<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
DOVE ENTERTAINMENT, 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE> 2
DOVE ENTERTAINMENT, INC.
8955 BEVERLY BOULEVARD
LOS ANGELES, CALIFORNIA 90048
-------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 30, 1998
-----------------
To the Shareholders of Dove Entertainment, Inc.:
Notice is hereby given that the 1997 and 1998 Annual Meeting of
Shareholders (the "Annual Meeting") of Dove Entertainment, Inc., a California
corporation (the "Company"), will be held at Dove Entertainment, Inc., 8955
Beverly Boulevard, Los Angeles, California 90048, on Thursday, April 30, 1998,
at 10:00 a.m., local time, for the following purposes:
1. To approve an amendment to the Company's Articles of Incorporation
to change the name of the Company to "[___________]
Entertainment";
2. To elect directors;
3. To approve and ratify the appointment of KPMG Peat Marwick LLP as
the Company's independent accountants for the fiscal year ended
December 31, 1997 and the fiscal year ending December 31, 1998;
and
4. To consider and act upon such other business as may properly come
before the meeting or any adjournment(s) thereof.
Information concerning these matters, including the names of the
nominees for election to the Board of Directors (the "Board"), is set forth in
the attached Proxy Statement, which is part of this Notice.
The Board has fixed April 1, 1998 as the record date for determination
of shareholders entitled to notice of and to vote at the Annual Meeting.
Accordingly, only those shareholders of record at the close of business on that
date are entitled to vote at the Annual Meeting or any adjournment(s) thereof.
The Board urges that all shareholders of record exercise their right to
vote at the meeting personally or by proxy.
Your proxy will continue in full force and effect unless and until you
revoke such proxy prior to the vote to which such proxy pertains. You may revoke
your proxy by a writing delivered to the Company stating that the proxy is
revoked, by a subsequently dated proxy executed by you, or by attending the
Annual Meeting and voting in person. The dates set forth on the proxy cards
preemptively determine the order of execution, regardless of the postmark dates
on the envelopes in which they are mailed.
By Order of the Board of Directors
Ronald Lightstone
President and Chief Executive Officer
April ____, 1998
Los Angeles, California
TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN (DO NOT PRINT) YOUR NAME AND DATE THE ENCLOSED PROXY CARD(S) AS PROMPTLY AS
POSSIBLE AND RETURN IT (THEM) IN THE ENCLOSED PRE-ADDRESSED ENVELOPE. IF YOU
RECEIVE MORE THAN ONE PROXY CARD BECAUSE YOU OWN SHARES REGISTERED IN DIFFERENT
NAMES OR AT DIFFERENT ADDRESSES, EACH PROXY CARD SHOULD BE COMPLETED AND
RETURNED.
<PAGE> 3
DOVE ENTERTAINMENT, INC.
8955 BEVERLY BOULEVARD
LOS ANGELES, CALIFORNIA 90048
-----------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 30, 1998
This Proxy Statement is furnished to the shareholders in connection
with the solicitation by the Board of Directors (the "Board") of Dove
Entertainment, Inc., a California corporation (the "Company"), of proxies for
use at the 1997 and 1998 Annual Meeting of Shareholders of the Company (the
"Annual Meeting") to be held at Dove Entertainment, Inc., 8955 Beverly
Boulevard, Los Angeles, California 90048, on Thursday, April 30, 1998, at 10:00
a.m., local time, and any postponement(s) and adjournment(s) thereof.
The Company's principal executive offices are located at 8955 Beverly
Boulevard, Los Angeles, California 90048 and its telephone number is (310) 786 -
1600.
This Proxy Statement, the accompanying Notice of Annual Meeting, the
accompanying proxy card(s), the Company's 1996 Annual Report to Shareholders and
the Company's 1997 Annual Report to Shareholders (collectively the "Annual
Report") are being first mailed to shareholders of the Company on or about April
14, 1998. The cost of preparing, assembling and mailing the foregoing will be
paid by the Company. The Company will pay brokers or other persons holding stock
in their names or the names of their nominees for the expense of forwarding
soliciting material to their principals. The Company may use the services of its
Directors, officers and other regular employees to solicit proxies personally or
by telephone. Such Directors, officers and employees will not receive additional
compensation for such solicitation but may be reimbursed for reasonable
out-of-pocket expenses incurred in connection with such solicitation. The Annual
Report is not to be regarded as proxy soliciting material or as a communication
by means of which any solicitation of proxies is to be made.
VOTING
The accompanying proxy will be voted in accordance with the
instructions contained thereon. In the absence of such instructions, the persons
designated as proxies in the accompanying proxy card(s) will vote: for the
approval of the amendment to the Company's Articles of Incorporation, for the
election of the Director nominees listed herein (the "Nominees"), for the
ratification of the selection of KPMG Peat Marwick LLP as the Company's
independent accountants for the fiscal year ended December 31, 1997 and the
fiscal year ending December 31, 1998 and, in their discretion, as to any other
business that may properly come before the Annual Meeting or any postponement(s)
and adjournment(s) thereof. The Board does not know of any other business to be
brought before the Annual Meeting.
Each duly executed proxy will continue in full force and effect unless
and until revoked by the person executing it prior to the vote pursuant thereto.
Such revocation may be effected by a writing delivered to the Company to the
attention of the Corporate Secretary at the address indicated above stating that
the proxy is revoked by a subsequently dated proxy, duly executed by or on
behalf of the person executing the prior proxy and presented at the Annual
Meeting, or by attending the Annual Meeting and voting in person.
GENERAL INFORMATION
The Board has fixed April 1, 1998 as the record date (the "Record
Date") for the determination of shareholders entitled to notice of and to vote
at the Annual Meeting or any postponement(s) or adjournment(s) thereof. At the
close of business on the Record Date, 6,301,544 shares of the Company's common
stock, par value $.01 per share (the "Common Stock"), held by __ holders of
record, were outstanding and entitled to vote at the Annual Meeting. As of that
date, there were 4,000 shares of the Company's Series B Preferred Stock (the
"Series B Preferred Stock"), 1,920 shares of the Company's Series C Preferred
Stock (the "Series C Preferred Stock"), and 214,113 shares of the Company's
Series D Preferred Stock (the "Series D Preferred Stock" and, together with the
Series B Preferred Stock and the Series C Preferred Stock, the "Preferred
Stock") outstanding and entitled to vote at the Annual Meeting. Each share of
Preferred Stock entitles the holder thereof to
1
<PAGE> 4
such number of votes per share equal to the number of shares of Common Stock
into which each share of Preferred Stock is then convertible (the "Equivalent
Common Stock") on the Record Date. On such date, the Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock were convertible into
2,000,000, 960,000, and 258,000 shares of Common Stock, respectively. The
Preferred Stock shall vote together with the Common Stock on all actions taken
by the shareholders of the Company except the election of directors, with
respect to which the holders of the Series B Preferred Stock, voting as a
separate class, are entitled to elect one-third of the directors of the Company
(i.e., two directors at the Annual Meeting). There are no other classes of stock
of the Company entitled to vote at the Annual Meeting.
Shareholders who own shares registered in different names or at
different addresses will receive more than one proxy card. A shareholder must
sign and return each of the proxy cards received to ensure that all of the
shares owned by such shareholder are represented at the Annual Meeting.
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of Common Stock and Equivalent Common Stock entitled to
vote at the Annual Meeting will constitute a quorum. With respect to the
election of directors, the five nominees receiving the highest number of
affirmative votes of the Common Stock and of the Equivalent Common Stock related
to the Series C Preferred Stock and the Series D Preferred Stock will be
elected, and two nominees will be elected solely by the holders of the Series B
Preferred Stock. With respect to the amendment of the Company's Articles of
Incorporation, the affirmative vote of the majority of the Common Stock and
Equivalent Common Stock represented at the Annual Meeting shall be required for
approval. Abstentions and broker non-votes (which occur if a broker or other
nominee does not have discretionary authority to vote the relevant shares as to
particular matters and has not received voting instructions from the beneficial
owner with respect to a particular item) are counted for the purpose of
determining the presence or absence of a quorum for the transaction of business.
Abstentions are counted in tabulations of the votes cast on proposals presented
to the shareholders and have the same legal effect as a vote against a
particular proposal (other than the election of directors). Broker non-votes are
not taken into account for purposes of determining whether a proposal has been
approved by the requisite shareholder vote.
Each share of Common Stock and Equivalent Common Stock entitles the
holder thereof to one vote on each matter to be voted on at the Annual Meeting.
However, in the election of directors, a shareholder (excluding holders of
Series B Preferred Stock) may cumulate his vote for one or more nominees, but
only if the names of nominees were placed in nomination prior to the voting and
any shareholder has given notice at the Annual Meeting prior to the voting of
his intention to so cumulate his votes. If any shareholder has given such
notice, all shareholders may cumulate their votes in such election of directors.
If the voting for directors is conducted by cumulative voting, each share of
Common Stock and Equivalent Common Stock will be entitled to a number of votes
equal to the number of directors to be elected, which votes may be cast for a
single nominee or distributed between or among two or more nominees in such
proportions as the shareholder or proxy deems fit.
Stockholders do not have dissenters' rights of appraisal under
California law with respect to any proposal to be submitted by the Board of
Directors at the Annual Meeting.
