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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 Section 240.14a-11(c) or Section
240.14a-12
OVERSEAS FILMGROUP, 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:
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(5) Total fee paid:
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/ / 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:
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(4) Date Filed:
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OVERSEAS FILMGROUP, INC.
8800 SUNSET BOULEVARD
THIRD FLOOR
LOS ANGELES, CALIFORNIA 90069
September 16, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Overseas Filmgroup, Inc. (the "Company") which will be held at the Ticketmaster
Screening Room, 8800 Sunset Boulevard, First Floor, Los Angeles, California on
Wednesday, October 14, 1998 at 3:00 p.m., Pacific Daylight time.
At the meeting, the stockholders of the Company will be asked to elect two
directors to the Company's Board of Directors and to ratify management's
appointment of independent auditors for 1998. The Notice of Annual Meeting and
Proxy Statement accompanying this letter describe matters upon which
stockholders will vote at the upcoming meeting, and we urge you to read these
materials carefully.
We hope you will be present to hear management's report to stockholders.
However, whether or not you plan to attend the meeting in person and
regardless of the number of shares you own, it is important to the Company
that your shares be represented at the meeting. Accordingly, we urge you to
complete, sign, date and return the accompanying proxy in the enclosed
postage pre-paid envelope as promptly as possible. If you do attend the
meeting and wish to vote your shares personally, you may revoke your proxy at
that time.
Sincerely,
/s/ Ellen Dinerman Little /s/ Robert B. Little
--------------------------- ------------------------
ELLEN DINERMAN LITTLE ROBERT B. LITTLE
President, Co-Chief Executive Officer and Co-Chief Executive Officer
Co-Chairman of the Board of Directors Co-Chairman of the Board of Directors
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OVERSEAS FILMGROUP, INC.
8800 SUNSET BOULEVARD
THIRD FLOOR
LOS ANGELES, CALIFORNIA 90069
(310) 855-1199
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 14, 1998
Notice is hereby given that the Annual Meeting of Stockholders of Overseas
Filmgroup, Inc. (the "Company") will be held at the TicketMaster Screening Room,
8800 Sunset Boulevard, First Floor, Los Angeles, California 90069 on Wednesday,
October 14, 1998 at 3:00 p.m. Pacific Daylight time (the "Annual Meeting") for
the following purposes:
1. To elect two (2) directors to serve until the Annual Meeting of
Stockholders in 2001;
2. To ratify the Company's selection of PricewaterhouseCoopers LLP as the
Company's independent auditors for the fiscal year ending December 31,
1998; and
3. To transact such other business as may properly come before the Annual
Meeting or any postponements or adjournments thereof.
The Board of Directors has fixed the close of business on September 3, 1998
as the record date ("Record Date") for determining the stockholders entitled to
receive notice of and to vote at the Annual Meeting.
You are cordially invited to attend the Annual Meeting. Whether or not you
plan to attend the Annual Meeting, you are urged to promptly date and sign the
enclosed proxy and mail it to the Company in the enclosed envelope, which
requires no postage if mailed in the United States. Return of your proxy does
not deprive you of your right to attend the Annual Meeting and to vote your
shares in person.
By Order of the Board of Directors,
/s/ William F. Lischak
-----------------------------
WILLIAM F. LISCHAK
Chief Operating Officer, Chief Financial Officer
and Secretary
September 16, 1998
Los Angeles, California
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OVERSEAS FILMGROUP, INC.
8800 SUNSET BOULEVARD, THIRD FLOOR
LOS ANGELES, CALIFORNIA 90069
_______________________
PROXY STATEMENT
____________________
This Proxy Statement is furnished to stockholders of Overseas Filmgroup,
Inc. (the "Company") in connection with the solicitation of proxies by and on
behalf of the Board of Directors of the Company (the "Board" or "Board of
Directors") for use at the Annual Meeting of Stockholders to be held at 3:00
p.m., Pacific Daylight time, on Wednesday, October 14, 1998, at the Ticketmaster
Screening Room, 8800 Sunset Boulevard, First Floor, Los Angeles, California
90069, and at any postponements or adjournments thereof. The approximate date
on which this Proxy Statement and accompanying form of proxy are first being
mailed to stockholders is September 16, 1998.
At the Annual Meeting, stockholders of the Company will be asked to
consider and vote upon the following items:
Item No.1: The election of two directors to serve until the Annual
Meeting of Stockholders in 2001; and
Item No. 2: A proposal to ratify the Company's selection of
PricewaterhouseCoopers LLP as the Company's independent
auditors for the fiscal year ending December 31, 1998.
The Board of Directors believes that election of its director nominees and
approval of Item No. 2 are in the best interests of the Company and its
stockholders and recommends to the stockholders the approval of each of the
nominees and of Item No. 2.
PERSONS ENTITLED TO VOTE AT THE ANNUAL MEETING
The Board has fixed the close of business on September 3, 1998, as the
Record Date for the determination of stockholders entitled to receive notice of
and to vote at the Annual Meeting. Only holders of record of the common stock
of the Company $.001 par value per share ("Common Stock"), at the close of
business on the Record Date will be entitled to notice of, and to vote at, the
Annual Meeting. At the close of business on the Record Date, the Company had
outstanding 5,732,778 shares of Common Stock.
Each share of Common Stock is entitled to one vote on all matters which may
come before the Annual Meeting. Pursuant to Delaware law and the Company's
Bylaws, each share of Common Stock may be voted for each nominee to be elected
to the Board of Directors and for whose election the share is entitled to vote.
The Company's stockholders are not entitled to cumulate votes with respect to
the election of directors.
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ACTION TO BE TAKEN UNDER PROXY
All proxies in the accompanying form that are properly executed and
returned in time and not revoked will be voted at the Annual Meeting and any
postponements or adjournments thereof in accordance with the specifications
thereon, or if no specifications are made, will be voted:
(i) FOR the election as a director of each of the two nominees described
herein; and
(ii) FOR ratification of the Company's selection of PricewaterhouseCoopers
LLP as the Company's independent auditors for the fiscal year ending
December 31, 1998.
The Board of Directors knows of no matters, other than those stated above,
to be presented and considered at the Annual Meeting. If, however, any other
matters properly come before the Annual Meeting or any postponements or
adjournments thereof, it is the intention of the persons named in the enclosed
proxy to vote such proxy in accordance with their judgment on such matters and
such persons shall have authority to do so. The persons named as proxies were
selected by the Board and are directors and officers of the Company. The
persons named in the enclosed proxy may also, if a quorum is not present, vote
such proxy to adjourn the Annual Meeting.
REVOCATION OF PROXY
Proxies may be revoked by a stockholder prior to their exercise by
delivering to the Company, to the Secretary's attention, a written instrument
signed by the stockholder revoking the same or a duly executed proxy bearing a
later date. In addition, a stockholder who attends the Annual Meeting may vote
his or her shares personally and thereby revoke his or her proxy at that time.
VOTE REQUIRED FOR APPROVAL
Assuming a quorum is present, the affirmative vote by the holders of a
plurality of the votes cast at the Annual Meeting will be required for the
election of directors, and the affirmative vote of a majority of the votes cast
at the Annual Meeting will be required to approve the proposal to ratify the
Company's selection of PricewaterhouseCoopers LLP as the Company's independent
auditors for fiscal 1998. For purposes of determining the number of votes cast
with respect to any voting matter, only those cast "for" or "against" are
included. However, with respect to all matters other than the election of
directors, broker non-votes (where a broker submits a proxy but indicates it
does not have discretionary authority to vote a customer's shares on one or more
matters) will not be treated as present and will have the effect of reducing the
number of affirmative votes required to achieve a majority of the votes cast,
while abstentions will be treated as present and entitled to vote and therefore
will have the effect of a vote against such proposal. With respect to the
election of directors, pursuant to Delaware law, shares as to which a
stockholder abstains or withholds from voting and broker non-votes will not be
counted as voting thereon and therefore will not affect the election of the
nominees receiving a plurality of votes cast.
The presence, in person or by proxy, of a majority of all of the
outstanding shares of the Company's Common Stock as of the Record Date is
necessary to constitute a quorum to transact business at the Annual Meeting.
Those shares present, in person or by proxy, including shares as
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to which authority to vote on any proposal being considered at the Annual
Meeting is withheld, shares abstaining as to any proposal being considered at
the Annual Meeting, and broker non-votes on any proposal being considered at the
Annual Meeting, will be considered present at the Annual Meeting for purposes of
establishing a quorum.
Certain stockholders of the Company (including, among others, Ellen
Dinerman Little, Co-Chairman of the Board of Directors, President and Co-Chief
Executive Officer of the Company, and Robert B. Little, Co-Chairman of the Board
of Directors and Co-Chief Executive Officer of the Company), who own an
aggregate of approximately 3,755,778 shares (65.5%) of the 5,732,778 shares of
the Company's Common Stock issued and outstanding as of the Record Date, are
parties to a stockholders voting agreement pursuant to which they have agreed to
vote in favor of the nominees for election as directors at the Annual Meeting
set forth herein. See "Background Regarding the Company; Certain Arrangements
Regarding Management of the Company, the Nomination and Election of Directors,
and Voting" below. If such parties do in fact cast their vote in such manner,
the election of such director nominees is assured. The Company has also been
informed that Ms. Little and Mr. Little, who are entitled to vote 3,202,778
shares (55.9%) of the 5,732,778 shares of the Company's Common Stock issued and
outstanding as of the Record Date, intend to vote in favor of the ratification
of the Company's selection of PricewaterhouseCoopers LLP as the Company's
independent auditors for the Company's fiscal year ending December 31, 1998. If
Ms. Little and Mr. Little do in fact cast their votes in such manner, the
approval of the proposal to ratify the selection of PricewaterhouseCoopers LLP
as the Company's independent auditors is also assured. See "Security Ownership
of Certain Beneficial Owners and Management" for a table of the beneficial
ownership of the Company's Common Stock by (i) each person known to the Company
to be the beneficial owner of more than 5% of the Company's Common Stock, (ii)
each current director of the Company, (iii) each of the executive officers of
the Company listed in the Summary Compensation Table under "Compensation of
Directors and Executive Officers" below, and (iv) all current executive officers
and directors of the Company as a group.
