-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IEzKx1zCDsSGXB+dHN+b18AHhF8riT4U/+C7gerSwQ6tnH1g8inj+oyBX6tc1UYf QD88fzJMrUIjHltBnnUY9A== 0000950148-96-002086.txt : 19970924 0000950148-96-002086.hdr.sgml : 19970924 ACCESSION NUMBER: 0000950148-96-002086 CONFORMED SUBMISSION TYPE: PRE 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961003 FILED AS OF DATE: 19960923 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DOVE AUDIO INC CENTRAL INDEX KEY: 0000930436 STANDARD INDUSTRIAL CLASSIFICATION: 3652 IRS NUMBER: 954015834 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: PRE 14A SEC ACT: SEC FILE NUMBER: 000-24984 FILM NUMBER: 96633425 BUSINESS ADDRESS: STREET 1: 8955 BEVERLY BLVD CITY: WEST HOLLYWOOD STATE: CA ZIP: 90048 BUSINESS PHONE: 3102737722 MAIL ADDRESS: STREET 2: 8955 BEVERLY BLVD CITY: WEST HOLLYWOOD STATE: CA ZIP: 90048 FORMER COMPANY: FORMER CONFORMED NAME: DOVE AUDIO INC DATE OF NAME CHANGE: 19941021 PRE 14A 1 PRELIMINARY PROXY MATERIAL 1 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 / / Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2)) / / Definitive Additional Materials / / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
DOVE AUDIO, 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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A. / / $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). / / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. (1) Title of each class of securities to which transaction applies: ---------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: ---------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): ---------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: ---------------------------------------------------------------------- (5) Total fee paid: ---------------------------------------------------------------------- / / Fee paid previously with preliminary materials. / / Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: ---------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: ---------------------------------------------------------------------- (3) Filing Party: ----------------------------------------------------------------------- (4) Date Filed: ---------------------------------------------------------------------- 2 DOVE AUDIO, INC. 8955 BEVERLY BOULEVARD WEST HOLLYWOOD, CALIFORNIA 90048 ____________ NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD OCTOBER 30, 1996 ____________ To the Shareholders of Dove Audio, Inc.: Notice is hereby given that the Annual Meeting of Shareholders (the "Annual Meeting") of Dove Audio, Inc., a California corporation (the "Company"), will be held at Dove Audio, Inc., 8955 Beverly Boulevard, West Hollywood, California 90048 on October 30, 1996, at 9:00 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 "Dove Entertainment, Inc."; 2. To approve an amendment to the Company's Bylaws to provide that the size of the Board of Directors (subject to vacancy from time to time) of the Company shall be not less than five (5) or more than nine (9), with the exact number of directors to be initially fixed at seven (7), subject to modification from time to time, within the limits specified, by approval of the Board of Directors (the "Board"); 3. To elect directors; 4. To approve an amendment to the Company's 1994 Stock Incentive Plan (the "Plan") (i) to increase the maximum number of shares of Common Stock which may be granted under the Plan to 750,000 shares, (ii) to impose a limit on the maximum grant of options and stock appreciation rights that can be granted to any individual under the Plan to 250,000 shares per calendar year, and (iii) to make certain other changes to the Plan in accordance with new Rules enacted under Section 16 of the Securities Exchange Act of 1934 and Section 162(m) of the Internal Revenue Code of 1986 and other changes, each of which is described or set forth herein; 5. To approve and ratify the appointment of KPMG Peat Marwick LLP as the Company's independent accountants for the fiscal year ending December 31, 1996; and 6. 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, is set forth in the attached Proxy Statement, which is part of this Notice. The Board of Directors has fixed September 9, 1996 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, or by a subsequently dated proxy executed by you, or by attending the meeting and voting in person. The dates 3 set forth on the proxy cards presumptively 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 Michael Viner President and Chief Executive Officer October __, 1996 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. 