<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. )
<TABLE>
<S> <C>
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
</TABLE>
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 SPECIAL MEETING (IN LIEU OF ANNUAL MEETING) OF
STOCKHOLDERS
TO BE HELD MAY 29, 1996
PLEASE TAKE NOTICE that a Special Meeting (in lieu of 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 May 29, 1996 for the following
purposes:
1. To elect five (5) 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 four (4) 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 April
22, 1996 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
April __, 1996
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 a Special Meeting (in
lieu of the Annual Meeting) of Stockholders of the Corporation to be held on May
29, 1996 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 April 22, 1996 (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 14,093,917 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 five (5) 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 four (4)
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 April __, 1996.
<PAGE> 4
MATTERS TO BE BROUGHT BEFORE THE MEETING
PROPOSAL NO. 1: ELECTION OF DIRECTORS
Five (5) 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
Name/Age Employment During Past Five Years Since
-------- --------------------------------- -----
<S> <C> <C>
Irwin Meyer/60 Director of the Corporation since its inception in 1989, 1989
President and Chief Executive Officer since February
1995 and Chairman of the Board since April 1996. 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 four of the
Corporation's made-for-television movies. Mr. Meyer was
nominated for the Producer of the Year by the Producers
Guild of America in 1995. In 1977, he 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 is a member of the Academy of Motion Picture Arts
and Sciences and the Academy of Television Arts and
Sciences. He holds a B.S. from New York University.
Arthur A director of the Corporation since February 1995, Mr February
Bernstein/33 Bernstein served as Vice President - Business and Legal 1995
Affairs of the Corporation from September 1991 to June
1992 and has served as Senior Vice President since June
1992. From July 1989 to August 1991, Mr. Bernstein was
Director of Legal and Business Affairs for New World
Entertainment Ltd. From 1987 to June 1989, he was
Assistant General Counsel of Four Star International,
Inc. Mr. Bernstein received a Bachelor of Science degree
in finance and marketing from Philadelphia College of
Textiles and Sciences in 1984 and a Juris Doctorate
degree from Temple University in 1987.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
Principal Occupation(s) or Director
Name/Age Employment During Past Five Years Since
-------- --------------------------------- -----
<S> <C> <C>
Michael Levy/55 A director of the Corporation since February 1995. Mr. February
Levy began his career as a theatrical agent in 1964. 1995
He represented numerous important actors (Angelica Huston,
Debra Winger, Sophia Loren, Peter O'Toole) and directors
(Milos Forman, Sidney Sheldon, Billy Wilder, Ingmar Bergman)
and has been responsible for packaging major motion
pictures and television series. Mr. Levy left the agency
business in 1981 to become President and CEO of the CBS
Theatrical Film Group, a division of CBS Entertainment.
In 1984, Mr. Levy formed his own production company and
has produced a number of theatrical feature films including
"Gardens of Stone" (Tri-Star), "Masquerade" (MGM), "Prelude
to a Kiss" (20th Century Fox) and "Eye for an Eye"
(Paramount). In 1993 Mr. Levy expanded his Company's
activities to include the management of actors, writers
and directors.
Ben A nominee for director. Mr. Lichtenberg is currently a ---
Lichtenberg/41 Managing Director of First Colonial Securities Group, a
full-service national investment firm headquartered in New
Jersey. Prior to joining First Colonial in 1992, Mr.
Lichtenberg served in similar capacities with other investment
firms, including Butcher & Singer and Bryn Mawr Investment
Group. Prior thereto, he was employed as a certified public
accountant with an international accounting firm. Mr.
Lichtenberg is a graduate of the Wharton School of the
University of Pennsylvania.
Michael D. A nominee for director. Mr. Dempsey is a senior partner ---
Dempsey/53 of the law firm of Dempsey & Johnson, P.C., Los Angeles.
Prior to his founding such firm, he was a partner at various
other firms, including Lillick, McHose & Charles (now merged
into Pilsbury, Madison & Sutro); Finley, Kumble, Underberg,
Wagner, Heine, Manley, Myerson & Casey; Myerson & Kuhn; and
Shea & Gould. Mr. Dempsey has been a practicing attorney for
over 25 years. He graduated magna cum laude from San Fernando
Valley State College (now California State University --
Northridge) and holds a Juris Doctor degree from the
University of California Los Angeles School of Law.
