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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB/A
(Amendment No.1)
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO ______________
COMMISSION FILE NUMBER 0-24984
DOVE ENTERTAINMENT, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
CALIFORNIA 95-4015834
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
8955 BEVERLY BOULEVARD
LOS ANGELES, CALIFORNIA 90048
- ---------------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (310) 786-1600.
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $.01 per share.
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this
Form 10-KSB. [ ]
The issuer's revenues for the fiscal year ending December 31, 1996 were
approximately $26,853,000
As of April 24, 1997, the aggregate market value of the voting stock held by
non-affiliates of the issuer was approximately $5,500,588 based upon the average
closing bid and asked price of such stock on such date.
Transitional Small Business Disclosure format: Yes [ ] No [X]
Shares outstanding as of April 24, 1997: 5,523,766
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The undersigned registrant (the "Registrant") hereby amends the
following items of its Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1996 (the "Report") as follows:
PART III
The Registrant hereby deletes the information set forth under Items 9,
10, 11 and 12 of the Report and replaces such items in their entirety as set
forth below.
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors of the Dove Entertainment, Inc. ("Dove" or "the Company") are
elected annually by the shareholders to serve for a term of one year or until
their successors are duly elected and qualified. Executive officers are elected
by and serve at the discretion of the Board of Directors (the "Board"), subject
to the rights, if any, of the executive officer under any contract of
employment. Michael Viner and Deborah Raffin are spouses; no other family
relationships exist between or among any of the executive officers or directors
of the Company.
The following table sets forth certain biographical information with
respect to the directors and executive officers of the Company.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Michael Viner(1) 53 President, Chief Executive Officer and Director
Deborah Raffin 44 Executive Vice President, Secretary and Director
Lee Ruttenberg 38 Acting Chief Financial Officer
Neil Topham 48 Chief Financial Officer Designee
Ronald M. Ziskin 45 Chief Operating Officer of Dove Four Point, Inc.
Steven Soloway 36 General Counsel, Vice President of Business Affairs
and Director
Gerald Leider(1) 65 Chairman of the Board and Director
James Belasco 61 Director
Steven F. Mayer 37 Director
Ronald Lightstone(1) 58 Director
John T. Healy 57 Director
Kenneth F. Gorman 58 Director
</TABLE>
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(1) Member of Executive Committee.
Mr. Viner and Ms. Raffin have been directors of the Company since its
inception in 1985. James Belasco has been a director of the Company since being
named to fill a vacancy on the Board in April 1995. Gerald Leider has been a
director since June 1995. Mr. Mayer has been a Director since November 1996.
Steven Soloway has been a director since December 1996. Messrs. Lightstone,
Healy and Gorman have been directors since March 1997.
Pursuant to the placement agent agreement entered into by the Company
in December 1995 in connection with a private placement, the Company agreed that
the placement agent, Whale Securities Co., L.P. ("Whale Securities"), and its
successors will have the right to designate a nominee for election, at its or
their option, either as a member or a non-voting advisor to the Board,
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and the Company agreed to use its reasonable best efforts to cause such nominee
to be elected and continue in office until December 14, 1997. The Company
believes that this right has been orally waived but has been advised by such
placement agent that it does not believe that any such waiver is in effect, and
that it has named Steven Mayer as its designee. According to a Schedule 13D
filed on February 10, 1997 by Norton Herrick, Whale Securities has agreed to
either (i) assign to Mr. Herrick its rights to nominate a member to the Board or
(ii) not exercise such right without the prior approval of Mr. Herrick. In
addition, until December 1, 1999, the managing underwriter of the Company's
initial public offering, Joseph Stevens & Company, L.P., ("Joseph Stevens &
Company") has the right to designate either one member of the Board or a person
to attend and observe meetings of the Board. Mr. Mayer has been designated to
serve on the Board by Joseph Stevens & Company.
Pursuant to the Four Point Entertainment, Inc. ("Four Point")
acquisition agreement entered into by the Company in April 1996, the Company
agreed to use its best efforts to appoint Shukri Ghalayini to the Board. In June
1996, Mr. Ghalayini's employment with the Company terminated. The Company
believes that Mr. Ghalayini's right to be on the Board has terminated and he is
not currently serving on the Board.
Pursuant to a stock purchase agreement (the "Stock Purchase Agreement")
entered into by the Company in March 1997 in connection with a private
placement, the Company agreed that Media Equities International, LLC ("MEI")
shall have the right, for so long as it owns at least 750,000 shares of Common
Stock (the "Common Stock"), par value $.01 per share (assuming for this purpose
the full conversion of all shares of 6% Series B Preferred Stock of the Company,
par value $.01 per share (the "Series B Preferred Stock"), then held by MEI), to
nominate three members of the Company's Board. Messrs. Lightstone, Healy and
Gorman have been designated pursuant to such right. In addition, in the event
that the Company breaches certain covenants of such stock purchase agreement and
such breach is continuing unremedied for a period of thirty (30) days after
notice thereof, MEI will have the right to nominate two additional directors
effectively giving MEI the right to nominate a majority of the Board, which
directors shall continue to serve until the earlier of the next occurring annual
meeting of the shareholders of the Company following the cure of any such breach
or until MEI no longer owns at least such 750,000 shares of Common Stock.
As part of the transactions pursuant to which MEI, Mr. Viner and Ms.
Raffin acquired shares of Series B Preferred Stock and Series C Preferred Stock,
respectively, MEI, Mr. Viner and Ms. Raffin entered into a shareholders voting
agreement, dated March 27, 1997 pursuant to which Mr. Viner and Ms. Raffin
agreed to vote all of their voting stock for the election as directors of all
director nominees of MEI, to the extent MEI had at such time a right to make
such nominations in accordance with certain applicable agreements, to use their
reasonable best efforts to cause their affiliates to vote their voting stock for
such nominees and to use their reasonable best efforts to take all steps
necessary to cause the election of such nominees.
MICHAEL VINER is the President and Chief Executive Officer, and was
co-founder of the Company in 1985. Mr. Viner also produces films for the
Company's film division and, in addition, has produced various other television
programs, movies and miniseries and feature films. Mr. Viner is the author of
"365 Ways You Can Save The Earth," "Final Exit for Cats" and the Company's
"Final Exit for Barney." Mr. Viner's professional activities prior to founding
the Company include producing records for hit artists such as Sammy Davis, Jr.
(platinum record "Candy Man"), Frank Sinatra, George Burns and Hank Williams,
Jr. Mr. Viner headed a division of MGM Records from 1971 to 1976, and he has
also produced two presidential inaugurals.
DEBORAH RAFFIN is the co-founder and Executive Vice President of the
Company and President of the Company's Dove Kids and Dove Multimedia divisions.
She has been a director of the Company since its founding and has served as
Secretary since March 1995. Ms. Raffin oversees the entire audio book department
and is involved in producing, directing, casting, new media ventures,
acquisitions, new interactive books, tapes and computer programs, films and
other
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Company projects. Ms. Raffin also continues to star in films. These include
"Touched By Love," "Noble House" and "Haywire." She also co-produced and starred
in the highly-rated CBS movie-of-the-week based on LaVyrle Spencer's bestselling
novel, "Home Song." Ms. Raffin co-produced "Family Blessings," another film
based on a Spencer novel. In 1993, she received a Grammy Award as producer for
the audio, "Audrey Hepburn's Enchanted Tales."