4 DOVE AUDIO, INC. 8955 BEVERLY BOULEVARD WEST HOLLYWOOD, CALIFORNIA 90048 -------------- PROXY STATEMENT ANNUAL MEETING OF SHAREHOLDERS TO BE HELD OCTOBER 30, 1996 -------------- This Proxy Statement is furnished to the shareholders in connection with the solicitation by the Board of Directors of Dove Audio, Inc., a California corporation (the "Company"), of proxies for use at the Annual Meeting of Shareholders of the Company (the "Annual Meeting") to be held at Dove Audio, Inc., 8955 Beverly Boulevard, West Hollywood, California, on October 30, 1996 at 9:00 a.m., local time, and any postponements and adjournment(s) thereof. The Company's principal executive offices are located at 8955 Beverly Boulevard, West Hollywood, California 90048 and its telephone number is (310) 786-1600. This Proxy Statement, the accompanying Notice of Annual Meeting, the accompanying proxy card(s) and the Company's 1995 Annual Report to Shareholders (the "Annual Report") are being first mailed to shareholders of the Company on or about October __, 1996. The costs 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 expenses 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. 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 approval of the amendment to the Company's Articles of Incorporation, for approval of the amendment to the Company's Bylaws, for the election of the Director nominees listed herein (the "Nominees"), for approval of the amendment of the Company's 1994 Stock Incentive Plan, for the ratification of KPMG Peat Marwick LLP as the Company's independent accountants for the fiscal year ending December 31, 1996 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. 1 5 GENERAL INFORMATION The Board has fixed September 9, 1996 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, 5,313,240 shares of the Company's common stock, par value $.01 per share (the "Common Stock"), held by 119 holders of record, were outstanding and entitled to vote at the Annual Meeting. The Common Stock is the only class 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 entitled to vote at the Annual Meeting will constitute a quorum. With respect to the election of directors, the seven (7) nominees receiving the highest number of affirmative votes will be elected. 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 purposes 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 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 may cumulate his votes 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 meeting prior to the voting of his intention to so cumulate his votes. If any one 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 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. Proposal 1 AMENDMENT OF ARTICLES OF INCORPORATION On April 22, 1996, the Board approved an amendment to Article I of the Company's Articles of Incorporation to change the name of the Company to "Dove Entertainment, Inc." The Company filed a fictitious name certificate to do business as Dove Entertainment, Inc. on December 6, 1995. Amendment of the Articles of Incorporation is subject to the affirmative approval by holders of a majority of the shares of Common Stock outstanding on the Record Date. With the diversification of the Company beyond its traditional historical business of the production of audio books, including the Company's expansion in the areas of the publication of printed books, the production of television programming and the distribution of feature films, among other areas, the Board believes it is desirable to change the Company's name to be more reflective of the Company's overall business. The text of the Amendment is set forth 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. 2 6 Proposal 2 AMENDMENT OF BYLAWS On April 22, 1996, the Board approved an amendment to Article III, Section 2 of the Company's Bylaws to provide that the number of directors of the Company shall be not less than five (5) or more than nine (9), with the exact number of directors to be initially fixed at seven (7), subject to modification from time to time, within the limits specified, by approval of the Board of Directors. Currently, the Board size may be set by the Board within a range of four (4) to seven (7) directors. As the Company has expanded through acquisition and raising of additional capital, it has become necessary and desirable to expand the size of the Board. The Board has nominated a slate of seven (7) directors for election at this Annual Meeting. Accordingly, it is necessary to amend the Bylaws to expand the permitted size of the Board, within a minimum and maximum range permitted by the California Corporation Code. Amendment of the Bylaws as set forth herein requires the affirmative vote of a majority of the outstanding shares of Common Stock represented and voting at the Annual Meeting. The text of the Amendment is set forth on Exhibit B to this Proxy Statement. THE BOARD OF DIRECTORS STRONGLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE APPROVAL OF THE AMENDMENT OF THE COMPANY'S BYLAWS. Proposal 3 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 six (6) members with one vacancy. The seven (7) nominees of management for election as directors are set forth below. See "Management." 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. The following table sets forth the nominees, their ages and present principal occupations or employment.
