<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. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of
the Commission
Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
COLLEGE TELEVISION NETWORK, INC.
------------------------------------------------------------------------
(Name of Registrant as specified in Its Charter)
----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
------------------------------------------------------------------------
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
March 2, 1998
------------------------------------------------------------------------
<PAGE>
COLLEGE TELEVISION NETWORK, INC.
5784 Lake Forrest Drive
Suite 275
Atlanta, Georgia 30328
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on April 24, 1998
The Annual Meeting of Shareholders of College Television Network, Inc. (the
"Company") will be held on Friday, April 24, 1998 at 10:00 a.m. Atlanta time, at
the Company's principal executive offices, 5784 Lake Forrest Drive, Suite 275,
Atlanta, Georgia, to consider and act upon the following matters:
1. To elect nine (9) directors to serve until the 1999 Annual Meeting of
Shareholders and until their successors are elected and qualified;
2. To ratify and approve the selection by the Board of Directors of Price
Waterhouse, L.L.P. as the Company's independent accountants for the current
year; and
3. To transact such other business as may properly come before the
meeting or any adjournment of the meeting.
Shareholders of record at the close of business on February 27, 1998 will
be entitled to notice of and to vote at the meeting or any adjournment thereof.
The stock transfer books of the Company will remain open.
All shareholders are cordially invited to attend the meeting.
By Order of the Board of Directors
/s/ Patrick G. Doran
Patrick G. Doran
Chief Financial Officer, Treasurer and Secretary
Atlanta, Georgia
March 2, 1998
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO
ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF MAILED IN
THE UNITED STATES.
<PAGE>
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
To Be Held on April 24, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of College Television Network, Inc. (the
"Company") for use at the Annual Meeting of Shareholders to be held on April 24,
1998, and at any adjournment of that meeting. All proxies will be voted in
accordance with the instructions contained therein, and if no choice is
specified, the proxies will be voted in favor of the proposals set forth in the
accompanying Notice of Meeting. Any proxy may be revoked by a Shareholder at
any time before it is exercised by giving written notice to that effect to the
Secretary of the Company.
The Board of Directors has fixed February 27, 1998 as the record date for
determining shareholders who are entitled to vote at the meeting. At the close
of business on March 2, 1998, there were outstanding and entitled to vote
8,015,148 shares of Common Stock of the Company, $.005 par value per share
("Common Stock"). Each share of Common Stock is entitled to one vote.
The Company's Annual Report for the year ended October 31, 1997 is being
mailed to the Company's shareholders with this Notice and Proxy Statement on or
about February 27, 1998. The Company will, upon written request of any
shareholder, furnish without charge a copy of its Annual Report on Form 10-KSB
for the year ended October 31, 1997, as filed with the Securities and Exchange
Commission, without exhibits. Please address all such requests to the Company,
Attention of Patrick G. Doran, Chief Financial Officer, 5784 Lake Forrest Drive,
Suite 275, Atlanta, Georgia 30328. Exhibits will be provided upon written
request and payment of an appropriate processing fee.
As used in this Proxy Statement, the terms "CTN" and "the Company" refer to
College Television Network, Inc.
The affirmative vote of the holders of a majority of the aggregate voting
power represented by the shares of Common Stock, present or represented at the
meeting, is required for the election of directors and for the approval of each
of the other matters which are to be submitted to the Shareholders at the
meeting.
Shares of Common Stock represented by executed proxies received by the
Company will be counted for purposes of establishing a quorum at the meeting,
regardless of how or whether such shares are voted on any specific proposal.
With respect to the required vote on any particular matter, abstentions will be
treated as shares present and represented, while votes withheld by nominee
recordholders who did not receive specific instructions from the beneficial
owners of such shares (so called "broker non-votes") will not be treated as
shares present or represented. Thus, for matters that require the affirmative
vote of the holders of a majority of the aggregate voting power represented by
the shares of Common Stock, present or represented at the meeting, abstentions
will have the same effect as a vote against, and broker non-votes will have no
effect.