EXPENSES OF SOLICITATION
The expense of preparing, printing and mailing this Proxy Statement and the
proxies solicited hereby will be borne by the Company. In addition to the
solicitation of proxies by use of the mails, proxies may be solicited by
officers, directors and regular employees of the company (none of whom will
receive additional compensation therefor), in person, or by telephone or other
means. The Company will also request brokerage firms, nominees, custodians and
fiduciaries to forward proxy materials to the beneficial owners of shares held
of record and will reimburse such persons for their reasonable out-of-pocket
expenses in connection therewith. The Company has also engaged the services of
D.F. King & Co., Inc., a firm specializing in proxy solicitation, to solicit
proxies for a fee of approximately $3,500.
BACKGROUND REGARDING THE COMPANY; CERTAIN ARRANGEMENTS REGARDING MANAGEMENT OF
THE COMPANY, THE NOMINATION AND ELECTION OF DIRECTORS, AND VOTING
The Company was incorporated in December 1993 under the name
Entertainment/Media Acquisition Corporation" as a Specified Purpose Acquisition
Company-Registered Trademark-* in order to acquire an
- ------------------
* "Specified Purpose Acquisition Company" is a registered servicemark of GKN
Securities Corp.
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operating business in the entertainment and media industry by merger or other
similar type of transaction. From inception until October 31, 1996 its
operations were limited to organizational activities, completion of an initial
public offering in February 1995, and the evaluation and negotiation of possible
business combinations. On October 31, 1996, pursuant to an Agreement of Merger
dated as of July 2, 1996, as amended as of September 20, 1996, among the
Company, Overseas Filmgroup, Inc. - a privately-held Delaware corporation
("Pre-Merger Overseas"), and Ellen Dinerman Little and Robert B. Little (as
amended, the "Merger Agreement"), the Company merged with Pre-Merger Overseas
(the "Merger"), with the Company as the surviving corporation in the Merger.
Upon consummation of the Merger, the Company changed its name to "Overseas
Filmgroup, Inc." and succeeded to the business and operations of Pre-Merger
Overseas which had been established in 1980. In this Proxy Statement, unless
otherwise specifically indicated or the context otherwise requires, the term the
"Company" includes the Company (Overseas Filmgroup, Inc.) and its wholly owned
subsidiaries and references to the operations of the Company are to the
operations of Pre-Merger Overseas through the date of the Merger and to the
combined company following the Merger. In addition, the term "EMAC" is
sometimes used herein to refer to the Company during the period from its
inception as "Entertainment/Media Acquisition Corporation" until the Merger.
Pursuant to the Merger Agreement, upon consummation of the Merger a
Stockholders' Voting Agreement, dated as of October 31, 1996 (the "Stockholders'
Voting Agreement"), was entered into among the Company, Ellen Dinerman Little,
Robert B. Little, William F. Lischak, and certain persons who were stockholders
of the Company prior to consummation of the Company's initial public offering
(Stephen K. Bannon, Scot K. Vorse, Jeffrey A. Rochlis, Barbara Boyle, the
Hoberman Family Trust and Gary M. Stein; collectively, the "Initial
Stockholders"). The parties to the Stockholders' Voting Agreement, who as of
the Record Dated owned an aggregate of 3,755,778 (or 65.5%) of the Company's
issued and outstanding Common Stock, have agreed to use their best efforts to
cause the Board of Directors of the Company to consist of seven members during
the term of such agreement, including four individuals designated by Ms. Little
and Mr. Little and three individuals designated by the Initial Stockholders. In
accordance therewith, of the two current director nominees (Ellen D. Little and
Scot K. Vorse), Ms. Little was designated by Ms. Little and Mr. Little, and Mr.
Vorse was designated by the Initial Stockholders. Of the remaining incumbent
directors, Robert B. Little, William F. Lischak and Alessandro Fracassi have
been designated by Ms. Little and Mr. Little and Stephen K. Bannon and Gary M.
Stein have been designated by the Initial Stockholders. Each party to the
Stockholders' Voting Agreement also agreed that the following actions shall
require the affirmative vote of at least seventy-five percent of the authorized
number of directors of the Company: (i) any amendment to the Restated
Certificate of Incorporation of the Company or the Company's Bylaws that would
change the voting rights of stockholders, the number or classes of directors, or
the notice and quorum requirements for meetings of the Board of Directors, its
committees or the shareholders; (ii) a merger or sale of all or substantially
all of the assets of the Company; (iii) the designation or issuance of any
preferred stock; and (iv) any amendments to the operating guidelines described
below (collectively, the "Supermajority Provisions"). The Stockholders' Voting
Agreement terminates eight and one-half years from the date of the Merger or
sooner if the employment with the Company of Ms. Little, Mr. Little and Mr.
Lischak is terminated. In addition, the right of Ms. Little and Mr. Little, and
of the Initial Stockholders, to designate directors (but not the obligation to
vote for the designees of others) will terminate (i) as to Ms. Little and Mr.
Little, (A) if they (and Mr. Lischak) own less than 794,444 shares of the
Company's
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Common Stock, they will be entitled to designate only two directors, and (B) if
they (and Mr. Lischak) own less than 20,000 shares, they will not be entitled to
designate any director; or (ii) as to the Initial Stockholders, (A) if they own
less than 175,000 shares of the Company's Common Stock, they will be entitled to
designate only two directors, (B) if they own less than 125,000 shares, they
will be entitled to designate only one director, and (C) if they own less than
20,000 shares, they will not be entitled to designate any director. In
connection with the Merger, operating guidelines for the Board of Directors and
management of the Company were established setting forth certain general
guidelines with respect to the authority and responsibilities of officers of the
Company, the structure and responsibilities of the Board of Directors and the
Executive Committee of the Company, and certain other general business matters.
The Board of Directors has also adopted operating resolutions implementing the
Supermajority Provisions.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The directors of the Company are divided into three classes, as indicated
below. At each annual meeting of stockholders, successors to the class of
directors whose terms expire at such meeting will be elected to serve for
three-year terms and until their successors are elected and have qualified.
It is intended that the persons named in the accompanying proxy will,
unless otherwise specifically instructed, vote for the election of the two
nominees listed below to serve as directors until the Annual Meeting of
Stockholders in 2001 and until their respective successors are elected and have
qualified. Stockholders of the Company will have an opportunity on their proxy
cards to vote in favor of one or more director nominees while withholding their
authority to vote for one or more director nominees. Both of the nominees are
present directors of the Company whose terms end at the 1998 Annual Meeting and
who have consented to being named in the Proxy Statement and to serve if
elected. If either nominee, for any reason presently unknown, cannot be a
candidate for election, the shares represented by valid proxies will be voted in
favor of the remaining nominee and may be voted for the election of a substitute
nominee proposed by the Board of Directors.
Nominees Term as Director
-------- ----------------
Ellen Dinerman Little Until 2001 Annual Meeting
Scot K. Vorse Until 2001 Annual Meeting
Incumbent Directors Term as Director
------------------- ----------------
William F. Lischak Until 1999 Annual Meeting
Alessandro Fracassi Until 1999 Annual Meeting
Gary M. Stein Until 1999 Annual Meeting
Robert B. Little Until 2000 Annual Meeting
Stephen K. Bannon Until 2000 Annual Meeting
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Ellen Dinerman Little and Robert B. Little are married to each other. Gary
Stein (a designee of the Initial Stockholders) was appointed as a director by
the Board of Directors as of September 3, 1998, to fill a vacancy on the Board
of Directors created by the resignation of Jeffrey Rochlis (also a designee of
the Initial Stockholders) in July 1998. Mr. Stein was appointed to serve as a
director for the remainder of Mr. Rochlis' term (until the 1999 Annual Meeting).
INFORMATION CONCERNING THE NOMINEES AND OTHER CURRENT DIRECTORS
The information set forth below with respect to the principal occupation or
employment of each nominee and incumbent director and the name and principal
business of the corporation or other organization in which such occupation or
employment is, or has been, carried on, and other affiliations and business
experiences during the past five years, has been furnished to the Company by the
respective nominees and incumbent directors.
NOMINEES FOR DIRECTOR:
ELLEN DINERMAN LITTLE became Co-Chairman of the Board of Directors,
Co-Chief Executive Officer and President of the Company upon consummation of the
Merger on October 31, 1996. Ms. Little co-founded the predecessor of Pre-Merger
Overseas in February 1980 and served as its President and Director, as well as
the President and a Director of Pre-Merger Overseas since its incorporation in
January 1984 until the Merger. Ms. Little is a founding member of The Archive
Council, an industry support group for the University of California at Los
Angeles (UCLA) Archive Film Preservation Program, serves on the Board of
Directors of the Antonio David Blanco Scholarship Fund, an endowment fund that
annually benefits deserving students in the UCLA Department of Film and
Television, and has been an active participant in the American Film Marketing
Association, having served on various of its committees. Ms. Little is Executive
Producer of RICHARD III, which was nominated for two Academy Awards in 1995.
Ms. Little is 56 years old.
SCOT K. VORSE became a Director of EMAC in January 1995 and continued to
serve as a Director of the Company following the Merger. From January 1995 until
the Merger in October 1996, he served as Treasurer and Secretary of EMAC, and
from January 1995 until November 1996, he served as Vice President of EMAC.
From June 1991 through July 31, 1998, Mr. Vorse served as an Executive Vice
President and the Chief Financial Officer of Bannon & Co., Inc., an investment
banking firm specializing in the entertainment, media and communications
industries and a registered broker-dealer under the Securities Exchange Act of
1934, as amended. On July 31, 1998, Bannon & Co., Inc. was acquired by SG Cowen
Securities Corporation, an integrated, full service U.S. securities and
investment banking firm. Mr. Vorse is now a managing director and Co-Head of SG
Cowen Securities Corporation's media and entertainment group. Mr. Vorse is a
registered principal with the National Association of Securities Dealers, Inc.
("NASD"). From 1985 to May 1991, Mr. Vorse was employed in various capacities
by Goldman, Sachs & Co., most recently as Vice President - Corporate Finance,
where his responsibilities included advising clients on mergers and acquisitions
and private and public financings. Mr. Vorse is 38 years old.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES LISTED ABOVE.