DIRECTOR NOMINEES ----------------- NAME AGE PRINCIPAL OCCUPATION ---- --- -------------------- Michael Viner 52 President, Chief Executive Officer and Director Gerald Leider 63 Producer of Feature Films; Chairman of the Board and Director Deborah Raffin 43 Executive Vice President, Secretary and Director Freddie Fields*+ 72 Film producer; President and Chief Executive Officer of The Fields Company; and Director James Belasco*+ 60 Professor, San Diego State University; Consultant, Management Development Associates and Director Robert Dilenschneider 53 President of The Dilenschneider Group Steven Mayer 36 President and Managing Director of Aries Capital Group LLC
* Denotes membership on Stock Option Committee. + Denotes membership on Audit Committee. 3 7 Mr. Viner and Ms. Raffin have been directors of the Company since its inception in 1985. Mr. Fields has been a director of the Company since 1986. Mr. Belasco has been a director of the Company since being named to fill a vacancy on the Board in April 1995. Mr. Leider has been a director since June 1995. None of the nominees is related by blood or marriage to one another or to an executive officer of the Company, except for Mr. Viner and Ms. Raffin who are each other's spouse. 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., and its successors will have the right to designate a nominee for election, at its or their option, either as a member or a non-voting advisor to the Board, and the Company agreed to use its reasonable best efforts to cause such nominee to be elected and continue in office until December 14, 1997. The Company believes that this right has been orally waived but has been advised by such placement agent, which has designated Steven Mayer as its nominee, that it does not believe that any such waiver is in effect. 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 has been designated to serve on the Board by Joseph Stevens & Company, L.P. Pursuant to the Four Point Entertainment, Inc. acquisition agreement entered into by the Company in April 1996, the Company agreed to use its best efforts to appoint Shukri Ghalayini to the Board. In June 1996, Mr. Ghalayini's employment with the Company terminated. The Company believes that Mr. Ghalayini's right to be on the Board has terminated and he is not being nominated to serve on the Board. Each of the Company's directors is elected annually by the shareholders. The Company has agreed to reimburse each Board member's travel expenses and the Company's 1994 Stock Incentive Plan provides for an automatic grant of option to purchase 5,000 shares of Common Stock to each of the outside directors. In addition, the Company has granted 10,000 options outside the plan to each of the non-employee board members for such members' service to the Board during the last year. Directors who are also executive officers of the Company do not receive any additional compensation for serving as members of the Board or any committee thereof. During the 1995 fiscal year, there were meetings of the Board and meetings of the Option Committee. All other action of the Board and Option Committee was taken pursuant to unanimous written consents. Each then-current director attended the meetings of the Board and the Option Committee held during the period for which he was a director or for which he served as an Option Committee member. There were no meetings of the Audit Committee apart from meetings of the entire Board of Directors. MICHAEL VINER is the President and Chief Executive Officer, and was co-founder of the Company in 1985. Mr. Viner also produces films for the Company's film division and, in addition, has produced various other television programs, movies and miniseries and feature films. Mr. Viner is the author of 365 Ways You Can Save The Earth, Final Exit for Cats and the Company's Final Exit for Barney. Mr. Viner's professional activities prior to founding Dove include producing records for hit artists such as Sammy Davis, Jr. (platinum record Candy Man), Frank Sinatra, George Burns and Hank Williams, Jr. Mr. Viner headed a division of MGM Records from 1971 to 1976, and he has also produced two presidential inaugurals. DEBORAH RAFFIN is the co-founder and Executive Vice President of the Company and President of the Dove Kids and Dove Multimedia divisions. She has been a director of the Company since its founding and has served as Secretary since March 1995. Ms. Raffin oversees the entire audio book department and is involved in producing, directing, casting, new media ventures, acquisitions, new interactive books, tapes and computer programs, films and other Company projects. Ms. Raffin also continues to star in films. These include Touched By Love, Noble House and Haywire. She also co-produced and starred in the recent highly-rated CBS movie-of-the-week based on LaVyrle Spencer's bestselling novel, Home Song. Ms. Raffin is currently co-producing Family Blessings, another film based on a Spencer novel. In 1993, she received a Grammy Award as producer for the Dove Kids audio, Audrey Hepburn's Enchanted Tales. 