1
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 27, 1998, the beneficial
ownership of the Company's outstanding Common Stock of (i) each person known by
the Company to own beneficially more than 5% of the Company's outstanding Common
Stock, (ii) each executive officer named in the Summary Compensation Table under
the heading "Executive Compensation" below, and (iii) all current directors and
executive officers as a group:
<TABLE>
<CAPTION>
NAME AND ADDRESS/(1)/ OF Number of Shares Percentage (%) of Common
BENEFICIAL OWNER BENEFICIALLY OWNED STOCK OUTSTANDING/(2)/
- -------------------------------------------------------------------------------------------
<S> <C> <C>
U-C Holdings, L.L.C./(3)/ 5,818,181/(4)/ 72.6
Jason Elkin 0 0
Joseph D. Gersh 0 0
John T. Dobson III 28,810/(5)/ *
Peter Kauff 364,992/(6)/ 4.6
Hollis W. Rademacher 0 0
Patrick G. Doran 0 0
Avy H. Stein 5,818,181/(4)(7)/ 72.6
Beth F. Johnston 5,818,181/(4)(7)/ 72.6
Stephen Roberts 8,321/(8)(9)/ *
Thomas Gatti 5,750/(10)/ *
6,235,554 77.8
All directors and executive
officers as a group (nine
persons)/(11)/
</TABLE>
- ------------------------
*Indicates beneficial ownership of less than one (1%) percent.
(1) The business address of Messrs. Elkin, Gersh and Doran is 5784 Lake Forrest
Drive, Suite 275, Atlanta, Georgia 30328. The business address of Mr.
Roberts is c/o The S. Roberts Company, 14724 Ventura Boulevard, Suite 503,
Sherman Oaks, California 91403, and the business address of Messrs. Dobson,
Kauff and Pearl is c/o College Television Network, Inc., 909 Third Avenue,
9th Floor, New York, New York 10022. The business address of U-C Holdings,
L.L.C., Mr. Stein and Ms. Johnston is c/o Willis Stein & Partners, L.P.,
227 West Monroe Street, Suite 4300, Chicago, Illinois 60606. The business
address of Mr. Rademacher is 55 West Monroe Street, Suite 2530, Chicago,
Illinois 60603. Except as otherwise indicated, each beneficial owner has
the sole power to vote and, as applicable, dispose of all shares of Common
Stock owned by such beneficial owner.
(2) For purposes of computing the percentage of outstanding shares of Common
Stock held by each person or group of persons named above, any security
which such person or persons have or have the right to acquire within 60
days is deemed to be outstanding but is not deemed to be outstanding for
the purpose of computing the percentage ownership of any other person.
(3) U-C Holdings, L.L.C. is a Delaware limited liability company. Willis Stein
& Partners, L.P., a Delaware limited partnership, is its Managing Member,
and has the power to direct the voting and disposition of all of the
Company Common Stock held by U-C Holdings, L.L.C. The general partner of
Willis Stein & Partners, L.P. is Willis Stein & Partners, L.L.C., a
Delaware limited liability company, of which John R. Willis, Avy H. Stein,
Beth F. Johnston, Daniel M. Gill and Daniel H. Blumenthal are the Founding
Members. Each such person may, through Willis Stein &
2
<PAGE>
Partners, be deemed to share the power to direct the voting and disposition
of all of the Company Common Stock held by U-C Holdings, L.L.C. The address
of each such entity and person is c/o Willis Stein & Partners, 227 West
Monroe Street, Suite 4300, Chicago, Illinois 60606.
(4) Does not include any shares issuable to U-C Holdings, L.L.C. upon (a) the
exercise of a Class C Warrant which is not exercisable within 60 days of
the date hereof, or (b) the exercise of rights to purchase Common Stock
pursuant to certain Equity Protection Agreements. The rights of U-C
Holdings, L.L.C. to purchase Common Stock pursuant to the Equity Protection
Agreements are exercisable only upon the exercise by third parties of
options and warrants to purchase Common Stock and, in such event, only to
the extent necessary to protect U-C Holdings, L.L.C. from the dilution of
its equity position in the Company.
(5) Includes 5,810 shares held by Mr. Dobson's wife.
(6) Includes the following which are exercisable within 60 days of the date
hereof: options covering 50,065 shares of Common Stock granted to Mr. Kauff
pursuant to the Company's 1990 Performance Equity Plan (the "Performance
Equity Plan"), 7,427 shares of Common Stock granted pursuant to the 1996
Stock Incentive Plan (the "Stock Incentive Plan") and options covering
270,000 shares of Common Stock granted pursuant to an Option Agreement,
dated September 12, 1996, as amended by resolution of the Board of
Directors dated April 8, 1997 pursuant to which the number of shares
subject to the option was increased from 67,500 to 270,000.
(7) All of such shares are held by U-C Holdings, L.L.C. Mr. Stein and Ms.
Johnston may be deemed to beneficially own the securities of the Company
owned by U-C Holdings, L.L.C. by virtue of their status as Founding Members
of Willis Stein & Partners, L.L.C., the general partner of Willis Stein &
Partners, L.P., which serves as the Managing Member of U-C Holdings,
L.L.C., as disclosed in footnote (3).
(8) Includes 2,321 shares of Common Stock held by the Roberts Family Trust of
1991, of which Mr. Roberts is co-trustee.