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OTHER DIRECTORS
ROBERT B. LITTLE became Co-Chairman of the Board of Directors and Co-Chief
Executive Officer of the Company upon consummation of the Merger in October
1996. Mr. Little co-founded the predecessor of Pre-Merger Overseas in February
1980 and served as Chairman of the Board of Pre-Merger Overseas from February
1987 until the Merger and its Chief Executive Officer from February 1990 until
the Merger. Mr. Little was a founding member of the American Film Marketing
Association, the organization which established the American Film Market, and
has served multiple terms on its Board of Directors. In 1993, Mr. Little served
on the City of Los Angeles Entertainment Industry Task Force, a task force
composed of industry leaders focused on maintaining and enhancing Los Angeles's
reputation as the entertainment capital of the world. Mr. Little is also a
founding member of The Archive Council and a member of the Board of Directors of
the Antonio David Blanco Scholarship Fund. Mr. Little is 53 years old.
STEPHEN K. BANNON has been a director of the Company since its
incorporation as EMAC in December 1993. Since the Merger, he has served as Vice
Chairman of the Board of Directors of the Company and Chairman of its Executive
Committee. Previously, from the incorporation of EMAC until the October 1996
Merger, he served as Chairman of the Board of Directors of EMAC. From June 1991
through July 31, 1998, Mr. Bannon served as the Chief Executive Officer of
Bannon & Co., Inc., an investment banking firm specializing in the
entertainment, media and communications industries. On July 31, 1998, Bannon &
Co., Inc. was acquired by SG Cowen Securities Corporation, an integrated, full
service U.S. securities and investment banking firm. Mr. Bannon is now a
managing director and Co-Head of SG Cowen Securities Corporation's media and
entertainment group. As part of an investment banking assignment, from April 1,
1994 to December 31, 1995, Mr. Bannon served as acting Chief Executive Officer
of SBV, a division of Decisions Investment Corp., which operates the Biosphere 2
project near Oracle, Arizona. Mr. Bannon is a registered principal with the
NASD. Bannon & Co. succeeded to the business of Talbott, Bannon & Co., of which
Mr. Bannon was a general partner from January 1990 to June 1991. From 1985 to
1990, Mr. Bannon was employed in various capacities by Goldman, Sachs & Co.,
most recently as Vice President, Investment Banking, where his responsibilities
included advising clients on mergers and acquisitions and corporate finance in
the entertainment and media industry. Mr. Bannon is 45 years old.
WILLIAM F. LISCHAK became Chief Operating Officer, Chief Financial Officer,
Secretary and a Director of the Company upon consummation of the Merger in
October 1996. Mr. Lischak served as Pre-Merger Overseas' Chief Operating Officer
from September 1990 until the Merger and its Chief Financial Officer from
September 1988 until the Merger. Mr. Lischak, a certified public accountant,
previously had worked in public accounting, including from 1982 to 1988 with the
accounting firm of Laventhol & Horwath. Mr. Lischak has a Masters Degree in
Taxation and has taught courses in the extension program at UCLA in accounting,
finance and taxation for motion pictures and television. Mr. Lischak is 41
years old.
ALESSANDRO FRACASSI became a Director of the Company upon consummation of
the Merger. Mr. Fracassi founded Racing Pictures s.r.l. (an Italian motion
picture production and distribution company) in 1976 and has served as its
President since such date. Mr. Fracassi has extensive experience in the field of
Pan-European motion picture and television production. He has served as a Vice
President of the Italian Producers Association, an Italian entertainment
industry trade group.
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Additionally, Mr. Fracassi and his family are active investors in various
privately-held businesses in Italy. Mr. Fracassi is 46 years old.
GARY M. STEIN became a Director of the Company in September 1998. Since
January 1997, Mr. Stein has served as general partner of Britten and Stone
Music, a Nashville-based publishing and consulting business, which he co-founded
with his wife. From December 1994 until the Merger in October 1996, Mr. Stein
served on the Board of Directors of EMAC. Between March 1990 and October 1996,
Mr. Stein served as Executive Vice President - Corporate and Financial
Development for Lancit Media Entertainment, Inc., a leading producer of quality
children's television programming. During 1995 and 1996, Mr. Stein also served
on the Board of Directors of Strategy Licensing Company, a Lancit subsidiary
engaged in the licensing of popular character-based properties. Mr. Stein
currently serves on the Board of Directors of Seventh Generation, Inc., a
publicly held supplier of environmentally-friendly household products. From
1987 through February 1990, Mr. Stein was an independent corporate development
consultant to a wide variety of media and entertainment firms. From 1984 to
1987, Mr. Stein served as Senior Analyst - Investment Banking at Rosenkrantz,
Lyon and Ross, a New York Stock Exchange-member securities firm (now known as
Josephthal & Co.) where he helped form the firm's corporate finance division.
Mr. Stein is 41 years old.
INFORMATION REGARDING THE BOARD OF DIRECTORS
AND ITS COMMITTEES
BOARD MEETINGS
During the year ended December 31, 1997, the Board of Directors of the
Company met on three occasions with full attendance at such meetings except for
Allesandro Fracassi, who attended one-third of the Board meetings. The Board
has standing Executive, Compensation and Audit Committees. The Company does not
have a standing nominating or similar committee, the function of which is
handled by the Company's Board of Directors.
EXECUTIVE COMMITTEE. Ellen Dinerman Little, Robert B. Little and Stephen
K. Bannon currently serve on the Executive Committee, with Mr. Bannon serving as
Chairman of such committee. During intervals between the meetings of the Board
of Directors of the Company, the Executive Committee is entitled to exercise all
powers of the Board of Directors (except those powers specifically reserved by
Delaware law or the Company's Bylaws to the full Board of Directors) in the
management and direction of the business and conduct of the affairs of the
Company in all cases in which specific directions have not been given by the
Board of Directors. In 1997, the Executive Committee did not meet.
COMPENSATION COMMITTEE. Messrs. Bannon and Vorse currently serve on the
Compensation Committee. The Compensation Committee administers the Company's
stock option plans to the extent contemplated thereby and reviews, approves, and
makes recommendations with respect to compensation of officers, consultants and
key employees. See "Stock Option Plans" under "Compensation of Executive
Officers and Directors" below. In 1997, the Compensation Committee did not
meet.
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AUDIT COMMITTEE. The Audit Committee of the Company currently consists of
Messrs. Bannon and Vorse. The function of the Audit Committee is, among other
things, to review and approve the selection of, and all services performed by,
the Company's independent auditors; to meet and consult with and to receive
reports from, the Company's independent auditors and the Company's financial and
accounting staff; and to review and act with respect to the scope of audit
procedures, accounting practices and internal accounting and financial controls
of the Company. In 1997, the Audit Committee met on one occasion.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following "Summary Compensation Table" sets forth individual
compensation information with respect to the Company's Co-Chief Executive
Officers (Ellen Dinerman Little and Robert B. Little), and two other executive
officers of the Company during the fiscal year ended December 31, 1997 whose
total salary and bonus compensation during fiscal 1997 from the Company was in
excess of $100,000 (William F. Lischak and M.J. Peckos). Such four executives
are referred to herein as the "Named Executives." With respect to the four
Named Executives, the Summary Compensation Table provides compensation
information for services rendered to the Company during the fiscal years ended
December 31, 1995, 1996 and 1997 respectively. The Summary Compensation Table
does not include distributions made to the stockholders of Pre-Merger Overseas.
Following the Summary Compensation Table is a table that indicates whether any
of the Named Executives exercised options in fiscal 1997 and includes the number
and value of unexercised options held by the Named Executives at December 31,
1997. No stock options or stock appreciation rights were granted to the Named
Executives in 1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------- -----------------------
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND COMPENSATION OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) SARS(#) COMPENSATION($)
- ------------------ ---- --------- --------- ------------ ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
ROBERT B. LITTLE 1997 $125,000 $27,404(13) $40,511(9) 0 $16,695(11)
CO-CHAIRMAN OF THE 1996 110,158 25,000(14) -- (1) 1,100,000 18,858 (2)
BOARD AND CO-CHIEF 1995 90,000 0 37,709(3) 0 16,455 (4)
EXECUTIVE OFFICER
ELLEN DINERMAN LITTLE 1997 125,000 27,404(13) 27,184(10) 0 23,892(12)
CO-CHAIRMAN OF THE 1996 110,457 25,000(14) -- (1) 1,100,000 24,812 (5)
BOARD, CO-CHIEF 1995 90,000 0 38,720 (6) 0 30,134 (4)
EXECUTIVE OFFICER AND
PRESIDENT
WILLIAM F. LISCHAK 1997 175,000 53,365 -- (1) 0 9,410 (8)
CHIEF OPERATING OFFICER, 1996 137,198 212,500 -- (1) 0 2,994 (7)
CHIEF FINANCIAL 1995 118,933 75,090 -- (1) 0 519 (7)
OFFICER AND SECRETARY
MJ PECKOS 1997 156,483 20,000 -- (1) 0 2,923 (7)
SENIOR VICE PRESIDENT 1996 126,100 40,000 -- (1) 0 2,922 (7)
1995 67,976 0 -- (1) 0 434 (7)
</TABLE>
___________
(1) Perquisites with respect to such Named Executive did not exceed the lesser
of $50,000 or 10% of such executive officer's salary and bonus.
9
<PAGE>
(2) Represents $2,049 for the Company's contributions on behalf of such Named
Executive pursuant to the Company's 401(k) Plan and $16,809 for life
insurance premiums paid by the Company for the benefit of such Named
Executive.
(3) Includes $13,959 for automobile lease payments and maintenance expenses and
$23,750 representing one-half the cost of a home sound system.
(4) Represents life insurance premiums paid by the Company for the benefit of
such Named Executive.
(5) Represents $2,049 for the Company's contribution on behalf of such Named
Executive pursuant to the Company's 401(k) Plan and $22,763 for life
insurance premiums paid by the Company for the benefit of such Named
Executive.
(6) Includes $14,970 for automobile payments and $23,750 representing one-half
the cost of a home sound system.
