further described in the
Plan.
2.10 "Common Stock" or "Stock" means the regular voting
Common Stock, $.01 par value per share, of the Company whether presently or
hereafter issued, and any other stock or security resulting from adjustment
thereof as described hereinafter or the common stock of any successor to the
Company which is designated for the purpose of the Plan.
2.11 "Company" means The Producers Entertainment Group
Ltd., a Delaware corporation, and includes any successor or assignee
corporation or corporations into which the Company may be merged, changed or
consolidated; any corporation for whose securities the securities of the
Company shall be exchanged; and any assignee of or successor to substantially
all of the assets of the Company.
2.12 "Disability" means a mental or physical illness that
entitles the Participant to receive benefits under the long term disability
plan of the Company or an Affiliate, if any such plan exists, or if the
Participant is not covered by such a plan or the Participant is not an employee
of the Company or an Affiliate, a mental or physical illness that renders a
Participant totally and permanently
2
<PAGE> 31
incapable of performing the Participant's duties for the Company or an
Affiliate. Notwithstanding the foregoing, a Disability shall not qualify under
the Plan if it is the result of (i) a willfully self-inflicted injury or
willfully self-induced sickness; or (ii) an injury or disease contracted,
suffered, or incurred while participating in a criminal offense. The
determination of Disability shall be made by the Committee. The determination
of Disability for purposes of the Plan shall not be construed to be an
admission of disability for any other purpose.
2.13 "Disinterested Person" shall mean a person who is
deemed a disinterested person within the meaning set forth in Rule 16b-3(d)(3),
or any successor definition adopted by the Commission.
2.14 "Effective Date" means the date the Plan was adopted
by the Board of Directors.
2.15 "Exchange Act" has the meaning specified in Section
1.3.
2.16 "Fair Market Value" means the value determined on the
basis of the good faith determination of the Committee, without regard to
whether the Common Stock is restricted or represents a minority interest,
pursuant to the applicable method described below:
(a) if the Common Stock is listed on a national
securities exchange or quoted on the NASDAQ National Market System
("NASDAQ/NMS"), the closing price of the Common Stock on the relevant date (or
the average of the closing bid and asked prices on such date if no trades of
Common Stock were made on such date), as reported by the principal national
exchange on which such shares are traded (in the case of an exchange) or by the
NASDAQ/NMS, as the case may be;
(b) if the Common Stock is not listed on a
national securities exchange or quoted on the NASDAQ/NMS, but is actively
traded in the over-the-counter market, the average of the closing bid and asked
prices for the Common Stock on the relevant date, or the most recent preceding
date for which such quotations are reported; and
(c) if, on the relevant date, the Common Stock is
not publicly traded or reported as described in (i) or (ii), the value
determined in good faith by the Committee.
2.17 "Grant Date" means the date that as of which an Award
is granted pursuant to the Plan.
2.18 "Incentive Stock Option" means any Stock Option
intended to be and designated as an "incentive stock option" within the meaning
of Section 422 of the Code.
2.19 "Nonqualified Stock Option" means an Option to
purchase Common Stock granted under the Plan other than an Incentive Stock
Option within the meaning of Section 422 of the Code.
3
<PAGE> 32
2.20 "Option Period" means the period during which the
Option shall be exercisable in accordance with the Agreement and Article VI.
2.21 "Option Price" means the price at which the Common
Stock may be purchased under an Option as provided in Section 6.3.
2.22 "Participant" means a person who satisfies the
eligibility conditions of Article V and to whom an Award has been granted by
the Committee under the Plan, and, in the event a Representative is appointed
for a Participant in accordance with the Plan, then the term "Participant"
shall mean such appointed Representative, or successor Representative
appointed, as the case may be. The term shall also include a trust for the
benefit of the Participant, the Participant's parents, spouse or descendants,
or a custodian under a uniform gifts to minors act or similar statute for the
benefit of the Participant's descendants, to the extent permitted by the
Committee and not inconsistent with Rule 16b-3. Notwithstanding the foregoing,
the term "Termination of Employment" shall mean the Termination of Employment
of the Participant.
2.23 "Plan" means this The Producers Entertainment Group
Ltd. 1995 Stock Option Plan, as the same may be amended hereafter from time to
time.
2.24 "Representative" means (a) the person or entity
acting as the executor or administrator of a Participant's estate pursuant to
the last will and testament of a Participant or pursuant to the laws of the
jurisdiction in which the Participant had the Participant's primary residence
at the date of the Participant's death; (b) the person or entity acting as the
guardian or temporary guardian of a Participant; or (c) the person or entity
which is the beneficiary of the Participant upon or following the Participant's
death; provided that only one of the foregoing shall be the Representative at
any point in time as determined under applicable law and recognized by the
Committee.
2.25 "Retirement" means the Participant's Termination of
Employment from active employment with the Company or an Affiliate pursuant to
the early retirement provisions of the applicable pension plan of the Company
or an Affiliate, if any, or on or after attaining age 65.
2.26 "Rule 16b-3" means Rule 16b-3 promulgated by the
Commission under the Exchange Act, as amended from time to time, or any
successor regulation thereto.
2.27 "Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
2.28 "Stock Appreciation Right" means a right granted under
Article VII.
2.29 "Stock Option" or "Option" means an option granted
under Article VI.
2.30 "Termination of Employment" means the occurrence of
any act or event, whether pursuant to an employment agreement or otherwise,
that actually or effectively causes or results in the person's ceasing, for
whatever reason, to be an officer, director or employee of the
4
<PAGE> 33
Company or of any Affiliate, including, without limitation, death, Disability,
dismissal, severance at the election of the Participant, Retirement, or
severance as a result of the discontinuance, liquidation, sale or transfer by
the Company or its Affiliates of all businesses owned or operated by the Company
or its Affiliates. A Termination of Employment shall occur to an employee who
is employed by an Affiliate if the Affiliate shall cease to be an Affiliate and
the Participant shall not immediately thereafter become an employee of the
Company or another Affiliate.