(9) Includes options covering 6,000 shares of Common Stock granted pursuant to
the Company's Outside Directors' 1996 Stock Option Plan (the "Outside
Directors' Plan") and the Stock Incentive Plan which are exercisable within
60 days of the date hereof.
(10) Includes options covering 750 shares of Common Stock granted to Mr. Gatti
pursuant to the Company's Stock Incentive Plan which are exercisable within
60 days of the date hereof.
(11) Includes options covering 9,500 shares of Common Stock granted pursuant to
the Company's Performance Equity Plan to a certain person who was an
executive officer of the Company until April 25, 1997, which are
exercisable within 60 days of the date hereof.
ELECTION OF DIRECTORS
Nominees for Election
The Board of Directors currently consists of eight directors. At the
annual meeting of shareholders, nine directors will be elected for a one-year
term which will expire upon the election and qualification of successor
directors at the annual meeting of shareholders held following the end of
calendar years 1998. There are no family relationships between any of the
directors or executive officers of the Company.
Each of the current members of the Board of Directors has been nominated to
stand for re-election as directors at the Annual Meeting of Shareholders and
James Wood has also been nominated for election as a director at the Annual
Meeting of Shareholders. The current directors of the Company who have been
nominated to stand for re-election are Jason Elkin, Joseph D. Gersh, John T.
Dobson III, Peter Kauff, Avy H. Stein, Beth F. Johnston, Stephen Roberts and
Hollis W. Rademacher. The following reflect certain biographical information on
the persons who have been nominated for election to the Board of Directors of
the Company at the Annual Meeting of Shareholders.
3
<PAGE>
JASON ELKIN, age 50, has been a director and Chairman of the Board of the
Company since May 13, 1997 and the Chief Executive Officer of the Company since
April 25, 1997. Mr. Elkin is currently the owner of WFXP-TV, a FOX affiliate
television station in Erie, Pennsylvania. From September 1, 1996 until April 28,
1997, Mr. Elkin was a consultant for U.S. Broadcast Group, L.L.P. (which owns
and operates seven television stations) and acted as its Chief Executive
Officer. Mr. Elkin was the Chairman and Chief Executive Officer of Future Vision
Television, Inc., which was the general partner of New Vision TV, L.P. (a
company which owned six television stations from December 1993 through March
1995, at which time all the assets of the company were sold). Prior to forming
New Vision TV, L.P., Mr. Elkin was a television broadcast manager for over 20
years. Mr. Elkin also served as a director of Complete Wellness Centers Inc.
until November 1997.
JOSEPH D. GERSH, age 43, has been a director and Vice Chairman of the
Company since May 13, 1997. Mr. Gersh is currently the owner with Mr. Elkin of
WFXP-TV, a FOX affiliate television station in Erie, Pennsylvania. From
September 1, 1996 until April 28, 1997, Mr. Gersh was a consultant for U.S.
Broadcast Group, L.L.C. (which owns and operates seven television stations) and
acted as its Chief Operating Officer. Mr. Gersh was the Chief Operating Officer
of Future Vision Television, Inc., which was the general partner of New Vision
TV, L.P. (a company which owned six television stations from December 1993
through March 1995, at which time all of the assets of the company were sold).
From November 1990 through November 1993, Mr. Gersh served as the Director of
Sales for FOX affiliate WATL-TV in Atlanta, Georgia.
JOHN T. DOBSON III, age 47, has been a director of the Company since May
13, 1997 and the President of the Company since April 25, 1997. Mr. Dobson was
the Vice President of Atlanta Market Sales for Turner Broadcasting Sales from
1986 until his resignation to join the Company on April 25, 1997. Mr. Dobson
was the Vice President and Regional Area Manager of Petry Television in Atlanta,
Georgia from 1980 through 1986, and a sales manager for American Katz
Television, in Atlanta, Georgia from 1978 through 1980.
PETER KAUFF, age 56, has been a director of the Company since January 1991
and was elected the Chief Operating Officer on April 25, 1997. Previously, he
served as Chairman of the Board of Directors of the Company since January 28,
1991 and Chief Executive Officer since February 1, 1994. Mr. Kauff was an
executive officer with Entertainment Equities, an entertainment and talent
management company, from 1988 to 1993. From 1971 to 1988, Mr. Kauff was a co-
founder and co-chairman of DIR Broadcasting, Inc. which was in the business of
radio syndication and radio and television production and was sold to Lorimar
Pictures, Inc. in 1986, following which he remained Co-Chairman until 1988 and
as a consultant up to 1990.
