<PAGE>
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>
<CAPTION>
Filed by the registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<S> <C> <C>
/ / Preliminary Proxy Statement / / Confidential, For Use
/X/ Definitive Proxy Statement of the Commission Only (as
/ / Definitive Additional Materials permitted by Rule 14a-6(e)(2)
/ / 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/ No Fee Required
/ / 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 transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials:
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
<PAGE>
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
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(4) Date filed:
<PAGE>
THE PRODUCERS ENTERTAINMENT GROUP LTD.
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 26, 1999
----------
TO OUR STOCKHOLDERS:
Notice is hereby given that the 1999 Annual Meeting of Stockholders of The
Producers Entertainment Group Ltd.("TPEG" or the "Company") will be held at the
Beverly Hilton, located at 9876 Wilshire Blvd., Beverly Hills, California
90210, on May 26, 1999 at 10:00 a.m., California time. The Annual Meeting is
being held for the following purposes:
1. To elect a Board of five (5) Directors to hold office until the next
Annual Meeting of Stockholders and until their respective successors
have been elected;
2. To consider and vote upon a proposed amendment to the Company's
Restated Certificate of Incorporation to change the name of the
Company from The Producers Entertainment Group Ltd. to IAT Resources
Corporation;
3. Pursuant to the stockholder approval requirements of the Nasdaq
SmallCap Market, to consider and vote upon a proposal to approve the
issuance of shares of Common Stock issuable upon the conversion and/or
exercise, as the case may be, of the Company's Series E Convertible
Preferred Stock and Warrants issued pursuant to the Securities
Purchase Agreement with Augustine Fund, L.P., which, together with
shares of Common Stock previously issued under the Company's Series D
and E Convertible Preferred Stock and Warrants pursuant to the
Securities Purchase Agreement with Augustine Fund, L.P., will be in
excess of 20% of the number of shares of Common Stock outstanding
before the issuance;
4. To consider and vote upon a proposed amendment to the Company's 1998
Stock Incentive Plan to increase the maximum number of shares of
Common Stock that may be issued pursuant to awards granted under the
plan from 2,000,000 shares to 3,000,000 shares;
5. To transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
Only stockholders of record of the Common Stock of the Company at the close
of business on April 21, 1999 are entitled to notice of and to vote at the
Annual Meeting and at any adjournments or postponements thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, to ensure your representation at the Annual Meeting, you are
urged to mark, sign and return the enclosed Proxy as promptly as
<PAGE>
possible in the postage prepaid envelope enclosed for that purpose. Any
stockholder attending the Annual Meeting may vote in person, even though he or
she has returned a Proxy.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Arthur H. Bernstein
----------------------------------
Arthur H. Bernstein
SECRETARY
Los Angeles, California 90036
April 30, 1999
IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE COMPLETE, DATE,
SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE AS PROMPTLY AS
POSSIBLE. IF YOU DO ATTEND THE MEETING, YOU MAY, IF YOU PREFER, REVOKE YOUR
PROXY AND VOTE YOUR SHARES IN PERSON.
<PAGE>
THE PRODUCERS ENTERTAINMENT GROUP LTD.
----------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 26, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of The Producers Entertainment
Group Ltd., a Delaware corporation ("TPEG" or the "Company"), for use at the
1999 Annual Meeting of Stockholders (the "Annual Meeting") to be held at the
Beverly Hilton, 9876 Wilshire Boulevard, Beverly Hills, California 90210, on May
26, 1999 at 10:00 a.m., California time, and at any adjournments or
postponements thereof, for the purposes set forth herein and in the attached
Notice of Annual Meeting of Stockholders. Accompanying this Proxy Statement is
the Board's Proxy for the Annual Meeting, which you may use to indicate your
vote on the proposals described in this Proxy Statement.
All Proxies which are properly completed, signed and returned to the
Company prior to the Annual Meeting, and which have not been revoked, will
unless otherwise directed by the stockholder be voted in accordance with the
recommendations of the Board set forth in this Proxy Statement. A stockholder
may revoke his or her Proxy at any time before it is voted either by filing with
the Secretary of the Company, at its principal executive offices, a written
notice of revocation or a duly executed proxy bearing a later date, or by
attending the Annual Meeting and expressing a desire to vote his or her shares
in person.
The close of business on April 21, 1999 has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting or at any adjournments or postponements of the Annual Meeting.
At the record date, 11,716,803 shares of common stock, par value $0.001 per
share (the "Common Stock"), were outstanding, and the Company had approximately
192 stockholders of record. The Common Stock is the only outstanding class of
securities of the Company entitled to vote at the Annual Meeting.
A stockholder is entitled to cast one vote for each share held of record on
the record date on all matters to be considered at the Annual Meeting. The five
nominees for election as directors at the Annual Meeting who receive the highest
number of affirmative votes will be elected. The amendment of the Restated
Certificate of Incorporation to effect a change in the name of the Company
requires the affirmative vote of a majority of the outstanding shares of the
Company's Common Stock. For purposes of the vote to amend the Restated
Certificate of Incorporation, abstentions and broker non-votes will be counted
as votes cast against approval of the amendment of the Restated Certificate of
Incorporation. The issuance of the Company's Common Stock to Augustine Fund, LP
requires the affirmative vote of a majority of the total votes cast on each
proposal in person or by proxy. For purposes of the vote to approve the
issuance of the Company's Common Stock, abstentions will be counted toward the
tabulation of votes cast and will have the same effect as negative votes.
However, broker non-votes, while included in the determination of shares present
at the meeting for purposes of determining a quorum, will not be counted as
votes cast for or against approval of each of these proposals. The approval of
the amendment to the 1998 Stock Incentive Plan requires the affirmative vote of
a majority of the shares of Common Stock present or represented and entitled to
vote at the Annual Meeting. With respect to the amendment to the 1998 Stock
Incentive Plan, abstentions will be counted toward the tabulation of votes cast
and will have the same effect as negative votes. However, broker non-votes,
while included in the determination of shares present at the Annual Meeting for
purposes of determining a quorum, will not be counted as votes cast for or
against approval of the amendment to the 1998 Stock Incentive Plan.
This Proxy Statement and the accompanying Proxy were mailed to stockholders
on or about April 30, 1999.
<PAGE>
NOMINEES FOR ELECTION AS DIRECTORS
In accordance with the Bylaws of TPEG (the "Bylaws"), the Company's
directors are elected at each Annual Meeting of Stockholders and hold office
until the next election of directors and until their successors are duly
elected. The Bylaws provide that the Board shall consist of no fewer than two
and no more than nine directors as determined from time to time by the Board.