(7) Represents the Company's contributions on behalf of such Named Executive
pursuant to the Company's 401(k) Plan.
(8) Represents $3,256 in contributions made by the Company on behalf of such
Named Executive pursuant to the Company's 401(k) Plan, $4,622 for life
insurance premiums paid by the Company for the benefit of such Named
Executive, and $1,532 for disability insurance premiums paid by the Company
for the benefit of such Named Executive.
(9) Includes $13,499 for automobile lease payments and $25,301 of business
management and accounting fees paid on behalf of such Named Executive by
the Company.
(10) Includes $25,301 of business management and accounting fees paid on behalf
of such Named Executive by the Company.
(11) Represents $2,625 in contributions made by the Company on behalf of such
Named Executive pursuant to the Company's 401(k) Plan, $2,131 representing
reimbursement of disability insurance premiums paid by the Company for the
benefit of such Named Executive and $11,939 in life insurance premiums for
which the Named Executive is entitled to reimbursement by the Company.
(12) Represents $2,633 in contributions made by the Company on behalf of such
Named Executive pursuant to the Company's 401(k) Plan, $2,353 representing
reimbursement of disability insurance premiums paid by the Company for the
benefit of such Named Executive and $18,906 in life insurance premiums for
which the Named Executive is entitled to reimbursement by the Company.
(13) Includes bonuses of $25,000 earned by each of such Named Executives in 1997
but which have not been paid to the Named Executive as of the date of
mailing of this Proxy Statement.
(14) Represents bonuses earned by each of such Named Executives in 1996 but
which have not been paid to the Named Executive as of the date of mailing
of this Proxy Statement.
10
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES(1)
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY OPTIONS/
UNDERLYING UNEXERCISED SARS AT DECEMBER 31,
OPTIONS/SARS AT DECEMBER 1997
31, 1997
SHARES ACQUIRED ON EXERCISABLE/
EXERCISE VALUE REALIZED EXERCISABLE/UNEXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) ($)
- ------------------------- ------------------- --------------- ------------------------- --------------------
<S> <C> <C> <C> <C>
Ellen Dinerman Little 0 $ 0 300,000/800,000 $ 0/0
Robert B. Little 0 0 300,000/800,000 0/0
William F. Lischak 0 0 0 (2) 0
MJ Peckos 0 0 0 (2) 0
</TABLE>
- -------------------------
(1) Although the Company's 1996 Basic Stock Option and Stock Appreciation
Rights Plan provides for the granting of stock appreciation rights, no
grant of such rights has been made by the Company.
(2) The Named Executive did not hold any options at December 31, 1997.
BOARD FEES
Pursuant to the Automatic Option Grant Program under the Company's 1996
Basic Stock Option and Stock Appreciation Rights Plan, each individual serving
as a non-employee Board member on October 31, 1996 was automatically granted a
non-qualified option to purchase 5,000 shares of the Company's Common Stock. In
addition, each member of the Board of Directors who is not employed by the
Company receives an automatic grant of a non-qualified option to purchase 5,000
shares of the Company's Common Stock (i) upon becoming a Board member, whether
through election at a meeting of the Company's stockholders or through
appointment by the Board of Directors, and (ii) on the date of each annual
meeting of stockholders, if such individual is to continue to serve as a Board
member after such meeting. Each such automatic option grant is, among other
things, exercisable at the fair market value of the Common Stock on the date of
the automatic grant and is generally exercisable after completion of one year of
service to the Board of Directors measured from the automatic grant date. In
addition, the Company reimburses all directors for travel and related expenses
incurred in connection with their activities on behalf of the Company. Directors
of the Company are not otherwise compensated for serving on the Board of
Directors.
INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements with its directors
(including those who are also executive officers) providing for indemnification
by the Company, including in circumstances in which indemnification is otherwise
discretionary under Delaware law. These agreements constitute binding
agreements between the Company and each of the parties thereto, thus preventing
the Company from modifying its indemnification policy in a way that is adverse
to any person who is a party to such an agreement.
11
<PAGE>
EMPLOYMENT AND RELATED AGREEMENTS
ELLEN DINERMAN LITTLE AND ROBERT B. LITTLE. Ms. Little and Mr. Little each
have an employment agreement with the Company with a five year term which
commenced on October 31, 1996 and ends on October 30, 2001. Ms. Little's and
Mr. Little's employment agreements provide for them to serve as Co-Chairs of the
Board of Directors, members of the Executive Committee of the Board of
Directors, and Co-Chief Executive Officers of the Company. Under Ms. Little's
employment agreement, she also serves as President of the Company. Pursuant to
these employment agreements, they each receive fixed annual compensation of
$125,000 and an annual bonus of $25,000, plus such additional bonus, if any, as
may be awarded to them by the Company's Board of Directors or compensation or
similar committee, with Ms. Little and Mr. Little abstaining from any vote
thereon. The employment agreements also provide for certain benefits including,
among other things, life, disability and health insurance, and an automobile
allowance. In the event that the relevant employment agreement is terminated by
Ms. Little or Mr. Little for Good Reason (as defined in the employment
agreements and which includes certain changes in control of the Company), or by
the Company other than for Cause (as defined in the employment agreements), she
or he will receive (a) a lump-sum payment equal to 250% of the greater of (i)
the aggregate of all fixed annual compensation to which she or he would
otherwise have been entitled through the balance of the term or (ii) an amount
equal to the fixed annual compensation and annual bonus for one full year; (b) a
lump-sum payment equal to 250% of the aggregate of all annual bonuses to which
she or he would otherwise have been entitled through the balance of the term;
(c) such additional payments as may be necessary to take into account and
reimburse her or him for certain excise taxes which may be applicable to
payments and benefits relating to such termination; (d) for the remainder of the
term, life, disability and health insurance and other benefits substantially
similar to those received prior to termination; and (e) automatic vesting of any
stock options held. Such termination of the relevant employment agreement would
also constitute an event of default under a $2,000,000 five year, secured
promissory note issued by the Company to Ms. Little and Mr. Little as part of
their consideration in the Merger (the "Merger Note"). In the event of the death
or permanent disability of Ms. Little or Mr. Little, she or he will be entitled
to a disability benefit or death benefit to the deceased's estate equal to the
product of two times (i) the aggregate fixed annual compensation that they were
entitled to receive for the full employment year in which the disability or
death occurs, plus (ii) an amount equal to the annual bonus.
In addition to their employment agreements, each of Ellen Dinerman Little
and Robert B. Little have entered into a Non-Competition Agreement, pursuant to
which she or he have agreed, for a period of five years commencing October 31,
1996, not to (i) own, manage, operate or control any business that competes with
the business of the Company (other than motion picture production activities and
activities that are specifically permitted under their employment agreements,
and other than the right to hold de minimis investments in publicly-held
companies) or (ii) solicit any Company employee or interfere with the
relationship of the Company with any employee, customer, supplier or lessee.
The non-competition obligations terminate earlier than the five-year term if the
individual party's employment is terminated by him or her for Good Reason or by
the Company other than for Cause (as such terms are defined in their employment
agreements), or if the Company fails to pay any amount due under the Merger Note
at a time when Ms. Little and Mr. Little do not control a majority of the Board
of Directors of the Company.
12
<PAGE>
WILLIAM F. LISCHAK. William F. Lischak has an employment agreement with
the Company with a five year term which commenced on October 31, 1996 and ends
on October 30, 2001 and which provides for his services as Chief Operating
Officer and Chief Financial Officer of the Company. Under the agreement, Mr.
Lischak receives an annual base salary of $175,000 for each of the first two
years of the term, $200,000 for the third and fourth years of the term and
$225,000 in the final year of the term. In addition, Mr. Lischak is entitled to
a guaranteed bonus of $50,000 per year payable in quarterly installments, plus
such additional bonus, if any, as may be awarded to Mr. Lischak by the Company's
Board of Directors or compensation or similar committee. Mr. Lischak also is
entitled to certain benefits including, among other things, certain health, life
and disability insurance benefits, and an automobile allowance. In the event of
a material uncured breach by the Company of his employment agreement, Mr.
Lischak is entitled to terminate the employment agreement and to receive his
base salary, fixed annual bonus, health, life and disability insurance benefits
due under the agreement through the remainder of the five-year term, and any
stock options held by Mr. Lischak will vest on the date of termination.
STOCK OPTION PLANS
The Company has two stock-based incentive compensation plans for the
Company's employees, directors and certain other persons providing services to
the Company: the 1996 Special Stock Option Plan and Agreement (the "Management
Option Plan") and the 1996 Basic Stock Option and Stock Appreciation Rights Plan
(the "Basic Plan") (collectively, the "Plans"). Under the Management Option
Plan, on October 31, 1996, each of Ms. Little and Mr. Little was granted two
non-qualified options for a total of 1,100,000 shares each of Common Stock: one
option for 537,500 shares of Common Stock ("Group A Options") at an exercise
price of $5.00 per share (exercisable on October 31, 1996 for 100,000 shares
with the balance vesting in five equal annual installments beginning each year
thereafter) and one option for 562,500 shares of Common Stock ("Group B
Options") at an exercise price of $8.50 per share (vesting in five equal annual
installments beginning on October 30, 1997). All 2,200,000 shares of Common
Stock initially reserved for issuance under the Management Option Plan were
subject to the options granted to Ms. Little and Mr. Little. Regular full-time
employees of the Company, non-employee members of the Company's Board of
Directors, and independent consultants and other persons who provide services on
a regular or substantial basis to the Company are generally eligible to
participate in the Basic Plan (under which 550,000 shares of Common Stock are
reserved for issuance). As of September 3, 1998, options to purchase an
aggregate of 45,000 shares of Common Stock were outstanding under the Basic
Plan, of which options to purchase 20,000 shares of Common Stock have an
exercise price of $5.25 per share, options to purchase 20,000 shares of Common
Stock have an exercise price of $2.375 per share, and options to purchase 5,000
shares of Common Stock have an exercise price of $2.125 per share. The Plans
are currently administered by the Compensation Committee to the extent
contemplated by the respective Plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee was established in October 1996 and
currently consists of Messrs. Bannon and Vorse. Mr. Bannon was Chairman of the
Board of Directors of EMAC during 1996 until consummation of the Merger and
currently serves as Vice Chairman of the
13
<PAGE>
Company's Board of Directors and Chairman of its Executive Committee. Mr. Vorse
served as Vice President, Treasurer, and Secretary of EMAC during 1996 through
consummation of the Merger. The Compensation Committee currently administers
both of the Company's stock option plans to the extent contemplated thereby.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The purpose of this Report is to inform the Company's stockholders of the
bases for the Chief Executive Officers' compensation for the last fiscal year
and the compensation policies applicable to the compensation of the executive
officers of the Company, including the relationship of corporate performance to
executive compensation.