PROPOSAL ONE
AMENDMENT OF ARTICLES OF INCORPORATION
On March [____], 1998, the Board approved an amendment to Article I of
the Company's Articles of Incorporation to change the name of the Company to
"[__________] Entertainment, Inc." The Company filed a fictitious name
certificate to do business as "[______] Entertainment, Inc." on March [____],
1998. Amendment of the Articles of Incorporation is subject to the affirmative
approval by holders of a majority of the shares of Common Stock and Equivalent
Common Stock outstanding on the Record Date. The Company has undergone
significant changes in management and operations and the Board believes it is
desirable to change the Company's name to reflect such changes and disassociate
itself from previous management. The text of the Amendment is set for on Exhibit
A to this Proxy Statement.
THE BOARD OF DIRECTORS STRONGLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE APPROVAL OF THE AMENDMENT OF THE COMPANY'S ARTICLES OF INCORPORATION.
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<PAGE> 5
PROPOSAL TWO
ELECTION OF DIRECTORS
Directors of 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. As of the date hereof, the Board consists of seven members. The five
management nominees and two Series B Preferred Stock nominees for election of
directors are set forth below. Unless otherwise marked, proxies will be voted
FOR the election of these nominees. Should any nominee become unavailable to
serve as a director before the election (which event is not anticipated), the
proxies may be voted for a substitute nominee selected by the Board or the
authorized number of directors may be reduced. If for any reason the authorized
number of directors is reduced, the proxies will be voted, in the absence of
instructions to the contrary, for the election of those nominees selected by the
persons designated as proxies in the accompanying proxy card (s). To the best of
the Company's knowledge, all nominees are and will be available to serve.
INFORMATION WITH RESPECT TO DIRECTORS AND NOMINEES
The following table sets forth the nominees, their ages and present
principal occupations or employment.
<TABLE>
<CAPTION>
MANAGEMENT
DIRECTOR NOMINEES
NAME AGE PRINCIPAL OCCUPATION
----------------- --- --------------------
<S> <C> <C> <C>
Terrence A. Elkes 63 Managing Director and co-owner of Apollo Partners, LLC
and Director
Ronald Lightstone 59 President and Chief Executive Officer of Dove
Entertainment, Inc. and Director
Bruce Maggin 54 Principal, H.A.M. Media Group, LLC and Director
Lee Masters * 45 President and Chief Executive Officer of E! Entertainment
Television and Director
Steven F. Mayer * 38 Managing Director, Libra Investments, Inc. and Director
SERIES B PREFERRED STOCK
DIRECTOR NOMINEES
NAME
Kenneth F. Gorman* 58 Managing Director and co-owner of Apollo Partners, LLC and
Director
John T. Healy 57 Principal in the H.A.M. Media Group, LLC and Director
- ---------------
</TABLE>
* Denotes membership on the Audit Committee
Messrs. Lightstone, Healy and Gorman became directors of the Company on
March 31, 1997 in connection with the equity investment by Media Equities
International, LLC ("MEI") described elsewhere herein. Messrs. Elkes and Maggin
were appointed directors of the Company to fill the vacancies created by Michael
Viner and Deborah Raffin (together the "Viners") upon their resignations as
directors described elsewhere herein. Mr. Masters was appointed a director of
the Company on September 30, 1997 to fill a then existing vacancy.
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 would have the right to designate a nominee for election, at its or
their option, either as a member or as a non-voting advisor to the Board, 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. Steven Mayer had been
so designated by Whale Securities. In addition, until December 1, 1999, the
managing underwriter of the Company's initial public offering, Joseph Stevens &
Company, L.P., has the right to designate either one member of the Board or a
person to attend and observe meetings of the Board. Steven Mayer
3
<PAGE> 6
has been designated to serve on the Board by Joseph Stevens & Company, L.P. Mr.
Mayer has been a member of the Board since November, 1996.
On October 27, 1997, Gerald Leider resigned as a member of the Board of
Directors and on October 29, 1997 James Belasco resigned as a member of the
Board of Directors.
The Company has agreed to reimburse each Board member's travel
expenses. For the fiscal year ended December 31, 1997, pursuant to the Company's
1994 Stock Incentive Plan (the "Plan"), each outside director was granted
options to purchase 5,000 shares of Common Stock. The Company granted 10,000
options outside the Plan to each of the non-employee directors for each members'
service during the prior year. For the fiscal year ending December 31, 1998, the
Company has agreed to grant to each director options to purchase 10,000 shares
of Common Stock, which options shall vest 25% at the end of each quarter, and to
make a cash payment of $1,000 per quarter to each director not associated with
MEI.
During the 1996 fiscal year, there were five meetings of the Board and
no actions of the Board were taken pursuant to unanimous written consents. Each
current director attended the meetings of the Board held during the period for
which he was a director. There were no meetings of the Audit Committee during
the 1996 fiscal year apart from meetings of the entire Board of Directors. The
Audit Committee during 1996 was comprised of Mr. James Belasco and Mr. Steven
Mayer and the Executive Committee consisted of Mr. Michael Viner and Ms. Debra
Raffin. During the 1997 fiscal year, there were seven meetings of the Board and
one action was taken pursuant to unanimous written consent. Each current
director attended the meetings of the Board held during the period for which he
was a director except for Mr. Healy who was not in attendance at the meeting
held on September 30, 1997 and Mr. Mayer who was not in attendance at the
meeting held on August 14, 1997. There were no meetings of the Audit Committee
during the 1997 fiscal year apart from the meetings of the entire Board of
Directors. The Audit Committee from January 1, 1997 until October 29, 1997 was
comprised of James Belasco and Steven Mayer, and after October 29, 1997 was
comprised of Lee Masters, Steven Mayer and Ken Gorman. The Company does not have
a standing nominating or compensation committee.
TERRENCE A. ELKES was appointed to the Board in June 1997 to fill the
vacancy provided by the resignation of Michael Viner, the former President ,
Chief Executive Officer and Director of the Company. Mr. Elkes is presently a
Managing Director and co-owner of Apollo Partners, LLC, formed in 1987, which is
involved in the acquisition of companies in the media, communications,
entertainment and broadcasting fields. Mr. Elkes served as President of Viacom
from 1978 to 1982 and as Chief Executive Officer from September 1983 to 1987. He
also served on the Viacom's Board of Directors from 1973 to 1987. Mr. Elkes
joined Viacom in 1972 as Vice President, General Counsel and Secretary. He
became Executive Vice President in 1976 with responsibility for the financial,
legal and human resources areas of that company. Shortly thereafter, he assumed
responsibility for Viacom's pay television and cable television operations as
well. Prior to joining Viacom, Mr. Elkes served as Vice President and General
Counsel for Parsons and Whittemore, a privately-owned paper corporation. In this
capacity, he also managed the company's financial operations and international
development. Previously, Mr. Elkes was an attorney at Norwich Pharmacal Company
and later became General Counsel for Norwich's International Division. Mr. Elkes
received his bachelor's degree cum laude in economics and political science from
the City College of New York in 1955, and in 1958 he earned a doctor of law
degree from the University of Michigan. He is a member of the New York City Bar
Association and a former member of the International Radio and Television
Society's Board of Governors. Currently, Mr. Elkes is Chairman of the Board of
Video Services Corporation and a Director of Entertainment Partners, Talent
Partners, IDC Services and Doane Agricultural Services Company. Mr. Elkes is a
member of the President's Advisory Committee of the University of Michigan, a
member of the University of Michigan's Investment Advisory Board and is a
Trustee of the Michigan Law School Foundation.
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, LLC, 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 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 the recipient
of the President's Award of the National Cable Association in 1978. He formerly
served as the Treasurer and Director of the International Council of the
National Academy of Television Arts and Sciences. Mr. Gorman currently serves as
Chairman of
4
<PAGE> 7
IDC Services, Inc. and is a director of the Musicland Group, Inc., 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 the American Broadcasting Co. ("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.
RONALD LIGHTSTONE has been President and Chief Executive Officer of the
Company since July 22, 1997 and a director since March 1997. 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. From December 1990 to October 1993,
he was Chief Operating 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. ("Viacom"), 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 has
served as Chairman of Multimedia Labs, Inc., a manufacturer of multimedia
equipment, from February 1994 to March 1997. Mr. Lightstone is a graduate of
Columbia University and New York University School of Law. Mr. Lightstone is a
member of Media Equities International, LLC.
BRUCE MAGGIN was appointed to the Board in June 1997 to fill the
vacancy provided by the resignation of Deborah Raffin, the former Executive Vice
President and Director of the Company. Mr. Maggin is the founder and a principal
of H.A.M. Media Group, LLC. Prior to forming H.A.M. Media Group, LLC, Mr. Maggin
was Executive Vice President of the Capital Cities/ABC Multimedia Group. Mr.
Maggin was also responsible for ABC's home video business as well as its new
media sales activities and technology investments. As Executive Vice President,
he was responsible for several international consultancies including NHK in
Japan and the BBC in the UK. Mr. Maggin joined ABC originally in 1970 and had
been Director of Corporate Planning before his appointment as Vice President of
Ziff Corporation, the parent company of Ziff-Davis Publishing and Broadcasting.