The Board currently consists of five directors.
Unless otherwise instructed, the Proxy holders will vote the Proxies
received by them for the nominees named below. If any nominee is unable or
unwilling to serve as a director at the time of the Annual Meeting or any
postponement or adjournment thereof, the Proxies will be voted for such other
nominee(s) as shall be designated by the current Board to fill any vacancy. The
Company has no reason to believe that any nominee will be unable or unwilling to
serve if elected as a director.
The Board proposes the election of the following nominees as directors:
1. Ivan Berkowitz
2. Arthur H. Bernstein
3. Thomas A. Daniels
4. Michael Iscove
5. Irwin Meyer
If elected, each nominee is expected to serve until the 2000 Annual Meeting
of Stockholders and thereafter until his or her successor is duly elected and
qualified. The five nominees for election as directors at the Annual Meeting who
receive the highest number of affirmative votes will be elected.
2
<PAGE>
INFORMATION WITH RESPECT TO NOMINEES AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
nominees and executive officers of the Company as of March 31, 1999:
<TABLE>
<CAPTION>
AGE AT YEAR FIRST
MARCH 31, ELECTED OR
--------- APPOINTED
NAME 1999 DIRECTOR PRINCIPAL OCCUPATION
---- ---- -------- --------------------
<S> <C> <C> <C>
Ivan Berkowitz 53 1999 Mr. Berkowitz has been director of the Company
since February 1999. Since 1993, Mr. Berkowitz
has served as Managing General Partner of Steib
& Company, also a privately held New York based
investment company. Between 1995 and 1997, Mr.
Berkowitz served as Chief Executive Officer of
PolyVision Corporation. Between 1990 and 1994,
Mr. Berkowitz served as Chairman of the Board of
Directors of Migdalei Shekel. Currently, Mr.
Berkowitz serves on the Board of Directors of
the following public companies: Propierre, a
real estate fund, HMG WorldWide, a manufacturer
of point of purchase displays, PolyVision
Corporation, a manufacturer of school products
and displays, and Migdalei Shekel, a real estate
company based in Tel Aviv. Since 1989, Mr.
Berkowitz has served as President of Great Court
Holdings Corporation, a privately held New York
based investment company. Mr. Berkowitz holds a
BA (cum laude) from Brooklyn College, an MBA in
Finance from Baruch College, City University of
New York and a Ph.D. in International Law from
Cambridge University, England.
Arthur H. Bernstein 36 1995 Mr. Bernstein has been a director of the
Company since February 1995 and has served as
the Executive Vice President of the Company
since October 1997 as well as the Company's
Secretary since March 1995. Between June 1992
and October 1997, Mr. Bernstein served as a
Senior Vice President of TPEG and was the
Company's Vice President-Business and Legal
Affairs from September 1991 to June 1992. Prior
to this, from July 1989 to August 1991, Mr.
Bernstein was the Director of Legal and Business
Affairs for New World Entertainment Ltd., a
television production and distribution company.
From 1987 to June 1989, he was Assistant General
Counsel of Four Star International, Inc., a
television production and distribution company.
Mr. Bernstein received a B.S. in finance and
marketing from Philadelphia College of Textiles
and Sciences in 1984 and his law degree from
Temple University in 1987.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
AGE AT YEAR FIRST
MARCH 31, ELECTED OR
--------- APPOINTED
NAME 1999 DIRECTOR PRINCIPAL OCCUPATION
---- ---- -------- --------------------
<S> <C> <C> <C>
Thomas A Daniels 45 1998 Mr. Daniels has been a director of the Company
since July 1998. Since the Company's acquisition
of MediaWorks in July 1998, Mr. Daniels has
served as President of MediaWorks. Mr. Daniels,
along with Mr. Craig Sussman, founded MediaWorks
in 1996. From 1992 until 1995, Mr. Daniels
served as an Executive Consultant of
International Distribution for Landmark
Entertainment Group. From 1989 until 1992, Mr.
Daniels served as Executive Vice President of
Blake Edward's Television, Paramount Pictures
Television.
Michael Iscove 48 1997 Mr. Iscove has been a director of the Company
since October 1997. Since June 1995, Mr. Iscove
has served as the Chairman, President and Chief
Executive Officer of Sirius Corporate Finance
Inc., a consulting firm providing strategic
planning, corporate finance, restructuring and
mergers and acquisitions support. Prior to that,
from April 1986 to June 1995, Mr. Iscove was the
President of Creative Fusion, a consulting
company. In 1978, Mr. Iscove received a
Chartered Accounts Designation in accounting
from the Canadian Institute of Chartered
Accountants. In 1972, Mr. Iscove received a B.A.
degree in English from York University, Toronto,
Canada.
Irwin Meyer 63 1989 Mr. Meyer has been a director of TPEG since its
inception in 1989 and has served as its Chief
Executive Officer since February 1995. Since
January 1999, Mr. Meyer has been Chairman of the
Board of Directors. At various times prior to
October 1997, Mr. Meyer served as TPEG's
Chairman of the Board (April 1996-October 1997;
January 1991-June 1992); Co-Chairman of the
Board (February 1990-December 1990) and
President (February 1995-October 1997). Mr.
Meyer was an executive producer of seven of
TPEG's made-for-television movies. In 1995 he
was nominated for Producer of the Year by the
Producers Guild of America. Mr. Meyer 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 for his 1977
production of the musical "Annie." 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.
</TABLE>
4
<PAGE>
BOARD MEETINGS AND COMMITTEES
The Board has an Audit Committee and a Compensation Committee. The Audit
Committee currently consists of Michael Iscove and Ivan Berkowitz.
Responsibilities of the Audit Committee include (i) reviewing financial
statements and consulting with the independent auditors concerning the
Company's financial statements, accounting and financial policies and internal
controls, (ii) reviewing the scope of the independent auditors' activities and
the fees of the independent auditors and (iii) maintaining good communications
among the Audit Committee, the Company's independent auditors and the Company's
management on accounting matters. One meeting of the Audit Committee was held
during the fiscal year ended June 30, 1998, and no meetings of the Audit
Committee have been held since June 30, 1998.
The Compensation Committee currently consists of Michael Iscove and Ivan
Berkowitz. The Compensation Committee is responsible for considering and
making recommendations to the Board regarding executive compensation. One
meeting of the Compensation Committee was held during the fiscal year ended
June 30, 1998, and one meeting of the Compensation Committee has been held
since June 30, 1998.