AVY H. STEIN, age 43, has been a director of the Company since May 13,
1997. Mr. Stein is currently a Founding Member of Willis Stein & Partners,
L.L.C., the general partner of Willis Stein & Partners, L.P., a private equity
fund formed in December 1995. From 1989 through 1994, Mr. Stein was a managing
director of Continental Illinois Venture Corporation, and was responsible for
deal flow origination, investment decision-making, transaction negotiation,
portfolio oversight and disposition. From 1980 through 1983, Mr. Stein was an
attorney with Kirkland & Ellis. From 1984 to 1985, Mr. Stein was President of
Cook Energy Corporation, an oil and gas exploration and production company, and
Vice President of Corporate Planning and Legal Affairs at Cook International,
Inc. In 1985, he founded and became CEO and majority shareholder of Regent
Corporation, which focused on making and managing acquisitions in the electronic
security and personal emergency response industries. From 1988 until joining
CIVC in 1989, Mr. Stein was a special consultant on acquisitions, dispositions
and restructurings to the CEO of NL Industries, Inc. and its affiliates. Mr.
Stein presently serves on the
4
<PAGE>
Boards of Directors of Racing Champions Corporation, The Petersen Companies,
Inc. and Tremont Corporation.
BETH F. JOHNSTON, age 37, has been a director of the Company since May 13,
1997. Ms. Johnston is currently a Founding Member of Willis Stein & Partners,
L.L.C., the general partner of Willis Stein & Partners, L.P. Prior to the
formation of Willis Stein & Partners, L.P. in December 1995, Ms. Johnston was a
managing director of Continental Illinois Venture Corporation where she worked
from 1988 through 1994. In 1986, she worked at Hewlett-Packard Company,
assisting in the management of the venture capital investments made through the
company's pension fund. From 1983 to 1985, Ms. Johnston was an associate with
The Boston Consulting Group, where she provided strategy consulting services for
Fortune 500 companies, particularly in the areas of acquisitions, manufacturing
and marketing.
STEPHEN ROBERTS, age 59, has been a director of the Company since January
28, 1991. Mr. Roberts is the president of R & G Communications, Inc., a
diversified communications firm focusing on the entertainment industry and
related businesses which he founded in July 1989. Mr. Roberts is also, and has
been since August 1985, the president of The S. Roberts Co., which provides
consulting services to the entertainment industry. In addition, Mr. Roberts has
been the president of Sandair Nevada, Inc., a sales representative and
manufacturing company, since June 1992. He presently serves as a member of the
Board of Directors of Rentrak Corp., a public company engaged in the
distribution of pre-recorded video cassettes. In addition, Mr. Roberts was the
recipient of the Pioneer Award from the International Tape Association, in
recognition of helping to create the international home video business. Mr.
Roberts is a member of the Academy of Motion Pictures, Arts and Sciences, the
Academy of Television Arts and Sciences and a former director of the Motion
Picture Association of America.
HOLLIS W. RADEMACHER, age 62, has been a director of the Company since June
24, 1997. Mr. Rademacher is currently a private investor and an investment
consultant. From 1987 until his retirement in 1993, he served as the Chief
Financial Officer of Continental Bank Corporation and Continental Bank, N.A.
("Continental") in Chicago, Illinois. Prior to being named CFO, he held various
positions with Continental including Chief Credit Officer and Executive Vice
President. He currently serves on the board of directors for Wintrust Financial
Corporation (and several of its subsidiaries), Schawk, Inc. and Cityscape
Financial Corp., all of which are publicly held companies.
JAMES WOOD, age 35, is currently the Managing Director of Media
Communications for First Union Capital Markets in Charlotte, North Carolina.
Mr. Wood has served in this position since September 1986.
All directors are elected for their terms and until their successors are
duly elected and qualified.
Recommendation of the Board of Directors concerning the Election of Directors
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR JASON ELKIN,
JOSEPH D. GERSH, JOHN T. DOBSON III, PETER KAUFF, AVY H. STEIN, BETH F.
JOHNSTON, STEPHEN ROBERTS, HOLLIS W. RADEMACHER AND JAMES WOOD TO HOLD OFFICE
UNTIL THE 1999 ANNUAL MEETING OF SHAREHOLDERS AND UNTIL THEIR SUCCESSORS ARE
ELECTED AND QUALIFY. PROXIES RECEIVED BY THE BOARD OF DIRECTORS WILL BE SO
VOTED UNLESS SHAREHOLDERS SPECIFY IN THEIR PROXY A CONTRARY CHOICE.
5
<PAGE>
Committees of the Board of Directors
The Board of Directors has established a Stock Option and Compensation
Committee comprised of Messrs. Rademacher and Roberts. Ms. Johnston and Messrs.