In addition, certain other terms used herein have definitions
given to them in the first place at which they are used.
ARTICLE III
ADMINISTRATION
3.1 Committee Structure and Authority. The Plan shall be
administered and interpreted by the Committee which, except as provided herein,
may be comprised of one or more persons. The Committee shall be the
Compensation Committee of the Board of Directors, unless such committee does
not exist or the Board establishes a committee whose sole purpose is the
administration of the Plan. A majority of the Committee shall constitute a
quorum at any meeting thereof (including any meeting held by telephone
conference) and the acts of a majority of the members present, or acts approved
in writing by a majority of the entire Committee without a meeting, shall be
the acts of the Committee for purposes of the Plan, except that the Committee
may authorize any one or more of its members or an officer of the Company to
execute and deliver documents on behalf of the Committee. The Board shall have
the authority to remove, replace or fill any vacancy of any member of the
Committee upon notice to the Committee and the affected member. Any member of
the Committee may resign upon notice to the Board. The Committee may allocate
among one or more of its members, or may delegate to one or more of its agents,
such duties and responsibilities as it determines. In the event no Committee
has been appointed, the Plan shall be administered by the Board, which shall
have all of the powers of the Committee hereunder.
Among other powers and authority, the Committee shall
have the authority, subject to the terms of the Plan, to:
(a) select those persons to whom Awards may be
granted from time to time;
(b) determine whether and to what extent
Incentive Stock Options and Nonqualified Stock Options or any combination
thereof are to be granted hereunder;
(c) determine the number of shares of Common
Stock to be covered by each Award granted hereunder;
(d) determine the terms and conditions of any
Award granted hereunder (including, but not limited to, the Option Price, the
Option Period, any exercise restriction or
5
<PAGE> 34
limitation and any exercise acceleration or forfeiture waiver regarding any
Award and the Common Stock relating thereto);
(e) adjust the terms and conditions, at any time
or from time to time, of any Award, subject to the limitations of Section 9.1;
(f) determine to what extent and under what
circumstances Common Stock and other amounts payable with respect to an Award
shall be deferred;
(g) determine under what circumstances an Award
may be paid for in cash or Common Stock;
(h) provide for the forms of Agreement to be
utilized in connection with the Plan;
(i) determine whether a Participant has a
Disability;
(j) determine what securities law requirements
are applicable to the Plan, Awards, and the issuance of Common Stock and to
require of a Participant that appropriate action be taken to comply with such
requirements;
(k) cancel, with the consent of the Participant
or as otherwise provided in the Plan or an Agreement, outstanding Awards;
(l) require, as a condition of the exercise of an
Award or the issuance or transfer of a certificate of Common Stock, the
withholding from a Participant of the amount of any federal, state or local
taxes as may be necessary to order for the Company or any other employer to
obtain a deduction or as may be otherwise required by law;
(m) determine whether and with what effect an
individual has incurred a Termination of Employment;
(n) determine whether the Company or any other
person has a right or obligation to purchase Common Stock from a Participant
and, if so, the terms and conditions on which such Common Stock is to be
purchased;
(o) determine the restrictions or limitations on
the transfer of Common Stock;
(p) determine whether an Award is to be adjusted,
modified or purchased, or is to become fully exercisable, under the Plan or the
terms of an Agreement;
(q) adopt, amend and rescind such rules and
regulations as, in its opinion, may be advisable in the administration of the
Plan; and
6
<PAGE> 35
(r) appoint and compensate agents, counsel,
auditors or other specialists to aid it in the discharge of its duties.
The Committee shall have the authority to adopt,
alter and repeal such administrative rules, guidelines and practices governing
the Plan as it shall, from time to time, deem advisable, to interpret the terms
and provisions of the Plan and any Award issued under the Plan (and any
Agreement) and to otherwise supervise the administration of the Plan.
Any determination made by the Committee pursuant to
the provisions of the Plan shall be made in its sole discretion, and in the
case of any determination relating to an Award, may be made at the time of the
grant of the Award or, unless in contravention of any express term of the Plan
or an Agreement, at any time thereafter. All decisions made by the Committee
pursuant to the provisions of the Plan shall be final and binding on all
persons, including the Company and the Participants.
ARTICLE IV
STOCK SUBJECT TO PLAN
4.1 Number of Shares of Common Stock. Subject to
adjustment under Section 4.6, the total number of shares of Common Stock
reserved and available for distribution pursuant to Awards under the Plan shall
be three million (3,000,000) shares of Common Stock. Such shares may consist,
in whole or in part, of authorized and unissued shares or treasury shares.
4.2 Release of Shares. Subject to Section 7.3(f), if any
Common Stock that has been optioned cease to be subject to an Award, if any
Common Stock that is subject to any Award are forfeited or if any Award
otherwise terminates without the issuance to the Participant of Common Stock
hereunder, such shares, in the discretion of the Committee, may again be
available for distribution in connection with Awards under the Plan.
4.3 Restrictions on Shares. Common Stock issued upon
exercise of an Award shall be subject to the terms and conditions specified
herein and to such other terms, conditions and restrictions as the Committee,
in its sole discretion, may determine or provide in the Award Agreement. The
Company shall not be required to issue or deliver any certificates for Common
Stock, cash or other property prior to (i) the listing of such shares on any
stock exchange (or other inter-dealer quotation systems or public market) on
which the Common Stock may then be listed (or regularly traded), (ii) the
completion of any registration or qualification of such shares under federal or
state law, or any ruling or regulation of any government body which the
Committee determines to be necessary or advisable, and (iii) the satisfaction
of any applicable withholding obligation in order for the Company or an
Affiliate to obtain a deduction with respect to the exercise of an Award or as
may otherwise be required by law. The Company may cause any certificate for
any Common Stock to be delivered to be properly marked with a legend or other
notation reflecting the limitations on transfer of such Common Stock as
provided in the Plan or as the Committee may otherwise require. The Committee
may require any person exercising an Award to make such representations and
7
<PAGE> 36
furnish such information as it may consider appropriate in connection with the
issuance or delivery of the Common Stock in compliance with applicable law or
otherwise. Fractional shares shall not be delivered, but shall be rounded to
the next lower whole number of shares.