At Ziff Corporation, Mr. Maggin was responsible for managing the company's
diversification efforts. He returned to ABC in 1982 in a newly created position,
Vice President of Cost Management and in 1983 became Vice President of ABC Video
Enterprises. Mr. Maggin has been a member of the board of several companies
including the cable networks, Lifetime and ESPN, and software ventures, Creative
Wonders and O.T. Sports. He is also a director of Phillips-Van Heusen
Corporation. A member of the New York State Bar, he received his BA degree from
Lafayette College.
LEE MASTERS was appointed to the Board on September 30, 1997. Mr.
Masters is currently the President and Chief Executive Officer of E!
Entertainment Television. Mr. Masters has led the evolution of this 24-hour
network since he joined the company in January 1990. Prior to E! Entertainment
Television, Mr. Masters was Executive Vice President and General Manager of MTV
Networks where he oversaw the network's worldwide expansion. Prior to his career
in television, Mr. Masters enjoyed a 20 year career in radio. He began as a disc
jockey and moved through the ranks as a programmer, station manager and then the
owner of a group of radio stations. Originally from Doylestown, Pennsylvania, he
attended Philadelphia's Temple University, where he studied mathematics and
philosophy.
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. (not connected
with Apollo Partners, LLC) 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 Board of Directors of
Chicago Pizza & Brewery, Inc., a restaurant company. In addition, Mr. Mayer has
served as the chairman or a member of numerous other boards of directors and
creditors committees. Mr. Mayer is a graduate of Princeton University and
Harvard Law School.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THE ELECTION OF THE PERSONS NOMINATED FOR DIRECTOR HEREIN.
5
<PAGE> 8
MANAGEMENT
EXECUTIVE OFFICERS
Executive officers are elected by and serve at the discretion of the
Board, subject to the rights, if any, of the executive officer under any
contract of employment. No family relationships exist between or among any of
the executive officers of the Company. With respect to those persons who are no
longer officers of the Company, Michael Viner and Deborah Raffin were married
when they were officers of the Company and no other family relationships existed
between or among any of the persons who were executive officers of the Company
at the time.
The following table contains certain biographical information with
respect to current executive officers of the Company, other than executive
officers whose biographical information is set forth above under the heading
"Director Nominees."
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
---- --- --------------------
<S> <C> <C> <C>
Neil Topham 48 Chief Financial Officer
Ronald Ziskin 46 President, Dove Television
Robert Murray 38 Vice President, General Counsel and Secretary
Geoff Hannell 48 Vice President, Publishing
Gene George 33 Vice President, Dove International
- ---------------
</TABLE>
NEIL TOPHAM joined the Company in April 1997 as Acting Chief Financial
Officer and in July, he was named to the position of Chief Financial Officer.
From April 1996 and prior to joining the Company, Mr. Topham was 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. Before 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 Priestly & Morris, Chartered Accountant for
seven years prior to joining William Collins Pty. Ltd. Mr. Topham received a
Master of Economics degree from Macquarie University (Australia)
RONALD M. ZISKIN has been the Chief Operating Officer of the Company's
television production subsidiary, Dove Television since its creation in April
1996. Mr. Ziskin co-founded and served as President of Four Point Entertainment,
Inc. from 1984 to April 1996. As such, Mr. Ziskin was responsible for the
development and production of "American Gladiators," and created the franchises
of "Make Me Laugh" for Comedy Central and "Amazing America" and "History of the
Unnatural" for the Discovery Channel. Mr. Ziskin has also produced the
made-for-television movie for ABC entitled "Unwed Father" starring Brian Austin
Greene.
ROBERT MURRAY joined the Company in October 1997 as Vice President and
General Counsel. Prior to joining the Company, Mr. Murray was a lawyer with
O'Melveny & Myers LLP specializing in corporate law and finance. Mr. Murray
received a BS degree from the University of Washington, a Ph.D. from the
Massachusetts Institute of Technology and a JD from Stanford University School
of Law.
GEOFFREY J. HANNELL joined the Company in October 1997 as a Publisher
of the Publishing division. Previously, Mr. Hannell was Senior Vice President at
Troll Communications LLC and from 1989-1996 he was employed by HarperCollins
Publishers in New York, where he was Senior Vice President and Publisher of
HarperPaperbacks and HarperAudio from 1992-1996. Originally from England, Mr.
Hannell attended university in South Africa, and is a graduate of the University
of Witwatersrand and the University of South Africa.
GENE L. GEORGE joined the Company in October 1995 as Vice President,
Sales and Acquisitions of Dove International, the film and television
distribution division of the Company. Prior to that, he was Executive Vice
President of Arista Films, Inc. and President of Arista Classics, where he
oversaw the worldwide distribution of over fifty independently produced and
specialized theatrical motion pictures over an eight year period. In 1992, he
was elected to the Board of
6
<PAGE> 9
Directors of the American Film Marketing Association, where he still serves
today. In 1986, Mr. George received his bachelor's degree cum laude in
international business and marketing from California State University at
Northridge.
EXECUTIVE COMPENSATION
SUMMARY OF EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation
for services to the Company for the years ended December 31, 1997, 1996, 1995,
and 1994, respectively, of the Company's two Chief Executive Officers during
those years and the four other executive officers of the Company who received
compensation in excess of $100,000 during those years:
<TABLE>
<CAPTION>
==============================================================================================================================
Restricted Securities
Name and Fiscal Stock Underlying All Other
Principal position Year Salary Bonus Awards Options/SARs Compensation
------------------ ------ ------ ----- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Ronald Lightstone 1997 $200,000 -- 400,000(1) -- --(2)
President, Chief Executive 1996 -- -- -- -- --
Officer and Director 1995 -- -- -- -- --
1994 -- -- -- -- --
Ron Ziskin 1997 $297,692 $64,062 -- -- $ 18,000(3)
Chief Operating Officer of 1996 $205,833 (4) -- -- 300,000 (5) $ 18,000(3)
Dove Four Point, Inc. 1995 -- -- -- -- --
1994 -- -- -- -- --
--
Neil Topham 1997 $175,000 -- -- -- --
Vice President and Chief 1996 -- -- -- -- --
Financial Officer 1995 -- -- -- -- --
1994 -- -- -- -- --
</TABLE>
PERSONS NO LONGER OFFICERS OF THE COMPANY:
<TABLE>
<CAPTION>
Restricted Securities
Name and Fiscal Stock Underlying All Other
Principal position Year Salary Bonus Awards Options/SARs Compensation
------------------ ------ ------ ----- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Michael Viner 1997 $141,827 (6) -- -- -- $ 133,234(7)
Then President, Chief Executive 1996 $312,000 -- -- 50,000 (8) $ 15,275(9)
Officer and Director 1995 $230,000 -- -- -- $ 12,487(9)
1994 $200,000 -- -- 250,000 (10) $ 34,955(9)
Deborah Raffin 1997 $113,461 (6) -- -- -- $ 66,704(11)
Then Executive Vice President, 1996 $250,000 -- -- 50,000 (8) $ 9,288(12)
Secretary and Director 1995 $115,000 -- -- -- $ 11,522(12)
1994 -- -- -- 250,000 (10) -- (12)
Steven Soloway 1997 $62,539 (6) -- -- -- $ 2,000(13)
Then General Counsel 1996 $120,077 $10,000 -- 30,000 (14) $ 2,000(13)
and Director 1995 $100,000 $10,000 -- 6,000 (14) --
1994 -- -- -- --
==============================================================================================================================
</TABLE>
(1) Such shares were issued to Mr. Lightstone in January 1998 and vest over a
three year period (1/36 of such shares vesting each month), which vesting
commenced July 10, 1997.
7
<PAGE> 10
(2) Pursuant to his employment agreement, Mr. Lightstone was to have received a
monthly automobile allowance of $1,000, but did not receive such payments
in 1997.
(3) Includes $18,000 automobile allowance in 1996 and 1997, respectively.
(4) 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 Agreements."
(5) Options were granted outside of the Plan and had an exercise price of
$11.00 per share. Such options have been canceled and the Company has
agreed to grant to Mr. Ziskin in lieu thereof options to purchase 150,000
shares of Common Stock of the Company at an exercise price of $1.50 per
share.
(6) Includes only that portion of annual salary actually paid in 1997.
(7) Includes (i) $100,000 as payment of accrued non-accountable expense
allowance of $50,000 in 1995 and $50,000 in 1996, (ii) payment of business
condominium expense of $2,000, (iii) personal checks of $20,833 and $1,050,
and (iv) automobile lease payments, insurance and repairs of $9,351. Does
not include payments of $107,491 made to Mr. Viner under the severance
agreement. See Certain Relationships and Related Transactions." Does not
include the payment to Mr. Viner of $50,000 for executive producer fees on
"Unwed Father," $11,053 for documentary writing fees, $75,000 for
commissions on the film "Wilde" and $13,187 for accrued interest on the
film "Wilde." See "Certain Relationships and Related Transactions."
(8) Options granted were exercisable in accordance with the terms of the
Company's 1994 Stock Incentive Plan (the "Plan") with an exercise price of
$3.50 per share. Such options terminated upon the Viners' resignations as
officers and directors of the Company.