LEE RUTTENBERG joined the Company as Acting Chief Financial Officer in
October, 1996. Mr. Ruttenberg is a consultant, and has been providing business
advisory services, to the entertainment and multimedia industries since 1988,
through Lee Ruttenberg & Associates. From 1986 to 1987, he was employed by
Carolco Pictures, Inc. as its Controller. Mr. Ruttenberg is a Certified Public
Accountant and was employed, prior to working for Carolco Pictures, Inc., for
approximately six years by two of the former big eight public accounting firms,
Ernst & Whinney - one of the predecessor firms to Ernst & Young LLP, and
Deloitte, Haskins & Sells - one of the predecessor firms to Deloitte & Touche
LLP.
NEIL TOPHAM joined the Company in April 1997 as an advisor. Effective
May 1, 1997, Mr. Topham will be Acting Chief Financial Officer of the Company.
From March 1996 through April 1997, Mr. Topham has been a consultant providing
business advisory services in the publishing and retail industries. He was
employed by HarperCollins Publishers, Inc., as Chief Financial Officer from 1990
until March 1996, and prior thereto served in the capacity of Vice President
Finance and Systems from 1987 until 1990. Prior to joining HarperCollins
Publishers, Inc., Mr. Topham was Director of Finance for William Collins
Publishers Pty. Ltd., Sydney, Australia. Mr. Topham is a Chartered Accountant
(Australia) and was employed by Priestley & Morris, Chartered Accountants for
seven years prior to joining William Collins Pty. Ltd.
RONALD M. ZISKIN has been the Chief Operating Officer of the Company's
Dove Four Point, Inc. ("Dove Four Point") subsidiary since its creation by the
Company in April 1996. Mr. Ziskin co-founded and served as President of Four
Point from 1984 to April 1996,. As such, Mr. Ziskin was responsible for the
development and production of "American Gladiators," and created the successful
franchises of "Haunted Lives" and "Dead Ghosts" prime time specials for CBS and
UPN, respectively. Mr. Ziskin has also produced and executive produced the Fox
prime time drama "Likely Suspects," the "Sandblast" franchise for MTV and "The
Gordon Elliott Show" pilot for CBS/20th TV.
STEVEN SOLOWAY has been a director of the Company since December 1996
and joined the Company as its General Counsel and Vice President of Business
Affairs in March 1995. Prior to joining the Company, Mr. Soloway was engaged in
business litigation practice; most recently at the law firms of Russ, August &
Kabat from June 1994 through March 1995, Tucker & Baum from March 1993 through
May 1994 and Mayer Glassman & Gaines from January 1991 through February 1993.
GERALD LEIDER has been a director of the Company since June, 1995 and
Chairman of the Board since June 1996. Since June 1996, Mr. Leider has served as
a part-time consultant to the Company through his management company, The Jerry
Leider Company. Since January 1991, Mr. Leider has been President of The Jerry
Leider Company, a producer of feature films for theatrical, television and cable
distribution. Mr. Leider is a past Co-Chairman of the Caucus for Producers,
Writers and Directors and, from 1984 to 1991 was Chairman and Chief Executive
Officer of ITC Entertainment Group, a worldwide film and television production
and distribution company. From 1969 to 1977, Mr. Leider held several positions
with Warner Bros. Television, including President
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and Executive Vice President in charge of foreign production. Mr. Leider was
educated at Syracuse University and Bristol University, England where he was a
Fullbright Scholar.
JAMES BELASCO, a director of the Company since June 1995, has been a
Professor of Management at San Diego State University since 1971. Mr. Belasco
also provides business consulting services through his affiliation with
Management Development Associates and is the author of such books as "Teaching
The Elephant to Dance," "Empowering Change in Your Organization," "Flight of The
Buffalo," and "Soaring to Excellence."
STEVEN F. MAYER has served as a director of the Company since November
1996. Since November 1996, Mr. Mayer has been a managing director of Libra
Investments, Inc., an investment and merchant banking firm. From June 1994 until
November 1996, Mr. Mayer was the president and managing director of Aries
Capital Group, LLC, a private investment firm. From April 1992 until June 1994,
Mr. Mayer was an investment banker with Apollo Advisors, L.P. and Lion Advisors,
L.P., affiliated private investment firms. Prior to that time, Mr. Mayer was a
lawyer with Sullivan & Cromwell specializing in mergers, acquisitions,
divestitures, leveraged buyouts and corporate finance. Mr. Mayer is a member of
the Boards of Chicago Pizza & Brewery, Inc., a restaurant company and
Electropharmacology, Inc., medical device manufacturer. In addition, Mr. Mayer
has served as the chairman or a member of numerous creditors' committees. Mr.
Mayer is a graduate of Princeton University and Harvard Law School.
RONALD LIGHTSTONE has been a director of the Company since March 1997.
Mr. Lightstone has served as Chairman of Multimedia Labs, Inc., a manufacturer
of multimedia equipment, since February 1994. From March 1992 to April 1994, he
was a member of the Board of Starsight Entertainment, a provider of an
electronic on screen television guide. Since October 1993, Mr. Lightstone has
been providing advisory services and engaging in investing activities in all
media. From December 1990 to October 1993, he was Chief Executive Officer and a
member of the Board of Spelling Entertainment Group, Inc. From September 1982 to
September 1987 he was Senior Vice President of Viacom International Inc., and
from December 1980 until September 1982 he was Senior Vice President, Business
Affairs of the Viacom Entertainment Group. Prior to that he was Vice President
and General Counsel of Viacom from November 1975 until December 1980. Mr.
Lightstone is a graduate of Columbia University and New York University School
of Law.
KENNETH F. GORMAN has been a director of the Company since March 1997.
Since October 1987, he has been Managing Director and a co-owner of Apollo
Partners Ltd., which is involved in the acquisition of companies in the media,
communications, entertainment and broadcasting fields. Mr. Gorman originally
joined Viacom in 1971 and served in various capacities, including Executive Vice
President and a member of the Board of Viacom International Inc. from October
1983 until September 1987 and Chairman of the Viacom Networks Group from January
1986 until September 1987. Before joining Viacom, he was with the CBS Broadcast
Group, serving in various positions, including Controller of CBS Radio. Mr.
Gorman started his career in 1961 at the National Broadcasting Company (NBC
Radio Division). Mr. Gorman received a bachelor's degree in accounting from St.
John's University in New York in 1962 and an honorary doctorate degree in 1994.
He was a recipient of the President's Award of the National Cable Association in
1978 and is a member of the International Radio and Television Society. He
formerly served as the
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Treasurer and Director of the International Council of the National Academy of
Television Arts and Sciences. Mr. Gorman currently serves as Chairman of IDC
Services, Inc. and is a Director of the Musicland Group, Inc., International
Post Ltd., Entertainment Partners, Talent Partners and Doane Agricultural
Services Company, and a member of the Advisory Board of St. John's University.