Rademacher and Roberts currently comprise the members of the Audit Committee of
the Board of Directors. The Stock Option and Compensation Committee is
responsible for reviewing and recommending salaries, bonuses and other
compensation for the Company's executive officers. The Stock Option and
Compensation Committee also is responsible for administering the Company's stock
option plans and for establishing the terms and conditions of all stock options
granted under these plans. The Audit Committee is responsible for recommending
independent auditors, reviewing with the independent auditors the scope and
results of the audit engagement, monitoring the Company's financial policies and
control procedures, and reviewing and monitoring the provisions of nonaudit
services by the Company's auditors. The Audit Committee is also responsible for
ongoing review of related party transactions.
The Company does not have a standing nominating committee.
Meetings of the Board of Directors and its Committees
During the year ended October 31, 1997, the Board of Directors of the
Company held five meetings, including written actions in lieu of meetings. The
Stock Option and Compensation Committee held two meetings during the year ended
October 31, 1997. The Audit Committee held no meetings during the year ended
October 31, 1997. Each of the directors attended at least 75% of the aggregate
of (i) the total number of meetings of the Board of Directors and (ii) the total
number of meetings held by all committees of the Board on which he served, in
each case during the periods that he served.
Directors' Compensation
Directors of the Company are reimbursed for reasonable travel and lodging
expenses incurred in attending meetings of the Board of Directors and any
committees on which they may serve. Directors do not presently receive any fees
for attendance or participation at Board or committee meetings. The Company
also has the Outside Directors' Plan, pursuant to which grants of options to
purchase shares of Common Stock may be made to members of the Board of Directors
who are not employees of the Company ("Eligible Directors"). A person who
satisfies the definition of Eligible Director is not automatically entitled to
option grants under the Outside Directors' Plan. The Board of Directors has the
authority under the Outside Directors' Plan to determine whether, when and in
what amount option grants will be made to Eligible Directors, and the Board is
not required to grant the same number of options to different Eligible
Directors.
Related Party Transactions
Stephen Roberts, an outside director of the Company, is also the President
and a 50% owner of R&G Communications, Inc., which is a sales representative for
the Company. During Fiscal 1997, in the ordinary course of business, the
Company paid sales commissions to R&G Communications, Inc. in an aggregate
amount of approximately $42,120.
6
<PAGE>
EXECUTIVE OFFICERS
The current executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Title
---- --- -----
<S> <C> <C>
Jason Elkin 50 Chairman of the Board and Chief
Executive Officer
Joseph D. Gersh 43 Chief Operating Officer
John T. Dobson III 47 President
Peter Kauff 56 Vice Chairman
Patrick G. Doran 41 Chief Financial Officer,
Treasurer and Secretary
Thomas G. Gatti 51 Executive Vice President
Richard Vogel 40 Chief Technical Officer and Vice President
of Product Development
</TABLE>
See "Election of Directors" for biographical information relating to each
of the foregoing executive officers other than Messrs. Doran, Gatti and Vogel
which is set forth below.
PATRICK G. DORAN, age 41, has been the Chief Financial Officer, Treasurer
and Secretary of the Company since September 10, 1997. Mr. Doran was the Vice
President-Operations and Planning for Turner Pictures Worldwide Distribution for
Turner Broadcasting System, Inc. from January 1994 through June 1997, and served
as Vice President - Group Controller for the Syndication and Licensing Group of
Turner Broadcasting System, Inc. from September 1987 through December 1993.
THOMAS G. GATTI joined the Company in July 1993 and was appointed Executive
Vice President in August 1993. Prior to joining the Company, Mr. Gatti served
since January 1992 as a Divisional Vice President for Katz Communications, a
national television/radio/cable representative firm. From July 1990 to January
1992, Mr. Gatti served as a Director of National Sales for Westinghouse
Broadcasting which owned and operated radio stations.
RICHARD VOGEL joined the Company in September 1992. He was appointed Chief
Technical Officer in September 1995, in addition to being Vice President of
Product Development, which position he has held since January 1993. Prior to
joining the Company, Mr. Vogel worked for New England Technology Group, a
systems development company, since 1983, and served as Director of Research and
Development there since January 1988.
The Company's officers are elected annually by, and serve at the pleasure
of, the Board of Directors, subject to the terms of any employment agreements.
Each of Jason Elkin, Joseph D. Gersh, John T. Dobson III, Peter Kauff, Patrick
G. Doran, Thomas Gatti and Richard Vogel has entered into an employment
agreement with the Company. See "Executive Compensation - Employment
Agreements." No family relationships exist between any directors or executive
officers of the Company.