(9) Includes $11,008, $12,497 and $22,655 (which $22,655 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. 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.
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." Does not include
compensation paid to Mr. Viner or Ms. Raffin for production, directing and
acting services, as applicable, relating to the making of "Home Song" and
"Family Blessings." See "Certain Relationships and Related Transactions."
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 were equal beneficiaries under such policy.
(10) An option to purchase an aggregate of 250,000 shares of Common Stock for
$.01 per share granted jointly to the Viners in September 1994 in
satisfaction of, among other things, compensation previously deferred by
them. Such options were exercised on May 23, 1997.
(11) Includes (i) $50,000 as payment of accrued non-accountable expenses
allowance of $25,000 in 1995 and $25,000 in 1996, (ii) personal checks of
$10,416 and $100, and (iii) automobile lease payments and insurance of
$6,188. Does not include payments of $78,648 made to Ms. Raffin under the
severance agreement. See "Certain Relationships and Related Transactions."
Does not include the payment to Ms. Raffin of $50,000 for executive
producer fees on "Unwed Father," $75,000 for commissions on the film
"Wilde" and $13,187 for accrued interest on the film "Wilde." See "Certain
Relationships and Related Transactions."
(12) 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. Does not include $3,850 and
$2,442 in medical insurance premiums for Ms. Raffin paid in fiscal 1996 and
1994, respectively. Does not include compensation paid to Mr. Viner or Ms.
Raffin for production, directing and acting services, as applicable,
relating to the making of "Home Song" and "Family Blessings."
(13) Includes $2,000 paid to Mr. Soloway for an automobile allowance, automobile
insurance and expenses incidental to operation of an automobile for 1996
and 1997, respectively.
(14) 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. The Company maintains that
such options terminated upon Mr. Soloway's resignation as an officer and
director of the Company. See "Employment Agreements."
8
<PAGE> 11
EMPLOYMENT AGREEMENTS
Pursuant to an employment agreement dated as of February 4, 1998,
Ronald Lightstone is employed by the Company as its President and Chief
Executive Officer. The term of Mr. Lightstone's employment agreement commenced
on June 10, 1997 and ends on June 10, 1999. Pursuant to the agreement, Mr.
Lightstone is paid a base salary of $200,000 per year. In addition to such base
salary, Mr. Lightstone was granted 400,000 shares of Common Stock, ownership
which shall vest over a three year period (1/36 of such shares vesting each
month), commencing July 10, 1997. The employment agreement also provides for (i)
three weeks paid vacation, (ii) reimbursement of business related expenses,
(iii) a car allowance of $1,000 per month, and (iv) eligibility to participate
in all compensation, pension, retirement and welfare and fringe benefit plans,
programs and policies of the Company applicable to executives of the Company
generally.
Pursuant to an agreement entered into in April 1997, Neil Topham joined
the Company as an advisor and effective May 1, 1997, was named Acting Chief
Financial Officer. In July 1997 Mr. Topham was named permanent Chief Financial
Officer and will be paid a salary of $175,000, on an annualized basis, plus a
guaranteed bonus of $25,000 for the first year of his employment.
The Company entered into a three-year employment agreement with Ronald
M. Ziskin pursuant to which he will be the President of Dove Television. Such
agreement expires in April 1999. Mr. Ziskin and the Company have agreed to the
terms of a new employment agreement which will have a term ending in December
2000. 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. The Company and Mr.
Ziskin have agreed to cancel such options and grant options to acquire 150,000
shares of Common Stock at an exercise price of $1.50 per share in lieu thereof.
EMPLOYMENT AGREEMENTS OF PERSONS NO LONGER OFFICERS OF THE COMPANY
Pursuant to an employment agreement dated as of January 1, 1995, which
was to expire January 1, 2002, Michael Viner was employed by the Company as its
President and Chief Executive Officer. Pursuant to such agreement Mr. Viner was
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 was entitled under such agreement to (i) a bonus as
agreed to by the Company; (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 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,
but was accrued. In 1997, Mr. Viner was paid $100,000 for such accrued
non-accountable expense allowance. In 1997, Mr. Viner was paid $20,833 for
non-accountable expenses. As described below, this agreement has been ended. In
addition, in connection with the guarantee by Mr. Viner of certain obligations
of the Company, in September 1996, Mr. Viner entered 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
was to expire January 1, 2002, Deborah Raffin was employed by the Company as its
Executive Vice President and Secretary. Pursuant to such agreement Ms. Raffin
was 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 was entitled under her
employment agreement to the same Benefits as Mr. Viner with two exceptions: Ms.
Raffin was not entitled to a life insurance policy and she was 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, but was
accrued. In 1997, Ms. Raffin was paid $50,000 for such accrued non-accountable
expense allowance. In 1997, Mr. Ruffin was paid $10,417 for non-accountable
expenses. As described below, this agreement has been ended. In addition, in
connection with the guarantee by Ms. Raffin of certain obligations 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."
9
<PAGE> 12
The increases in each of the salaries of the Viners 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.
On June 10, 1997 the Viners entered into a Securities Purchase
Agreement ( the "Securities Purchase Agreement") with MEI pursuant to which the
Viners sold to MEI (i) all of the Series C Preferred Stock and Warrants to
purchase Common Stock acquired by the Viners pursuant to that Stock Purchase
Agreement (the "Stock Purchase Agreement") made as of March 27, 1997, as
amended, among the Company, MEI, and the Viners, including 1,570 shares of
Series C Preferred Stock and Warrants to purchase 825,000 shares of Common Stock
for an aggregate purchase price of $1,570,000; (ii) 214,113 shares of Series D
Preferred Stock, constituting all of the Series D Preferred Stock owned by the
Viners, for an aggregate purchase price of $516,000; and (iii) 500,000 shares of
Common Stock owned by the Viners for an aggregate purchase price of $1,000,000.
Concurrently with entering into the Securities Purchase Agreement, the
Viners entered into an Employment Termination Agreement (the "Termination
Agreement") pursuant to which the Viners agreed to end their respective
employment agreements in consideration of, among others, the following terms:
(i) commencing June 10, 1997 the Company will pay Mr. Viner $14,583.33 per month
for 60 months (the "Term"), for an aggregate amount of $875,000, plus a monthly
automobile allowance of $1,000 for 24 months; (ii) commencing June 10, 1997 the
Company will pay Ms. Raffin $10,416.67 per month for 60 months, for an aggregate
amount of $625,000, plus a monthly automobile allowance of $1,000 for 24 months;
(iii) the Company will maintain the SAG group medical insurance in place during
the Term for the benefit of the Viners; (iv) the Company issued 1,500 shares of
a new series of preferred stock into escrow as security for certain of the
Company's obligations under the Termination Agreement; (v) the Company will
reimburse the Viners for actual medical expenses incurred through June 10, 1997
not covered by insurance in an amount not exceeding $10,000; (vi) the Viners are
prohibited from competing with the Company in the audio book business, directly
or indirectly, and soliciting authors or readers currently under contract with
the Company or in the Company catalog for a period of four years with certain
exceptions; (vii) the Company provided the Viners the office space, parking and
related facilities and equipment which he or she previously used at the
Company's Canon facility until September 1, 1997; and (viii) the Company paid
the Viners the budgeted producer and executive producer fees on "Unwed Father"
of $50,000. Pursuant to the Termination Agreement the Viners resigned as
officers and directors of the Company and its subsidiaries. See "Security
Ownership of Certain Beneficial Owners and Management Change in Control."
In August 1997, Mr. Viners commenced an arbitration against the Company
seeking specific performance of, and alleging breach of, the Termination
Agreement. They subsequently identified in writing their intention to arbitrate
a variety of miscellaneous claims, including the Company's alleged failure to
timely pay the full amount of fees under the Termination Agreement and producer
fees on "Unwed Father", to reimburse business expenses, payments to Mr. Viner's
masseuse, payments to Mr. Viner's psychologist and medical and dental expenses
and to return personal property. On October 16, 1997, the Viners filed an action
in the Los Angeles Superior Court (Case No. BC 179639) for "Breach of Written
Contract; Specific Performance, Temporary Restraining Order, Preliminary and
Permanent Injunctive Relief" which sought damages for some of the same claims
identified in the arbitration. In this action the Viners claimed that, in
addition to other damages, they were entitled to accelerate all payments to
become due under the Termination Agreement, in the aggregate amount of $1,511,
824 and to the rights to certain titles. This action appears to have been filed
for purposes of obtaining an attachment. After the Company obtained a temporary
restraining order in the action staying the arbitration, the Viners filed
another action in the Los Angeles Superior Court (Case No. BC 180301) seeking
declaratory relief and an injunction staying other arbitration proceedings
between them and the Company. After the Company defeated an application for
temporary restraining order in that action, the Viners filed requests for
dismissals of both actions. In the arbitration, the Company is (i) seeking over
$105,000 in compensatory damages from the Viners for certain unauthorized
Company checks that Mr. Viner signed to himself and Ms. Raffin, to the Viners'
personal attorney, for repairs for Mr. Viner's car, and for payments for the
Viners' credit card accounts, (ii) seeking punitive damages for Mr. Viner's
causing Dove to pay to himself and Ms. Raffin amounts that had already been
credited to them in the Viners' purchase of Company stock, (iii) seeking damages
of at least $175,000 for Mr. Viner's breach of the non-interference provision of
the Termination Agreement, (iv) seeking reimbursement of approximately $9,600
for an airline ticket that was paid for by the Company and subsequently
reimbursed to Mr. Viner for a flight that Mr. Viner did not take and (v) as a
result of their breach of the non-competition provision of the Termination
Agreement, requesting that the arbitrator enjoin the Viners from competing with
the Company in the audio book business through June 9, 2001. The Company
believes that, with the exception of certain immaterial amounts which it expects
to pay, it has good and meritorious defenses to the claims by
10
<PAGE> 13
the Viners and that the Company has meritorious claims against the Viners. Three
is no assurance, however, that the Company will prevail on these issues and
claims.