JOHN T. HEALY has been a director of the Company since March 1997.
Since February 1997, he has been a principal of The H.A.M. Media Group, LLC,
which engages in investments and provides advisory services in all media. Mr.
Healy has served as an advisor to Disney/ABC International Television since July
1996. He originally joined ABC in August of 1970 and held various executive
positions including Vice President Corporate Planning (1976), Vice President,
ABC Video Enterprises (1983), President, ABC Distribution Company (1986). Most
recently, he was President of ABC International Operations and Executive Vice
President of ABC Cable & International Broadcast Group from July 1993 to July
1996. Mr. Healy was a member of the Board of Directors of Arts & Entertainment
(which became A&E Networks), Lifetime and ESPN cable services from their
inception until his resignation from the ABC Company in July 1996.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC") and the Nasdaq Stock Market. Officers, directors and greater than
ten-percent shareholders are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during fiscal 1996,
Lee Ruttenberg, the Acting Chief Financial Officer of the Company, failed to
file on a timely basis one report, covering one transaction.
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY OF EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation
for services in all capacities to the Company for the years ended December 31,
1996, 1995 and 1994, respectively, of the Company's Chief Executive Officer and
the three other executive officers of the Company who received compensation
in excess of $100,000 during the fiscal years ended December 31, 1996, 1995
and 1994:
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<TABLE>
<CAPTION>
Securities
Name and Fiscal Underlying All Other
Principal Position Year Salary Bonus Options/SARs Compensation
- ------------------ ---- ------ ----- ----------- ------------
<S> <C> <C> <C> <C> <C>
Michael Viner 1996 $312,500 -- 50,000(1) 15,275(2)(3)(4)(5)(6)
President, Chief 1995 230,000 -- -- 12,497(2)(3)(4)(5)(6)
Executive Officer 1994 200,000 -- 250,000(7) 34,955(2)(3)
and Director
Deborah Raffin 1996 $250,000 -- 50,000(1) 9,288(5)(8)(9)
Executive Vice 1995 115,000 -- -- 11,522(5)(8)
President, Secretary 1994 -- -- 250,000(7) -- (9)
and Director
Ron Ziskin 1996 $205,833(10) -- 300,000(11) --
Chief Operating 1995 -- -- -- --
Officer of Dove 1994 -- -- -- --
Four Point, Inc.
Steven Soloway 1996 $120,077 $10,000 30,000(12) 2,000(13)
General Counsel 1995 100,000 10,000 6,000(12) --
and Director 1994 -- -- -- --
</TABLE>
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(1) Options granted exercisable in accordance with the terms of the Plan
with an exercise price of $3.50 per share.
(2) Includes $11,008, $12,497 and $22,655 (which $22,655 amount includes
amounts paid to Mr. Viner on behalf of Ms. Raffin's automobile) paid to
Mr. Viner for an automobile allowance, automobile insurance and
expenses incidental to operation of an automobile for 1996, 1995 and
1994, respectively.
(3) Does not include $17,354, $3,229 and $4,141 in medical expenses and
insurance premiums for Mr. Viner paid in fiscal 1996, 1995 and 1994,
respectively.
(4) Amount does not include $14,000 and $66,000 paid to Mr. Viner in 1996
and 1995, respectively, for the business rental of a condominium owned
by Mr. Viner. See "Certain Relationships and Related Transactions."
(5) This amount does not include compensation paid to Mr. Viner or Ms.
Raffin for production, directing and acting services, as applicable,
related to the making of "Home Song" and "Family Blessings." See
"Certain Relationships and Related Transactions."
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(6) Does not include $2,250 and $4,010 in life insurance premiums paid in
fiscal 1996 and 1995, respectively, on a policy covering Mr. Viner's
life. The Company and Ms. Raffin are equal beneficiaries under such
policy.
(7) An option to purchase an aggregate of 250,000 shares of Common Stock for
$.01 per share granted jointly to Mr. Viner and Ms. Raffin in September
1994 in satisfaction of, among other things, compensation previously
deferred by them.
(8) Includes $11,522 and $9,288 paid to Ms. Raffin for an automobile
allowance, automobile insurance and expenses incidental to the operation
of an automobile for 1996 and 1995, respectively.
(9) Does not include $3,850 and $2,442 in medical insurance premiums for Ms.
Raffin paid in fiscal 1996 and 1994, respectively.
(10) Amount represents Mr. Ziskin's salary for 1996 which amount represents a
pro rata portion of his yearly salary and annual advance against producer
fees. See " -- Employment Agreement."
(11) Options were granted outside of the Plan and have an exercise price of
$11.00 per share.
(12) Options granted to Mr. Soloway are exercisable in accordance with terms
of the Plan. An option to purchase 2,000 shares of Common Stock granted
in 1995 has an exercise price of $6.75 per share; an option to purchase
4,000 shares of Common Stock granted in 1995 has an exercise price of
$10.00 per share; and an option to purchase 30,000 shares of Common Stock
granted in 1996 has an exercise price of $2.50 per share.
(13) Includes $2,000 paid to Mr. Soloway for an automobile allowance,
automobile insurance and expenses incidental to operation of an
automobile for 1996.
EMPLOYMENT AGREEMENTS
Pursuant to an employment agreement dated as of January 1, 1995, which
expires January 1, 2002, Michael Viner is employed by the Company as its
President and Chief Executive Officer. Pursuant to such agreement Mr. Viner
shall be paid a base salary of at least $230,000 per year subject to an increase
thereof as determined by the Board in its sole discretion. The Board approved an
annual salary increase to $312,000 per year for Mr. Viner for the 1996 fiscal
year, after a review by KPMG Peat Marwick LLP Compensation and Benefits division
(the "KPMG Compensation Division"). In addition to base salary, as may be
adjusted from time to time, Mr. Viner is entitled under such agreement to (i) a
bonus as agreed to by the Company; (ii) medical and dental insurance and
reimbursement of medical and dental expenses up to $25,000 per year; (ii) a life
insurance policy in the amount of $1,000,000, with proceeds of such policy to be
split evenly between the Company and Deborah Raffin, his wife, and the premium
paid by the Company; (iii) payment of all costs incidental to owning or leasing
and operating an automobile; (iv) participation in any benefit program the
Company has in effect or establishes for senior executives; (v) vacation and
sick leave; and (vi) reimbursement of reasonable business expenses and a $50,000
per year non-accountable expense allowance ((i) through (vi) collectively, the
"Benefits"). No such non-accountable expense allowance was paid to Mr. Viner
in either 1996 or 1995. Mr. Viner may terminate such agreement upon 30 days'
written notice to the Company. In addition, in connection with the guarantee
by Mr. Viner of certain obligation of the Company, in September 1996
Mr. Viner entered
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into an agreement pursuant to which he would be entitled to certain payments
upon the occurrence of certain events. See "Certain Relationships and Related
Transactions."