4.4 Shareholder Rights. No person shall have any rights
of a shareholder as to Common Stock subject to an Award until, after proper
exercise of the Award or other action required, such Stock shall have been
recorded on the Company's official shareholder records as having been issued or
transferred. No adjustment shall be made for cash dividends or other rights
for which the record date is prior to the date such shares are recorded as
issued or transferred in the Company's official shareholder records, except as
provided herein or in an Agreement.
4.5 Anti-Dilution. In the event of any Company stock
dividend, stock split combination or exchange of shares, recapitalization or
other change in the capital structure of the Company, corporate separation or
division of the Company (including, but not limited to, a split-up, spin-off,
split-off or distribution to Company shareholders other than a normal cash
dividend), sale by the Company of all or a substantial portion of its assets
(measured on either a stand-alone or consolidated basis), reorganization,
rights offering, a partial or complete liquidation, or any other corporate
transaction or event involving the Company and having an effect similar to any
of the foregoing, then the Committee shall adjust or substitute, as the case
may be, the number of shares of Common Stock available for Awards under the
Plan, the number of shares of Common Stock covered by outstanding Awards, the
exercise price per share of outstanding Awards, or new or amended securities,
and any other characteristics or terms of the Awards as the Committee shall
deem necessary or appropriate to reflect equitably the effects of such changes
to the Participants; provided, however, that any fractional shares resulting
from any such adjustment shall be eliminated by rounding to the next lower
whole number of shares with appropriate payment for such fractional share as
shall reasonably be determined by the Committee.
ARTICLE V
ELIGIBILITY
5.1 Eligibility. Except as herein provided, the persons
who shall be eligible to participate in the Plan and be granted Awards shall be
those persons who are officers, directors or employees of the Company or any
Affiliate who shall be in a position, in the opinion of the Committee, to make
contributions to the growth, management, protection and success of the Company
and its Affiliates. Of those persons described in the preceding sentence, the
Committee may, from time to time, select persons to be granted Awards and shall
determine the terms and conditions with respect thereto. In making any such
selection and in determining the form of the Award, the Committee may give
consideration to the functions and responsibilities of the person's
contributions to the Company and its Affiliates, the value of the individual's
service to the Company and its Affiliates and such other factors deemed
relevant by the Committee. The Committee may designate in writing that a
person who would otherwise be eligible to participate in the Plan will not be
eligible to participate in the Plan.
8
<PAGE> 37
ARTICLE VI
STOCK OPTIONS
6.1 General. The Committee shall have authority to grant
Stock Options under the Plan at any time or from time to time. Stock Options
may be either Incentive Stock Options or Nonqualified Stock Options. A Stock
Option shall entitle the Participant to receive Common Stock upon exercise of
such Stock Option, subject to the Participant's satisfaction in full of any
conditions, restrictions or limitations imposed by the Company in accordance
with the Plan or an Agreement (the terms and provisions of which may differ
from other Agreements) including without limitation, payment of the Option
Price.
6.2 Grant and Exercise. The grant of a Stock Option
shall occur as of the date the Committee determines. Each Stock Option granted
under the Plan shall be evidenced by an Agreement, in a form approved by the
Committee, which shall embody the terms and conditions of such Option and which
shall be subject to the express terms and conditions set forth in the Plan.
Such Agreement shall become effective upon execution by the Participant. Only
a person who is a common-law employee of the Company, (including, without
limitation, an employee within the meaning of Treasury Regulation Section
31.3401(c)-1), any parent corporation of the Company or a subsidiary (as such
terms are defined in Section 424 of the Code) on the date of grant shall be
eligible to be granted an Option which is intended to be and is an Incentive
Stock Option. To the extent that any Stock Option is not (a) designated as an
Incentive Stock Option or (b) even if so designated, does not qualify as an
Incentive Stock Option, it shall constitute a Nonqualified Stock Option.
Anything in the Plan to the contrary notwithstanding, no term of the Plan
relating to Incentive Stock Options shall be interpreted, amended or altered,
nor shall any discretion or authority granted under the Plan be exercised, so
as to disqualify the Plan under Section 422 of the Code or, without the consent
of the Participant affected, to disqualify any Incentive Stock Option under
such Section 422. The aggregate Fair Market Value (determined at the time an
Incentive Stock Option is granted) of the Common Stock with respect to which
Incentive Stock Options are first exercisable by a Participant during any
calendar year (under the Plan and any other plans of the Company) may not
exceed $100,000.
6.3 Terms and Conditions. Stock Options shall be subject
to such terms and conditions as shall be determined by the Committee, including
the following:
(a) Option Period. The Option Period of each
Stock Option shall be fixed by the Committee; provided that no Nonqualified
Stock Option shall be exercisable more than ten (10) years after the date the
Stock Option is granted. In the case of an Incentive Stock Option, the Option
Period shall not exceed ten (10) years from the date of grant or five (5) years
in the case of an individual who owns more than ten percent (10%) of the
combined voting power of all classes of stock of the Company, a corporation
which is a parent corporation of the Company or any subsidiary of the Company
(each as defined in Section 424 of the Code). No Option shall be granted more
than ten (10) years from the date the Plan is adopted by the Company.