EXECUTIVE COMPENSATION PHILOSOPHY. The Compensation Committee believes
that the Company's executive officers should be compensated on a basis generally
competitive with other quality companies in order to attract, retain and
motivate the qualified executives critical to the Company's long-term success.
The Compensation Committee further believes that, where possible, compensation
of such officers should be linked in part to operating performance. Often this
can be done by the grant of stock options. The Company does not apply specific
formulas or procedures in every case to link executive compensation to corporate
performance or to achieve other compensation goals. Instead, the Company can be
flexible in the manner in which it seeks to achieve its compensation goals given
the relatively small number of executive officers of the Company. This permits
the Company to structure the compensation arrangements of the Company's
executive officers with a view to the Company's compensation goals on a
case-by-case basis.
CHIEF EXECUTIVE OFFICERS' COMPENSATION FOR FISCAL 1997. Ellen Dinerman
Little and Robert B. Little became Co-Chief Executive Officers of the Company
upon consummation of the Merger in October 1996 and entered into five year
employment agreements with the Company at such time which, among other things,
govern the annual compensation paid to Ms. Little and Mr. Little (including the
compensation paid to them in 1997). The terms of such employment agreements were
negotiated between the Company and Ms. Little and Mr. Little, respectively,
prior to the Merger in 1996. In connection with the negotiation of such
employment agreements, the Company considered the advice and recommendations of
the Company's financial advisors, information publicly available or known in the
motion picture industry regarding employment arrangements of chairmen and/or
chief executive officers (who perform functions substantially similar to those
performed by Ms. Little and Mr. Little, respectively) of publicly-held
entertainment companies, and such information regarding the compensation of
executive officers in similar positions and performing similar functions in
privately-held motion picture production companies as was publicly available.
Compensation to be paid to Ms. Little and Mr. Little, respectively,
pursuant to their employment agreements (including the compensation paid to them
in 1997) is not based on any specific quantitative or qualitative criteria
relating to the Company's financial performance. The Management Option Plan is
a primary vehicle providing equity incentives to the Co-Chief Executive
Officers, thus linking their compensation to the Company's performance.
Adoption and execution of the Management Option Plan was a condition to the
Merger, and the terms of the Management Option Plan and the grants of options
pursuant thereto were negotiated between the parties to the Merger in 1996. All
2,200,000 shares of Common Stock initially reserved for issuance under the
14
<PAGE>
Management Option Plan were subject to the options granted to Ms. Little and Mr.
Little upon consummation of the Merger. The Compensation Committee does not
currently intend to grant additional stock options to Ms. Little or Mr. Little
as they now possess a significant equity interest in the Company (the options,
as well as their ownership of issued and outstanding Common Stock) which the
Compensation Committee believes aligns the interest of such officers with those
of the stockholders.
In light of the Company's working capital requirements in 1997, Ms. Little
and Mr. Little agreed to defer payment to them of certain amounts otherwise
payable to them, including, among other things, an aggregate of $100,000 in
bonuses payable to them under their employment agreements and an aggregate of
approximately $8,300 in expenses for which they are entitled to reimbursement
under their employment agreements. As of September 10, 1998, such bonuses have
not been paid and such expenses have not been reimbursed.
COMPENSATION OF OTHER EXECUTIVE OFFICERS. The Company attempts to attract
and retain the most qualified individuals to serve as executive officers of the
Company within the parameters of reasonable budgetary constraints. The
employment marketplace for highly qualified individuals with experience in the
motion picture industry is competitive. The Company competes for the services
of its executive officers with several "major" film studios which are dominant
in the motion picture industry (including The Walt Disney Company, Paramount
Pictures Corporation, Universal Pictures, Sony Pictures Entertainment, Inc.,
Twentieth Century Fox, Warner Brothers Inc. and MGM/UA) as well as numerous
independent motion picture and television production and distribution companies,
including Polygram N.V., Morgan Creek Productions, Inc., New Regency
Productions, Inc. and Gramercy Pictures, many of whom have substantially greater
resources than the Company and are able to offer more attractive non-salary
benefits than the Company. In order to attract qualified executives, the
Company generally offers total compensation packages within the competitive
range of those offered by other prospective employers. With respect to the
compensation of executive officers other than the Co-Chief Executive Officers,
the Compensation Committee relies to a great extent upon the recommendations of
the Company's Co-Chief Executive Officers who observe and evaluate the
performance of the Company's executive officers in the regular course of the
Company's business and operations. In addition, all of the Company's employees
(including the Littles and the Company's other executive officers) traditionally
receive one week's salary as a seasonal bonus each December.
The compensation of both William F. Lischak, the Chief Operating Officer,
Chief Financial Officer, Secretary and a Director of the Company, and MJ Peckos,
Senior Vice President - Domestic Distribution and Marketing of the Company was
established at the time of the Merger and took into account the recommendation
of Ms. Little and Mr. Little. Mr. Lischak served as Pre-Merger Overseas' Chief
Operating Officer from September 1990 until the Merger and Chief Financial
Officer from September 1988 until the Merger. Pursuant to the Merger Agreement,
a condition to consummation of the Merger was the execution by Mr. Lischak of an
employment agreement with the Company. As with the employment agreements of Ms.
Little and Mr. Little, the terms of Mr. Lischak's employment agreement
(including the compensation paid to him in 1997) were negotiated between the
parties to the Merger in 1996, and took into account publicly available
information regarding employment arrangements of chief operating and/or chief
financial officers of publicly-held and privately-held entertainment companies.
15
<PAGE>
1996 BASIC STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN. The Basic Plan
provides an incentive for key employees, directors and consultants of the
Company to increase stockholder value by aligning such persons own interests
with those of the Company's stockholders. The Basic Plan is administered by the
Compensation Committee which determines who shall be granted options and the
terms of such option grants. Options (other than automatic grants to
non-employees directors under the plan) will be granted at the discretion of the
Compensation Committee, generally taking into account, among other things, (i)
the recommendations of the Co-Chief Executive Officers as to grants for other
officers, (ii) prior grants to the officer, (iii) the salary level of the
officer, and (iv) subjective evaluations of performance. There is no particular
formula governing the number of option shares to be awarded to any particular
person. The Compensation Committee anticipates that most options will be
granted at the fair market value of the Common Stock on the date of grant.
POLICY REGARDING SECTION 162(m) OF THE INTERNAL REVENUE CODE. Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), generally
limits the federal income tax deduction that a public corporation may claim for
annual compensation paid to certain executive officers. The limitation with
respect to each affected executive officer is $1,000,000 per year. However, the
limitation does not apply to compensation which is performance-based and
satisfies certain other conditions set forth in Section 162(m)(4)(C) and the
regulations thereunder. With respect to the Co-Chief Executive Officers, the
Company anticipates that any compensation deemed paid by the Company in
connection with the exercise of the Group B Options granted to them will qualify
as performance-based compensation for purposes of Section 162(m) of the Code and
will not have to be taken into account for purposes of the $1 million limitation
per covered individual on the deductibility of the compensation paid to certain
executive officers of the Company. Accordingly, all compensation deemed paid
with respect to those Group B Options will remain deductible by the Company
without limitation under Section 162(m) of the Code. The Group A Options will
not qualify as performance-based grants under Section 162(m) of the Code.
Accordingly, any compensation deemed paid by the Company in connection with the
exercise of the Group A Options will have to be taken into account for purposes
of the $1 million limitation per covered individual on the deductibility of the
compensation paid to certain executive officers of the Company. As a result,
the Company may not be allowed an income tax deduction for all or part of the
compensation deemed paid in connection with the exercise of the Group A Options.
With regard to such compensation to the Co-Chief Executive Officers as well as
with regard to future executive compensation actions, the Compensation
Committee's policy is to maintain flexibility to take actions that it deems to
be in the best interests of the Company and its stockholders but which may not
necessarily qualify for tax deductibility under Section 162(m) or other sections
of the Code.
CONCLUSION. The Compensation Committee believes that the compensation
provided to the Co-Chief Executive Officers and to the Company's other executive
officers is fair, reasonable and in the best interests of the stockholders of
the Company.
SUBMITTED BY: STEPHEN K. BANNON
SCOT K. VORSE
16
<PAGE>
PERFORMANCE GRAPH
The graph below compares the cumulative total return on the Company's Common
Stock with the cumulative total return of (i) the Standard & Poor's SmallCap 600
Index ("S&P Index"), (ii) the Russell 2000, and (iii) an industry peer group
composed of other companies in the motion picture industry: The Kushner-Locke
Company, Polygram N.V., Spelling Entertainment, Inc. and Trimark Holdings, Inc.
("Peer Group"). The graph assumes $100 was invested on February 17, 1995 (the
date the Common Stock of the Company, then named Entertainment/Media Acquisition
Corporation, began trading on the OTC Bulletin Board) in shares of the Company's
Common Stock, the stocks comprising the S&P Index, the stocks comprising the
Russell 2000 and the stocks comprising the Peer Group. The returns have been
calculated assuming reinvestment of dividends; the Company has not paid any
dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG OVERSEAS FILMGROUP, INC., S&P SMALLCAP 600 INDEX,
RUSSELL 2000, AND PEER GROUP
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
OVERSEAS FILMGROUP, INC. S&P SMALL CAP 600 INDEX PEER GROUP RUSSELL 2000
<S> <C> <C> <C> <C>
Feb. 17, 95 $100.00 $100.00 $100.00 $100.00
Dec. 31, 95 $111.76 $127.07 $135.93 $125.94
Dec. 31, 96 $108.82 $154.16 $124.94 $146.71
Dec. 31, 97 $48.52 $193.60 $120.89 $179.51
</TABLE>
<TABLE>
<CAPTION>
DEC. 31, DEC. 31,
FEB. 17, '95 '95 COMPANY NAME/INDEX '96
- --------------- ----------- ------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
100....... .............. 127.07 ......... S&P SMALLCAP 600 ......... 154.16.... ..............