Pursuant to an employment agreement dated as of January 1, 1995, which
expires January 1, 2002, Deborah Raffin is employed by the Company as its
Executive Vice President and Secretary. Pursuant to such agreement Ms. Raffin
shall be paid a base salary of at least $115,000 per year subject to an increase
thereof as determined by the Board in its sole discretion. The Board approved an
annual salary increase to $250,000 per year for Ms. Raffin for the 1996 fiscal
year after a review by the KPMG Compensation Division. In addition to base
salary, as may be adjusted from time to time, Ms. Raffin is entitled under her
employment agreement to the same Benefits as Mr. Viner with two exceptions: Ms.
Raffin is not entitled to a life insurance policy and she is entitled to a
$25,000 per year non-accountable expense allowance. No such non-accountable
expense allowance was paid to Ms. Raffin in either 1996 or 1995. Ms. Raffin may
terminate such agreement upon 30 days' written notice to the Company. In
addition, in connection with the guarantee by Ms. Raffin of certain obligation
of the Company, in September 1996 Ms. Raffin entered into an agreement pursuant
to which she would be entitled to certain payments upon the occurrence of
certain events. See "Certain Relationships and Related Transactions."
The increases in each of the salaries of Mr. Viner and Ms. Raffin for
fiscal year 1996 was approved following a review by the KPMG Compensation
Division which was retained by the Company. The KPMG Compensation Division
reviewed compensation levels (base salaries, annual incentives and long-term
incentives) for each executive officer relative to competitive compensation
levels of other top executives at companies comparable to the Company. This
review was undertaken by the Company to establish consistent yet competitive
compensation arrangements.
Pursuant to an agreement, dated October 15, 1996, Lee Ruttenberg is
serving as acting Chief Financial Officer of the Company with compensation of
$3,000 per week. Under the terms of his agreement, Mr. Ruttenberg received
options to purchase 50,000 shares of Common Stock with an exercise price of
$2.50 per share. Such options are subject to the terms of the Company's 1994
Stock Incentive Plan (the "Plan"). Additionally, Mr. Ruttenberg earned a bonus
in 1997 of $12,000 upon the occurrence of certain events. Such bonus was
approved by the Executive Committee of the Board. Mr. Ruttenberg will cease
being Acting Chief Financial Officer after April 30, 1997. Commencing May 1,
1997 Mr. Ruttenberg will serve the Company as an independent consultant and
receive compensation on an hourly basis.
Pursuant to an agreement entered into in April 1997, Neil Topham has
agreed to join the Company as an advisor for a period of at least two months.
Effective May 1, 1997, Mr. Topham will be Acting Chief Financial Officer. Mr.
Topham shall be paid a salary of $175,000, on an annualized basis.
Pursuant to an employment agreement, dated as of October 15, 1996, which
expires on October 15, 1999, Steven Soloway is employed by the Company as its
General Counsel and Vice President of Business Affairs. The Company may
terminate such agreement upon written notice to Mr. Soloway, upon Mr. Soloway's
death or Disability or for Cause, each as defined in such agreement. If Mr.
Soloway's employment is terminated for any reason, the Company shall pay all
amounts
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accrued through the date of such termination. Further, if Mr. Soloway is
terminated without cause (which Mr. Soloway may elect to include a merger or
consolidation with, purchase of assets by or other transfer of assets to a
successor to the Company, other than a related company, or the occurrence of an
Event (as defined in the Plan), the Company shall be obligated to pay
Mr. Soloway his base salary through the remainder of the term of such agreement
and all options granted to him pursuant to such agreement shall automatically
vest and be exercisable. As part of the transactions contemplated by the Stock
Purchase Agreement, Mr. Soloway waived the application of such provision to the
acquisition by MEI of not more than 40% of the outstanding shares of Common
Stock and the election of representatives of MEI to the Board pursuant to, or as
contemplated by, the Stock Purchase Agreement. The employment agreement provides
for a base salary of $125,000 per year and an annual salary increase of at least
10% of the then current base salary. Under the terms of such agreement, in
October 1996 Mr. Soloway was granted options to purchase 30,000 shares of Common
Stock pursuant to the terms of the Plan with an exercise price of $2.50 per
share. The employment agreement also provides for an annual bonus of at least
$10,000.
The Company has entered into a three-year employment agreement with
Ronald M. Ziskin pursuant to which he will be the Chief Operating Officer of
Dove Four Point. Such agreement expires in April 1999. Mr. Ziskin receives an
annual base salary of $200,000, annual advances against producer fees of
$100,000 per year and customary fringe benefits. In addition, Mr. Ziskin was
granted options to acquire 300,000 shares of Common Stock at an exercise price
of $11.00 per share which options vest upon the achievement of certain
performance criteria or, if earlier, nine years and eleven months after the date
of the grant of such options.
OPTION/SAR GRANTS IN 1995
There were no SARs granted to named executive officers during 1996. The
following table sets forth stock options granted to named executive officers
during 1996.
<TABLE>
<CAPTION>
Number of Percent of
Securities Total Options/
Underlying SARs Granted Exercise Or
Options/SARs To Employees Base Price
Name Granted In Fiscal Year ($/Share) Expiration Date
- ---- ------- -------------- ------------ ---------------
<S> <C> <C> <C> <C>
Michael Viner 50,000 9% $3.50 11/29/2004
Deborah Raffin 50,000 9% $3.50 11/29/2004
Lee Ruttenberg 50,000 9% $2.50 11/29/2004
Ronald M. Ziskin 300,000 55% $11.00 5/1/2006
Steven Soloway 30,000 5% $2.50 11/29/2004
</TABLE>
OPTION EXERCISES IN 1996 AND YEAR-END OPTION VALUES
No stock options were exercised by any named executive officer during
1996. The following table provides certain information concerning the number of
shares covered by both exercisable and non-exercisable stock options held as of
December 31, 1996. Also shown are values for "in-the-money" options, which
represent the positive difference between the exercise price of such options and
the price of the Common Stock at year end.
10
<PAGE> 11
AGGREGATED YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Number of Securities Value of Unexercised In-The-Money Options/
Unexercised Options/ Underlying Unexercised In-The-Money Options/ SARs At Fiscal
SARs At Fiscal Year Options/SARs At Fiscal SARs At Fiscal Year Year End
Name End Exercisable Year End Unexercisable End Exercisable ($)(1) Unexercisable ($)(1)
- ---- -------------------- ---------------------- ---------------------- --------------------
<S> <C> <C> <C> <C>
Michael Viner 267,667(2) 33,333 $ 341,250 --
Deborah Raffin 267,667(2) 33,333 341,250 --
Lee Ruttenberg 16,667 33,333 -- --
Ronald M. Ziskin 300,000(3) 300,000(3) -- --
Steven Soloway 14,000 22,000 -- --
</TABLE>
- -----------
(1) Based on a closing price of $1.375 per share of Common Stock on December
31, 1996, the last trading day of fiscal year 1996.
(2) Includes options to acquire an aggregate of 250,000 shares of Common
Stock, held jointly by Mr. Viner and Ms. Raffin.