The Viners also claimed that their agreement not to compete with the
Company in the book and audio business is not enforceable. On January 12, 1998,
the arbitrator issued his decision in which he held that the Viners' contention
that the non-compete provision of the Termination Agreement is invalid and
unenforceable is without merit and that the provision prohibiting the Viners
from competing with the Company in the audio book business for a period of four
years from June 10, 1997 is valid and enforceable, and he enjoined the Viners
from engaging in the audio book business during such period.
In addition, in July 1997, the Viners commenced on arbitration against
the Company claiming that they are owed in excess of $1 million by the Company
relating to the motion picture entitled "Morning Glory", that they are also
entitled to the repayment of certain deferred amounts for producing and acting
services rendered by them in connection with such film and to 50% of the
profits. They also claim that a former director of the Company, Gerald Leider,
is entitled to the other 50% of the profits. Present management believes the
Company has good and sufficient defenses to the claims, including , but not
limited to the Viners' waiver of their claims that any amounts are owed to them
as debt, as profit participation or as deferred compensation and that the
Company has not yet recouped its investment in the picture. The Company has also
asked the arbitrator to determine that the Viners are not entitled to any moneys
or rights with respect to "Morning Glory", including any proceeds received from
any recovery of an existing judgment relating to litigation involving the
picture. There is no assurance that the Company will prevail on these claims and
defenses.
In another arbitration proceeding involving the Viners and the Company,
the Viners claimed that the Company breached the Termination Agreement by
failing to prepare office space for use by the Viners and interfering with their
use of the space, failing to repair a toilet and failing to provide for and pay
secretaries for the Viners, and that a subsequent purported occupancy agreement
that allowed the Viners to use the Company's offices at 301 N. Canon was
enforceable. The Company claimed, among other things, that the Company was
entitled to compensatory damages plus costs incurred in restoring the Viners'
offices to their original condition and the costs of recovering possession and
that the occupancy agreement was invalid because it was never disclosed to or
approved, authorized or ratified by the Company's shareholders or the Board. The
arbitrator rendered a decision on February 13, 1998 (amended and corrected on
March 2, 1998), in which he awarded the Company the sum of $14,093 plus costs,
finding, among other things, that neither of the Viners had the right to occupy
the Company's office space after September 1, 1997 and that the purported
occupancy agreement is invalid and unenforceable.
Pursuant to an employment agreement, dated as of October 15, 1996,
which was to have expired on October 15, 1999, Steven Soloway was employed by
the Company as its General Counsel and Vice President of Business Affairs. The
Company was permitted to 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 was terminated for any reason, the
Company was required to pay all amounts accrued through the date of such
termination. Further, if Mr. Soloway was terminated without cause (which may
have included 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 certain events constituting a change in control of the
Company), the Company may be have been 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 may have automatically vested and
become exercisable. As part of the transaction 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. The employment
agreement provided for a base salary of $125,000 per year and an annual 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 Company maintains that all of Mr. Soloway's options
terminated upon his termination of employment with the Company. The employment
agreement also provided for an annual bonus of at least $10,000. In June, 1997
Mr. Soloway's employment as General Counsel and Vice President of Business
Affairs ended and on July 30, 1997 Mr. Soloway resigned from the Board. In July
1997, the Company was served with a complaint in an action entitled Steven A.
Soloway v. Dove Entertainment, Inc., etc. et al. (Los Angeles Superior Court
Case No. BC 175516) (the "Soloway Action"). Mr. Soloway has sought damages of
approximately $350,000 for breach of contract. Mr. Soloway claims that as a
result of the Securities Purchase Agreement he was entitled to declare his
employment agreement terminated without cause and to receive his base salary
through September 1999. Although the Company believes that it has good and
meritorious defenses and setoffs to the Soloway Action, there can be no
assurance that the Company will prevail in the action. The Company has filed a
cross-complaint against Mr. Soloway for breach of fiduciary duty and legal
malpractice asserting that Mr. Soloway fabricated a version of his employment
agreement, submitted the fabricated version for inclusion in the Company's
public documents,
11
<PAGE> 14
without authorization or approval drafted and signed on behalf of the Company an
occupancy agreement pursuant to which the Viners unrightfully occupied the
Company's offices, fabricated minutes of the Board and disclosed confidential
information that he obtained as an officer of the Company.
OPTION/SAR GRANTS IN 1996 AND 1997
There were no SARs granted to the named executive officers during 1996
or 1997. The following tables set forth stock options granted to the named
executive officers during 1996 and 1997.
<TABLE>
<CAPTION>
1996 OPTION NUMBER OF PERCENT OF
TABLE SECURITIES TOTAL OPTIONS/
UNDERLYING SARS GRANTED EXERCISE OR
OPTIONS/SARS TO EMPLOYEES BASE PRICE EXPIRATION
NAME GRANTED IN FISCAL YEAR ($/SHARE) DATE
- ---- ------- -------------- --------- ----
<S> <C> <C> <C> <C>
Ronald M. Ziskin 300,000 55% 11.00 5/1/2006(1)
PERSONS NO LONGER OFFICERS OF THE COMPANY:
Michael Viner 50,000 9% $3.50 11/29/2004(2)
Deborah Raffin 50,000 9% 3.50 11/29/2004(2)
Steven Soloway 30,000 5% 2.50 11/29/2004(3)
</TABLE>
(1) Mr. Ziskin and the Company have agreed to cancel such options and in lieu
thereof the Company will grant Mr. Ziskin the option to purchase 150,000
shares of Common Stock of the Company at an exercise price of $1.50 per
share.
(2) Such options have been terminated.
(3) The Company maintains that all of the Mr. Soloway's options terminated upon
his termination of employment with the Company.
<TABLE>
<CAPTION>
1997 OPTION NUMBER OF PERCENT OF
TABLE SECURITIES TOTAL OPTIONS/
UNDERLYING SARS GRANTED EXERCISE OR
OPTIONS/SARS TO EMPLOYEES BASE PRICE EXPIRATION
NAME GRANTED IN FISCAL YEAR ($/SHARE) DATE
- ---- ------- -------------- --------- ----
<S> <C> <C> <C> <C>
Ronald Lightstone -- -- N/A N/A
Neil Topham -- -- N/A N/A
Ronald M. Ziskin --(1) -- N/A N/A
PERSONS NO LONGER OFFICERS OF THE COMPANY:
Michael Viner -- -- N/A N/A
Deborah Raffin -- -- N/A N/A
Steven Soloway -- -- N/A N/A
</TABLE>
(1) In 1996 Mr. Ziskin was granted an option to purchase 300,000 shares of
Common Stock of the Company at an exercise price of $11.00 per share. Mr.
Ziskin and the Company have agreed to cancel such options and in lieu
thereof the Company will grant Mr. Ziskin the option to purchase 150,000
shares of Common Stock of the Company at an exercise price of $1.50 per
share.
OPTIONS EXERCISED IN 1996 AND 1997 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 December 31, 1996.
12
<PAGE> 15
Aggregated Year-end Option Values At December 31,1996:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES NUMBER OF SECURITIES
UNDERLYING UNDERLYING VALUE OF UNEXERCISED VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/ UNEXERCISED OPTIONS/ IN-THE-MONEY IN-THE-MONEY
SARS SARS OPTIONS/SARS OPTIONS/SARS
NAME EXERCISABLE UNEXERCISABLE EXERCISEABLE (1) UNEXERCISABLE (1)
- ---- -------------------- --------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Ronald M. Ziskin 300,000 (2) 300,000 -- --
PERSONS NO LONGER OFFICERS OF THE COMPANY:
Michael Viner 267,667 (3) 33,333 $ 341,250 --
Deborah Raffin 267,667 (3) 33,333 341,250 --
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) Options vest on the date nine years and eleven months after the date of the
grant and such vesting will accelerate upon Dove Television meeting certain
performance criteria. Based upon measurement of such performance none of
these options will be exercisable within the next 60 days.
(3) Includes options to acquire an aggregate of 250,000 shares of Common Stock,
held jointly by the Viners. Such option was exercised on May 23, 1997.