7
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth certain information with respect to the
annual and long-term compensation of the Company's Chief Executive Officer and
each of the four other most highly compensated executive officers of the Company
for the three years ended October 31, 1997 (such executive officers are
sometimes collectively referred to herein as the "named executive officers"):
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Name and Principal Other Annual
Position/(1)/ Year Salary Bonus Compensation/(2)/ Options/(3)/
<S> <C> <C> <C> <C> <C>
Jason Elkin/(4)/ 1997 $147,577 0 0 0
Chief Executive Officer
and Chairman of the Board
Joseph D. Gersh/(4)/ 1997 $ 98,385 0 0 0
Vice Chairman
John T. Dobson III/(4)/ 1997 $133,554 0 0 0
President
Peter Kauff/(5)/ 1997 $265,404 0 0 0
Chief Operating Officer 1996 $222,103 0 0 100,000/(6)/
1995 $181,574 0 0 25,000
Thomas Gatti 1997 $209,093 0 0
1996 $169,250 0 0
1995 $165,623 0 0
</TABLE>
_____________________
(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted because such perquisites and other personal benefits
constituted less than the lesser of $50,000 or 10% of the total annual
salary and bonus for the named executive officer for such year.
(2) The Company has no long-term cash incentive plan.
(3) The number of shares of Common Stock underlying options granted shown has
been adjusted to reflect the one-for-five reverse stock split which was
effective November 12, 1997.
(4) Joined the Company on April 29, 1997. Became an officer of the Company on
May 13, 1997.
(5) Mr. Kauff served as the Chief Executive Officer and Chairman of the Board
during the fiscal years ended October 31, 1995 and 1996 and until May 13,
1997.
(6) Excludes options covering 7,426 shares of Common Stock granted to Mr. Kauff
as of January 25, 1996, pursuant to the Stock Incentive Plan. Such options
replaced options covering 7,426 shares of Common Stock granted to Mr. Kauff
in 1991 pursuant to the Company's Performance Equity Plan which were
surrendered as of September 26, 1995. 67,500 of these options were
adjusted to become 270,000 options, by action of the Board of Directors
taken April 8, 1997 pursuant to anti-dilution provisions contained in the
Option Agreement dated September 12, 1996.
8
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth information concerning stock option grants
made during Fiscal 1997 to the Named Executives. These grants are also
reflected in the Summary Compensation Table. The Company has not granted any
stock appreciation rights.
<TABLE>
<CAPTION>
Number of
Securities % of Total Options
Underlying Granted to
Options Employees in Fiscal Exercise Price Expiration
Name Granted/(1)/ Year 1997 ($/Share)/(2)/ Date
---- --------- --------- ------------ ----
<S> <C> <C> <C> <C>
Peter Kauff 202,500 3.8% 3.795 9/12/2001
</TABLE>
__________________________
(1) Grants become exercisable in equal installments on the first four
anniversaries of the date of grant. Vesting may be accelerated upon the
occurrence of certain events.
(2) The exercise price of the options granted was equal to the fair market
value of the underlying stock on the date of grant.
Fiscal Year-End Option Values
The following table sets forth information concerning unexercised options,
including the aggregate dollar value of in-the-money options, held by the Named
Executives at the end of Fiscal 1997, as adjusted to reflect the one-for-five
reverse stock split effective November 12, 1997. The closing price of the
Common Stock underlying the options on October 31, 1997 (the last trading day of
the fiscal year) on The Nasdaq Stock Market's SmallCap Market ("Nasdaq") was
$0.59375, $2.96875 as adjusted to reflect the one-for-five reverse stock split.
No options were exercised by the Named Executives in Fiscal 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
Underlying Unexercised In-the-Money
Options at FY-End (#) Options at FY-End ($)
--------------------- ---------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Peter Kauff 359,992 -- $20,522 --
Thomas Gatti 750 2,250 -- --
</TABLE>
Repricing of Options
On or around April 8, 1997, by resolution of the Board of Directors of the
Company (the "April 1997 Resolutions"), the number of shares of Common Stock
obtainable upon exercise of the Peter Kauff Stock Option Agreement dated
September 12, 1996 (the "Kauff Option Agreement") was adjusted from 337,500
shares to 1,350,000 shares. As a result of the one-for-five reverse stock split
effective
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November 12, 1997, Mr. Kauff has an option to purchase 270,000 shares of the
Company's Common Stock pursuant to the Kauff Option Agreement. In addition, the
April 1997 Resolutions provided for an adjustment in the exercise price under
the Kauff Option Agreement to an amount to be determined by a formula that
includes the market price of the Company's Common Stock at the time such options
are exercised.
Finally, pursuant to resolutions of the Board of Directors dated October 6,
1997, the exercise period for options held by Alan Pearl to purchase 60,000
shares of the Company's Common Stock at an exercise price of $1.50 per share was
extended to expire one year after the date of Mr. Pearl's termination of
employment by the Company.