4 8 FREDDIE FIELDS has been a director of the Company since 1986. He is the President and Chief Executive Officer of the Fields Company (f.k.a. the Field Organization, Inc.) and Chairman of the Fields + Hellman Company, Inc. Each of these companies produces motion picture and television presentations. Mr. Fields produced the Academy Award-winning film Glory, the film Crimes of the Heart, which received multiple Academy Award nominations, Looking for Mr. Goodbar, American Gigolo and executive produced the nationally-syndicated television program, The Montel Williams Show. Mr. Fields founded Creative Management Associates (now known as ICM), a leading international talent agency, and served as president of two major motion picture studios, Metro-Goldwyn-Mayer and United Artists. Mr. Fields is a director of Network Event Theater Inc., a start-up satellite distribution company, and a member of the Los Angeles Sports and Entertainment Commission. JAMES BELASCO, a director of the Company since June 1995, has been a Professor of Management at San Diego State University since 1971. Mr. Belasco also provides business consulting services through his affiliation with Management Development Associates and is the author of such books as Teaching The Elephant to Dance, Empowering Change in Your Organization and Flight of The Buffalo, Soaring to Excellence. GERALD LEIDER has been a director of the Company since June, 1995 and Chairman of the Board of Directors since June 12, 1996. Mr. Leider is a producer of feature films for theatrical, television and cable distribution and serves as a part-time consultant to the Company through his management company. Mr. Leider is a past Co-Chairman of the Caucus for Producers, Writers and Directors and, until recently, was Chairman and Chief Executive Officer of ITC Entertainment Group, a worldwide film and television production and distribution company. Mr. Leider has held several positions with Warner Bros. Television and was Executive Vice President in charge of foreign production. Mr. Leider was educated at Syracuse University and Bristol University, England where he was a Fullbright Scholar. ROBERT L. DILENSCHNEIDER has been President of The Dilenschneider Group, a public relations firm he founded in 1991. Prior to such time, Mr. Dilenschneider served as president and chief executive officer of Hill and Knowlton, Inc. Mr. Dilenschneider serves as a director of Cross Country Healthcare Personnel and SafeCare Services, Inc., is a member of the board of governors of the American Red Cross and a member of the advisory boards of The New York Hospital-Cornell Medical Center and the College of Business Administration at the University of Notre Dame. Further, he is a member of the board of trustees of the American Health Foundation and the Institute for International Education. Mr. Dilenschneider has also published such books as Power and Influence and A Briefing for Leaders. STEVEN F. MAYER is currently the president and managing director of Aries Capital Group, LLC, a private investment firm. From April 1992 until June 1994, when he left to co-found Aries Capital Group, Mr. Mayer was an investment banker with Apollo Advisors, L.P. ("Apollo") and Lion Advisors, L.P. ("Lion"), 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. While at Apollo and Lion, Mr. Mayer was responsible for equity and debt investments in a wide range of industries, including the aluminum, apparel, automobile parts manufacturing, bedding, cable television, cosmetics, environmental services, furniture distribution, homebuilding, hotel, plastics, radio, real estate, retail and textile industries. Mr. Mayer is a current or former member of the Boards of Directors of Mednet, MPC Corporation, a publicly traded managed prescription care company, Chicago Pizza & Brewery, Inc., a restaurant company, Electropharmacology, Inc., a publicly traded medical device manufacturer, BDK Holdings, Inc., a textile manufacturer, Roland International Corporation, a real estate holding company and The Greater LA Fund, a non-profit investment group affiliated with Rebuild LA. In addition, Mr. Mayer has served as the chairman or a member of numerous creditors' committees. Mr. Mayer is a graduate of Princeton University and Harvard Law School. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION OF THE SEVEN (7) PERSONS NOMINATED FOR DIRECTOR HEREIN. MANAGEMENT EXECUTIVE OFFICERS AND OTHER SIGNIFICANT EMPLOYEES 5 9 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. Michael Viner and Deborah Raffin are spouses; no other family relationships exist between or among any of the executive officers of the Company. The following table contains certain biographical information with respect to the executive officers of the Company, other than executive officers whose biographical information is set forth above under the heading "Director Nominees."