The Board held six meetings and acted by written consent on two occasions
during the fiscal year ended June 30, 1998. No director attended less than 75%
of all the meetings of the Board and those committees on which he served in
1998.
The Company does not have a standing Nominating Committee; the full Board
performs the functions of the Nominating Committee.
COMPENSATION OF DIRECTORS
Employee directors of the Company do not receive any compensation for
attending Board or Committee meetings. Non-employee directors of the Company
each receive an annual grant of stock options to purchase 25,000 shares of the
Common Stock of the Company. When requested by the Company to attend Board
meetings in person, it is the policy of the Company to reimburse directors for
reasonable travel and lodging expenses incurred in attending these Board
meetings.
EXECUTIVE COMPENSATION
The information relating to executive compensation is herein incorporated
by reference to the Company's Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1998, under Item 10 - Executive Compensation.
CERTAIN TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
The information relating to certain transactions with directors and
executive officers is herein incorporated by reference to the Company's Annual
Report on Form 10-KSB for the fiscal year ended June 30, 1998, under Item 12 -
Certain Relationships and Related Transactions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission (the "Commission" or "SEC") initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Officers, directors and greater than
ten percent stockholders are required by the Commission regulations to furnish
the Company with copies of Section 16(a) forms they file.
5
<PAGE>
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended June 30, 1998, all Section
16(a) filing requirements applicable to its officers, directors and greater
than ten percent beneficial owners were satisfied.
PRINCIPAL STOCKHOLDERS
The information relating to principal stockholders is herein incorporated
by reference to the Company's Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1998, under Item 11 - Security Ownership of Certain Beneficial
Owners and Management.
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board approved the engagement of Singer Lewak
Greenbaum & Goldstein LLP as its independent auditors for the year ending June
30, 1998 to replace Kellogg & Andelson Accountancy Corporation ("Kellogg &
Andelson"), who resigned as auditors of the Company effective June 22, 1998.
Kellogg & Andelson advised TPEG that Kellogg & Andelson could no longer provide
services as independent accountants for publicly held companies. The change in
independent public accountants was filed with the Commission on Form 8-K on
June 29, 1998.
Kellogg & Andelson audited the financial statements of TPEG as of June 30,
1996 and 1997, and the related statements of operations, stockholders' equity
and cash flows for the years ended June 30, 1996 and 1997 (collectively, the
"Financial Statements"). Kellogg & Andelson's reports on the Financial
Statements for the past two years did not contain an adverse opinion or
disclaimer of opinion, nor was it qualified or modified as to uncertainty,
audit scope or accounting principles.
In connection with the audits of TPEG's financial statements for the years
ended June 30, 1996 and 1997, and in the subsequent interim period through June
22, 1998, there were no disagreements with Kellogg & Andelson on any matters of
accounting principles or practices, financial statement disclosure, or auditing
scope and procedures which disagreements, if not resolved to the satisfaction
of Kellogg & Andelson would have caused Kellogg & Andelson to make reference to
the subject matter of the disagreements in their reports.
Representatives of Singer Lewak Greenbaum & Goldstein LLP are expected to
be present at the Annual Meeting of Stockholders. They will have the
opportunity to make a statement if they desire to do so, and will be available
to respond to appropriate questions.
6
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Board has nominated Messrs. Ivan Berkowitz, Arthur H. Bernstein,
Thomas A. Daniels, Michael Iscove and Irwin Meyer to serve as directors of the
Company for a one-year term. Each nominee, if elected, will hold office until
the 2000 annual meeting of stockholders at which time his term of office
expires, and until his successor is elected and qualified, unless he resigns or
his seat on the Board becomes vacant due to his death, removal or other cause
in accordance with the Bylaws of the Company. Management knows of no reason why
any of these nominees would be unable or unwilling to serve, but if any nominee
should be unable or unwilling to serve, the proxies will be voted for the
election of such other persons for the office of director as the Board may
recommend in the place of such nominee.
THE BOARD UNANIMOUSLY RECOMMENDS VOTING "FOR" THE FIVE NOMINEES NAMED
ABOVE, AND YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
7
<PAGE>
PROPOSAL 2
AMENDMENT TO THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION
TO CHANGE THE NAME OF THE COMPANY
The Board of the Company has approved, subject to stockholder approval, a
proposed amendment to the Company's Restated Certificate of Incorporation (the
"Amendment") which will effect a change in the name of the Company from The
Producers Entertainment Group Ltd. to IAT Resources Corporation (the "Name
Change"). The complete text of the Amendment is set forth as Exhibit "A" to
this Proxy Statement. The Board of Directors believes that it is in the best
interest of the Company to effect the Name Change in order to more accurately
reflect the Company's change in direction in terms of new areas of business.
The Amendment will be presented to stockholders in the form of a
resolution as follows:
RESOLVED, that Article Second of the Restated Certificate of Incorporation of
this Corporation be amended so that such Article, as amended, shall be and read
as follows:
2. The name of the corporation is IAT RESOURCES CORPORATION.
If the Name Change is approved by the requisite vote of the Company's
stockholders, the Name Change will be effective upon the close of business on
the date of filing of the Amendment with the Delaware Secretary of State, which
filing is expected to take place shortly after the Annual Meeting. If this
proposal is not approved by the stockholders, then the Amendment will not be
filed.
RECOMMENDATION AND REQUIRED VOTE
The Board has unanimously approved the Name Change. The affirmative vote
of a majority of the outstanding shares of the Company's Common Stock is
required to approve the Amendment. For purposes of the vote to amend the
Restated Certificate of Incorporation, abstentions and broker non-votes will be
counted as votes cast against approval of the Amendment of the Restated
Certificate of Incorporation. The Board is of the opinion that the Amendment
is advisable and in the best interests of the Company and recommends a vote FOR
the approval of the Amendment. All proxies will be voted to approve the
Amendment unless a contrary vote is indicated on the enclosed proxy card.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" APPROVAL
OF THE AMENDMENT TO EFFECT THE NAME CHANGE OF THE COMPANY, AND YOUR PROXY
WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
8
<PAGE>
PROPOSAL 3
APPROVAL OF THE ISSUANCE OF ADDITIONAL SHARES
OF COMMON STOCK PURSUANT TO THE
SECURITIES PURCHASE AGREEMENT WITH AUGUSTINE FUND, L.P.
The Common Stock of the Company is traded on the Nasdaq SmallCap Market.
Rule 4310(c)(25)(H) of The Nasdaq Stock Market, Inc. Marketplace Rules requires
stockholder approval to be obtained prior to issuing common stock (or shares
convertible into common stock) in a transaction other than a public offering at
a price less than the greater of book or market value of the common stock when
the amount of common stock to be issued (or issuable upon conversion) is or is
greater than 20% of the common stock or voting power of the company outstanding
prior to issuance.