(3) Options vest on the date nine years and eleven months after the date of
the grant and such vesting will accelerate upon Dove Four Point meeting
certain performance criteria. Based upon measurement of such performance
none of these options will be exercisable within the next 60 days.
PLAN SUMMARY
The Company's Plan authorizes the granting of stock incentive awards
("Awards") to qualified officers, employee directors, key employees and third
parties providing valuable services to the Company, e.g., independent
contractors, consultants and advisors to the Company. At April 24, 1997, options
to purchase 463,999 shares of Common Stock had been granted and were outstanding
under the Plan out of an aggregate of 750,000 shares authorized for issuance
under the Plan. In addition, options to purchase 300,000 shares of Common Stock
had been granted in 1996 outside of the Plan and were outstanding as of April
24, 1997. The Plan is administered by the Board or by a committee
appointed by the Board and consisting of two or more members, each of whom must
be disinterested (the "Committee"). The Committee determines the number of
shares to be covered by an Award (provided that in any calendar year no more
than 250,000 Options or SARs (each as defined below) may be granted to a
participant), the term and exercise price, if any, of the Award and other terms
and provisions of Awards. Members of the Committee receive formula awards.
Awards can be Stock Options ("Options"), Stock Appreciation Rights
("SARs"), Performance Share Awards ("PSAs") and Restricted Stock Awards
("RSAs"). The number and kind of shares available under the Plan are subject to
adjustment in certain events. Shares relating to Options or SARs which are not
exercised, shares relating to RSAs which do not vest and shares relating to PSAs
which are not issued will again be available for issuance under the Plan.
11
<PAGE> 12
An Option may be an incentive stock option ("ISO") or a nonqualified
Option. The exercise price for Options is to be determined by the Committee, but
in the case of an ISO is not to be less than fair market value on the date the
Option is granted (110% of fair market value in the case of an ISO granted to
any person who owns more than 10% of the Common Stock). The award agreement may
provide for "cashless" exercise and payment. Subject to early termination or
acceleration provisions, an Option is exercisable, in whole or in part, from the
date specified in the related award agreement (which may be six months after the
date of grant) until the expiration date determined by the Committee.
An SAR is the right to receive payment based on the appreciation in the
fair market value of Common Stock from the date of grant to the date of
exercise. In its discretion, the Committee any grant an SAR concurrently with
the grant of an Option. An SAR is only exercisable at such time, and to the
extent, that the related Option is exercisable. Upon exercise of an SAR, the
holder receives for each share with respect to which the SAR is exercised an
amount equal to the difference between the exercise price under the related
Option and the fair market value of a share of Common Stock on the date of
exercise of the SAR. The Committee in its discretion may pay the amount in cash,
shares of Common Stock, or a combination thereof.
An RSA is an award of a fixed number of shares of Common Stock subject
to restrictions. The Committee specifies the prices, if any, the recipient must
pay for such shares. Shares included in an RSA may not be sold, assigned,
transferred, pledged or otherwise disposed of or encumbered until they have
vested. These restrictions may not terminate earlier than six months after the
award date. The recipient is entitled to dividend and voting rights pertaining
to such RSA shares even though they have not vested, so long as such shares have
not been forfeited.
A PSA is an award of a fixed number of shares of Common Stock, the
issuance of which is contingent upon the attainment of such performance
objectives, and the payment of such consideration, if any, as is specified by
the Committee. Issuance shall in any case not earlier than six months after the
award date.
To date, no SAR, RSA or PSA awards have been granted by the Company.
The options granted under the Plan are not transferable other than by
will or the laws of descent and distribution. Unexercised options generally
lapse three months after termination of employment other than by reason of
retirement, disability or death in which case it terminates one year thereafter.
The exercisability of all outstanding Awards will be accelerated,
subject to the discretion of the Committee to prevent such acceleration, upon
the occurrence of an Event, defined in the Plan to include approval by the
shareholders of the dissolution or liquidation of the Company, certain mergers,
consolidations, sale of substantially all of the Company's business and/or
assets and a change in control. The Plan defines a change in control to have
occurred if (i) a person, as defined in Section 13(d) and 14(d) under the
Exchange Act, acquires 35% or more of the outstanding shares of Common Stock of
the
12
<PAGE> 13
Company and (ii) during any two consecutive year periods there has been a change
of a majority of the members of the Board, unless the election or nomination of
the new Directors has been approved by at least three-fourths of the members
still in office from the beginning of the two year period. As part of the Stock
Purchase Agreement, the Company waived the application of this provision to the
transactions contemplated by the Stock Purchase Agreement, including the sale
and issuance of securities in accordance therewith and the election of directors
who are representatives of MEI whether pursuant to the terms of the Series B
Preferred Stock or pursuant to the Stock Purchase Agreement.
The Plan provides for anti-dilution adjustments which are applicable in
the event of a reorganization, merger, combination recapitalization,
reclassification, stock dividend, stock split or reverse stock split; however,
no such adjustment need be made if it is determined that the adjustment may
result in the receipt of federal taxable income to optionees or the holders of
Common Stock or other classes of the Company's securities. Upon the dissolution
or liquidation of the Company, or upon a reorganization, merger or consolidation
of the Company as a result of which the Company is not the surviving entity, the
Plan shall terminate, and any outstanding awards shall terminate and be
forfeited unless assumed by the successor corporation.
DIRECTORS COMPENSATION
The Company has agreed to reimburse each Board members' travel expenses
and the Plan provides for an automatic grant of options to purchase 5,000 shares
of Common Stock to each of the outside directors. In addition, the Company has
granted 10,000 shares in options outside the plan to each of Messrs. Leider,
Belasco and Mayer as non-employee Board members for such members' service to the
Board during the last year. Directors who are also executive officers of the
Company do not receive any additional compensation for serving as members of the
Board or any committee thereof.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables sets forth information as of April 24, 1997
concerning the shares of capital stock of the Company beneficially owned by each
shareholder known to the Company to own beneficially more than five percent (5%)
of the outstanding shares of such class by each director and director nominee,
by each executive officer and by all executive officers and directors as a
group. Unless otherwise specified, the address of each beneficial owner listed
below is 8955 Beverly Boulevard, Los Angeles, California 90048.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP PERCENTAGE OF CLASS
- ------------------------ --------- -------------------
<S> <C> <C>
Michael Viner...................................2,926,449(2) 41.3%
Deborah Raffin..................................2,926,449(2) 41.3%
Bruce Maggin....................................2,032,500(3) 27.0%
John T. Healy ..................................2,005,000(3) 26.6%
Media Equities International, LLC...............2,000,000(3) 26.6%
Apollo Partners LLC.............................2,000,000(3) 26.6%
Terrence A. Elkes...............................2,000,000(3) 26.6%
Kenneth F. Gorman...............................2,000,000(3) 26.6%
H.A.M. Media Group LLC..........................2,000,000(3) 26.6%
Ronald Lightstone...............................2,000,000(3) 26.6%
Sidney Sheldon....................................664,413(4) 11.9%
Norton Herrick....................................375,000(5) 6.6%
Ronald M. Ziskin..................................201,757(6) 3.6%
</TABLE>
13
<PAGE> 14
<TABLE>
<S> <C> <C>
Gerald Leider......................................36,000(7) *
Lee Ruttenberg.....................................19,167(8) *
Steve Soloway......................................14,000(9) *
Neil Topham........................................10,000 *
Steven F. Mayer.................................... 6,667(10) *
James Belasco...................................... 4,333(11) *
All current directors and executive officers
as a group (twelve individuals)................ 5,223,373(2)(3)(4)(5)(6)
(7)(8)(9)(10)(11) 57.1%
</TABLE>
- -------------
* Less than 1%.