NAME AGE PRINCIPAL OCCUPATION ---- --- -------------------- Simon Baker 32 Chief Financial Officer Ronald M. Ziskin 44 Chief Operating Officer of Dove Four Point
SIMON BAKER joined the Company as Chief Financial Officer on March 1, 1996. From 1986 to 1996 Mr. Baker was with Bank of America where he served as a Vice President of Corporate Finance. Mr. Baker has extensive international finance experience and was a Vice President in Bank of America's London-based corporate finance group for six years prior to joining the Entertainment and Media Industries Group in Los Angeles in 1992. Mr. Baker graduated from Oxford University where he holds a Master's Degree in Politics, Philosophy and Economics. RONALD M. ZISKIN is the Chief Operating Officer of the Company's Dove Four Point subsidiary. Mr. Ziskin co-founded and served as President of Four Point Entertainment, Inc. From 1984 to April 1996, Mr. Ziskin optioned, developed and executive produced "American Gladiators", and created the successful franchises of "Haunted Lives" and "Dead Ghosts" prime time specials for CBS and UPN. Mr. Ziskin has also produced and executive produced the Fox prime time drama "Likely Suspects," the "Sandblast" franchise for MTV and "The Gordon Elliott Show" pilot for CBS/20th TV. OTHER SIGNIFICANT EMPLOYEES WILLIAM A. SHIELDS is President of Worldwide Sales and Marketing for Dove International and is involved in all aspects of acquisition, sales, marketing and distribution of the feature and television product that Dove produces. Mr. Shields is also Chairman of the American Film Export Association (AFEA), a member of the Board of Directors of AFMA and sits on its executive committee. Mr. Shields is also a member of the Motion Picture Academy of America and is on the Board of Directors of the Friars Club of Los Angeles. Previously, Mr. Shields was President and Chief Executive Officer of Trans Atlantic Entertainment and two time Chairman of the American Film Marketing Association (AFMA). STEVE SOLOWAY, age 36, is the Company's General Counsel and Vice President of Business Affairs. He joined the Company in March 1995, having been in private practice concentrating on business, contract and entertainment litigation matters for over ten years. EXECUTIVE COMPENSATION SUMMARY OF EXECUTIVE COMPENSATION The following table sets forth the annual and long-term compensation for services in all capacities to the Company for the years ended December 31, 1995, 1994 and 1993, respectively, of the Company's Chief Executive Officer and compensation for the year-ended December 31, 1995 of the Company's Secretary (no other executive officer of the Company received compensation in excess of $100,000 during the fiscal years ended December 31, 1995, 1994 and 1993):
Securities Name and Fiscal Underlying All Other Principal Position Year Salary Bonus Options/SARs Compensation - - - ------------------ ---- ------ ----- ------------ ------------ Michael Viner 1995 $230,000 $ -- ---- 12,497(5)(6) Chairman & Chief 1994 $200,000 -- 250,000(1) 34,955(2) Executive Officer 1993 $100,000 -- ---- 19,777(3)(4) Deborah Raffin 1995 $115,000 -- ---- 11,522(5) Executive Vice President, Secretary and Director
6 10 (1) An option to purchase 250,000 shares of Common Stock for $.01 per share granted jointly to Mr. Viner and Ms. Raffin in September 1994 in satisfaction of, among other things, compensation previously deferred by them. (2) Includes approximately $22,655 consisting of an automobile allowance, automobile insurance and expenses incidental to operation of an automobile. (3) Includes (i) $14,195 consisting of an automobile allowance, automobile insurance and expenses incidental to operation of an automobile, and (ii) $5,582 consisting of health insurance premiums and reimbursement of medical expenses incurred which were not reimbursed under such insurance. (4) Does not include $1,730 in life insurance premiums paid in fiscal 1992 on a policy covering Mr. Viner's life during fiscal 1993. The Company and Ms. Raffin are equal beneficiaries under such policy. (5) Includes $11,522 paid to Ms. Raffin and $12,497 paid to Mr. Viner for an automobile allowance, automobile insurance and expenses incidental to the operation of an automobile. This amount does not include compensation paid to Mr. Viner and Ms. Raffin for production and acting services related to the making of Home Song. (See "Certain Relationships and Related Transactions.") (6) Does not include $4,010 in life insurance premiums paid in fiscal 1995 on a policy covering Mr. Viner's life during fiscal 1995. The Company and Ms. Raffin are equal beneficiaries under such policy. EMPLOYMENT AGREEMENTS As of January 1, 1993, the Company entered into employment agreements with Mr. Viner and Ms. Raffin which expire in December 1999. Mr. Viner and Ms. Raffin may terminate such agreements upon 30 days written notice to the Company. The agreements provide for aggregate compensation of no less than $275,000 per year with certain provisions, including an indemnification and benefits such as health insurance and an automobile allowance. In addition, Mr. Viner and Ms. Raffin are entitled to an annual salary increase and bonus subject to certain limitations agreed upon with the underwriter of the Initial Public Offering at the discretion of the Board. The Board approved an annual salary increase for the principal