Pursuant to the Securities Purchase Agreement (as defined below),
Augustine Fund, LP ("Augustine") may acquire under certain circumstances up to
5,500,000 shares of Series D, Series E and Series F Preferred Stock. In
addition, pursuant to the Securities Purchase Agreement, for each purchase by
Augustine of Series D and E Preferred Stock, Augustine received a like number
of shares of Series F Preferred Stock. In accordance with these terms,
Augustine acquired 50,000 shares of Series D Convertible Preferred Stock, par
value $0.001 per share, and in connection therewith, 50,000 shares of Series F
Convertible Preferred Stock, par value $0.001 per share, in July and August
1998 and 25,000 shares of Series E Convertible Preferred Stock, par value
$0.001 per share, and in connection therewith 25,000 shares of Series F
Convertible Preferred Stock in September 1998. On January 25, 1999 and
February 16, 1999, Augustine acquired 75,000 shares and 100,000 shares,
respectively of the Series E Preferred Stock and, in connection therewith,
175,000 shares of Series F Convertible Preferred Stock. The Securities
Purchase Agreement provides for the future purchases of Series E Convertible
Preferred Stock by Augustine, as more particularly described below. The
Company and Augustine have also entered into new negotiations for the future
purchase of shares of the Company's Series E Convertible Preferred Stock.
In connection with the transactions contemplated by the Securities
Purchase Agreement, for certain services rendered to the Company by its
placement agent, BridgeWater Capital Corporation ("Bridgewater"), the Company
agreed to issue warrants (the "Warrants") to BridgeWater to purchase the number
of shares of Common Stock that is equivalent to 4% of the total dollar value of
any Series D and E Preferred Stock sold pursuant to the Securities Purchase
Agreement. Accordingly, in connection with the sale of the Series D Preferred
Stock, the Company issued warrants to purchase an aggregate of 20,000 shares of
Common Stock to BridgeWater and its designees. In connection with the sale of
the Series E Preferred Stock made in September 1998 and January and February
1999, the Company issued warrants to purchase an aggregate of 80,000 shares of
Common Stock to BridgeWater and its designees.
In the event that Nasdaq aggregates the issuances of the Series D and E
Convertible Preferred Stock and the Warrants issued in connection with the
Series D and E issuances made in July and September 1998 with the issuance of
the Series E Convertible Preferred Stock and the Warrants issued in connection
with the Series E issuance made in January and February 1999 (such transactions
are more particularly described below), stockholder approval is required to the
extent that future issuances under either the terms of the Securities Purchase
Agreement or any related agreement or a separately negotiated written agreement
entered into by the Company and Augustine, aggregated with all prior issuances,
upon conversion or exercise, as the case may be, exceeds 19.99% of the
outstanding Common Stock of the Company.
THE SECURITIES PURCHASE AGREEMENT WITH AUGUSTINE FUND, L.P.
On July 31, 1998, the Company entered into a Securities Purchase Agreement
(the "Securities Purchase Agreement") with Augustine Fund, L.P. Pursuant to
the terms of the Securities Purchase Agreement, on July 31, 1998, the Company
issued to Augustine 25,000 shares of the Company's Series D Convertible
Preferred Stock for $10.00 per share. A subsequent closing was held in August
1998, pursuant to which the Company issued Augustine an additional 25,000
shares of the Company's Series D Convertible Preferred Stock for $10.00 per
share. The terms of the Series D Convertible Preferred Stock allowed Augustine
to convert the Preferred Stock into Common Stock, at any time after the earlier
of (i) the date on which a registration statement filed with the Securities and
Exchange
9
<PAGE>
Commission, covering the Common Stock into which the Series D Convertible
Preferred Stock is convertible, is declared effective and (ii) the date which
is 120 days from the date of issuance of the Series D Convertible Preferred
Stock. The shares of Series D Convertible Preferred Stock are convertible into
that number of shares of the Company's Common Stock as equals $10.00 per share
of Series D Convertible Preferred Stock tendered, plus accumulated and unpaid
dividends, divided by the lesser of (A) 100% of the average of the closing bid
prices per share of the Company's Common Stock on the Nasdaq stock market for
the five trading days preceding the date of purchase of the Series D
Convertible Preferred Stock; (B) 80% of the average of the closing bid prices
for the five trading days preceding conversion; or (C) the post adjustment
exercise price per share of the Common Stock purchasable pursuant to a certain
warrant.
The Company filed on September 1, 1998 a registration statement covering
the Common Stock underlying the shares of Series D Convertible Preferred Stock,
50,000 shares of the Series F Convertible Preferred Stock and the Warrants
issued in connection with the Series D issuance. The registration statement
was declared effective on September 18, 1998.
The Securities Purchase Agreement also provides for the future purchases
of shares of Series E Convertible Preferred Stock by Augustine, assuming
certain conditions are met. Under the terms of the Securities Purchase
Agreement, Augustine agreed to purchase and the Company agreed to sell, over a
24 month period, a minimum of 150,000 shares of Series E Convertible Preferred
Stock and up to a maximum of 500,000 shares of the Series E Preferred Stock, in
a series of tranches, each of which tranche was to be a minimum of 10,000
shares and a maximum of 30,000 shares.
The conditions also included the following:
1. the subsequent tranche would not close until 15 days after the date
on which either (x) a registration statement as contemplated by the
Registration Rights Agreement and covering all Registrable Securities (as
defined) was declared effective by the SEC or (y) a Registration Statement
covering the resale of all Registrable Securities underlying all shares of
Preferred Stock previously issued is declared effective;
2. each of the representations and warranties of the Company made in the
Purchase Agreement, the Registration Rights Agreement and Escrow Agreement
shall be true and correct and the Company shall have performed all required
obligations;
3. the average daily dollar trading volume for the common stock for the
prior 20 trading days must equal or exceed $40,000. In addition, the maximum
number of Series E Convertible Preferred Shares sold shall be based on the
Average Dollar Volume (in accordance with a chart in the agreement - i.e., if
the minimum Average Daily Volume is $40,000, then the maximum draw down
available to the Company is $100,000);
4. the average closing bid price for the Common Stock for the ten
trading days prior to the date of the closing must equal or exceed $.625 per
share; and
5. the number of shares issuable upon conversion of the Series E
Convertible Preferred Shares then purchased, together with the shares of Common
Stock issued prior thereto pursuant to the transaction documents shall not
exceed 20% of the outstanding shares of the Company's common stock.