(1) Percentages set forth are based upon 5,523,766 shares of common stock
outstanding as of April 24, 1997.
(2) All of such shares are jointly held by Mr. Viner and Ms. Raffin as
community property. Includes (i) options to purchase 250,000 shares of
Common Stock at an exercise price of $.01 per share; (ii) 33,333 shares
of Common Stock issuable upon exercise of options issued in September
1996 with an exercise price of $3.50 per share; (iii) 1,000,000 shares of
Common Stock issuable upon exercise of warrants (which shares include
warrants to purchase 500,000 shares of Common Stock purchased in March
1997 and warrants to purchase 500,000 shares of Common Stock as to which
Mr. Viner and Ms. Raffin are committed to purchase on or before May 25,
1997) at exercise prices on 333,333 shares of $2.00 per share, on 333,333
shares of $2.50 per share and on 333,334 shares of $3.00 per share; and
(iv) 284,604 shares of Common Stock issuable upon conversion of 236,192
14
<PAGE> 15
shares of the Series D Preferred Stock of the Company (convertible into
Common Stock at a rate of 1.20497 for each share of Series D Preferred
Stock, subject to certain anti-dilutive protections) acquired in a one
for one exchange of the Series A Preferred Stock of the Company
originally acquired in April 1995. The Series C Preferred Stock table
includes 1,920 shares of Series C Preferred Stock of the Company (the
"Series C Preferred Stock"), 920 of which were acquired by Mr. Viner and
Ms. Raffin in March 1997 and 1,000 shares of which are shares of Series
C Preferred Stock as to which Mr. Viner and Ms. Raffin are committed to
purchase on or before May 25, 1997. Excludes options, which are not
currently exercisable and will not be exercisable within the next 60
days, to purchase a combined total of 66,667 shares of Common Stock at
an exercise price of $3.50 per share issued to each of Mr. Viner and Ms.
Raffin in September 1996. Assuming full conversion of all shares of
Series C Preferred Stock and Series D Preferred Stock, Mr. Viner and Ms.
Raffin would beneficially own 3,886,449 shares of Common Stock
representing approximately 48.3% of the Common Stock. Assuming full
conversion of all shares of Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock and the full exercise by MEI of all
of its Warrants, Mr. Viner and Ms. Raffin would beneficially own
approximately 32.3% of the Common Stock.
(3) Based on a Schedule 13-D filed on April 15, 1997. Common Stock
table includes 2,000,000 shares of Common Stock issuable to MEI upon
exercise of warrants (which shares are issuable upon exercise of
warrants to purchase 1,500,000 shares of Common Stock purchased in March
1997 and warrants to purchase 500,000 shares of Common Stock as to which
MEI is committed to purchase on or before May 25, 1997) 666,666 shares
of Common Stock with an exercise price of $2.00 per share, 666,667
shares of Common Stock within an exercise price of $2.50 per share and
666,667 shares of Common Stock with an exercise price of $3.00 per
share. Series B Preferred Stock table includes 4,000 shares of series B
Preferred Stock, 3,000 of which were acquired by MEI in March 1997 and
1,000 shares of which are shares of Series B Preferred Stock which MEI
is committed to purchase on or before May 25, 1997. None of the Shares
of Series B Preferred Stock are convertible within the next 60 days.
Does not include shares of Common Stock or Preferred Stock beneficially
owned by Mr. Viner and Ms. Raffin subject to the shareholders voting
agreement referenced below or any shares of Common Stock issuable in
accordance with the MEI consulting arrangement, which amount is not
currently determinable. Assuming full conversion of all shares of Series
B Preferred Stock, MEI would beneficially own 4,000,000 shares of Common
Stock representing approximately 42.0% of the Common Stock. Assuming
full conversion of all shares of Series B Preferred Stock, Series C
Preferred Stock and all shares of Series D Preferred Stock and the full
exercise by Mr. Viner and Ms Raffin of all of their options and
warrants, MEI would beneficially own approximately 33.2% of the Common
Stock. Apollo Partners LLC ("Apollo"), H.A.M. Media Group LLC ("H.A.M.
Media") and Mr. Lightstone are members of MEI. Messrs. Elkes and Gorman
are members and managers of Apollo. Messrs. Healy and Maggin are members
and managers of H.A.M. Media.
The business address for MEI, Apollo and Messrs. Elkes and Gorman is One
Stamford Plaza, 12th Floor, Stamford, Connecticut 06901. The business
address for H.A.M. Media
15
<PAGE> 16
and Messrs. Healy and Maggin is 305 Madison Avenue, Suite 3016, New
York, New York 10017. The business address for Mr. Lightstone is 400
Parkwood Drive, Los Angeles, California 90077-3530.
(4) Includes 50,000 shares of Common Stock issuable in exchange for certain
rights from Mr. Sheldon in connection with certain of Mr. Sheldon's
future books.
(5) Based solely on a Schedule 13D filed on February 10, 1997 by Norton
Herrick. Includes 187,500 shares of Common Stock issuable to Mr. Herrick
upon exercise of a currently exercisable warrant at $12.00 per share.
(6) Excludes options, which are not currently exercisable and will not be
exercisable within the next 60 days, to purchase 300,000 shares of
Common Stock with an exercise price of $11.00.
(7) Includes 1,000 shares of Common Stock issuable to Mr. Leider upon
exercise of a currently exercisable option with an exercise price of
$7.38 per share and 20,000 shares of Common Stock issuable to Mr. Leider
upon exercise of a currently exercisable option, with an exercise price
of $3.50 per share. Excludes options that are not currently exercisable
and will not be exercisable within the next 60 days, including options
to purchase 40,000 shares of Common Stock with an exercise price of
$3.50 per share granted in September 1996. Includes an aggregate of
5,000 shares of Common Stock which Mr. Leider gifted to his sons as
to which he disclaims beneficial ownership.
(8) Includes 16,667 shares of Common Stock issuable to Mr. Ruttenberg upon
exercise of a currently exercisable option, with an exercise price of
$2.50 per share. Excludes options, which are not currently exercisable
and will not be exercisable within the next 60 days, to purchase 33,333
shares of Common Stock with an exercise price of $2.50 per share.
(9) Includes (i) 1,333 shares of Common Stock issuable to Mr. Soloway upon
exercise of a currently exercisable option with an exercise price of
$6.75 per share; (ii) 2.667 shares of Common Stock issuable to Mr.