</TABLE>
MEETINGS OF THE BOARD AND COMMITTEES
Since commencement of the Corporation's fiscal year ended June 30,
1995, the Board held a total of 12 meetings. During such period, 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, except for Ronald Lightstone
who attended approximately 56% of the Board meetings held since he became a
director in June 1995. See "Litigation with Ronald Lightstone."
The Corporation does not have a standing Audit Committee, Nominating
Committee or Compensation Committee or any committees performing similar
functions.
3
<PAGE> 6
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 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 April 22,
1996, 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 14,093,917 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
- ------------------- --------------------------- ------------
<S> <C> <C>
Mountaingate Productions, LLC 2,283,334(2) 15.9%
12610 Promontory Road
Los Angeles, CA 90049
</TABLE>
- -------------------
(1) If stockholders approve the one-for-four Reverse Split described under
Proposal No. 3 elsewhere in this Proxy Statement, the number of shares
of Common Stock owned beneficially by the stockholders named in the
foregoing table will be adjusted accordingly upon the effectiveness of
such Reverse Split.
(2) Includes 2,000,000 shares of Common Stock purchased by Mountaingate
Productions, LLC, a California limited liability company
("Mountaingate"), in November 1995 and currently exercisable options to
purchase 141,667 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 also "Executive Compensation -- Stock Purchase" and "Litigation
with Ronald Lightstone."
4
<PAGE> 7
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information as of April 22, 1996
with respect to holdings of the Corporation's Common Stock beneficially owned by
each of the Corporation's incumbent directors, nominees for director and named
executive officers (including certain key independent contractors) and by all
officers, directors, nominees and key independent contractors of the Corporation
as a group. As of such date, the Corporation has issued and outstanding
14,093,917 shares of Common Stock.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of
Beneficial Owner (1) Beneficial Ownership (2)(3) Percent of Class (3)
- -------------------- --------------------------- --------------------
<S> <C> <C>
Irwin Meyer 0 (4) 0 (4)
Michael Levy 75,000 (5) *
Ben Lichtenberg 35,618(6)(7)
Michael Dempsey 0(7) 0
Arthur Bernstein 120,000 (5) 1.0%
Officers, directors, nominees 195,000(4)(5) 1.4%
and key independent
contractors as a group
(consisting of 6 persons)
</TABLE>
- ---------------------
* less than 1%
(1) The address of each of Messrs. Meyer, Levy and Bernstein is 9150
Wilshire Boulevard, Beverly Hills, California 90212. The address of
Mr. Dempsey is 1925 Century Park East, Ste 2350, Los Angeles,
California 90067 and the address of Mr. Lichtenberg is 401 N. Route 73,
Marlton, New Jersey 08053.
(2) If stockholders approve the one-for-four 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) See "Executive Compensation -- Stock Purchase" and "Litigation with
Ronald Lightstone."
(4) Does not include 2,000,000 shares of Common Stock owned by
Mountaingate, of which Mr. Meyer has no direct or indirect economic
interest and in which he disclaims any beneficial ownership.
(5) Reflects stock options which are currently exercisable or become
exercisable within 60 days of the date hereof.
(6) Includes 10,618 shares of Common Stock and Class B Warrants to purchase
25,000 shares of Common Stock at an exercise price of $2.00 per share,
all of which are held by First Colonial Securities Profit Sharing Plan
FBO Ben Lichtenberg. Does not include (i) 1,100 shares of the
Corporation's Preferred Stock held by such plan FBO Ben Lichtenberg or
(ii) 13,500 Underwriter's Options held by Mr. Lichtenberg which were
transferred to him by First Colonial Securities Corp. following the
public
5
<PAGE> 8
offering of such Units by the Corporation in December 1994. Each such
Underwriter's Option entitles the holder thereof to purchase one Unit
(consisting of one share of Preferred Stock and one Class B Warrant to
purchase a share of Common stock at an exercise price of $2.00) at an
exercise price of $7.00.