In September 1998, the Company sold to Augustine 25,000 shares of the
Company's Series E Convertible Preferred Stock for $10.00 per share. At the
time, the Company had been informed by counsel that condition 1 above could not
be met as the SEC did not allow the registration in advance of common stock
underlying preferred stock subject to an equity line. Additionally, the Company
and Augustine entered into an agreement dated September 17, 1998 pursuant to
which Augustine agreed to waive condition number 3. The terms of the Series E
Convertible Preferred Stock allowed Augustine to convert the Preferred Stock
into Common Stock, at any time after issuance. The shares of Series E
Convertible Preferred Stock are convertible into that number of shares of the
Company's Common Stock as equals $10.00 per share of Series E Convertible
Preferred Stock tendered, plus accumulated and unpaid dividends, divided by the
lesser of (A) 82.5% of the average of the closing bid prices for the five
trading days
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preceding conversion; or (B) the post adjustment exercise price per share of
the common stock purchasable pursuant to a certain warrant.
The Series D and E Convertible Preferred Stock issued pursuant to the
Securities Purchase Agreement and the Warrants issued to BridgeWater in
connection therewith are not subject to any preemptive rights.
The Company filed on September 18, 1998 a registration statement covering
the Common Stock underlying the 25,000 shares of Series E Convertible Preferred
Stock and 25,000 shares of the Series F Convertible Preferred Stock. The
registration statement was declared effective on September 23, 1998.
On January 25, 1999 and February 16, 1999, the Company sold to Augustine
75,000 shares of the Company's Series E Convertible Preferred Stock and 100,000
shares of the Company's Series E Convertible Preferred Stock, respectively, for
$10.00 per share. At the time of the sales, the Company met only conditions
number 3 and 4 to closing under the Purchase Agreement.
Accordingly, the Company and Augustine negotiated a new sale, without
giving effect to any of the prior terms or conditions of the Securities
Purchase Agreement. Because the Company already had authorized the Series E
Convertible Preferred Stock, the Company sold to Augustine shares of the Series
E Convertible Preferred Stock. As part of the new agreement with Augustine, the
Company issued to Augustine a warrant to acquire 250,000 shares of the
Company's Common Stock.
Augustine has agreed to provide the Company with equity financing in
connection with the sales of the Series D, E and F Convertible Preferred Stock
in an aggregate gross amount up to $5,500,000. The Company received gross
proceeds from the sale of the Series D Convertible Preferred Stock in July and
August 1998 in the amount of $500,000. The Company's net proceeds from such
sale were approximately $460,000. The Company's gross proceeds from the sale
of the Series E Convertible Preferred Stock in September 1998 was $250,000, the
net proceeds of which were approximately $230,000. The Company received gross
proceeds from the sale of each of the Series E Convertible Preferred Stock in
January and February 1999 in the amount of $1,750,000, of which approximately
$1,600,000 constitute the net proceeds. The Company has devoted the net
proceeds for working capital purposes. The Company anticipates issuing the
additional shares of Series E Convertible Preferred Stock to Augustine and
Warrants in connection therewith to BridgeWater in the future.
The Company and Augustine have agreed to continue to work together in the
future and the Company believes that Augustine will continue to provide equity
funding to the Company. Accordingly, the Board believes that it is important
to the Company to obtain the approval of the stockholders with respect to
future stock issuances.
If this Proposal is not approved by the stockholders, then the Company
will be required to locate new sources of financing for the Company.
EFFECT OF THE ISSUANCE OF COMMON STOCK UNDERLYING THE ISSUANCE OF
ADDITIONAL PREFERRED STOCK AND WARRANTS
The future issuance of the Series E Convertible Preferred Stock and the
Warrants issued in connection therewith will upon conversion or exercise, as
the case may be, increase the number of outstanding shares of Common Stock. As
a result of the increase in the number of outstanding shares of Common Stock
upon conversion of the Series E Convertible Preferred Stock and/or exercise of
the Warrants issued in connection therewith, the economic interests and voting
rights of each stockholder will be diluted.
RECOMMENDATION AND REQUIRED VOTE
The issuance at a discount of a number of shares of the Company's Common
Stock equal to or in excess of 20% of the number of shares of the Company's
Common Stock outstanding before the issuance requires the affirmative vote of a
majority of the total votes cast on the proposal in person or by proxy. With
respect to this proposal, abstentions will be counted toward the tabulation of
votes cast and will have the same effect as negative votes. However, broker
non-votes, while included in the determination of shares present at the meeting
for purposes
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of determining a quorum, will not be counted as votes cast for or against
approval of this proposal. The Board is of the opinion that the issuance of
the Common Stock upon the conversion of the Preferred Stock and/or exercise of
the Warrants, as the case may be, is advisable and in the best interests of the
Company and recommends a vote "FOR" the approval of this Proposal 3. All
proxies will be voted to approve this Proposal 3 unless a contrary vote is
indicated on the enclosed proxy card.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
APPROVAL OF THE ISSUANCE OF ADDITIONAL COMMON STOCK ISSUABLE UPON THE
CONVERSION OF PREFERRED STOCK AND/OR EXERCISE OF THE WARRANTS, AS THE CASE
MAY BE, AND YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
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PROPOSAL 4
APPROVAL OF THE AMENDMENT TO THE 1998 STOCK INCENTIVE PLAN
GENERAL
The Board of Directors has approved an amendment (the "Plan Amendment") to
the 1998 Stock Incentive Plan (the "1998 Plan") to increase the number of
shares of Common Stock available for issuance under the 1998 Plan from
2,000,000 shares to 3,000,000 shares. The complete text of the Plan Amendment
is attached hereto as Exhibit "B". The Plan Amendment is being submitted to the
stockholders for approval.
The Board of Directors approved the Plan Amendment to ensure that a
sufficient number of shares are available for issuance under the 1998 Plan.
The 1998 Plan provides for the issuance of awards to purchase shares of the
Company's Common Stock to non-employee directors, officers, employees and
consultants of the Company. At April 21, 1999, approximately 14 persons were
eligible to receive awards under the 1998 Plan and 75,000 shares were granted
as awards under the 1998 Plan. The Board of Directors believes that the
ability to grant stock-based awards is important to the future success of the
Company. The grant of stock options and other stock-based awards is important
to the future success of the Company. The grant of stock options and other
stock-based awards can motivate high levels of performance and provide an
effective means of recognizing contributions of key personnel to the success of
the Company. In addition, stock-based compensation can be valuable in
recruiting and retaining key personnel who are in great demand as well as
rewarding and providing incentives to the Company's current directors,
officers, employees and consultants. The increase in the number of shares
available for awards under the 1998 Plan will enable the Company to continue to
realize the benefits of granting stock-based compensation.