Aggregated Year-end Option Values at December 31, 1997:
The Viners exercised options to purchase 250,000 shares of common stock
of the Company on June 5, 1997. 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, 1997. 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 December 31,
1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES ACQUIRED ON UNEXERCISED IN-THE-MONEY
Name EXERCISE VALUE REALIZED OPTIONS/SARS OPTIONS/SARS
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ronald Lightstone -- -- -- --
Neil Topham -- -- -- --
Ronald M. Ziskin -- -- 300,000(1) --
PERSONS NO LONGER OFFICERS OF THE COMPANY:
Michael Viner 250,000(2) $575,625 -- --
Deborah Raffin 250,000(2) $575,625 -- --
Steven Soloway -- -- -- --
</TABLE>
(1) The Company and Mr. Ziskin have agreed to terminate such options and in
lieu thereof grant Mr. Ziskin the option to purchase 150,000 shares of
Common Stock of the Company at an exercise price of $1.50 per share.
(2) Held jointly by the Viners
13
<PAGE> 16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables sets forth information as of March 2, 1998,
concerning shares of equity securities 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 named executive officer and by all current directors and executive
officers as a group. Unless otherwise specified, the address of each beneficial
owner listed below is 8955 Beverly Boulevard, Los Angeles, California 90048.
COMMON STOCK
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS (1)
- ------------------------ ------------------ ----------------
<S> <C> <C>
Ronald Lightstone ............................ 6,840,222(2)(3) 54.6%
Bruce Maggin ................................. 6,750,000(2) 53.9%
John T. Healy ................................ 6,723,000(2) 53.7%
Media Equities International, LLC ............ 6,718,000(2) 53.7%
Apollo Partners LLC .......................... 6,718,000(2) 53.7%
Terrence A. Elkes ............................ 6,718,000(2) 53.7%
Kenneth F. Gorman ............................ 6,718,000(2) 53.7%
H.A.M. Media Group LLC ....................... 6,718,000(2) 53.7%
Sidney Sheldon ............................... 634,913(4) 10.1%
Norton Herrick ............................... 375,000(5) 5.8%
Ronald M. Ziskin ............................. 351,757(6) 5.6%
Steven F. Mayer .............................. 13,334(7) *
Neil Topham .................................. 10,000 *
Lee Masters .................................. 0(8) *
All current directors and executive officers
as a group (eleven individuals) .............. 7,215,313(2)(3)(6)(7) 56.9%
PERSONS NO LONGER OFFICERS OR DIRECTORS OF THE COMPANY:
Michael Viner ................................ 312,511(9) 4.9%
Deborah Raffin ............................... 312,511(9) 4.9%
Gerald Leider ................................ 20,000(10) *
James Belasco ................................ 0(11) *
Steven Soloway ............................... 0(12) *
</TABLE>
- ------------------
* Less than 1%.
(1) Percentages set forth are based upon 6,301,544 shares of Common Stock
outstanding as of March 2, 1998 adjusted in each case for contingently
issuable Common Stock.
(2) Includes (i) 3,000,000 shares of Common Stock issuable to MEI upon exercise
of warrants exercisable within 60 days as follows: 1,000,000 shares of
Common Stock with an exercise price of $2.00 per share, 1,000,000 shares of
Common Stock with an exercise price of $2.50 per share and 1,000,000 shares
of Common Stock with an exercise price of $3.00 per share, (ii) 2,000,000
shares of Common Stock issuable to MEI upon conversion of 4,000 shares of
Series B Preferred Stock, (iii) 960,000 shares of Common Stock issuable to
MEI upon conversion of 1,920 shares of Series C Preferred Stock, (iv)
258,000 shares of Common Stock issuable upon to MEI conversion of 214,113
shares of Series D Preferred Stock and (v) 500,000 issued and outstanding
shares of Common Stock owned of record by MEI. The Series B Preferred
14
<PAGE> 17
Stock table (below) includes 4,000 shares of Series B Preferred Stock,
3,000 of which were acquired on March 27, 1997; 250 of which were acquired
on May 15, 1997; and 750 of which were acquired on June 3, 1997. The Series
C Preferred Stock table (below) includes 1,920 shares of Series C Preferred
Stock purchased from the Viners or their assigns. 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 1
Stamford Plaza, 12th Floor, Stamford, Connecticut 06901. The business
address for H.A.M. Media and Messrs. Healy and Maggin is 305 Madison
Avenue, Suite 3016, New York, New York 10017.
(3) Includes 122,222 shares of Common Stock that have vested or will vest on or
prior to May 10, 1998 pursuant to Mr. Lightstone's employment agreement
with the Company. Does not include 277,778 shares of Common Stock issued to
Mr. Lightstone under his employment agreement with the Company which will
vest after May 10, 1998.
(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 and 12,500 shares of Common Stock issuable upon exercise of a
currently exercisable warrant with an exercise price of $12.00 per share.
The business address for Mr. Sheldon is i/c/o Irwin Rennert, Gelsand,
Rennert & Feldman, 1880 Century Park East, Suite 900, Los Angeles ,
California 90067.
(5) Base solely on a Schedule 13-D 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 with an exercise price of
$12.00 per share. The business address for Mr. Herrick is 2295 Corporate
Blvd. N. W., Suite 222, Boca Raton, Florida 33431.
(6) Includes 150,000 shares of Common Stock issuable upon exercise of stock
option with an exercise price of $1.50.
(7) Includes 6,667 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 6,667 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 3,333 shares of Common
Stock with an exercise price of $3.75 per share and 3,333 shares of Common
stock with an exercise price of $3.50 per share. The business address for
Mr. Mayer is Libra Investments, 11766 Wilshire Blvd., Suite 870, Los
Angeles, CA 90025.
(8) The business address for Mr. Masters is E! Entertainment, 5670 Wilshire
Boulevard., 2nd Floor, Los Angeles, CA 90036.
(9) Based solely on a Schedule 13-D as amended on August 20, 1997 and the
Company's knowledge of the sale by the Viners of 800,000 shares of Common
Stock of the Company in February 1998. All of such shares are jointly held
by the Viners as community property. The business address for the Viners is
a New Millennium Entertainment, 350 S. Beverly Dr., #315, Beverly Hills, CA
90212.
(10) Excludes any shares of Common Stock issuable upon exercise of any options
to which Mr. Leider may claim to have a right. Includes an aggregate of
5,000 shares of Common Stock which Mr. Leider gifted to his sons as to
which Mr. Leider disclaims beneficial ownership. The business address for
Mr. Leider is The Jerry Leider Company,11661 San Vicente Blvd., Suite 901,
Los Angeles, California 90049.
(11) The business address for Mr. Belasco is Management Development Associates,
4336 Goldfinch Street, San Diego, CA 92103.
(12) The business address for Mr. Soloway is New Millennium Entertainment, 350
S. Beverly Drive, #315, Beverly Hills, CA 90212.
15
<PAGE> 18
<TABLE>
<CAPTION>
SERIES B PREFERRED STOCK
------------------------
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT 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 LLC ................. 4,000(a) 100%
Bruce Maggin ........................... 4,000(a) 100%
John T. Healy .......................... 4,000(a) 100%
Ronald Lightstone ...................... 4,000(a) 100%
</TABLE>
- ------------------
(a) Each share of Series B Preferred is convertible six months after issuance
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 except that the Series B Preferred Stock shall not
be entitled to vote on the election of directors except voting as a separate
class shall be entitled to elect one-third of the directors 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 on the Record Date. See
footnote 2 above.
<TABLE>
<CAPTION>
SERIES C PREFERRED STOCK
------------------------
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
- ------------------------ ------------------ ----------------
<S> <C> <C>
Media Equities International, LLC ...... 1,920(b) 100%
Apollo Partners LLC .................... 1,920(b) 100%
Terrence A. Elkes ...................... 1,920(b) 100%
Kenneth F. Gorman ...................... 1,920(b) 100%
H.A.M. Media Group LLC ................. 1,920(b) 100%
Bruce Maggin ........................... 1,920(b) 100%
John T. Healy .......................... 1,920(b) 100%
Ronald Lightstone ...................... 1,920(b) 100%
</TABLE>
- -------------------
(b) Each share of Series C Preferred is convertible six months after issuance
into 500 shares of Common Stock subject to certain anti-dilution protections.
Each share of Series C 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 vote together with other classes, each
share of Series C Preferred Stock shall be entitled to such number of votes as
such shares are then convertible into on the Record Date. See footnote 2 above.
16
<PAGE> 19
<TABLE>
<CAPTION>
SERIES D PREFERRED STOCK
------------------------
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
- ------------------------ ------------------ ----------------
<S> <C> <C>
Media Equities International, LLC ...... 214,113(c) 100%
Apollo Partners LLC .................... 214,113(c) 100%
Terrence A. Elkes ...................... 214,113(c) 100%
Kenneth F. Gorman ...................... 214,113(c) 100%
H.A.M. Media Group LLC ................. 214,113(c) 100%
Bruce Maggin ........................... 214,113(c) 100%
John T. Healy .......................... 214,113(c) 100%
Ronald Lightstone ...................... 214,113(c) 100%
</TABLE>
- --------------------
(c) Each share of Series D Preferred Stock is convertible into 1.20497 shares
of Common Stock, subject to certain anti-dilution protections. Each share of
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 Series D
Preferred Stock vote together with other classes, each share Series D Preferred
Stock shall be entitled to such number of votes as such shares are then
convertible into on the Record Date. See footnote 2 above.