9
<PAGE> 38
(b) Option Price. The Option Price per Common
Share purchasable under an Option shall be determined by the Committee. If
such Option is intended to qualify as an Incentive Stock Option, the Option
Price per share shall be not less than the Fair Market Value per share on the
date the Option is granted, or where granted to an individual who owns or who
is deemed to own stock possessing more than ten percent (10%) of the combined
voting power of all classes of stock of the Company, a corporation which is a
parent corporation of the Company or any subsidiary of the Company (each as
defined in Section 424 of the Code), not less than one hundred ten percent
(110%) of such Fair Market Value per share. The Option Price per share of any
Nonqualified Stock Options shall be determined by the Committee but shall not
be less than 25% of the Fair Market Value per share on the date such Stock
Option is granted.
(c) Exercisability. Subject to Section 8.1,
Stock Options shall be exercisable at such time or times and subject to such
terms and conditions as shall be determined by the Committee; provided,
however, that in no event shall an Option granted to an officer of the Company
(as determined in accordance with Rule 16b-3) be exercisable prior to (i) six
months after the date of grant or (ii) six months after the Plan is approved by
the Company's shareholders. No Option shall be exercisable prior to the date
upon which the Plan is approved by the Company's shareholders. If the
Committee provides that any Stock Option is exercisable only in installments,
the Committee may at any time waive such installment exercise provisions, in
whole or in part. In addition, the Committee may at any time accelerate the
exercisability of any Stock Option.
(d) Method of Exercise. Subject to the
provisions of this Article VI, a Participant may exercise a Stock Option, in
whole or in part, at any time during the Option Period by the Participant's
giving written notice of exercise on a form provided by the Committee (if
available) to the Company specifying the number of shares of Common Stock
subject to the Stock Option to be purchased. Such notice shall be accompanied
by payment in full of the purchase price by cash or check or such other form of
payment as the Company may accept. If approved by the Committee, payment in
full or in part may also be made (i) by delivering Common Stock already owned
by the Participant having a total Fair Market Value on the date of such
delivery equal to the Option Price; (ii) by the execution and delivery of a
note or other evidence of indebtedness (and any security agreement thereunder
satisfactory to the Committee and permitted in accordance with Section 6.3(e));
(iii) by authorizing the Company to retain Common Stock which would otherwise
be issuable upon exercise of the Option having a total Fair Market Value on the
date of delivery equal to the Option Price; (iv) by the delivery of cash by a
broker-dealer to whom the Participant has submitted an irrevocable notice of
exercise; or (v) by any combination of the foregoing approved by the Committee.
In the case of an Incentive Stock Option, the right of a Participant to make a
payment in the form of previously owned Common Stock of the same class as the
Common Stock subject to the Stock Option may be authorized only at the time the
Stock Option is granted. No Common Stock shall be issued until full payment
therefor has been made. A Participant shall have all of the rights of a
shareholder of the Company only upon issuance of the Common Stock by the
Company pursuant to the provisions of Section 4.4.
(e) Company Loan or Guarantee. Upon the exercise
of any Option and subject to the pertinent Agreement and the sole discretion of
the Committee, the Company may at the request of the Participant:
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(i) lend to the Participant, with recourse, an
amount equal to such portion of the Option Price as the Committee may
determine; or
(ii) guarantee a loan obtained by the Participant
from a third-party for the purpose of tendering the Option Price.
The terms and conditions of any loan or guarantee, including
the term, interest rate, and any security interest thereunder, shall be
determined by the Committee, except that no extension of credit or guarantee
shall obligate the Company for an amount to exceed the lesser of the aggregate
Fair Market Value of the Common Stock on the date of exercise, less the par
value of the Common Stock to be purchased upon the exercise of the Award, or
the amount permitted under applicable laws or the regulations and rules of the
Federal Reserve Board and any other governmental agency having jurisdiction.
(f) Non-transferability of Options. Except as
provided herein, no Stock Option shall be transferable by the Participant other
than by will or by the laws of descent and distribution, and all Stock Options
shall be exercisable during the Participant's lifetime only by the Participant.
The Committee may permit a Stock Option to be transferred pursuant to a domestic
relations order which would be a "qualified domestic relations order" as defined
in Section 414 of the Code if such section applied to the Stock Option, but only
to the extent consistent with a Stock Option's intended status as an Incentive
Stock Option.
6.4 Termination by Reason of Death. If a Participant
incurs a Termination of Employment due to death, any unexpired and unexercised
Stock Option held by such Participant shall thereafter be fully exercisable for
a period of one (1) year (or such longer period as the Committee may specify)
immediately following the date of such death or until the expiration of the
Option Period, whichever period is the shorter.
6.5 Termination by Reason of Disability. If a
Participant incurs a Termination of Employment due to a Disability, any
unexpired and unexercised Stock Option held by such Participant shall
thereafter be fully exercisable by the Participant for the period of one (1)
year (or such other period as the Committee may specify) immediately following
the date of such Termination of Employment or until the expiration of the
Option Period, whichever period is shorter, and the Participant's death at any
time following such Termination of Employment due to Disability shall not
affect the foregoing. In the event of Termination of Employment by reason of
Disability, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422 of the Code, such
Stock Option will thereafter be treated as a Nonqualified Stock Option.
6.6 Other Termination. Unless otherwise provided in an
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to Retirement, voluntary termination by the Participant
without the approval of the Board, or the Termination of Employment is
involuntary on the part of the Participant (but is not due to death, Disability
or with Cause), any Stock Option held by such Participant shall thereupon
terminate, except that such Stock Option, to the extent then exercisable, may
be exercised for the lesser of the ninety day period commencing with
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the date of such Termination of Employment or until the expiration of the Option
Period. If a Participant incurs a Termination of Employment which is either (a)
voluntary on the part of the Participant (and is not due to Retirement) or (b)
with Cause, any Stock Option held by such Participant shall terminate
immediately. The death or Disability of a Participant after a Termination of
Employment otherwise provided herein shall not extend the exercisability of the
time permitted to exercise an Option.