(7) To be granted, upon election to the Board, options to purchase 25,000
shares of the Corporation's Common Stock at an exercise price equal to
the market price of a the Common Stock on the Nasdaq SmallCap Market on
the date of grant.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------- ------ --------
NAME AND OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) (# 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)
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>
- ------------------------
(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.
(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
6
<PAGE> 9
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 through the end of the
Corporation's 1995 fiscal year. See "Certain Relationships and Related
Transactions" elsewhere in this Proxy Statement for a description of
the February 1996 agreement among Mr. Bibicoff, Bibicoff & Associates
and the Corporation with regard, among other matters, such options.
(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) See "Stock Purchases" under this caption.
(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 balance of such options were canceled in connection with the
settlement litigation involving the Corporation, Mr. Levin and others.
See "Certain Relationships and Related Transactions" elsewhere in this
Proxy Statement.
(12) If stockholders approve the one-for-four 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.
AGREEMENTS WITH EXECUTIVE OFFICERS
In November 1995, the Corporation entered into agreements with Irwin
Meyer, for his services as Chief Executive Officer of the Corporation, and with
Mountaingate for the services of Mr. Meyer and others as producers and/or
executive producers and to perform other duties. These agreements with Mr. Meyer
and Mountaingate supersede 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 the agreement with Mr. Meyer provides for annual compensation to
Mr. Meyer of $50,000. The term of each such agreement expires on June 30, 1998.
The agreements are terminable by the Corporation in the event of Mr. Meyer's
death or disability. In such event, the Corporation shall pay Mountaingate the
guarantee fee of $262,000 for one year. The Corporation may also terminate these
agreements for Cause (as defined in the agreements). Mountaingate and Mr. Meyer
may terminate their respective agreements in the event of a material breach
thereof by the Corporation or for Good Reason (as defined in the agreements). In
such event, the Corporation shall be obligated to pay all amounts due thereunder
for the balance of their respective terms. In the event that the
7
<PAGE> 10
Corporation materially breaches either agreement after a Change in Control (as
defined in the agreements), Mountaingate and Mr. Meyer, respectively, shall be
entitled to a lump sum payment equal to three times their then current total
compensation. In November 1995, the Corporation also sold 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 owned by Mountaingate.
Arthur Bernstein is employed as Senior Vice President of the
Corporation pursuant to an employment agreement, as amended, which expires on
December 31, 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 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.
STOCK PURCHASES
In November 1995, the Corporation sold, subject to the vesting
requirements described below, 2,000,000 shares of its Common Stock, at a
purchase price of $.50 per share, to Mountaingate Productions, LLC, a California
limited liability company of which Alison Meyer and Patricia Meyer, the adult
daughters of Irwin Meyer, are the sole members ("Mountaingate"). 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 purchased by
Mountaingate.
The purchase price for these shares of Common Stock was paid by
Mountaingate by delivery of a promissory note (the "Note") to the Corporation.
The Note bears interest at the rate of 7% per annum, compounded semiannually.
Twenty five percent (25%) of the amounts due under the Note are with recourse to
the purchaser and the remaining seventy five percent (75%) of the amounts due
thereunder are without recourse against the purchaser. The entire amount of
principal and accrued interest under the Note is secured by a pledge to the
Corporation of the Common Stock purchased with the proceeds of such borrowing.
Twelve and one-half percent (12.5%) of the original principal amount of the
Note, together with interest thereon, is due and payable on April 1, 1997;
twelve and one-half percent (12.5%) of the original principal amount of the
Note, together with interest thereon, is due and payable on October 1, 1998; and
the balance of the principal of and interest on the Note is due and payable on
October 1, 2000.
The shares of Common Stock acquired by Mountaingate are subject to
forfeiture to the Corporation (with a corresponding reduction in the Note) in
the event the employment of Mr. Meyer is terminated (other than termination as a
result of his death or disability or termination by the Corporation without
cause) prior to the applicable vesting date of such shares. Fifty percent (50%)
of the Common Stock purchased by Mountaingate
8
<PAGE> 11
vested on April 1, 1996, 25% will vest on June 30, 1996, and 25% will vest on
June 30, 1997. Notwithstanding such vesting schedule, Mountaingate is entitled
to vote all of such shares of Common Stock.