100....... .............. 125.94 ......... RUSSELL 2000 ......... 146.71.... ..............
100....... .............. 135.93 ......... PEER GROUP ......... 124.94.... ..............
100....... .............. 111.76 ......... OVERSEAS FILMGROUP ......... 108.82.... ..............
<CAPTION>
DEC. 31,
FEB. 17, '95 '97
- --------------- -----------
<S> <C>
100....... 193.60
100....... 179.51
100....... 120.89
100....... 48.52
</TABLE>
17
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of the Record Date, September 3,
1998, by (i) each person known to the Company to be the beneficial owner of more
than 5% of the Company's Common Stock, (ii) each current director of the
Company, (iii) each of the Named Executives listed in the Summary Compensation
Table under "Compensation of Directors and Executive Officers" above, and (iv)
all current executive officers and directors of the Company as a group. The
number of shares and percentages in the table and accompanying footnotes are
based upon 5,732,778 shares of Common Stock outstanding as of the Record Date.
The shares of Common Stock underlying immediately exercisable options, warrants
or rights, or immediately convertible securities, or shares of Common Stock
underlying options, warrants, rights or convertible securities that become
exercisable or convertible within 60 days of the Record Date, are deemed to be
outstanding for the purpose of calculating the number and percentage
beneficially owned by the holder of such options, warrants, rights or
convertible securities, but are not deemed to be outstanding for the purpose of
computing the percentage beneficially owned by any other person. Unless
otherwise indicated in the footnotes following the table, the persons as to whom
the information is given had sole voting and investment power over the shares of
Common Stock shown as beneficially owned by them, subject to community property
laws where applicable.
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF SHARES COMMON STOCK
OF COMMON STOCK BENEFICIALLY
NAME BENEFICIALLY OWNED OWNED
- ---- ------------------ -----
<S> <C> <C>
Ellen Dinerman Little (1). . . . . . . . . . 4,202,778 (2) 62.4%
Robert B. Little (1) . . . . . . . . . . . . 4,202,778 (2) 62.4%
Stephen K. Bannon . . . . . . . . . . . . . 131,324 (3) 2.3%
William F. Lischak . . . . . . . . . . . . . 249,560 (4) 4.4%
Alessandro Fracassi. . . . . . . . . . . . . 10,000 (3) *
Gary Stein . . . . . . . . . . . . . . . . . 178,000 (5) 3.1%
Scot K. Vorse. . . . . . . . . . . . . . . . 136,323 (6) 2.4%
MJ Peckos. . . . . . . . . . . . . . . . . . 0 0%
Kingdon Capital Management Corporation . . . 747,000 (7)(8) 12%
Dolphin Offshore Partners, L.P. . . . . . . 1,055,000 (9)(10) 17.4%
All current executive officers
and directors as a
group (8 persons). . . . . . . . . . . . . 4,658,425 (11) 68.9%
</TABLE>
- ---------------------
* less than one percent
(1) Such person's business address is in care of the Company, 8800 Sunset
Boulevard, Third Floor, Los Angeles, California 90069.
18
<PAGE>
(2) Includes (i) 2,953,218 shares of Common Stock held by Ellen Dinerman Little
and Robert B. Little as community property in a revocable living trust,
(ii) the right to vote 249,560 shares of Common Stock pursuant to an
irrevocable proxy granted to Ms. Little and Mr. Little by Mr. Lischak,
(iii) 500,000 shares of Common Stock subject to immediately exercisable
options granted to such person under the Management Option Plan, and (iv)
500,000 shares of Common Stock subject to immediately exercisable options
granted to such person's spouse under the Management Option Plan which
generally may only be exercised by such person's spouse (although such
person disclaims beneficial ownership of the shares subject to his or her
spouse's options). Does not include (a) 600,000 shares of Common Stock
subject to options granted to such person under the Management Option Plan
or 600,000 shares of Common Stock subject to options granted to such
person's spouse under the Management Option Plan, the exercisability of
which, in each case, is subject to certain vesting requirements. The proxy
granted to Ms. Little and Mr. Little by Mr. Lischak will continue during
Mr. Lischak's ownership of the shares, until October 30, 2001 (the
"Expiration Date"); provided, however, that such proxy terminates earlier
if the Littles own or control less than five percent of the outstanding
voting power of the Company, or if the shares to which the proxy relates
are sold in the public market. In addition until the Expiration Date, Ms.
Little and Mr. Little also have, under certain circumstances, certain
rights to acquire (while the shares are held by Mr. Lischak) the 249,560
shares of Common Stock held by Mr. Lischak. See footnote (4) below.
(3) Includes 10,000 shares of Common Stock subject to immediately exercisable
options granted pursuant to the Basic Plan.
(4) All the shares indicated are subject in the event of transfer (including
voluntary and certain involuntary transfers) to a right of first refusal or
option to purchase at the then current market price (and a right of
repurchase at $2.00 per share in the event Mr. Lischak's employment with
the Company terminates for a reason other than death, disability or the
Company's material breach of Mr. Lischak's employment agreement) in favor
of Ellen Dinerman Little and Robert B. Little during Mr. Lischak's
ownership of such shares until the Expiration Date. In addition, Mr.
Lischak has granted the right to vote all such shares to the Littles
pursuant to an irrevocable proxy which continues during Mr. Lischak's
ownership of the shares until the Expiration Date, subject to earlier
termination in certain circumstances. See footnote (2) above.
(5) Includes 11,000 shares of Common Stock owned by Mr. Stein's spouse for
which he disclaims beneficial ownership.
(6) Include (i) 10,000 shares of Common Stock subject to immediately
exercisable options granted pursuant to the Basic Plan; and (ii) 126,323
shares of Common Stock contributed by Mr. Vorse to a revocable living trust
for the benefit of Mr. Vorse's spouse.
(7) The address of Kingdon Capital Management Corporation is 152 West 57th
Street, New York, New York 10019.
(8) Includes 498,000 shares of Common Stock issuable upon exercise of Warrants.
Information provided herein was obtained from a Schedule a 13-D filed with
the Securities and Exchange Commission in March 1995 by Kingdon Capital
Management Corporation.
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<PAGE>
(9) The General Partner of Dolphin Offshore Partners is Peter E. Salas, and the
address of Mr. Salas and Dolphin Offshore Partners, L.P. is c/o Dolphin
Management, 129 East 17th Street, New York, New York 10003
(10) Includes 328,000 shares of Common Stock issuable upon exercise of Warrants.
Information provided herein was obtained from the General Partner of
Dolphin Offshore Partners, L.P.
(11) Includes 500,000 shares of Common Stock subject to immediately exercisable
options granted to Ellen Dinerman Little under the Management Option Plan,
500,000 shares of Common Stock subject to immediately exercisable options
granted to Robert B. Little under the Management Option Plan, and an
aggregate of 30,000 shares of Common Stock subject to immediately
exercisable option granted to Messrs. Bannon, Fracassi, and Vorse under the
Basic Plan.
Pursuant to a Lock-Up and Registration Rights Agreement entered into by Ms.
Little, Mr. Little and Mr. Lischak upon consummation of the Merger (the "Lock-Up
and Registration Rights Agreement"), each such person has agreed not to sell, or
otherwise dispose of (except for estate planning purposes and other limited
exceptions), any shares received by them in the Merger (2,928,218 shares held by
the Littles and 249,560 shares held by Mr. Lischak) (the "Merger Shares") for a
period which commenced on the date of the Merger and ends in three equal
installments on February 16, 1998, February 16, 1999 and February 16, 2000. As
of the date of the mailing of this Proxy Statement, 1,952,145 Merger Shares held
by the Littles and 166,373 Merger Shares held by Mr. Lischak remain subject to
the lock-up. The lock-up will terminate earlier (i) with respect to an
individual, if such person's employment with the Company is terminated Without
Cause by the Company or for Good Reason by such person (as such terms are
defined in their respective employment agreements with the Company); (ii) with
respect to 10% of the Merger Shares subject to the Lock-Up and Registration
Rights Agreement if both Littles are deceased; (iii) with respect to any Merger
Shares held by Mr. Lischak that are purchased by Ms. Little or Mr. Little or
their designees pursuant to any right of first refusal or repurchase agreement;
(iv) with respect to any Merger Shares surrendered in satisfaction of any
indemnification obligation under the Merger Agreement; and (v) with respect to a
number of Merger Shares equal in value to the outstanding principal balance
(plus interest) of the Merger Note, if the Company fails to pay any amount due
under such note.
Pursuant to the Lock-Up and Registration Rights Agreement, the Littles and
Mr. Lischak have the right on three occasions (but not more than once in any
18-month period) to require the Company, at its expense, to file a registration
statement under the Securities Act for the registration of a minimum of 250,000
of the Merger Shares released to them from the lock-up. These demand rights
terminate, as to one demand, on October 31, 2004; as to the second demand, on
October 31, 2008; and as to the third demand, on October 31, 2011. In addition,
the Littles and Mr. Lischak have unlimited "piggyback" rights in connection with
registration statements filed by the Company under the Securities Act until
October 31, 2004.