Pursuant to a Stock Purchase Agreement among MEI, the Company and the
Viners dated March 28, 1997, the Company must obtain MEI's consent, which right
of consent is required to be exercised in good faith and in a commercially
reasonable manner, prior to undertaking certain activities (including adopting
an annual budget, incurring any debt for borrowed money or issuing 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 advisors, certain litigation
matters, certain acquisition or production matters and certain other
activities).
CHANGE IN CONTROL
As of December 31, 1997, MEI has acquired control of the Company
through its ownership of equity securities and the majority presence of its
affiliates on the Company's Board of Directors. This change of control occurred
through the transactions described herein below.
Pursuant to a Stock Purchase Agreement, dated as of March 27, 1997,
among the Company, MEI, and the Viners, MEI agreed to purchase an aggregate of
4,000 shares of Series B Preferred Stock for $1,000 per share in cash and
warrants to purchase 2,000,000 shares of Common Stock and the Viners agreed to
purchase an aggregate of 1,920 shares of Series C Preferred Stock and warrants
to purchase 1,000,000 shares of Common Stock. The Stock Purchase Agreement
closed in two trances. In the first trance, which closed on March 27, 1997, MEI
purchased 3,000 shares of Series B Preferred Stock and warrants to purchase
1,500,000 shares of Common Stock and the Viners purchased 920 shares of Series C
Preferred Stock and warrants to purchase 500,000 shares of Common Stock,
respectively. The second trance was completed in two stages. On May 15, 1997,
MEI purchased 250 shares of Series B Preferred Stock and Warrants to purchase
125,000 shares of Common Stock and the Viners purchased 150 shares of Series C
Preferred Stock and Warrants to purchase 75,000 shares of Common Stock. On June
3, 1997, MEI purchased 750 shares of Series B Preferred Stock and warrants to
purchase 375,000 shares of Common Stock and the Viners purchased 500 shares of
Series C Preferred Stock and warrants to purchase 250,000 shares of Common
Stock. The Series B Preferred Stock, the Series C preferred Stock and the
warrants have the respective conversion rights described in the beneficial
ownership tables set forth above.
In connection with the Stock Purchase Agreement, the Viners agreed with
MEI, in certain circumstances, to vote all of the Company voting securities
owned by them for the election of MEI director designees, subject to applicable
fiduciary duties of the Viners, if any. The circumstances in which the foregoing
would become applicable involve (i) the inability of MEI to elect directors as
entitled by its ownership of Series B Preferred Stock or (ii) the Company's
obligation to appoint MEI director designees to the Board in the event the
Company fails to obtain MEI's consent to certain actions (discussed below).
17
<PAGE> 20
On June 10, 1997, the Viners entered into a Securities Purchase
Agreement with MEI pursuant to which MEI purchased from the Viners 500,000
shares of Common Stock, 1,570 shares of Series C Preferred Stock, 214,113 shares
of Series D Preferred Stock and warrants to purchase 825,000 shares of Common
Stock for $3,086,000 in cash. MEI has a right of first refusal on any shares of
Common Stock offered for sale or transfer by the Viners for a period of three
years. For the same three year period, sales by Mr. Viner or Ms. Raffin in a
market transaction must be limited during any three month period to the greater
of (i) the volume limitations of Rule 144 promulgated under the Securities Act
of 1933, as amended, and (ii) 150,000 shares.
Concurrently with the execution of the Securities Purchase Agreement,
the Viners entered into an Employment Termination Agreement dated June 10, 1997
among the Company and the Viners, pursuant to which the Viners resigned from all
positions with the Company and its subsidiaries, including as directors.
Concurrently with such resignations, the Board of Directors appointed Terrence
A. Elkes and Bruce Maggin, two affiliates of MEI, to replace the Viners as
directors and elected Ronald Lightstone as Acting Chief Executive Officer. Three
members of the Board of Directors are affiliated with MEI in addition to Messrs.
Elkes and Maggin.
The foregoing discussion is qualified in its entirety by reference to
(i) the Stock Purchase Agreement, filed as Exhibit 10.40 to the Company's Form
10-KSB, filed April 14, 1997, and (ii) the Employee Termination Agreement and
the Securities Purchase Agreement, filed as Exhibits 10.45 and 10.46,
respectively, to the Company's Current Report on Form 8-K filed on June 25,
1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In September 1996, the Company entered into a consulting agreement with
Steven F. Mayer whereby Mr. Mayer was to provide certain financial consulting
and investment banking services to the Company. Such agreement provided 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 ended effective February 28, 1997.
As part of the MEI 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 and services
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 is to pay MEI $300,000
per year, of which $200,000 is to be payable in cash quarterly in advance and
the remaining $100,000 is to be paid in shares of Common Stock valued at the
current market value on the date of payment, payable quarterly in arrears.
In September 1997, the Company entered into an agreement with MEI
providing the Company with a $450,000 loan facility for working capital purposes
(the "MEI Loan"). The MEI Loan was subsequently increased to $550,000. The MEI
Loan was secured by substantially all of the Company's assets, other than the
Company's building which security interest was junior to the security interest
of Sanwa Bank. The MEI Loan provided for interest at 10% per annum, payable
monthly and was required to be repaid in full in the event the Company
refinanced the term loan with Sanwa Bank. The Company drew the entire $550,000
of the MEI Loan. On November 12, 1997, the MEI Loan was repaid in full from the
proceeds from a loan facility provided to the Company by The Chase Manhattan
Bank (the "Credit Facility"), and the MEI Loan was terminated. Pursuant to
Guaranty Agreements each dated as of November 4, 1997, each of the principals of
MEI (i.e. Messrs. Elkes, Gorman, Healy, Maggin and Lightstone) have agreed to
guaranty the obligations of the Company under the Credit Facility in an amount
not to exceed the lesser of $2,000,000 and the outstanding principal of and any
interest on all loans made under the Credit Facility in excess of the borrowing
base (which borrowing base will be equal to or less than $6,000,000). Each MEI
principal guarantees an amount not to exceed the product of 110% of such
principal's ownership interest in MEI multiplied by the aggregate amount
guaranteed. The Company is not permitted to borrow any amounts under the Credit
Facility in excess of the borrowing base without the prior written approval of
MEI. The Company has agreed to pay MEI a fee of $25,000 for such guaranty by its
principals. In order to secure the repayment of any amounts the MEI principals
may be required to pay to The Chase Manhattan Bank under the guarantees, MEI has
been granted a security interest in substantially all of the assets of the
Company, other than the Company's building. Such security interest is junior to
the security interest of The Chase Manhattan Bank which secures the Company's
obligations under the Credit Facility.
18
<PAGE> 21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS WITH PERSONS NO LONGER OFFICERS
OR DIRECTORS OF THE COMPANY
During 1997, 1996 and 1995, the Company made payments totaling $2,000,
$14,000 and $66,000, respectively, to Michael Viner for the 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 moneys 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.
During 1997, the Company paid to Mr. Viner and Ms. Raffin $50,000 each
for executive producer fees in connection with the made for television movie
"Unwed Father." In addition, Ms. Raffin was paid $3,150 as a per diem for work
related to "Unwed Father." Mr. Viner was paid $11,053 for writing services on a
documentary produced by the Company.
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
(pounds) 333,334 on delivery of the Picture. The Company has made all of the
required payments including the payment due on the delivery of the Picture. 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 obligation to repay Mr. Viner
the $500,000 deposit made with Guinness Mahon and to repay Mr. Viner the 5%
commission on proceeds from the Picture were terminated. In 1997, Mr. Viner and
Ms. Raffin were each paid $75,000 in respect of commissions and $13,187 in
respect of accrued interest related to Wilde.
Each of Mr. Viner and Ms. Raffin had 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. In
November 1997, the Company's obligations to Sanwa Bank were repaid in full and
terminated.
See "Employment Agreements of Persons No Longer Officers of the
Company" for a discussion of arbitration proceedings between the Viners and the
Company and litigation between Mr. Soloway and the Company.
Pursuant to an agreement, dated May 16, 1996, Mr. Leider was to provide
management consulting services to the Company until the Company and Mr. Leider
mutually agreed to terminate such agreement. Such agreement provided 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.
19
<PAGE> 22
Pursuant to a severance agreement, dated September 4, 1996, if Mr.
Leider's consultancy pursuant to the above referenced agreement was terminated,
the Company may have been required to pay all amounts accrued through the date
Mr. Leider was terminated and his consulting compensation for a period of time
following the date of termination. Further, if Mr. Leider's consultancy was
terminated for any reason other than death, Disability, Retirement or for Cause,
as defined in the agreement, or Mr. Leider terminated 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 may have been entitled to
all amounts accruing to him as of the date of such termination and his
consulting compensation for up to six months following the date of termination.
Mr. Leider's employment with the Company was terminated on September 12, 1997
and in October of 1997 he resigned as a director of the Company.
In December of 1997, the Company was served with a complaint in an
action entitled Gerald J. Leider v. Dove Entertainment, Inc. fka Dove Audio,
Inc. (Los Angeles Superior Court Case No. BC183056). Mr. Leider has sought
damages of approximately $287,000 for breach of contract and $60,000 for unpaid
consulting fees. Mr. Leider also is seeking a declaration that the Company must
comply with certain stock option agreements and for an order for inspection and
copying of certain records of the Company and an award of expenses related
thereto. Although the Company believes that it has good and meritorious defenses
to Mr. Leider's claims and that the Company has meritorious claims against Mr.