In addition, in November 1995 the Corporation issued to Ronald
Lightstone, then its Chairman, and to Charles Weber, then its Chief Operating
Officer, 1,500,000 shares of Common Stock and 100,000 shares of Common Stock,
respectively, on substantially the same terms as those described above. None of
such shares issued to Mr. Lightstone had vested as of the date the Corporation
terminated Mr. Lightstone's employment and such shares were therefore forfeited
to the Corporation at such time. See "Litigation with Ronald Lightstone." In
connection with Mr. Weber's resignation from the Corporation in April 1996, the
Corporation waived the vesting and forfeiture provisions applicable to the
shares issued to Mr. Weber.
LITIGATION WITH RONALD LIGHTSTONE
In December 1995, the Board terminated the employment of Ronald
Lightstone, the Corporation's then Chairman of the Board, and removed him from
such office. Mr. Lightstone remains a director of the Corporation, but has not
been nominated by the Board for re-election as a director at the Meeting.
Following such termination, the Corporation canceled 1,500,000 shares of its
Common Stock (the "Lightstone Shares") which were issued to Mr. Lightstone in
November 1995 subject to certain vesting requirements which were not satisfied
prior to such termination. All of such shares were restored by the Corporation
to the status of authorized but unissued shares and will not be entitled to vote
at the Meeting on any matters described in this Proxy Statement. Mr.
Lightstone has objected to the forfeiture of such shares.
In January 1996, the Corporation commenced legal proceedings against
Mr. Lightstone in California Superior Court seeking, among other relief, damages
arising out of alleged breaches by Mr. Lightstone of his fiduciary duties to the
Corporation while serving as an officer and director, rescission of the
agreements executed in connection with the issuance of the Lightstone Shares,
declaratory relief regarding the terms of Mr. Lightstone's employment (including
the status of an alleged written employment agreement which the Corporation
contends was never approved, and was in fact expressly rejected, by the Board),
and return of certain payments made by the Corporation to Mr. Lightstone during
the term of his employment. Mr. Lightstone has filed a cross-complaint against
the Corporation and Irwin Meyer, the Corporation's Chief Executive Officer, in
the above-described action. The cross-complaint seeks unspecified monetary
damages in excess of $3,000,000 for, among other matters, the claimed wrongful
termination of Mr. Lightstone's employment in breach of the alleged written
employment agreement described above.
9
<PAGE> 12
OPTION/SAR GRANTS IN FISCAL 1995
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Apprecia-
Individual Grants tion for 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 $7,880 $16,150
Harvey
Bibicoff(1) 400,000 ---(1) $.50 2/27/99 0 0
</TABLE>
- --------------------------------------------
(1) Options granted to Mr. Bibicoff in February 1996 in exchange for the
cancellation of certain other options. The exercise price of these
options is $.50 per share, which is greater than the market price of
the Corporation's Common Stock on such date. See "Certain Relationships
and Related Transactions" elsewhere in this Proxy Statement for a
description of the February 1996 agreement among Mr. Bibicoff, Bibicoff
& Associates and the Corporation with regard, among other matters, such
options.
(2) If stockholders approve the one-for-four Reverse Split described under
Proposal No. 3 elsewhere in this Proxy Statement, the number of shares
of Common Stock subject to options and the exercise price of such
options will be adjusted accordingly.