As of April 21, 1999, the last reported sales price of the Common Stock on
the Nasdaq SmallCap Market was $2.28 per share.
SUMMARY OF THE 1998 PLAN
The following is a summary of the principal features of the 1998 Plan.
PURPOSE. The purpose of the 1998 Plan is to advance the interests of the
Company and its stockholders by strengthening the Company's ability to obtain
and retain the services of the types of employees, consultants, officers and
directors who will contribute to the Company's long term success and to provide
incentives which are linked directly to increases in stock value which will
inure to the benefit of all stockholders of the Company.
ADMINISTRATION. The 1998 Plan may be administered by the Board of the
Company, or a committee of the Board whose members shall serve at the pleasure
of the Board. The party administering the 1998 Plan is referred to herein as
the "Administrator." Subject to the provisions of the 1998 Plan, the
Administrator has full and final authority (i) to select from among eligible
directors, officers, employees and consultants, those persons to be granted
awards under the 1998 Plan, (ii) to determine the type, size and terms of
individual awards to be made to each person selected, (iii) to determine the
time when awards will be granted and to establish objectives and conditions
(including, without limitation, vesting and performance conditions), if any,
for earning awards, (iv) to amend the terms or conditions of any outstanding
award, subject to applicable legal restrictions and to the consent of the other
party to such award, (v) to authorize any person to execute, on behalf of the
Company, any instrument required to carry out the purposes of the 1998 Plan,
and (vii) to make any and all other determinations which the Administrator
determines to be necessary or advisable in the administration of the 1998 Plan.
The Administrator shall have full power and authority to administer and
interpret the Plan and to adopt, amend and revoke such rules, regulations,
agreements, guidelines and instruments for the administration of the 1998 Plan
and for the conduct of its business as the Administrator deems necessary or
advisable.
ELIGIBILITY. Any person who is a director, officer, employee or
consultant of the Company, or any of its subsidiaries (a "Participant"), shall
be eligible to be considered for the grant of awards under the 1998 Plan. No
Participant may receive awards representing more than 50% of the number of
shares of Common Stock covered by the 1998 Plan.
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TYPES OF AWARDS. Awards authorized under the 1998 Plan may consist of any
type of arrangement with a Participant that, by its terms, involves or might
involve or be made with reference to the issuance of shares of the Company's
Common Stock, or a derivative security with an exercise or conversion price
related to the Common Stock or with a value derived from the value of the
Common Stock. Awards are not restricted to any specified form or structure and
may include sales, bonuses and other transfers of stock, restricted stock,
stock options, reload stock options, stock purchase warrants, other rights to
acquire stock or securities convertible into or redeemable for stock, stock
appreciation rights, phantom stock, dividend equivalents, performance units or
performance shares, or any other type of award which the Administrator shall
determine is consistent with the objectives and limitations of the 1998 Plan.
An award may consist of one such security or benefit, or two or more of them in
tandem or in the alternative.
CONSIDERATION. The Common Stock or other property underlying an award may
be issued for any lawful consideration as determined by the Administrator,
including, without limitation, a cash payment, services rendered, or the
cancellation of indebtedness. In addition, an award may permit the recipient
to pay the purchase price of the Common Stock or other property or to pay such
recipient's tax withholding obligation with respect to such issuance, in whole
or in part, by delivering previously owned shares of capital stock of the
Company or other property, or by reducing the number of shares of Common Stock
or the amount of other property otherwise issuable pursuant to such award.
TERMINATION OF AWARDS. All awards granted under the 1998 Plan expire ten
years from the date of grant, or such shorter period as is determined by the
Administrator. No option is exercisable by any person after such expiration.
If an award expires, terminates or is canceled, the shares of Common Stock not
purchased thereunder shall again be available for issuance under the 1998 Plan.
AMENDMENT AND TERMINATION OF THE 1998 PLAN. The Administrator may amend
the 1998 Plan at any time, may suspend it from time to time or may terminate it
without approval of the stockholders; provided, however, that stockholder
approval is required for any amendment which materially increases the number of
shares for which awards may be granted, materially modifies the requirements of
eligibility, or materially increases the benefits which may accrue to
recipients of awards under the 1998 Plan. However, no such action by the Board
or stockholders may unilaterally alter or impair any award previously granted
under the 1998 Plan without the consent of the recipient of the award. In any
event, the 1998 Plan shall terminate on the tenth anniversary of the date the
1998 Plan is approved by the stockholders unless sooner terminated by action of
the Board.
EFFECT OF SECTION 16(b) OF THE EXCHANGE ACT. The acquisition and
disposition of Common Stock by officers, directors and greater-than-ten percent
stockholders of the Company ("Insiders") pursuant to awards granted to them
under the 1998 Plan may be subject to Section 16(b) of the Exchange Act.
Pursuant to Section 16(b), a purchase of common stock by an Insider within six
months before or after a sale of common stock by the Insider could result in
recovery by the Company of all or a portion of any amount by which the sale
proceeds exceeds the purchase price. Insiders are required to file reports of
changes in beneficial ownership under Section 16(a) of the Exchange Act upon
acquisitions and dispositions of shares. Rule 16b-3 provides an exemption from
Section 16(b) liability for certain transactions pursuant to certain employee
benefit plans. The 1998 Plan is designed to comply with Rule 16b-3.
OMNIBUS BUDGET RECONCILIATION ACT IMPLICATIONS FOR EXECUTIVE COMPENSATION.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
places a limit of $1,000,000 on the amount of compensation that may be deducted
by the Company in any year with respect to each of the Company's five most
highly paid executive officers. Certain "performance-based" compensation that
has been approved by the Company's stockholders is not subject to the deduction
limit. The 1998 Plan is intended to qualify as performance-based compensation
which is not subject to the $1,000,000 limitation of Section 162(m) of the
Code.
FEDERAL INCOME TAX CONSEQUENCES FOR STOCK OPTIONS
As of April 21, 1999, the only type of award granted by the Company has
been stock options. The following is a general discussion of the principal tax
considerations for both "incentive stock options" within the meaning of Section
422 of the Code ("Incentive Stock Options") and non-statutory stock options
("Non-statutory Stock Options"), and is based upon the tax laws and regulations
of the United States existing as of the date hereof, all of which are
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subject to modification at any time. The 1998 Plan does not constitute a
qualified retirement plan under Section 401(a) of the Code (which generally
covers trusts forming part of a stock bonus, pension or profit-sharing plan
funded by the employer and/or employee contributions which are designed to
provide retirement benefits to participants under certain circumstances) and is
not subject to the Employee Retirement Income Security Act of 1974 (the pension
reform law which regulates most types of privately funded pension, profit
sharing and other employee benefit plans).