20
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's directors and executive officers and
persons who own more than 10% of the Company's Common Stock ("10% Stockholders")
to file with the Securities and Exchange Commission (the "Commission") initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Executive officers, directors and 10%
Stockholders of the Company are required by Commission regulations to furnish
the Company with copies of Section 16(a) forms they file. To the Company's
knowledge based solely upon a review of the Forms 3 and 4 and amendments thereto
furnished to the Company during its most recent fiscal year, the Forms 5
furnished to the Company with respect to its most recent fiscal year, and
written representations of the Company's directors, executive officers and 10%
Stockholders, during the fiscal year ended December 31, 1997, all Section 16(a)
filing requirements applicable to the Company's executive officers, directors
and 10% Stockholders were complied with except: (i) the Form 3 for Christopher
Trunkey, who was an executive officer from September 2, 1997 to May 1, 1998, was
not filed with the Commission until October 1, 1997, and (ii) the Form 5 for
William Lischak with respect to the Company's last fiscal year failed to reflect
a gift by Mr. Lischak to a third party of 1,000 shares of Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On October 31, 1996, as part of the consideration to them in the Merger,
Ellen Dinerman Little (Co-Chairman of the Board, Co-Chief Executive Officer and
President of the Company) and Robert B. Little (Co-Chairman of the Board and
Co-Chief Executive Officer of the Company) received the Merger Note, a
$2,000,000 secured promissory note of the Company, bearing interest at the rate
of 9% per annum, with principal and interest originally payable in monthly
installments of $41,517 over a five year period ending October 1, 2001. The
Merger Note is secured by a security interest (subordinate to the security
interest of the Company's commercial lenders) in substantially all of the
Company's assets.
In mid-1997, in order to address what the Company had anticipated was a
need for additional working capital availability occasioned by the disappointing
worldwide performance of films acquired by the Company and the maturity of
various film facilities under the Company's credit facility, the Company began
discussions with the lenders providing the Company's credit facility for such
lenders to make additional amounts available to the Company under the $5,000,000
operating facility portion of the credit facility and to extend the commitment
to lend under the credit facility. As part of the discussions, Ms. Little and
Mr. Little agreed to defer payments to them under the Merger Note. During 1997,
an aggregate of approximately $207,584 in principal and interest was paid to the
Littles under the Merger Note and approximately $290,616 was deferred. In April
1998, the Company and the lenders under the credit facility amended the
Company's credit facility, as well as extended the date of the lender's annual
review of the facility and the expiration of their commitment to lend under the
facility. As part of the amendments to the Company's credit facility, Ms.
Little and Mr. Little agreed to continue deferral of payments under the Merger
Note. Payments under the Merger Note accrue, but payment is deferred until
outstanding borrowings under the operating facility portion of the credit
facility (under which the lenders extended availability to a
21
<PAGE>
total of $7,234,000) are reduced to at least $5,000,000, the Company and the
lenders view such reduction as permanent, and not before May 1999. The Merger
Note will be extended for the period of time payments are deferred, the deferred
payments will continue to bear interest, and the monthly payments will be
adjusted to compensate for additional interest accrued pursuant to the deferral
of payments. The rights of Ms. Little and Mr. Little under the Merger Note and
related security agreement are not otherwise affected. At August 31, 1998, the
aggregate amount outstanding (including accrued interest) under such promissory
note was approximately $2,013,796 (including an aggregate of approximately
$622,751 in previously deferred payments of principal and interest).
As part of the April 1998 amendments to the Company's credit facility, Ms.
Little and Mr. Little also agreed to personally guarantee for the benefit of the
lenders under the credit facility all amounts in excess of $6,000,000 (up to a
maximum guarantee amount of $618,000) drawn under the operating facility portion
of the credit facility; provided that the guarantee will be extinguished when
the amounts outstanding under the operating facility are permanently reduced to
less than $6,000,000.
In connection with the Merger, on October 31, 1996 the Littles also
received an unsecured promissory note of the Company in the principal amount of
$137,061 representing the cash value on such date of certain life insurance
policies the ownership of which was transferred to the Company on Merger, and
under which the Company was named as the beneficiary. This promissory note
bears interest at the rate of 9% per annum. The promissory note matured on
October 31, 1997 and is currently due and payable to the Littles. At August 31,
1998, the aggregate amount outstanding (including accrued interest) under such
promissory note was approximately $162,720. In addition to the amounts payable
to the Littles under the foregoing promissory note, certain other amounts
otherwise previously payable to the Littles but deferred by them as a result of
the Company's need for additional working capital availability in 1997 are
currently due to the Littles, consisting of an aggregate of $100,000 in bonuses
to the Littles earned by them in 1996 and 1997, reimbursement of approximately
$8,300 in expenses as provided in their employment agreements with the Company
and reimbursement of certain tax payments as described below.
In December 1997 and February 1998, Ms. Little and Mr. Little loaned the
Company an aggregate of $400,000 in order to provide a portion of the funds
required by Company for the print and advertising costs associated with the
domestic theatrical release by the Company of MRS. DALLOWAY. The loan is
secured by a security interest in domestic revenues from MRS. DALLOWAY
(currently subordinate to the security interest of the Company's commercial
lenders), bears interest at the rate of 9% per annum, and is to be repaid as and
when revenues from MRS. DALLOWAY and DIFFERENT FOR GIRLS are received by the
Company (after repayment of a film facility under the Company's credit facility
related to the acquisition of domestic rights to both DIFFERENT FOR GIRLS and
MRS. DALLOWAY and print and advertising costs lent by the lenders with respect
to DIFFERENT FOR GIRLS). At August 31, 1998, the aggregate amount outstanding
(including accrued interest) pursuant to such loan was approximately $421,000.
Neo Motion Pictures, Inc., a California corporation ("Neo") involved in the
production of motion pictures, provided (on a non-exclusive basis) production
services with respect to approximately 12 motion pictures for Pre-Merger
Overseas from 1989 through the date of Merger and may provide production
services to motion pictures for Company in the future. As permitted
22
<PAGE>
by his employment agreement with the Company, Mr. Little has performed
consulting services for Neo. During 1997, Mr. Little did not perform any
consulting services for Neo and no consulting fees were paid by Neo to Mr.
Little, although, at August 31, 1998, Neo owed Mr. Little $15,990 in accrued but
unpaid consulting fees. Mr. Little and the Company co-own an option to acquire
a fifty percent interest in Neo for a purchase price of less than $60,000. The
Company is the guarantor of a promissory note of Neo payable to a third party
which matured on September 8, 1998 and under which an aggregate of approximately
$164,781 in principal and accrued interest was outstanding as of August 31,
1998. Neo is discussing with the lender under the promissory note an extension
of time for payment by Neo of the note.
Alessandro Fracassi, a Director of the Company, is the sole owner of
Original Film Company, an Italian corporation ("Original"), which owns or
controls, together with certain of its affiliates, distribution rights to 13
motion pictures for which the Company acts as sales agent pursuant to various
agreements. In exchange for licensing distribution rights to such films on
behalf of Original and its affiliates, the Company receives a sales agency fee
generally ranging from 5% to 15% of the revenues generated by such licensing,
depending on the film. During 1997, sales or licenses of distribution rights to
such films by the Company generated less than $5,000 of gross revenues to the
Company.
Mr. Fracassi is also the President and owner of Racing Pictures s.r.l., an
Italian corporation ("Racing Pictures") which is engaged in the production and
distribution of motion pictures. In 1990 and 1991, Pre-Merger Overseas licensed
to Racing Pictures various distribution rights (primarily Italian television and
video distribution rights) to approximately 86 motion pictures which the Company
owns or for which the Company controls various distribution or sales agency
rights. The licenses, which generally have terms of six to twelve years,
obligated Racing Pictures to pay aggregate minimum guarantees of approximately
$2,900,000 to Pre-Merger Overseas. With respect to video distribution rights
granted to Racing Pictures pursuant to such licenses, the Company is generally
entitled to a 25% royalty on all gross receipts of Racing Pictures relating to
Racing Pictures' exploitation of such video distribution rights. With respect
to television rights granted to Racing Pictures pursuant to such licenses,
Racing Pictures is generally entitled to a distribution fee of 25% of gross
receipts from exploitation of such television rights and recoupment of all
Racing Pictures' distribution expenses. The Company is entitled to the balance
of the gross receipts of Racing Pictures from exploitation of the television
rights. Both the video royalty payable to the Company and the Company's share
of the gross receipts from Racing Pictures' exploitation of the television
rights are applied first to Racing Pictures' recoupment of the minimum
guarantees. In September 1996, the Company and Racing Pictures agreed that
$413,000 in then past due minimum guarantees owed by Racing Pictures to the
Company were to be paid to the Company, without interest, by September 30, 1998.
In 1997, $132,000 of such amount was paid by Racing Pictures to the Company (via
the Company's retention of collected revenues on sales and licenses of motion
pictures owned or controlled by Racing Pictures and distributed by the Company
as described below), all with respect to films for which the Company owns the
copyright. In 1998 (through September 16, 1998), an additional $132,000 was
paid by Racing Pictures to the Company (in the same manner as for 1997). Upon
payment by Racing Pictures of the remaining $149,000 of minimum guarantees owed
to the Company, the Company would be entitled to retain approximately $25,760 of
the total amount as distribution fees, with the remainder of such amount to be
paid to the various parties from which distribution rights to the films licensed
to Racing Pictures were acquired.
23
<PAGE>
Racing Pictures also owns or controls distribution rights to three motion
pictures for which the Company acts as sales agent or distributor pursuant to
various agreements. In exchange for licensing distribution rights in such
films, the Company receives a fee generally ranging from 10% to 20% of the
revenues generated by such licensing, depending on the film. In each of 1997
and 1998, in connection with sales and licenses of distribution rights to such
films by the Company, the Company collected $165,000 (retaining in each year
$33,000 as fees and $132,000 as an offset against the minimum guarantees due
from Racing Pictures as described above).
From January 1989 until October 31, 1996, Pre-Merger Overseas was treated
for federal (but not state) income tax purposes as an S Corporation. As a
result, Pre-Merger Overseas's taxable income during this period was taxed for
federal purposes directly to the Pre-Merger Overseas stockholders (Ellen
Dinerman Little, Robert B. Little and William F. Lischak, Chief Operating
Officer, Chief Financial Officer, Secretary and a Director of the Company),
rather than to Pre-Merger Overseas. Pursuant to the Merger Agreement, the
Company entered into a Tax Reimbursement Agreement, dated October 31, 1996, with
Ms. Little, Mr. Little and Mr. Lischak (the "Tax Reimbursement Agreement").