10
<PAGE> 13
OPTION EXERCISES AND FISCAL YEAR-END (JUNE 30, 1995)
OPTION VALUES
No stock options were exercised by the named executive officers during
fiscal 1995. The following table sets forth certain information concerning the
outstanding options held by such named executive officers.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY
ACQUIRED ON VALUE FY-END OPTIONS AT
NAME EXERCISE (3) REALIZED($) # OF SHARES(3) FY-END - $
<S> <C> <C> <C> <C> <C>
Irwin Meyer (1) 0 0 0 Exercisable 0
0 Unexercisable 0
Arthur Bernstein 3,500 4,594 25,000 Exercisable 0
120,000 Unexercisable 18,750
Harvey Bibicoff (2) 0 0 400,000 Exercisable 0(2)
0 Unexercisable 0
</TABLE>
- --------------------------------------------
(1) Does not include options to purchase 141,667 shares of Common Stock
held by each of Alison Meyer and Patricia Meyer, the adult daughters of
Mr. Meyer. 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) Options granted to Mr. Bibicoff in February 1996 in exchange for the
cancellation of certain other options. The exercise price of these
options is $.50 per share, which is greater than the market price of
the Corporation's Common Stock on such date. See "Certain Relationships
and Related Transactions" elsewhere in this Proxy Statement for a
description of the February 1996 agreement among Mr. Bibicoff, Bibicoff
& Associates and the Corporation with regard, among other matters, such
options.
(3) If stockholders approve the one-for-four 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
The Company and its affiliates have agreed to a settlement of all
disputes and litigation with Drew S. Levin (a former officer and director of the
Corporation), Joseph Cayre, DSL Entertainment Group, Ltd. ("DSL") and Simply
Style Productions, Inc. (collectively, the DSL Parties). Pursuant to the terms
of the settlement, DSL agreed to pay the Company an aggregate of $258,000 (which
was increased to $308,000 by reason of the fact
11
<PAGE> 14
that certain payments were not timely made to the Company), including $130,000
due to DSL from a third party. Final payment of all such amounts is due not
later than June 30, 1996 (subject to extension to August 1996 in the event DSL
files a registration statement with respect to an initial public offering of its
shares prior to June 30, 1996). TPEG's right to payment of these amounts is
secured by a pledge of shares of DSL representing a 14.9% interest in DSL. TPEG
will retain an additional 5% interest in DSL, which percentage interest shall be
protected against dilution in the event of an initial public offering of DSL's
shares. Pursuant to the settlement, TPEG has also agreed to cause the
cancellation of a $383,000 promissory note of Drew S. Levin currently held by
DSL Productions, Inc. (a subsidiary of the Company). In addition, under the
settlement Joseph Cayre retained ownership of 125,000 shares of the Company's
Common Stock which were issued to Mr. Cayre in connection with the acquisition
of DSL Productions, Inc. by the Company in May 1994. Mr. Cayre has also
relinquished his right to a participation in revenues to be derived from certain
TV series which may be produced by the Corporation.
The Company has also agreed in principle to the settlement of a lawsuit
entitled DSL Entertainment, Joint Venture, a California Joint Venture v. DSL
Productions, Inc. In connection with such settlement, the Company has agreed to
pay to DSL Entertainment, Joint Venture, a California Joint Venture ("DSLJV")
$50,000 in equal monthly installments of $5,000, to issue to DSLJV 130,000
shares of its Common Stock and to grant to DSLJV warrants (having a term of two
years) to purchase an additional 100,000 shares of its Common Stock (the
"Warrants") for an exercise price equal to the market price of the Company's
Common Stock on the day immediately preceding the date of issuance of such
Warrants. The settlement of this action is subject to execution by the parties
of a definitive settlement agreement and related documentation.
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
February 1996, the Corporation, Mr. Bibicoff and Bibicoff & Associates agreed,
among other matters, to terminate all of the approximately 846,000 options to
purchase Common Stock then held by Mr. Bibicoff and Bibicoff & Associates (which
options were exercisable at prices ranging from $1.25 to $3.25 per share) and to
issue to Mr. Bibicoff new options to purchase 400,000 shares of Common Stock at
an exercise price of $.50 per share. Such new options expire on the third
anniversary of the date of grant.
In connection with the agreement between Mountaingate and the
Corporation pursuant to which Mountaingate provides the Corporation with the
services of Irwin Meyer and others, the agreement between the Corporation and
AliPat, which formerly provided the Corporation with the services of Mr. Meyer
and others, was terminated and indebtedness of AliPat to the Corporation in the
amount of $67,496 was canceled. See "Agreements With Executive Officers"
elsewhere in this Proxy Statememt.
Dempsey & Johnson, P.C., a law firm of which Michael Dempsey, a nominee
for director, is a partner, currently provides legal services to the Corporation
and, since January 1, 1995, received fees for such services in the amount of
approximately $217,000.