Long-Term Incentive Plan Awards
No awards were made by the Company under any long-term incentive plan
during Fiscal 1997.
Employment Agreements
Messrs. Elkin, Gersh, Dobson, Kauff, Doran, Gatti and Vogel are employed by
the Company pursuant to written employment agreements.
Mr. Elkin's employment agreement has an initial term of four years from
April 29, 1997 and is automatically renewed for additional one-year periods
unless either party provides written notice of termination six months in advance
of the expiration date of the current term. Mr. Elkin received an annual salary
of $300,000 until April 29, 1998, with an annual raise of ten percent (10%) and
an annual bonus in an amount determined by the Compensation Committee. If Mr.
Elkin is terminated without cause, he would be entitled to his salary for the
remaining portion of the term. Mr. Elkin's employment agreement also contains a
covenant not to compete.
Mr. Gersh's employment agreement has an initial term of four years from
April 29, 1997 and is automatically renewed for additional one-year periods
unless either party provides written notice of termination six months in advance
of the expiration date of the current term. Mr. Gersh is entitled to receive an
annual salary of $200,000 until April 29, 1998, with an annual raise of ten
percent (10%) and an annual bonus in an amount determined by the Compensation
Committee. If Mr. Gersh is terminated without cause, he would be entitled to
his salary for the remaining portion of the term. Mr. Gersh's employment
agreement also contains a covenant not to compete.
Mr. Dobson's employment agreement has an initial term of four years from
April 29, 1997 and is automatically renewed for additional one-year periods
unless either party provides written notice of termination six months in advance
of the expiration date of the current term. Mr. Dobson is entitled to receive
an annual salary of $275,000 until April 29, 1998, with an annual raise of seven
percent (7%) and an annual bonus in an amount up to $100,000 depending on
achieving certain net operating income thresholds. Mr. Dobson is also entitled
to reimbursement for rent payments for an apartment in New York City of up to
$4,000 per month for a period of time. If Mr. Dobson is terminated without
cause, he would be entitled to his base salary for the remaining portion of the
term. Mr. Dobson can also be terminated for cause for the Company's failure to
achieve certain financial goals. Mr. Dobson's employment agreement also
contains a covenant not to compete.
Mr. Kauff's employment agreement has a term of four years from April 25,
1997. Mr. Kauff is entitled to receive an annual salary of $275,000 until April
25, 1998, with an annual raise based upon
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increases in the Consumer Price Index. Mr. Kauff's employment agreement also
contains a covenant not to compete. In the event that Mr. Kauff's employment is
terminated without cause in the first year under this employment agreement, or
he resigns in the first year, he is entitled to receive a one-time payment equal
to $500,000.
Mr. Doran's employment agreement commenced on September 10, 1997 and ends
on September 9, 2000, and may be extended by the mutual consent of the parties.
Mr. Doran is entitled to an annual salary of $150,000, subject to increase in
the discretion of the Board of Directors, and an annual bonus to be determined
by the Company on a yearly basis. The amount and calculation of Mr. Doran's
annual bonus is (i) $20,000 if the Company achieves 80% of its affiliate
relations goal (to be determined by the Company), (ii) $20,000 if the Company
achieves 80% of its stated sales goal (to be determined by the Company), and
(iii) $20,000 at the discretion of the Chief Executive Officer of the Company
and the Board of Directors. If Mr. Doran is terminated without cause, he would
be entitled to his base salary plus benefits and bonus for the remainder of the
term. Pursuant to the employment agreement, Mr. Doran was granted options to
purchase 30,200 shares of the Company's common stock. Mr. Doran's employment
agreement also includes a covenant not to compete.
Mr. Gatti's employment agreement commenced January 1, 1998 and ends on
December 31, 2000, and is automatically extended for successive one-year periods
unless either party gives notice to the other that the agreement will not be
extended at least 90 days prior to the expiration date of the then-current
extension period. Mr. Gatti is entitled to an annual salary of $200,000 during
the first year of the agreement term, with an increase of 7% on each anniversary
date of the agreement. Mr. Gatti will also receive a percentage commission
bonus as agreed upon between Mr. Gatti and the Company on a yearly basis.
Pursuant to the employment agreement, Mr. Gatti was granted options to purchase
10,000 shares of the Company's common stock. The agreement further provides
that Mr. Gatti will receive 50 Class B Management Units of U-C Holdings, L.L.C.