CONSEQUENCES TO EMPLOYEES: INCENTIVE STOCK OPTIONS. No income is
recognized for federal income tax purposes by an optionee at the time an
Incentive Stock Option is granted, and, except as discussed below, no income is
recognized by an optionee upon his or her exercise of an Incentive Stock
Option. If the optionee makes no disposition of the Common Stock received upon
exercise within two years from the date such option was granted or one year
from the date such option is exercised, the optionee will recognize mid-term or
long-term capital gain or loss when he or she disposes of his or her Common
Stock depending on the length of the holding period. Such gain or loss
generally will be measured by the difference between the exercise price of the
option and the amount received for the Common Stock at the time of disposition.
If the optionee disposes of the Common Stock acquired upon exercise of an
Incentive Stock Option within two years after being granted the option or
within one year after acquiring the Common Stock, any amount realized from such
disqualifying disposition will be taxable as ordinary income in the year of
disposition to the extent that (i) the lesser of (a) the fair market value of
the shares on the date the Incentive Stock Option was exercised or (b) the fair
market value at the time of such disposition exceeds (ii) the Incentive Stock
Option exercise price. Any amount realized upon disposition in excess of the
fair market value of the shares on the date of exercise will be treated as
long-term, mid-term or short-term capital gain, depending upon the length of
time the shares have been held.
The use of stock acquired through exercise of an Incentive Stock Option to
exercise an Incentive Stock Option will constitute a disqualifying disposition
if the applicable holding period requirement has not been satisfied.
For alternative minimum tax purposes, the excess of the fair market value
of the stock as of the date of exercise over the exercise price of the
Incentive Stock Option is included in computing that year's alternative minimum
taxable income. However, if the shares are disposed of in the same year, the
maximum alternative minimum taxable income with respect to those shares is the
gain on disposition. There is no alternative minimum taxable income from a
disqualifying disposition in subsequent years.
CONSEQUENCES TO EMPLOYEES: NON-STATUTORY STOCK OPTIONS. No income is
recognized by a holder of Non-statutory Stock Options at the time Non-statutory
Stock Options are granted under the 1998 Plan. In general, at the time shares
of Common Stock are issued to a holder pursuant to exercise of Non-statutory
Stock Options, the holder will recognize ordinary income equal to the excess of
the fair market value of the shares on the date of exercise over the exercise
price.
A holder will recognize gain or loss on the subsequent sale of Common
Stock acquired upon exercise of Non-statutory Stock Options in an amount equal
to the difference between the selling price and the tax basis of the Common
Stock, which will include the price paid plus the amount included in the
holder's income by reason of the exercise of the Non-statutory Stock Options.
Provided the shares of Common Stock are held as a capital asset, any gain or
loss resulting from a subsequent sale will be short-term, mid-term or long-term
capital gain or loss depending upon the length of time the shares have been
held.
CONSEQUENCES TO THE COMPANY: INCENTIVE STOCK OPTIONS. The Company will not
be allowed a deduction for federal income tax purposes at the time of the grant
or exercise of an Incentive Stock Option. There are also no federal income tax
consequences to the Company as a result of the disposition of Common Stock
acquired upon exercise of an Incentive Stock Option if the disposition is not a
disqualifying disposition. At the time of a disqualifying disposition by an
optionee, the Company will be entitled to a deduction for the amount received
by the optionee to the extent that such amount is taxable to the optionee as
ordinary income.
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CONSEQUENCES TO THE COMPANY: NON-STATUTORY STOCK OPTIONS. Generally, the
Company will be entitled to a deduction for federal income tax purposes in the
year and in the same amount as the optionee is considered to have realized
ordinary income in connection with the exercise of Non-statutory Stock Options.
RECOMMENDATION AND REQUIRED VOTE
The Approval of the Plan Amendment requires the affirmative vote of a
majority of the shares of the Company's Common Stock present or represented and
entitled to vote on this matter at the Annual Meeting. An abstention will be
counted toward the tabulation of votes cast and will have the same effect as a
vote against the proposal. A broker non-vote, however, will not be treated as
a vote cast for or against approval of the proposal.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
APPROVAL OF THE AMENDMENT TO THE 1998 STOCK INCENTIVE PLAN TO INCREASE THE
NUMBER OF SHARES AVAILABLE FOR ISSUANCE UNDER THE 1998 PLAN, AND YOUR
PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
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STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Any stockholder who intends to present a proposal at the next Annual
Meeting of stockholders for inclusion in the Company's Proxy Statement and
Proxy form relating to such Annual Meeting must submit such proposal to the
Company at its principal executive offices by December 12, 1999.
SOLICITATION OF PROXIES
It is expected that the solicitation of proxies will be primarily by mail.
The cost of solicitation by management will be borne by the Company. The
Company will reimburse brokerage firms and other persons representing
beneficial owners of shares for their reasonable disbursements in forwarding
solicitation material to such beneficial owners. Proxies may also be solicited
by certain of the Company's directors and officers, without additional
compensation, personally or by mail, telephone, telegram or otherwise for the
purpose of soliciting such proxies.
ANNUAL REPORT ON FORM 10-K
THE COMPANY INCORPORATES HEREIN BY REFERENCE INFORMATION SET FORTH IN
THE ANNUAL REPORT ON FORM 10-KSB, WHICH HAS BEEN FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION FOR THE FISCAL YEAR ENDED JUNE 30, 1998. THE
COMPANY IS PROVIDING TO STOCKHOLDERS ALONG WITH THIS PROXY STATEMENT THE
ANNUAL REPORT ON FORM 10-KSB AND THE COMPANY'S QUARTERLY REPORTS ON FORM
10-QSB, WHICH HAVE BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
FOR THE QUARTERS ENDED SEPTEMBER 30, 1998 AND DECEMBER 31, 1998.
ON BEHALF OF THE BOARD OF DIRECTORS
/s/ Arthur H. Bernstein
-----------------------
ARTHUR H. BERNSTEIN
SECRETARY
LOS ANGELES, CALIFORNIA 90036
APRIL 30, 1999
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EXHIBIT A
CERTIFICATE OF AMENDMENT
OF
RESTATED 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 RESTATED CERTIFICATE OF INCORPORATION OF THE CORPORATION IS HEREBY
AMENDED TO CHANGE THE NAME OF THE CORPORATION FROM THE PRODUCERS ENTERTAINMENT
GROUP LTD. TO IAT RESOURCES CORPORATION.