First Colonial Securities Group, an investment banking firm of which
Mr. Lichtenberg, a nominee for director, is a managing director and a
stockholder, served as an underwriter in a public offering of securities by the
Corporation in December 1994. In such transaction, First Colonial and its
affiliates received compensation in the form of underwriters'discounts and other
fees totalling approximately of $225,000 and was granted a five year option to
purchase up to 45,000 of the Units sold in such offering at a price of $7.00 per
Unit, $2.00 per
12
<PAGE> 15
Unit above the public offering price thereof. Such options have since been
transferred by First Colonial to certain employees of such firm, including Mr.
Lichtenberg. See "Security Ownership of Management" elsewhere in this Proxy
Statememt. First Colonial is continuing, but is under no obligation, to act as a
market maker in the Corporation's securities for which it receives no
compensation from the Corporation.
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 5,000,000 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-four Reverse Split described under Proposal No. 3, the number of shares
of Common Stock reserved under the 1995 Plan shall be reduced to 1,250,000
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 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
13
<PAGE> 16
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
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-FOUR 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-four Reverse Split of all issued shares of Common Stock
pursuant to which each four (4) shares of Common Stock (the "Old Common Stock")
issued as of the effective date of the
14
<PAGE> 17
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,
14,093,917 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 four. It is estimated that,
following the completion of the Reverse Split, approximately 3,523,475 shares of
New Common Stock will be issued and outstanding and approximately 46,476,525
shares of Common Stock will be authorized and unissued, of which, approximately
582,500 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 $14,093 based
upon the Corporation's stated capital as of the Record Date, to approximately
$3,523. 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 four, 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,
15
<PAGE> 18
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) 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:
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
December 31, 1995 0.625 0.688
March 31, 1996 0.281 0.313
</TABLE>
16
<PAGE> 19
As of the close of business on the business day immediately preceding
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.
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,
17
<PAGE> 20
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.
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.
18
<PAGE> 21
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.
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
April __, 1996
19
<PAGE> 22
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 four (4) 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 four (4) 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 $.001 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 four (4) 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
(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
<PAGE> 23
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: , 1996
---------------
-------------------------------
Irwin Meyer, President
Attest:
- -----------------------------
Arthur Bernstein, Secretary
<PAGE> 24
THE PRODUCERS ENTERTAINMENT GROUP LTD.
1995 STOCK OPTION PLAN
<PAGE> 25
TABLE OF CONTENTS
<TABLE>
<S> <C>
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
</TABLE>
<PAGE> 26
<TABLE>
<S> <C>
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
</TABLE>
ii
<PAGE> 27
<TABLE>
<S> <C>
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
</TABLE>
iii
<PAGE> 28
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
<PAGE> 29
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.
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
<PAGE> 30
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 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.
3
<PAGE> 31
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.
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.
4
<PAGE> 32
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 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;
5
<PAGE> 33
(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 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;
6
<PAGE> 34
(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
(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 five million
(5,000,000) 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
7
<PAGE> 35
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 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
8
<PAGE> 36
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.
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.
9
<PAGE> 37
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.
(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
10
<PAGE> 38
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:
(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.
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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 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
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<PAGE> 40
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.
(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.
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(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 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.
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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.
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
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(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 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.
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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.
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
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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 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
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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.
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
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<PAGE> 47
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 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 Special Meeting (in lieu of Annual Meeting) of Stockholders
on May 29, 1996.
The undersigned hereby constitutes and appoints Irwin Meyer and Arthur
Bernstein, 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 Special Meeting (in lieu of 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 May 29,
1996 and any adjournments thereof, on all matters before said meeting.
1. ELECTION OF DIRECTORS
Nominees: Irwin Meyer, Arthur Bernstein, Michael Levy, Ben Lichtenberg
and Michael Dempsey.
<TABLE>
<S> <C>
/ / FOR all nominees listed except vote withheld / / WITHHELD AUTHORITY to vote from
from the following nominees (if any): all nominees listed above
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
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 FOUR (4) 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 , 1996
-----------------------------
-----------------------------------------
-----------------------------------------
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.