ARTICLE VII
STOCK APPRECIATION RIGHTS
7.1 General. The Committee shall have authority to grant
Stock Appreciation Rights under the Plan at any time or from time to time.
Subject to the Participant's satisfaction in full of any conditions,
restrictions or limitations imposed in accordance with the Plan or an
Agreement, a Stock Appreciation Right shall entitle the Participant to
surrender to the Company the Stock Appreciation Right and to be paid in
consideration therefor, in Common Stock, cash or a combination thereof as
herein provided, the amount described in Section 7.3(b).
7.2 Grant. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan, in
which case the exercise of the Stock Appreciation Right shall require the
cancellation of a corresponding portion of the Stock Option. In the case of a
Nonqualified Stock Option, such rights may be granted either at or after the
time of grant of such Stock Option. In the case of an Incentive Stock Option,
such rights may be granted only at the time of grant of such Stock Option. A
Stock Appreciation Right may also be granted on a stand alone basis. The grant
of a Stock Appreciation Right shall occur as of the date the Committee
determines. Each Stock Appreciation Right granted under the Plan shall be
evidenced by an Agreement, which shall embody the terms and conditions of such
Stock Appreciation Right and which shall be subject to the terms and conditions
set forth in the Plan.
7.3 Terms and Conditions. Stock Appreciation Rights
shall be subject to such terms and conditions as shall be determined by the
Committee, including the following:
(a) Period and Exercise. The term of a Stock
Appreciation Right shall be established by the Committee. If granted in
conjunction with a Stock Option, the Stock Appreciation Right shall have a term
which is the same as the Option Period and shall be exercisable only at such
time or times and to the extent the related Stock Options would be exercisable
in accordance with the provisions of Article VI. A Stock Appreciation Right
which is granted on a stand alone basis shall be for such period and shall be
exercisable at such times and to the extent provided in an Agreement, but shall
be for a term not to exceed the term set forth in the last sentence of Section
6.3(a). Stock Appreciation Rights shall be exercised by the Participant's
giving written notice of exercise on a form provided by the Committee (if
available) to the Company specifying the portion of the stock Appreciation
Right to be exercised.
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(b) Amount. Upon the exercise of a Stock
Appreciation Right, a Participant shall be entitled to receive an amount in
cash, Common Stock, or both, as determined by the Committee or as otherwise
permitted in an Agreement equal in value to the excess of the Fair Market Value
per Common Share over the Option Price per Common Share specified in the
related Agreement multiplied by the number of shares in respect of which the
Stock Appreciation Right shall have been exercised. In the case of a Stock
Appreciation Right granted on a stand alone basis, the Agreement shall specify
the value to be used in lieu of the Option Price per Common Share. The
aggregate Fair Market Value of the Common Stock shall be determined as of the
date of exercise of such Stock Appreciation Right.
(c) Special Rules. In the case of Stock
Appreciation Rights relating to Stock Options held by Participants who are
actually or potentially subject to Section 16(b) of the Exchange Act:
(i) the Committee may require that such
Stock Appreciation Rights be exercised only in accordance with the
applicable "window period" provisions of Rule 16b-3;
(ii) the Committee may provide that the
amount to be paid upon exercise of such Stock Appreciation Rights
(other than those relating to Incentive Stock Options) during a Rule
16b-3 "window period" shall be based on the highest mean sales price of
the Common Stock on the principal exchange on which the Common Stock is
traded, NASDAQ/NMS, NASDAQ Small Cap Market or other relevant market
for determining value on any day during such "window period"; and
(iii) no Stock Appreciation right shall be
exercisable during the first six months of its term.
(d) Non-transferability of Stock Appreciation
Rights. Stock Appreciation rights shall be transferable only when and to the
extent that a Stock Option would be transferable under the Plan unless
otherwise provided in an Agreement.
(e) Termination. A Stock Appreciation Right
shall terminate at such time as a Stock Option would terminate under the Plan,
unless otherwise provided in an Agreement.
(f) Effect on Shares Under the Plan. Upon the
exercise of a Stock Appreciation Right, the Stock Option or part thereof to
which such Stock Appreciation Right is related shall be deemed to have been
exercised for the purpose of the limitation set forth in Section 4.2 on the
number of shares of Common Stock to be issued under the Plan, but only to the
extent of the number of shares of Common Stock covered by the Stock
Appreciation Right at the time of exercise based on the value of the Stock
Appreciation Right at such time as determined in accordance with Section 7.3(b)
hereof.
(g) Incentive Stock Option. A Stock Appreciation
Right granted in tandem with an Incentive Stock Option shall not be exercisable
unless the Fair Market Value of the
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Common Stock on the date of exercise exceeds the Option Price. In no event shall
any amount paid pursuant to the Stock Appreciation Right exceed the difference
between the Fair Market Value on the date of exercise and the Option Price.
ARTICLE VIII
CHANGE IN CONTROL PROVISIONS
8.1 Impact of Event. Notwithstanding any other provision
of the Plan to the contrary, in the event of a Change in Control (as defined in
Section 8.2) the Committee, in its sole discretion, may determine:
(a) that any Stock Appreciation Rights and Stock
Options outstanding as of the date such Change in Control is determined to have
occurred and not then exercisable shall become fully exercisable to the full
extent of the original; or
(b) with respect to Awards outstanding as of the
date of such Change in Control, to substitute or assume for such Awards a
corresponding new Award under the plan of the acquired corporation, provided
that (a) the excess of the aggregate Fair Market Value of shares subject to the
Award immediately after the substitution or assumption above the aggregate
award price of such new Stock is not more than the similar excess subject to
the Award immediately before such substitution and (b) the new Award does not
give the Participant additional benefits, including any extension of the
exercise period, all in accordance with Section 424(a) of the Code.