Leider, there is no assurance that the Company will prevail in such action. The
Company has filed a separate complaint against Mr. Leider for breach of
fiduciary duty, fraud and breach of covenant of good faith and fair dealing
asserting that Mr. Leider entered into purported agreements with the Company
that were unfair to the Company, were not disclosed to the Board or the
Company's shareholders and were never approved by the Board or the Company's
shareholders. In addition, the Company is seeking declaratory relief requesting
that the court determine that Mr. Leider is not entitled to a claimed 50%
interest in the film "Morning Glory" or any right to amounts in respect thereof
and that Mattken Corporation, a company affiliated with Mr. Leider, is not
entitled to a claimed 15% sales agency fee in respect of such film.
On November 4, 1997, James Belasco, a former director of the Company,
filed an action against the Company in Los Angeles County Superior Court
entitled James A. Belasco v. Dove Entertainment, Inc. etc. et al. LASC case no.
BC 1807070. Mr. Belasco seeks to recover over $178,000 that he claims he is owed
for royalties from the distribution of the book entitled "Flight of the Buffalo:
Soaring to Excellence. Learning to Let Employees Lead." Mr. Belasco also seeks
punitive damages. On November 4, 1997, James Belasco filed an action against the
Company in Los Angeles County Superior Court entitled James A. Belasco v. Dove
Entertainment, Inc. etc. et al. LASC case no. BC 180706. Mr. Belasco alleges
that the Company has interfered with the publication of the work entitled "The
Phoenix Organization." Mr. Belasco seeks punitive damages and over $200,000 in
general damages. Mr. Belasco and the Company have agreed to settle all such
claims for payments over time to Mr. Belasco totaling $150,000 and the grant to
the Company of audio rights to certain current and future books by Mr. Belasco
and payment of certain book commissions by Mr. Belasco to the Company.
PROPOSAL THREE
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP have been the Company's principal accountants
since September 18, 1995 and functioned as the Company's independent certified
public accountants for the fiscal year ended December 31, 1996 and the fiscal
year ended December 31, 1997.
Upon recommendation of the Board, the Company has appointed KPMG Peat
Marwick LLP as the Company's independent certified public accountants for the
fiscal year ended December 31, 1997 and the fiscal year ending December 31,
1998.
Services provided to the Company by KPMG Peat Marwick LLP during fiscal
years 1995, 1996 and 1997 included the examination of the Company's consolidated
financial statements, tax return preparation and certain additional accounting
services provided in connection with acquisitions and securities matters.
In the event shareholders do not approve the appointment of KPMG Peat
Marwick LLP as the Company's independent accountants for the forthcoming fiscal
year, such appointment will be reconsidered by the Board.
20
<PAGE> 23
Representatives of KPMG Peat Marwick LLP will be present at the Annual
Meeting to respond to appropriate questions and to make such statements as they
may desire.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS.
SHAREHOLDERS' PROPOSALS FOR THE 1999 ANNUAL MEETING OF SHAREHOLDERS
A proper proposal submitted by a shareholder for presentation at the
Company's 1999 Annual Meeting and received at the Company's executive offices no
later than November 15, 1998 will be included in the Company's proxy statement
and form of proxy relating to the 1999 Annual Meeting.
OTHER MATTERS
The Board is not aware of any matter to be acted upon at the Annual
Meeting other than those described in this Proxy Statement. Unless otherwise
directed, all shares represented by the persons named in the accompanying proxy
will vote in favor of the proposals described in this Proxy Statement. If any
other matter properly comes before the meeting, however, the proxy holders will
vote thereon in accordance with their best judgment.
MISCELLANEOUS
SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934 BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires executive officers and directors, and persons who beneficially own more
than (10%) of the Company's stock, to file initial reports of ownership and
reports of changes in ownership with the SEC. Executive officers, directors and
greater than ten percent (10%) beneficial owners are required by SEC regulations
to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on a 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, and that during fiscal year
1997 all Section 16(a) filing requirements applicable to its executive officers,
directors and greater than 10% beneficial owners have been satisfied, other than
the filing of a Form 5 by each of Michael Viner, Deborah Raffin, Gerald Leider,
James Belasco, Steven Soloway and Sidney Sheldon. The Company is reporting the
failure to file a Form 5 for each such person based on each such person's
failure to provide a written representation that no Form 5 was required to be
filed.
ANNUAL REPORT TO SECURITIES AND EXCHANGE COMMISSION
The Company files each year with the SEC an Annual Report on Form
10-KSB as prescribed by the rules of the SEC and for the fiscal year December
31, 1996, also filed an amendment to the Annual Report on Form 10-KSB/A. Copies
of the Forms 10-KSB and 10KSB/A will be provided, without charge, to any
shareholder of the Company. Written requests for such copies should be directed
to Dove Entertainment, Inc., 8955 Beverly Boulevard, Los Angeles, California
90048, Attention Secretary.
INFORMATION INCORPORATED BY REFERENCE
The following documents are incorporated by reference: (i) the Stock
Purchase Agreement, filed as Exhibit 10.40 to the Company's Form 10-KSB, filed
April 14, 1997 and (ii) the Employee Termination Agreement and the Securities
Purchase Agreement, filed as Exhibits 10.45 and 10.46, respectively, to the
Company's Current Report on Form 8-K filed on June 25, 1997.
The Company undertakes to provide, without charge, to each person to
whom a proxy statement is delivered, upon written or oral request of such person
and by first class mail or other equally prompt means within one business day of
receipt
21
<PAGE> 24
of such request, a copy of the information that has been incorporated by
reference. Requests for such copies should be directed to the Corporate
Secretary, Dove Entertainment, Inc., 8955 Beverly Boulevard, Los Angeles,
California, 90048 (Tel: 310-786-1600).
22
<PAGE> 25
EXHIBIT A
AMENDMENT TO ARTICLES OF INCORPORATION OF DOVE ENTERTAINMENT, INC.
1. Article I is stricken from the Articles of Incorporation of the corporation
and amended to read as follows:
"The name of the corporation is "[___________] Entertainment."
23
<PAGE> 26
PROXY DOVE ENTERTAINMENT, INC.
8955 BEVERLY BOULEVARD
LOS ANGELES, CALIFORNIA 90048
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF DOVE
ENTERTAINMENT, INC.
The undersigned hereby appoints Ronald Lightstone and Neil Topham and each of
them, acting singly or jointly, as Proxies, each with the power to appoint his
substitute, and hereby authorizes each of them to represent and to vote as
designated below, all of the shares of Common Stock, $.01 par value per share,
of Dove Entertainment, Inc. (the "Company") held of record by the undersigned on
April 1, 1998, at the Annual Meeting of Shareholders of the Company to be held
at 10:00 a.m., local time on Thursday, April 30, 1998, and any adjournments or
postponements thereof.
Receipt of the Notice of Annual Meeting, the Proxy Statement and the 1996 and
1997 Annual Report of the Company is hereby acknowledged.
The Board of Directors of the Company unanimously recommends a vote FOR each
of the items below.
(1) Amendment of the Articles of Incorporation of the Company to change the name
of the Company to "
- ------------------------------------".
(2) Election of Directors for a one-year term:
<TABLE>
<C> <C>
VOTE FOR all Nominees WITHHOLD AUTHORITY
listed below (except as to vote for all
marked to the contrary nominees listed below
[ ] [ ]
<CAPTION>
<C> <S>
VOTE FOR all Nominees INSTRUCTION: To withhold authority to vote FOR any
listed below (except as individual nominee strike a line through that
marked to the contrary nominee's name on the list below.
[ ]
</TABLE>
NOMINEES: Terence A. Elkes, Bruce Maggin, Steven F. Mayer, Lee Masters and
Ronald Lightstone
(3) Ratification of the appointment of KPMG Peat Marwick LLP as independent
accountants for the fiscal year ended December 31, 1997 and the fiscal year
ending December 31, 1998.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(4) In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before such meeting and any and all
postponements and adjournments thereof.
PLEASE DATE, SIGN ON THE REVERSE SIDE AND RETURN IN THE ACCOMPANYING
ENVELOPE. THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS
INDICATED; HOWEVER, IF NO INSTRUCTIONS ARE GIVEN, THE PROXIES WILL VOTE THE
SHARES ON SPECIFIED MATTERS AS RECOMMENDED BY THE BOARD OF DIRECTORS AND IN
THEIR DISCRETION ON MATTERS DESCRIBED IN ITEM 3.
(continued on reverse)
<PAGE> 27
THIS PROXY, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted on specific matters as recommended by the Board of Directors and in
their discretion on matters described in Item 4.
------------------------
Signature
------------------------
Date
------------------------
Signature
------------------------
Date
IMPORTANT: Please date
this card and sign your
name exactly as it
appears on this Proxy.
When shares are held
jointly, both holders
should sign. When
signing as attorney,
executor or
administrator, or
trustee or guardian,
please give your full
title as such. If a
corporation, please sign
in full the corporate
name by an authorized
officer. If a
partnership, please sign
in the partnership's
name by an authorized
person.
Do you plan to attend
the meeting?
YES [ ] NO [ ]
PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY.