Under the Tax Reimbursement Agreement, the Company agreed to reimburse these
individuals for up to $400,000 of federal income taxes payable for the short
1996 S corporation taxable year of Pre-Merger Overseas ending at the time of the
Merger (the "1996 Reimbursement Amount"). The corporate income tax returns of
Pre-Merger Overseas for its 1992 and 1993 fiscal years have been audited by the
Internal Revenue Service ("IRS") and returns for the 1994, 1995, 1996 and 1997
fiscal years remain open to audit. In the absence of the Tax Reimbursement
Agreement, the stockholders of Pre-Merger Overseas during periods prior to the
Merger, and not the Company, would be responsible for any tax liability assessed
as a result of any federal income tax audits of pre-Merger periods because of
the S corporation status for such periods. Under the Tax Reimbursement
Agreement, the Company agreed to indemnify the three stockholders of Pre-Merger
Overseas for any federal income tax liabilities of theirs (including penalties
and interest) arising from any adjustment to the income, deductions or credits
of Pre-Merger Overseas for periods prior to the Merger, together with any
federal and state income tax arising from such indemnity payments. The
Company's reimbursement obligations are limited to $150,000 (plus any of the
$400,000 1996 Reimbursement Amount not used to reimburse such individuals for
their federal income taxes for the short 1996 S Corporation taxable year),
except with respect to adjustments to the Company's income, deductions or
credits which are reasonably expected to result in decreases to the Company's
income or increases in its deductions or credits after the Merger. As of the
date of the mailing of this Proxy Statement, no amounts had been paid pursuant
to the Tax Reimbursement Agreement, although the Company and the Littles are
discussing the amount of the payments due the Littles under the provisions of
the agreement. The Company currently estimates that approximately $200,000 is
payable to the Littles under the Tax Reimbursement Agreement.
Mr. Lischak and his spouse own BLAH, Inc. which, until March 1, 1998
provided the production executive services of Mr. Lischak's spouse to the
Company in accordance with a Loan-Out Agreement dated as of March 11, 1996, (the
"Loan-Out Agreement"). Pursuant to the Loan-Out Agreement, BLAH, Inc. received
an aggregate of $73,200 in 1997 and an aggregate of $22,785 in 1998 (including
$6,400 payable to BLAH, Inc. with respect to 1997 but deferred without interest
until 1998).
24
<PAGE>
As part of the Company's exploration of additional sources of financing for
the Company, on July 28, 1998 (which was prior to Gary Stein's appointment as a
Director of the Company), the Company and Mr. Stein entered into an agreement
whereby Mr. Stein agreed to act as a finder, introducing the Company to a
potential strategic partner. In the event a transaction with the potential
strategic partner is consummated by the Company, Mr. Stein will receive a cash
fee equal to 1.5% of the total dollar market value of the transaction, although
there can be no assurance that any such transaction will be consummated. Mr.
Stein was appointed to the Board of Directors of the Company on September 3,
1998.
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The stockholders of the Company are being asked to consider a proposal to
ratify the Company's selection, on the advice of its Audit Committee, of
PricewaterhouseCoopers LLP as the Company's independent auditors for the fiscal
year ending December 31, 1998.
Representatives of PricewaterhouseCoopers LLP are expected to attend the
Annual Meeting, will have an opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions.
PricewaterhouseCoopers LLP has served as Pre-Merger Overseas' independent
auditors since 1990 and as the Company's independent auditors since the Merger,
including for the fiscal years ended December 31, 1996 and 1997. BDO Seidman,
LLP had previously served as EMAC's independent auditors from inception of EMAC
through the date of the Merger. The change of accountants at the time of the
Merger was based on the desire of the Board of Directors of the Company to
provide continuity of independent auditors in performing accounting services for
the business and operations of the Company. Upon consummation of the Merger,
the Company succeeded to the business and operations of Pre-Merger Overseas.
The results of operations and financial position of the Company, for periods and
dates prior to the Merger, are the historical results of operations and
financial position of Pre-Merger Overseas for such periods and dates. None of
BDO Seidman, LLP's reports rendered to EMAC during their service as EMAC's
independent auditors contained adverse opinions or disclaimers of opinion and
none of such reports were qualified as to uncertainty, audit scope, or
accounting principles. There were no disagreements between EMAC and BDO
Seidman, LLP on any matters of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures which, if not resolved to
BDO Seidman, LLP's satisfaction, would have caused them to make reference to the
subject matter of the disagreement in connection with any of their reports. The
appointment of PricewaterhouseCoopers LLP to serve as the Company's independent
auditors after the Merger was approved by the Company's Board of Directors and,
at the October 1996 Special Meeting of Stockholders, was also approved by the
Company's stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
25
<PAGE>
OTHER MATTERS
The Board of Directors is not aware of any other matter that may properly
come before the Annual Meeting. If any other matter not mentioned in this Proxy
Statement is properly brought before the Annual Meeting, the persons named in
the enclosed form of proxy will have discretionary authority to vote all proxies
with respect thereto in accordance with their judgment and applicable law.
STOCKHOLDER PROPOSALS
Stockholders are advised that any stockholder proposals intended for
consideration at the 1999 Annual Meeting of Stockholders and submitted to the
Company in accordance with Rule 14a-8 under the Securities Exchange Act of 1934,
as amended, must be received by the Company at its principal executive offices
on or before May 19, 1999 in order to be considered for inclusion in the
Company's proxy materials for the 1999 Annual Meeting. Any stockholder
proposals intended for consideration at the 1999 Annual Meeting of Stockholders
and submitted outside the processes of Rule 14a-8 must be received by the
Company at its principal executive offices not later than the close of business
on May 19, 1999 nor earlier than the close of business on April 19, 1999 in
order to be considered for inclusion in the Company's proxy materials for the
1999 Annual Meeting. Proposals, as well as any questions related thereto,
should be submitted in writing to the Secretary of the Company. It is
recommended that stockholders submitting proposals utilize certified mail,
return receipt requested. Proposals may be included in the proxy statement for
the 1999 Annual Meeting if they comply with certain rules and regulations
promulgated by the Securities and Exchange Commission (including Rule 14a-8) and
if the stockholder submitting any such proposal has complied with the Company's
Bylaws.
INCORPORATION BY REFERENCE
To the extent this Proxy Statement has been or will be incorporated by
reference into any filing by the Company under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, the sections of
this Proxy Statement entitled "Compensation Committee Report on Executive
Compensation" and "Performance Graph" shall not be deemed to be so incorporated
unless specifically otherwise provided in any such filings, and such sections
shall not otherwise be deemed filed under such Acts.
ANNUAL REPORT
Concurrently with this Proxy Statement, the Company is providing to each
stockholder a copy of its Annual Report to Stockholders, which contains the
Company's Annual Report on Form 10-K, exclusive of exhibits, as well as the
Company's most recent Quarterly Report on Form 10-Q, exclusive of exhibits, for
the quarter ended June 30, 1998. If for any reason a stockholder entitled
26
<PAGE>
to vote at the Annual Meeting does not receive the accompanying Annual Report to
Stockholders and Form 10-Q, the Company will provide such stockholder a copy
(without charge) upon the stockholder's written request. Requests should be
directed to Overseas Filmgroup, Inc., Attention: Secretary, 8800 Sunset
Boulevard, Third Floor, Los Angeles, California 90069.
By Order of the Board of Directors,
/s/ William F. Lischak
-----------------------------
William F. Lischak
Chief Operating Officer, Chief Financial Officer
and Secretary
Los Angeles, California
September 16, 1998
STOCKHOLDERS ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY
CARD IN THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION
IS APPRECIATED.
27
<PAGE>
OVERSEAS FILMGROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 14, 1998
THIS REVOCABLE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned stockholder of Overseas Filmgroup, Inc. (the "Company")
hereby nominates, constitutes and appoints Ellen Dinerman Little, Robert B.
Little and William F. Lischak, and each of them, the agent and proxy of the
undersigned, each with full power of substitution, to vote all shares of Common
Stock of the Company which the undersigned is entitled to vote at the 1998
Annual Meeting of Stockholders of the Company to be held at Los Angeles,
California on October 14, 1998 at 3:00 p.m. Pacific Daylight time, and at any
and all postponements or adjournments thereof, as fully and with the same force
and effect as the undersigned might or could do if personally present thereat.
<TABLE>
<S> <C> <C>
THIS REVOCABLE PROXY WILL BE VOTED AS DIRECTED BELOW. IN THE ABSENCE OF ANY DIRECTION, THIS PROXY WILL BE VOTED PLEASE MARK
FOR ALL NOMINEES OF THE BOARD OF DIRECTORS IN THE ELECTION OF DIRECTORS AND FOR RATIFICATION OF THE COMPANY'S YOUR VOTES AS /X/
SELECTION OF PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR FISCAL 1998. INDICATED IN
THIS EXAMPLE
</TABLE>
<TABLE>
<S> <C>
1. Election of Directors--Election of Ellen Dinerman Little and Scot K. Vorse to serve on the Board of Directors of the
Company until the 2001 Annual Meeting of Stockholders and until their respective successors are elected and have
qualified.
/ / FOR ALL NOMINEES / / WITHHOLD AUTHORITY FOR ALL NOMINEES
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ELECTION OF ANY PERSON NOMINATED BY THE BOARD OF DIRECTORS, MARK FOR ABOVE
AND CROSS OUT THE NAME OR NAMES OF THE PERSON OR PERSONS WITH RESPECT TO WHOM AUTHORITY IS WITHHELD.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES.
(CONTINUED ON REVERSE SIDE)
IMPORTANT: PLEASE DATE AND SIGN THE PROXY ON REVERSE SIDE
<PAGE>
<TABLE>
<S> <C>
2. Independent Auditors--To ratify the selection of Price Waterhouse LLP to serve as the Company's independent auditors for
the fiscal year ending December 31, 1998.
/ / FOR / / AGAINST / / ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF ITS SELECTION OF INDEPENDENT AUDITORS.
3. OTHER BUSINESS--TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY POSTPONEMENTS OR
ADJOURNMENTS THEREOF. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE ANNUAL MEETING OF STOCKHOLDERS OR ANY ADJOURNMENTS THEREOF.
</TABLE>
Mark this box if you plan to attend the Annual Meeting. / /
Signature
------------------------------
Signature
------------------------------
Date
------------------------------
Note: Please sign as the name
appears hereon. Joint owners
should each sign. When signing
as attorney, executor,
administrator, trustee or
guardian, please give full
title as such.