Notwithstanding any other provision of the Plan, in the event
of a Change in Control, unless the Committee shall provide otherwise in an
Agreement, a Participant shall have the right, whether or not the Award is
fully exercisable or may be otherwise realized by the Participant by giving
notice during the 60-day period from and after a Change in Control to the
Company, to elect to surrender all or part of the Award to the Company and to
receive cash, within 30 days of such notice, in an amount equal to the amount
by which the "Change in Control Price" (as defined in Section 8.3) per Common
Share on the date of such election shall exceed the amount which the
Participant must pay to exercise the Award per Common Share under the Award
(the "Spread") multiplied by the number of shares of Common Stock granted under
the Award as to which the right granted hereunder shall have been exercised;
provided, however, that if the end of such 60-day period from and after a
Change in Control is within six months of the date of grant of the Award held
by a Participant who is an officer or director of the Company (within the
meaning of Section 16(b) of the Exchange Act), such Award shall be cancelled in
exchange for a cash payment to the Participant, effected on the day which is
six months and one day after the date of grant of such Award, equal to the
Spread multiplied by the number of shares of Common Stock granted under the
Award. With respect to any Participant who is an officer or director of the
Company (within the meaning of Section 16(b) of the Exchange Act), the 60-day
period shall be extended, if necessary, to include the "window period" of Rule
16(b)- 3 which first commences on or after the date of the Change in Control,
and the Committee shall have sole discretion to approve the Participant's
exercise hereunder.
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8.2 Definition of Change in Control. For purposes of the
Plan, a "Change in Control" shall mean the happening of any of the following
events:
(a) (i) An acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act
(a "Person") of the beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of the then outstanding Common Stock of the
Company (the "Outstanding Company Common Stock") or the combined voting power
of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities") or (ii) the approval by the shareholders of the Company of a
reorganization, merger, consolidation, complete liquidation or dissolution of
the Company, the sale or disposition of all or substantially all of the assets
of the Company or similar corporate transaction (in each case referred to in
this Section 8.2 as a "Corporate Transaction") or, if consummation of such
Corporate Transaction is subject, at the time of such approval by shareholders,
to the consent of any government or governmental agency, the obtaining of such
consent (either explicitly or implicitly); provided such acquisition of
beneficial ownership or such Corporation Transaction would result in any person
(other than the beneficial holders of the Outstanding Common Stock immediately
prior to the Corporate Transaction) beneficially owning (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) following the acquisition or
Corporate Transaction 25% or more of the Outstanding Company Common Stock or
25% or more of the Outstanding Company Voting Securities; excluding, however
any acquisition by any subsidiary of the Company or by an employee benefit plan
(or related trust) sponsored or maintained by the Company or an Affiliate; or
(b) A change in the composition of the Board such
that the individuals who constitute the Board (such Board shall be hereinafter
referred to as the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, for purposes of this Section
8.2(b), that any individual who becomes a member of the Board subsequent to the
Effective Date of the Plan, whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of those
individuals who are members of the Board and who were also members of the
Incumbent Board (or deemed to be such pursuant to this proviso) shall be
considered as though such individual were a member of the Incumbent Board;
provided, further, however that any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board shall not be so considered as
a member of the Incumbent Board.
(c) Change in Control Price. For purposes of the Plan,
"Change in Control Price" means the higher of (a) the highest reported sales
price of a Common Share in any transaction reported on the principal exchange
on which such shares are listed or on NASDAQ/NMS or NASDAQ Small Cap Market
during the 60-day period prior to and including the date of a Change of Control
or (b) if the Change in Control is the result of a tender or exchange offer or
a Corporate Transaction, the highest price per Common Share paid in such tender
or exchange offer or such Corporate Transaction, except that, in the case of
Incentive Stock Options and Stock Appreciation Rights relating to Incentive
Stock Options, such price shall be based only on the Fair Market Value
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of the Common Stock on the date such Incentive Stock Option is exercised. To
the extent that the consideration paid in any such transaction described above
consists all or in part of securities or other non-cash consideration, the value
of such securities or other non-cash consideration shall be determined in the
sole discretion of the Committee.
ARTICLE IX
MISCELLANEOUS
9.1 Amendments and Termination. The Board may amend,
alter, or discontinue the Plan at any time, but no amendment, alteration or
discontinuation shall be made which would (a) impair the rights of a
Participant under a Stock Option or Stock Appreciation Right theretofore
granted without the Participant's consent, except such an amendment made to
cause the Plan to qualify for the exemption provided by Rule 16b-3 or (b)
disqualify the Plan from the exemption provided by Rule 16b-3. In addition, no
such amendment shall be made without the approval of the Company's shareholders
to the extent such approval is required by law, the Plan or agreement.
The Committee may amend the Plan at any time provided
that (a) no amendment shall impair the rights of any Participant under any
Award theretofore granted without the Participant's consent, (b) no amendment
shall disqualify the Plan from the exemption provided by Rule 16b-3, and (c)
any amendment shall be subject to the approval or rejection of the Board.
The Committee may amend the terms of any Award
theretofore granted, prospectively or retroactively, but no such amendment
shall impair the rights of any Participant without the Participant's consent,
except such an amendment made to cause the Plan or Award to qualify for the
exemption provided by Rule 16b-3. The Committee may also substitute new Stock
Options or Stock Appreciation Rights for previously granted Stock Options or
Stock Appreciation Rights, including previously granted Stock Options or Stock
Appreciation Rights having higher Option Prices but no such substitution shall
be made which would impair the rights of Participants under such Stock Option
or Stock Appreciation Right theretofore granted without the Participant's
Consent.
Subject to the above provisions, the Board shall have
authority to amend the Plan to take into account changes in law and tax and
accounting rules, as well as other developments and to grant Awards which
qualify for beneficial treatment under such rules without shareholder approval.