(currently the holder of a majority of the Company's outstanding common stock)
at a price of $50, which Units will become vested and owned by Mr. Gatti over
the 36 month period after the date of the agreement in equal proportions on each
anniversary date if, as of such anniversary date, Mr. Gatti is employed by the
Company. The Management Units will also become vested in the event of certain
transactions involving a sale of substantially all of the stock or assets of the
Company or a sale of substantially all of the equity interests or assets of U-C
Holdings, L.L.C. Mr. Gatti's employment agreement also includes non-disclosure,
non-competition and non-solicitation covenants.
Mr. Vogel's employment agreement, as amended, which runs until September 8,
1998, provides that Mr. Vogel is to receive an annual salary of $102,500 for the
12-month period ending September 8, 1997, and $110,000 for the 12-month period
ending September 8, 1998, plus cost of living increases. Mr. Vogel is also
entitled to a bonus of $7,500 for the 12-month period ending September 8, 1997,
and $15,000 for the 12-month period ending September 8, 1998; provided that such
bonus amounts are approved at such times by the Chairman. In addition, Mr.
Vogel has been granted options to purchase 2,000 and 7,500 shares of Common
Stock, respectively, pursuant to the terms of the Company's Performance Equity
Plan and in accordance with, and subject to, the terms of two stock option
agreements between Mr. Vogel and the Company, at per share exercise prices of
$14.40 and $6.80, respectively. In the event that Mr. Vogel's employment is
terminated without cause, he is to receive his base salary for the lesser of 12
months from the date of termination or the then remaining term of his employment
agreement.
The Company offers basic health, major medical and life insurance to the
employees. No retirement, pension or similar program has been adopted by the
Company.
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INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Restated Certificate of Incorporation includes certain
provisions permitted pursuant to the Delaware General Corporation Law (the
"GCL"), whereby officers and directors of the Company are to be indemnified
against certain liabilities. The Restated Certificate of Incorporation also
limits to the fullest extent permitted by the GCL a director's liability to the
Company or its Stockholders for monetary damages for breach of any fiduciary
duty as a director, except where a director (i) breaches his or her duty of
loyalty to the Company or its stockholders, (ii) fails to act in good faith or
engages in intentional misconduct or a knowing violation of the law, (iii)
authorizes payment of an unlawful dividend or stock repurchase or redemption or
(iv) obtains an improper personal benefit. This provision of the Restated
Certificate of Incorporation has no effect on any director's liability under
Federal securities laws or the availability of equitable remedies, such as
injunction or recession, for breach of fiduciary duty. The Company believes
that these provisions will facilitate the Company's ability to continue to
attract and retain qualified individuals to serve as directors and officers of
the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), requires the Company's directors and executive officers, and persons who
own more than ten (10%) percent of a registered class of the Company's equity
securities, to file with the Commission initial reports of ownership and reports
of changes in ownership of Common Stock and other equity securities of the
Company. Reporting persons are required by Commission regulations to furnish
the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company, the following persons failed to file, on a
timely basis, reports required by Section 16(a) of the 1934 Act, for the number
of transactions indicated, during Fiscal 1997:
Stephen Roberts Form 4 1 Transaction
Peter Kauff Form 4 1 Transaction
Patrick Doran Form 3 0 Transactions
SELECTION OF INDEPENDENT ACCOUNTANTS
Subject to ratification by the Shareholders, the Board of Directors has
selected the firm of Price Waterhouse, L.L.P., as the Company's independent
accountants for the year ending December 31, 1998. If the shareholders do not
ratify the selection of Price Waterhouse, L.L.P., the Board of Directors will
reconsider the matter. Representatives of Price Waterhouse, L.L.P. are expected
to be present at the Annual Meeting of Shareholders. They will have an
opportunity to make a statement if they desire to do so, and will also be
available to respond to appropriate questions from shareholders.
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OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the meeting. However, if any other matters are properly presented to the
meeting, it is the intention of the persons named in the accompanying proxy to
vote, or otherwise act, in accordance with their judgment on such matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitation by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews. Brokers, custodians and fiduciaries will be
requested to forward proxy soliciting material to the owners of stock held in
their names, and the Company will reimburse them for reasonable out-of-pocket
expenses in connection with the distribution of proxy solicitation material.
DEADLINE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be present at the 1999 Annual Meeting
of Shareholders must be received by the Company at its principal office in
Atlanta, Georgia not later than January 29, 1999 for inclusion in the proxy
statement for that meeting.
By order of the Board of Directors
/s/ Jason Elkin
----------------------------------
Jason Elkin
Chairman of the Board and
Executive Officer
March 2, 1998
THE BOARD OF DIRECTORS HOPES THAT SHAREHOLDERS WILL ATTEND THE MEETING,
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. YOUR PROMPT RESPONSE
WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING, AND WE APPRECIATE YOUR
COOPERATION.
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