Soloway upon exercise of a currently exercisable option, with an
exercise price of $10.00 per share and (iii) 10,000 shares of Common
Stock issuable to Mr. Soloway upon exercise of a currently exercisable
option, with an exercise price of $2.50 per share. Excludes options
which are not currently exercisable and will not be exercisable within
the next 60 days to purchase (i) 667 shares of Common Stock with an
exercise price of $6.75 per share, (ii) 1,333 shares of Common Stock
with an exercise price of $10.00 per share and (iii) 20,000 shares of
Common Stock with an exercise price of $2.50 per share.
(10) Includes 3,333 shares of Common Stock issuable to Mr. Mayer upon
exercise of a currently exercisable option, with an exercise price of
$3.75 per share, and 3,334 shares of Common Stock issuable to Mr. Mayer
upon exercise of a currently exercisable option, with an exercise price
of $3.50 per share. Excludes options, which are not currently
exercisable and will not be exercisable within the next 60 days, to
purchase 6,667 shares of Common Stock with an exercise price of $3.75
per share and 6,666 shares of Common stock with an exercise price of
$3.50 per share.
(11) Includes 1,000 shares of Common Stock issuable to Mr. Belasco upon
exercise of a currently exercisable option with an exercise price of
$9.75 per share and 3,333 shares of
16
<PAGE> 17
Common Stock issuable to Mr. Belasco upon exercise of a currently
exercisable option with an exercise price of $3.50 per share. Excludes
options that are not currently exercisable and will not be exercisable
within the next 60 days, including options to purchase 66,667 shares of
Common Stock within an exercise price of $3.50 per share granted in
September 1996.
The following table sets forth information relating to the beneficial
ownership of the Company's Series B Preferred Stock:
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP PERCENTAGE OF CLASS
- ------------------------ --------- -------------------
<S> <C> <C>
Media Equities International, LLC.................4,000(a) 100%
Apollo Partners LLC...............................4,000(a) 100%
Terrence A. Elkes.................................4,000(a) 100%
Kenneth F. Gorman.................................4,000(a) 100%
H.A.M. Media Group................................4,000(a) 100%
John T. Healy.....................................4,000(a) 100%
Bruce Maggin......................................4,000(a) 100%
Ronald Lightstone.................................4,000(a) 100%
</TABLE>
The following table sets forth information relating to the beneficial
ownership of the Company's Series C Preferred Stock:
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP PERCENTAGE OF CLASS
- ------------------------ --------- -------------------
<S> <C> <C>
Michael Viner........................................1,920(b) 100%
Deborah Raffin.......................................1,920(b) 100%
</TABLE>
The following table sets forth information to the beneficial ownership
of the Company's Series D Preferred Stock:
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP PERCENTAGE OF CLASS
- ------------------------ --------- -------------------
<S> <C> <C>
Michael Viner....................................236,192(b) 100%
Deborah Raffin...................................236,192(b) 100%
</TABLE>
- ------------
(a) Each share of Series B Preferred Stock is convertible into 500 shares of
Common Stock, subject to certain anti-dilution protections, and has the
right to vote together with all other voting classes and series of stock of
the Company as a single class on all actions to be taken by the
shareholders of the Company. On each such action that the shares of Series
B Preferred Stock votes together with other classes, each share of Series B
Preferred Stock shall be entitled to such number of votes as such shares
are then convertible into. See footnote 3 above.
(b) Each share of Series C Preferred Stock is convertible into 500 shares of
Common Stock and each share of Series D Preferred Stock is convertible into
1.20497 shares of Common Stock, subject in each case to certain
anti-dilution protections. Each share of Series C Preferred Stock and
Series D Preferred Stock has the right to vote together with all other
voting classes and series of stock of the Company as a single class on all
actions to be taken by the shareholders of the Company. On each such action
that the shares of Series C Preferred Stock and Series D Preferred Stock
vote together with other classes, each share of Series C Preferred Stock
and Series D Preferred Stock shall be entitled to such number of votes as
such shares are then convertible into. See footnote 2 above.
Pursuant to the Stock Purchase Agreement, MEI has the right to consent,
which right of consent is required to be exercised in good faith and in a
commercially reasonable manner, prior to the Company undertaking certain
activities (including adopting an annual budget, incurring any debt for borrowed
money or selling and issuing debt or equity securities (subject to certain
limited exceptions) or changing or altering its principal business or entering
into new businesses) and prior to the Company's executive officers undertaking
certain activities (including certain personnel matters, changes in certain of
the Company's outside advisers, certain litigation matters, certain acquisition
or production matters and certain other activities).
MEI, Mr. Viner and Ms. Raffin entered into a pledge agreement, dated
March 27, 1997, with the Company pursuant to which MEI agreed to pledge certain
of its shares of Series B Preferred Stock and Mr. Viner and Ms. Raffin agreed to
pledge certain of their shares of Series C Preferred Stock as collateral to
secure the payment for securities as to which they have committed to purchase in
the second closing under the Stock Purchase Agreement on or before May 25, 1997.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1996 and 1995, the Company made payments totaling $14,000 and
$66,000, respectively, to Michael Viner for the business rental of a condominium
owned by Mr. Viner. The business rental is $2,000 per month on a month-to-month
basis, and the balance of the monies paid to Mr. Viner in 1996 and 1995
represents the settlement of deferred rental amounts owed by the Company to Mr.
Viner for previous years which were not previously paid.
17
<PAGE> 18
During 1996, the Company entered into three producer service agreements
and a directors television motion picture agreement with Mr. Viner, Ms. Raffin
and Mr. Leider. The agreements provide for compensation of $50,000 to each such
person. In addition, Ms. Raffin has entered into an agreement providing for
compensation of $50,000 for her directing and producing services in connection
with the movie "Family Blessings."
During 1995, the Company entered into two producer service agreements
and an actor's television motion picture agreement with Mr. Viner, Ms. Raffin
and Mr. Leider. These agreements provide for compensation of $150,000, $100,000
and $25,000 for Mr. Viner, Ms. Raffin and Mr. Leider, respectively, for acting
(Ms. Raffin) and production services (all three) relating to the making of "Home
Song."
During 1996, in connection with the above noted agreements for the
making of "Home Song" and "Family Blessings," the Company made payments to Mr.
Viner, Ms. Raffin and Mr. Leider of $175,000, $190,000 and $75,000,
respectively.
In September 1996, in connection with Samuelson Entertainment Ltd.'s
("Samuelson") financing of the production of the motion picture presently
entitled "Wilde" (the "Picture") for which the Company acquired certain North
American rights, Michael Viner personally guaranteed $1,000,000 of the payment
obligations of Dove International, Inc. ("Dove International") payable
commencing on December 1, 1996 through April 2, 1997 to Samuelson in order to
obtain additional time for Dove International to make such payments. In
addition, Mr. Viner personally deposited $500,000 at Guinness Mahon & Co. Ltd.