9.2 Unfunded Status of Plan. It is intended that the
Plan be an "unfunded" plan for incentive and deferred compensation purposes.
The Committee may authorize the creation of trusts or other arrangements to
meet the obligations created under the Plan to deliver Common Stock or make
payments; provided, however, that unless the Committee otherwise determines,
the existence of such trusts or other arrangements is consistent with the
"unfunded" status of the Plan.
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9.3 General Provisions.
(a) Representation. The Committee may require
each person purchasing or receiving shares pursuant to an Award to represent to
and agree with the Company in writing that such person is acquiring the shares
without a view to the distribution thereof. The certificates for such shares
may include any legend which the Committee deems appropriate to reflect any
restrictions on transfers.
(b) No Additional Obligation. Nothing contained
in the Plan shall prevent the Company or an Affiliate from adopting other or
additional compensation arrangements for its employees.
(c) Withholding. No later than the date as of
which an amount first becomes includable in the gross income of the Participant
for Federal income tax purposes with respect to any Award, the Participant
shall pay to the Company (or other entity identified by the Committee), or make
arrangements satisfactory to the Company or other entity identified by the
Committee regarding the payment of, any Federal, state, local or foreign taxes
of any kind required by law to be withheld with respect to such amount required
in order for the Company or an Affiliate to obtain a current deduction. Unless
otherwise determined by the Committee, withholding obligations may be settled
with Common Stock, including Common Stock that is part of the Award that gives
rise to the withholding requirement provided that any applicable requirements
under Section 16 of the Exchange Act are satisfied. The obligations of the
Company under the Plan shall be conditioned on such payment or arrangements,
and the Company and its Affiliates shall, to the extent permitted by law, have
the right to deduct any such taxes from any payment otherwise due to the
Participant.
(d) Representation. The Committee shall
establish such procedures as it deems appropriate for a Participant to
designate a Representative to whom any amounts payable in the event of the
Participant's death are to be paid.
(e) Controlling Law. The Plan and all Awards
made and actions taken thereunder shall be governed by and construed in
accordance with the laws of the State of Delaware (other than its laws
respecting choice of law). The Plan shall be construed to comply with all
applicable law, and to avoid liability to the Company, an Affiliate or a
Participant, including, without limitation, liability under Section 16(b) of
the Exchange Act.
(f) Offset. Any amounts owed to the Company or
an Affiliate by a Participant of whatever nature may be offset by the Company
from the value of any Common Stock, cash or other item of value under the Plan
or an Agreement to be transferred to the Participant, and no Common Stock, cash
or other item of value under the Plan or an Agreement shall be transferred
unless and until all disputes between the Company and the Participant have
been fully and finally resolved and the Participant has waived all claims to
such against the Company or an Affiliate.
(g) Limited Transfer During Offering. In the
event there is an effective registration statement under the Securities Act
pursuant to which Common Stock shall be offered for
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sale in an underwritten offering, a Participant shall not, during the period
requested by the underwriters managing the registered public offering, effect
any public sale or distribution of Common Stock issued directly or indirectly
pursuant to an Award.
(h) Committee Discretion. The Committee may in
its discretion include in any Agreement an obligation that the Company purchase
a Participant's Common Stock received upon the exercise of an Award (including
the repurchase of any unexercised Options which have not expired), or may
obligate a Participant to sell Common Stock to the Company upon such terms and
conditions as the Committee may determine and set forth in an Agreement.
(i) No Company Obligation. Except as required by
law, neither the Company, nor any Affiliate, shall have any duty or obligation
to affirmatively disclose to a record or beneficial holder of Common Stock or
an Option, and such record or beneficial holders shall have no right to be
advised of, any material information regarding the Company or an Affiliate at
any time prior to, upon or in connection with the exercise of an Award or the
Company's purchase of Common Stock or an Award from such holder in accordance
with the terms hereof. The Company shall have no duty or obligation to
register the Common Stock.
(j) Transfer of Shares. A Participant may at any
time make a transfer of Common Stock received pursuant to the exercise of an
Award to his parents, spouse or descendants or to any trust for the benefit of
the foregoing or to a custodian under a uniform gifts to minors act or similar
statute for the benefit of any of the Participant's descendants. Any transfer
of shares received pursuant to the exercise of an Award shall not be permitted
or valid unless and until the transferee agrees to be bound by the provisions
of the Plan, and any provision respecting Common Stock under the Agreement;
provided however, that "Termination of Employment" shall continue to refer to
the Termination of Employment of the Participant.
9.4 Mitigation of Excise Tax. If any payment or right
accruing to a Participant under the Plan (without the application of this
Section 9.4), either alone or together with other payments or rights accruing
to the Participant from the Company or an Affiliate ("Total Payments") would
constitute a "parachute payment" (as defined in Section 280G of the Code and
regulations thereunder), such payment or right shall be reduced to the largest
amount or greatest right that will result in no portion of the amount payable
or right accruing under the Plan being subject to an excise tax under Section
4999 of the Code or being disallowed as a deduction under Section 280G of the
Code. The determination of whether any reduction in the rights or payments
under the Plan is to apply shall be made by the Committee in good faith after
consultation with the Participant, and such determination shall be conclusive
and binding on the Participant. The Participant shall cooperate in good faith
with the Committee in making such determination and providing the necessary
information for this purpose. The foregoing provisions of this Section 9.4
shall apply with respect to any person only if, after reduction for any
applicable federal excise tax imposed by Section 4999 of the Code and federal
income tax imposed by the Code, the Total Payments accruing to such person
would be less than the amount of the Total Payments as reduced, if applicable,
under the foregoing provisions of the Plan and after reduction for only federal
income taxes.
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9.5 Rights with Respect to Continuation of Employment.