3. THE FOREGOING AMENDMENT OF THE RESTATED CERTIFICATE OF INCORPORATION OF THE
CORPORATION HAS BEEN DULY ADOPTED BY THE 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: ATTEST:
-------------------
- ------------------------------ -----------------------------------
IRWIN MEYER, CHIEF EXECUTIVE OFFICER ARTHUR BERNSTEIN, SECRETARY
A-1
<PAGE>
EXHIBIT B
AMENDMENT
TO
1998 STOCK INCENTIVE PLAN
OF
THE PRODUCERS ENTERTAINMENT GROUP LTD.
WHEREAS, THE PRODUCERS ENTERTAINMENT GROUP LTD., A DELAWARE CORPORATION
(THE "COMPANY"), MAINTAINS THE 1998 STOCK INCENTIVE PLAN OF THE COMPANY,
EFFECTIVE AS OF APRIL 28, 1998 (THE "STOCK INCENTIVE PLAN"); AND
WHEREAS, PURSUANT TO SECTION 9 OF THE STOCK INCENTIVE PLAN, THE BOARD OF
DIRECTORS OF THE COMPANY (THE "BOARD") MAY AMEND THE STOCK INCENTIVE PLAN FROM
TIME TO TIME;
NOW THEREFORE, BE IT RESOLVED, THAT EFFECTIVE AS OF MAY 26, 1999, THE
STOCK INCENTIVE PLAN BE, AND IT HEREBY, IS AMENDED AS FOLLOWS.
1. THE FIRST SENTENCE OF SECTION 5 SHALL BE AMENDED AND RESTATED IN ITS
ENTIRETY AS FOLLOWS:
THE AGGREGATE NUMBER OF SHARES OF COMMON STOCK THAT MAY BE
ISSUED OR ISSUABLE PURSUANT TO ALL AWARDS UNDER THE 1998 PLAN
(INCLUDING AWARDS IN THE FORM OF INCENTIVE STOCK OPTIONS AND
NON-STATUTORY STOCK OPTIONS) SHALL NOT EXCEED AN AGGREGATE OF
3,000,000 SHARES OF COMMON STOCK, SUBJECT TO ADJUSTMENT AS PROVIDED
IN SECTION 7 OF THE 1998 PLAN.
RESOLVED FURTHER, THAT THIS AMENDMENT TO THE STOCK INCENTIVE PLAN SHALL BE
PRESENTED TO THE STOCKHOLDERS OF THE COMPANY FOR APPROVAL AT THE ANNUAL MEETING
TO BE HELD ON MAY 26, 1999.
B-1
<PAGE>
THE PRODUCERS ENTERTAINMENT GROUP LTD.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
The undersigned, a stockholder of THE PRODUCERS ENTERTAINMENT GROUP LTD., a
Delaware corporation, (the "Company") hereby appoints Irwin Meyer and Arthur
Bernstein, and each of them, the proxy of the undersigned, with full power of
substitution, to attend, vote and act for the undersigned at the Company's
Annual Meeting of Stockholders (the "Annual Meeting"), to be held on May 26,
1999, and at any of its postponements or adjournments, to vote and represent all
of the shares of the Company which the undersigned would be entitled to vote, as
follows:
The Board of Directors recommends a FOR vote on Proposal 1, a FOR vote on
Proposal 2, a FOR vote on Proposal 3, and a FOR vote on Proposal 4.
1. The approval of the election of five (5) Directors of the Company to hold
office until the next Annual Meeting of Stockholders and until their respective
successors have been elected.
/ / FOR / / AGAINST / / ABSTAIN
2. The approval of an amendment to the Company's Restated Certificate of
Incorporation to change the name of the Company from The Producers Entertainment
Group Ltd. to IAT Resources Corporation.
/ / FOR / / AGAINST / / ABSTAIN
3. The approval of the issuance of shares of Common Stock, issuable upon
conversion and exercise, as the case may be, of the Company's Series E
Convertible Preferred Stock and Warrants issued in connection with the
Securities Purchase Agreement with Augustine Fund, L.P., which, together with
shares of Common Stock previously issued pursuant to the Securities Purchase
Agreement with Augustine Fund, L.P., will be in excess of 20% of the number of
shares of Common Stock outstanding before issuance.
/ / FOR / / AGAINST / / ABSTAIN
4. The approval of the amendment to the Company's 1998 Stock Incentive Plan to
increase the number of shares available for issuance under the 1998 Plan.
/ / FOR / / AGAINST / / ABSTAIN
The undersigned hereby revokes any other proxy to vote at the Annual
Meeting, and hereby ratifies and confirms all that the proxy holder may lawfully
do by virtue hereof. As to any other business that may properly come before the
Annual Meeting and any of its postponements or adjournments, the proxy holder is
authorized to vote in accordance with its best judgment.
This Proxy will be voted in accordance with the instructions set forth
above. This Proxy will be treated as a GRANT OF AUTHORITY TO VOTE FOR the
approval of the election of five (5) Directors of the Company, the approval of
the amendment to the Company's Restated Certificate of Incorporation, the
approval of the issuance of shares of Common Stock, issuable upon conversion and
exercise, as the case may be, of the Company's Series E Convertible Preferred
Stock and Warrants issued in connection with the Securities Purchase Agreement
with Augustine Fund, L.P., the approval of the amendment to the Company's 1998
Stock Incentive Plan and as the proxy holder shall deem advisable on such other
business as may come before the Annual Meeting, unless otherwise directed.
(CONTINUED ON REVERSE SIDE)
<PAGE>
The undersigned acknowledges receipt of a copy of the Notice of Annual
Meeting and accompanying Proxy Statement dated April 30, 1999 relating to the
Annual Meeting.
Date: __________________, ________
__________________________________
__________________________________
Signature(s) of Stockholder(s)
(See Instructions Below)
The signature(s) hereon should
correspond exactly with the
name(s) of the stockholder(s)
appearing on the Stock
Certificate. If stock is jointly
held, all joint owners should
sign. When signing as attorney,
executor, administrator, trustee
or guardian, please give full
title as such. If signer is a
corporation, please sign the full
corporation name, and give title
of signing officer.
THIS PROXY IS SOLICITED BY
THE BOARD OF DIRECTORS OF
THE PRODUCERS ENTERTAINMENT GROUP LTD.