("Guinness Mahon") (and pledged the deposit plus interest thereon) to secure
Dove International's additional payment obligation to Samuelson in the amount of
(pound)333,334 on delivery of the Picture. The Company has made all of the
required payments, other than the payment due in early April 1997 and the
payment due on the delivery of the Picture. The Company has entered into
discussions with Guinness Mahon to reschedule the early April 1997 payment until
late May 1997 which the Company believes will enable it to receive delivery of
the Picture, which delivery has been delayed. While the Company believes it
will reach agreement with Guinness Mahon, there is no assurance that such
agreement will be reached. In consideration for agreeing to pledge such deposit,
Samuelson and Dove International agreed that Mr. Viner will receive a 5%
commission, up to a maximum of $120,000, payable from 5% of 100% of the gross
receipts (only after recoupment of Dove's full distribution fee) received by all
third-party distributors (including Dove International) from exploitation of the
North American distribution rights in the Picture. The terms pursuant to which
Mr. Viner pledged the deposit were based on similar terms as offered by the
producer (Samuelson) to a third party, which were not able to be consummated. In
addition, Samuelson agreed that Mr. Viner will receive 8% of 100% of Samuelson's
net profits from the Picture. As part of the transaction pursuant to which Mr.
Viner and Ms. Raffin acquired shares of Series C Preferred Stock and warrants to
acquire Common Stock of the Company, the Company's obligations to repay Mr.
Viner the $500,000 deposit made with Guinness Mahon & Co. and to pay Mr. Viner
the 5% commission on proceeds from the Picture were terminated.
Each of Mr. Viner and Ms. Raffin has also personally guaranteed the
Company's obligations to Sanwa Bank California to a maximum principal amount of
$1,600,000 in order to avoid an event of default on such obligations. As of
December 31, 1996, approximately $1,279,000 was outstanding.
In connection with the above guarantees, in September 1996, the Company
entered into a reimbursement agreement with Michael Viner and Deborah Raffin.
The Company agreed to immediately reimburse or provide cash collateral to Mr.
Viner and Ms. Raffin upon the occurrence and during the continuation of certain
events of default relating to the guaranteed obligations or upon the occurrence
of certain other Events (including a change in control of the Company), as
defined in the Plan. The Company further agreed that should Mr. Viner or Ms.
Raffin terminate their employment agreements following the occurrence of an
Event or material
18
<PAGE> 19
breach of their employment agreements, the Company would remain obligated to
continue to pay them their base compensation and other benefits due for the
balance of their employment terms, together with reimbursement of any excise tax
payable with respect to such compensation. Upon any such termination, such
executives would be free to establish, invest in or be employed by any business,
whether or not in competition with the Company. Under the agreement, the Company
also granted to Mr. Viner, in the first instance, and Ms. Raffin, secondarily, a
right of first refusal in the event of certain asset sales outside the ordinary
course of business by the Company or any of its subsidiaries through September
1999. As part of the transactions contemplated by the Stock Purchase Agreement,
Mr. Viner and Ms. Raffin waived the application of these provisions to the
acquisition by MEI of not more than 40% of the outstanding shares of Common
Stock and the election of representatives of MEI to the Board pursuant to, or
as contemplated by, the Stock Purchase Agreement.
Pursuant to an agreement, dated May 16, 1996, Gerald Leider is to
provide management consulting services to the Company until the Company and Mr.
Leider mutually agree to terminate such agreement. Such agreement provides for
an annual compensation of $125,000 payable monthly in arrears. Under the terms
of such agreement, Mr. Leider was granted options to purchase 50,000 shares of
Common Stock with an exercise price of $3.50 per share. Such agreement can only
be terminated or amended by mutual agreement between the Company and Mr. Leider.
During 1996, Mr. Leider received approximately $73,000 under this Consulting
Agreement.
Pursuant to a severance agreement, dated September 4, 1996, if Mr.
Leider's consultancy pursuant to the above referenced agreement is terminated
within two years after the occurrence of an Event, as defined in the Plan, the
Company shall pay all amounts accrued through the date Mr. Leider is terminated
and his full consulting compensation for two years following the date of
termination. Further, if Mr. Leider's consultancy is terminated for any reason
other than death, Disability, Retirement or for Cause, as defined in the
agreement, or Mr. Leider terminates his consultancy within three months of any
of the following: (i) assignment of duties materially inconsistent with his
status with the Company or a material change in his reporting responsibilities,
(ii) material reduction of Mr. Leider's consulting compensation, (iii)
subsequent to an Event, failure by the Company to continue any benefit or
compensation in which Mr. Leider is participating at the time of the Event or
(iv) any purported termination of Mr. Leider's consultancy effected pursuant to
a Notice of Termination, as defined in the agreement, and such termination is
not valid or effective; then Mr. Leider is entitled to all amounts accruing to
him as of the date of such termination and his full consulting compensation for
six months following the date termination. As part of the transaction
contemplated by the Stock Purchase Agreement, Mr. Leider waived the application
of these provisions to the acquisition by MEI of not more than 40% of the
outstanding shares of Common Stock and the election of representatives of MEI
to the Board pursuant to, or as contemplated by, the Stock Purchase Agreement.
In September 1996, the Company entered into a consulting agreement with
Steven F. Mayer whereby Mr. Mayer is to provide certain financial consulting and
investment banking services to the Company. Such agreement provides for
compensation of $3,000 per month, options to purchase 10,000 shares of Common
Stock, certain contingent compensation and customary expense reimbursement. The
agreement terminated effective February 28, 1997.
As part of the Stock Purchase Agreement, the Company and MEI agreed to
the terms, subject to final documentation, of a three year consulting
arrangement with MEI which arrangement commenced on April 1, 1997. MEI has
agreed to provide substantial general management consulting advice including but
not limited to, financial (including assisting in obtaining bank financing),
television and film distribution and business affairs. As compensation for such
services and advice, the Company will pay MEI $300,000 per year, of which
$200,000 will be payable in cash quarterly in advance and the remaining $100,000
will be paid in shares of Common Stock valued at the current market value on the
date of payment, payable quarterly in arrears.
19
<PAGE> 20
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto, duly authorized, on this ___ day of April, 1997.
DOVE ENTERTAINMENT, INC.
By: /s/ MICHAEL VINER
-----------------------------------
Michael Viner, President
In accordance with the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ MICHAEL VINER
- ------------------------
Michael Viner Chief Executive Officer, April 30, 1997
President and Director
/s/ DEBORAH RAFFIN
- ------------------------
Deborah Raffin Vice President, Secretary April 30, 1997
and Director
/s/ LEE RUTTENBERG
- ------------------------
Lee Ruttenberg Acting Chief Financial Officer April 30, 1997
and Acting Chief Accounting Officer
/s/ STEVEN SOLOWAY
- ------------------------
Steven Soloway Vice President, General Counsel April 30, 1997
and Director
/s/ GERALD LEIDER
- ------------------------
Gerald Leider Chairman and Director April 30, 1997
/s/ JAMES BELASCO
- ------------------------
James Belasco Director April 30, 1997
/s/ STEVEN MAYER
- ------------------------
Steven Mayer Director April 28, 1997
</TABLE>
20
<PAGE> 21
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ RONALD LIGHTSTONE
- ------------------------
Ronald Lightstone Director April 30, 1997
- ------------------------
Ken Gorman Director
- ------------------------
John T. Healy Director
</TABLE>
21