Nothing contained herein shall be deemed to alter the relationship between the
Company or an Affiliate and a Participant, or the contractual relationship
between a Participant and the Company or an Affiliate if there is a written
contract regarding such relationship. Nothing contained herein shall be
construed to constitute a contract of employment between the Company or an
Affiliate and a Participant. The Company or an Affiliate and each of the
Participants continue to have the right to terminate the employment or service
relationship at any time for any reason, except as provided in a written
contract. The Company or an Affiliate shall have no obligation to retain the
Participant in its employ or service as a result of the Plan. There shall be
no inference as to the length of employment or service hereby, and the Company
or an Affiliate reserves the same rights to terminate the Participant's
employment or service as existed prior to the individual becoming a Participant
in the Plan.
9.6 Awards in Substitution for Awards Granted by Other
Corporations. Awards may be granted under the Plan from time to time in
substitution for awards held by employees, directors or service providers of
other corporations who are about to become officers, directors or employees of
the Company or an Affiliate as the result of a merger or consolidation of the
employing corporation with the Company or an Affiliate, or the acquisition by
the Company or an Affiliate of the assets of the employing corporation, or the
acquisition by the Company or Affiliate of the stock of the employing
corporation, as the result of which it becomes a designated employer under the
Plan. The terms and conditions of the Awards so granted may vary from the
terms and conditions set forth in the Plan at the time of such grant as the
majority of the members of the Committee may deem appropriate to conform, in
whole or in part, to the provisions of the awards in substitution for which
they are granted.
9.7 Procedure for Adoption. Any Affiliate of the Company
may by resolution of such Affiliate's board of directors, with the consent of
the Board of Directors and subject to such conditions as may be imposed by the
Board of Directors, adopt the Plan for the benefit of its employees as of the
date specified in the board resolution.
9.8 Procedure for Withdrawal. Any Affiliate which has
adopted the Plan may, by resolution of such Affiliate's board of directors,
with the consent of the Board and subject to such conditions as may be imposed
by the Board of Directors, terminate its adoption of the Plan.
9.9 Delay. If at the time a Participant incurs a
Termination of Employment (other than for Cause) or if at the time of a Change
in Control, the Participant is subject to "short-swing" liability under Section
16 of the Exchange Act, any time period provided for under the Plan or an
Agreement shall be suspended and delayed during the period the Participant
would be subject to such liability, but not more than six (6) months and one
(1) day and not to exceed the Option Period, or the period for exercise of a
Stock Appreciation Right as provided in the Agreement, whichever is shorter.
The Company shall have the right to suspend or delay any time period described
in the Plan or an Agreement if the Committee shall determine that the action
may constitute a violation of any law or result in liability under any law to
the Company, an Affiliate or a shareholder of the Company until such time as
the action required or permitted shall not constitute a violation of law or
result in liability to the Company, an Affiliate or a shareholder of the
Company. The Committee shall have
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the discretion to suspend the application of the provisions of the Plan required
solely to comply with Rule 16b-3 if the Committee shall determine that Rule
16b-3 does not apply to the Plan.
9.10 Headings. The headings contained in the Plan are for
reference purposes only and shall not affect the meaning or interpretation of
the Plan.
9.11 Severability. If any provision of the Plan shall for
any reason be held to be invalid or unenforceable, such invalidity or
unenforceability shall not effect any other provision hereby, and the Plan
shall be construed as if such invalid or unenforceable provision were omitted.
9.12 Successors and Assigns. The Plan shall inure to the
benefit of and be binding upon each successor and assign of the Company. All
obligations imposed upon a Participant, and all rights granted to the Company
hereunder, shall be binding upon the Participant's heirs, legal representatives
and successors and permitted assigns.
9.13 Entire Agreement. The Plan and the Agreement
constitute the entire agreement with respect to the subject matter hereof and
thereof, provided that in the event of any inconsistency between the Plan and
the Agreement, the terms and conditions of the Plan shall control.
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THE PRODUCERS ENTERTAINMENT GROUP LTD.
Proxy Solicited on Behalf of the Board of Directors of the Corporation
for the Annual Meeting of Stockholders on December ____, 1995
The undersigned hereby constitutes and appoints Irwin Meyer and Ronald
Lightstone, each of them with full power to act without the other, his true and
lawful agents and proxies with full power of substitution and resubstitution in
each, to represent the undersigned at the Annual Meeting of Stockholders of THE
PRODUCERS ENTERTAINMENT GROUP LTD. to be held at The Wilshire Room of the
Radisson Beverly Pavillion Hotel, 9360 Wilshire Boulevard, Beverly Hills,
California, at 9:30 A.M., California time, on December ____, 1995 and any
adjournments thereof, on all matters before said meeting.
1. ELECTION OF DIRECTORS
Nominees: Irwin Meyer, Ronald Lightstone, Charles Weber and Michael
Levy.
/ / FOR all nominees listed except vote withheld
from the following nominees (if any):
/ / WITHHELD AUTHORITY to vote from
all nominees listed above
_______________________________________________________________________________
2. PROPOSAL TO APPROVE THE CORPORATION'S 1995 STOCK OPTION PLAN
(Mark Only One)
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO APPROVE AN AMENDMENT TO THE CORPORATION'S CERTIFICATE OF
INCORPORATION EFFECTING A ONE (1) FOR THREE (3) REVERSE SPLIT OF THE
CORPORATION'S ISSUED COMMON STOCK (Mark Only One).
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion, upon other matters as may properly come before
the meeting.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted FOR all the nominees listed, FOR approval of the 1995 Stock Option Plan
and FOR approval of the amendment to the Corporation's Certificate of
Incorporation effecting the reverse split.
Dated _________________________________, 1995
_____________________________________________
_____________________________________________
Signature of Stockholder
This proxy must be signed as name appears
hereon. Executors, administrators, trustees,
etc. should give full title as such. If the
signer is a corporation, please sign full
corporate name by duly authorized officer.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