shareholders/officers to a combined total of $345,000 per year for 1995 and to a combined total of $600,000 per year for 1996. The Company has entered into a three-year employment agreement with Ronald M. Ziskin as Chief Operating Officer of Dove Four Point. Mr. Ziskin receives annual base salary of $200,000, annual advances against producer fees of $100,000 per year and customary fringe benefits. OPTION/SAR GRANTS IN 1995 There were no stock options or SARs granted to named executive officers during 1995. OPTION EXERCISES IN 1995 AND YEAR-END OPTION VALUES The following table provides certain information concerning the exercise of stock options and shows the number of shares covered by both exercisable and non-exercisable stock options held as of December 31, 1995. Also shown are values for "in-the-money" options, which represent the positive difference between the exercise price of such options and the price of the Common Stock at year end. 7 11 AGGREGATED OPTION EXERCISES IN 1995 AND YEAR-END OPTION VALUES
Shares acquired Value Name on Exercise Realized ($) Exercisable Unexercisable Exercisable ($) Unexercisable ($) - - - ---- ----------- ------------ ----------- ------------- --------------- ----------------- Michael Viner --(1) -- 250,000 (2) --- 3,216,250 (3)
(1) Does not include option exercised in April 1995 to purchase 214,113 shares of the Company's Series A Preferred Stock issued in connection with the IPO to Mr. Viner and Ms. Raffin in repayment of certain amounts owed to them by the Company. See "Certain Relationships and Related Transactions." (2) Held jointly by Mr. Viner and Ms. Raffin. (3) Based on a closing price of $12.875 per share of Common Stock on December 29, 1995, the last trading day of fiscal 1995. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information as of September 1, 1996 concerning the shares of Common Stock beneficially owned by each shareholder known to the Company to own beneficially more than five percent (5%) of the outstanding shares of Common Stock, by each director and director nominee and the Chief Executive Officer, and by all executive officers and directors as a group. Unless otherwise specified, the address of each beneficial owner listed below is 8955 Beverly Boulevard, West Hollywood, California 90048.
Amount and Nature of Beneficial Percentage of Name of Beneficial Owner Ownership Outstanding Shares - - - ------------------------ ---------------------------- ------------------ Michael Viner 1,613,311 (1)(2) 39.6% Deborah Raffin 1,613,311 (1)(2) 39.6% Sidney Sheldon 611,913 11.5% Freddie Fields 2,000 (3) * Norton Herrick James Belasco 1,000 (4) * Gerald Leider 1,000 (5) * Robert Dilenschneider --- * Gary Matus --- * Steven Mayer(6) --- * All current directors and executive officers as a group (eight individuals) 2,123,424 (2)(3)(4)(5) 39.6%
* Less than 1%. (1) All of such shares are jointly held by Mr. Viner and Ms. Raffin as community property. (2) Includes (i) Mr. Viner's and Ms. Raffin's option to purchase 250,000 shares of Common Stock at an exercise price of $.01 per share and (ii) 214,113 shares of Common Stock issuable upon conversion of the Preferred Shares acquired by Mr. Viner and Ms. Raffin in April 1995. Excludes options to purchase 50,000 shares of Common Stock at an exercise price of $3.50 per share issued to each of Mr. Viner and Ms. Raffin in September 1996. (3) Includes (i) 1,000 shares of Common Stock issuable to Mr. Fields upon exercise of a currently exercisable option at an exercise price of $6.00 per share and (ii) 1,000 shares of Common Stock issuable to Mr. Fields 8 12 upon exercise of an option at an exercise price of $6.00 per share, which becomes exercisable in November 1996. (4) Includes 1,000 shares of Common Stock issuable to Mr. Belasco upon exercise of a currently exercisable option, exercisable at $9.75 per share. (5) Includes 1,000 shares of Common Stock issuable to Mr. Leider upon exercise of a currently exercisable option, exercisable at $7.38 per share. Excludes nonvested options, including options to purchase 50,000 shares of Common Stock exercisable at $3.50 per share granted in September 1996. (6) Mr. Mayer has been retained by the Company pursuant to a consulting agreement dated as of September 13, 1996, subject to termination by either party on 30 days notice, under which he received options to purchase 10,000 shares of Common Stock exercisable at $3.75 per share. Under such agreement, Mr. Mayer may receive additional stock consideration in the event of consummation of a transaction introduced or facilitated by him. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During 1995, the Company made payments totaling $66,000 to Michael Viner for the business rental of a condominium owned by Mr. Viner. The business rental is $2,000 per month on a month-to-month basis, and the balance of the monies paid to Mr. Viner in 1995 represents the settlement of amounts owed by the Company to Mr. Viner for previous years which were not paid. During 1995, the Company entered into two executive 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 and production services relating to the making of Home Song. In September 1996, the Company entered into a reimbursement agreement with Michael Viner and Deborah Raffin in connection with their providing or agreeing to provide personal guarantees of certain Company obligations. The Company agreed to immediately reimburse or provide cash collateral to Michael Viner and Deborah Raffin upon the occurrence and during the continuation of certain events of default relating to the guaranteed obligations or upon the occurrence of certain other "Events" (including a change in control of the Company) as defined in the Company's 1994 Stock Incentive Plan. The Company further agreed that should Michael Viner or Deborah Raffin terminate their employment agreement following the occurrence of an "Event" or material breach of their employment agreements, the Company would remain obligated to continue to pay them their base compensation and other benefits due for the balance of their employment terms, together with reimbursement of any excise tax payable with respect to such compensation. Upon any such termination, such executives would be free to establish, invest in or be employed by any business, whether or not in competition with the Company. Under the agreement, the Company also granted to Michael Viner, in the first instance, and Deborah Raffin, secondarily, a right of first refusal in the event of certain asset sales outside the ordinary course of business by Dove or any of its subsidiaries in the next three years. Proposal 4 AMENDMENT OF 1994 STOCK INCENTIVE PLAN The Company's 1994 Stock Incentive Plan (the "Plan") was designed to encourage executive officers, other key employees and certain third parties to acquire a proprietary interest in the Company and thereby align their interests with those of the shareholders, to continue their employment or work with the Company and to render superior performance during such period. On April 22, 1996, the Board approved an amendment to the Company's 1994 Stock Incentive Plan (the "Plan") to increase the number of shares of Common Stock available for option grant under the Plan from an aggregate of 400,000 shares to an aggregate of 750,000 shares (in each case, subject to adjustment in the event of stock splits, combinations or similar circumstances). Amendment of the Plan is subject to the affirmative approval of a majority of the outstanding shares of Common Stock represented and voting at the Annual Meeting. At September 10, 1996, 289,999 shares had been granted and were outstanding under the Plan. The Board took such action to increase the Plan because it believes that a stock incentive program is an important factor in attracting, retaining and motivating key employees and certain third parties who will dedicate their maximum productive efforts toward the advancement of the Company. The Board believes that the proposed amendment furthers these objectives by assuring continuing availability of stock incentives in the appropriate circumstances and permitting flexibility in compensation awards. In general, Section 162(m) of the Code imposes an annual $1,000,000 limit on the tax deduction that the Company may take for compensation paid to certain top executives, including salary, bonuses, and the "spread" on nonqualified stock options, unless the compensation meets the requirements for an option. To comply with the requirements that apply to stock options and stock appreciation rights, [the Board has approved] an amendment to the Plan imposing and increasing the limit on the maximum number of options or stock appreciation rights which may be granted to a participant in one calendar year to 250,000 shares. A limit on the maximum number of shares is required to comply with tax provisions related to the Plan. The Board believes this to be an appropriate maximum because it will allow the Committee flexibility in attracting and retaining high quality personnel. 9 13 Finally, because of legislative revisions to Employee Benefit Plan Exemptive Rules Under Section 16 of the Securities Exchange Act of 1934, as amended, the Board has approved certain amendments to the Plan, which modifications will comport with changes made in the Rules. These prescribed changes include, among others, the elimination of certain prohibitions on exercise during the six months following the date of grant and the replacement of the "disinterested director" requirement for committee within "non-employee director". The text of the Amendment is set forth on Exhibit C to this Proxy Statement. Plan Summary The Plan authorizes the granting of stock incentive awards ("Awards") to qualified officers, employee directors, key employees and third parties providing valuable services to the Company, e.g., independent contractors, consultants and advisors to the Company. At September 10, 1996, 94,999 shares had been granted and were outstanding under the Plan. The Plan is administered by a committee appointed by the Board and consisting of two or more members, each of whom must be disinterested (the "Committee"). The Committee determines the number of shares to be covered by an Award, the term and exercise price, if any, of the Award and other terms and provisions of Awards; members of the Committee receive formula awards. Awards can be Stock Options ("Options"), Stock Appreciation Rights ("SARs"), Performance Share Awards ("PSAs") and Restricted Stock Awards ("RSAs"). The number and kind of shares available under the Plan are subject to adjustment in certain events. Shares relating to Options or SARs which are not exercised, shares relating to RSAs which do not vest and shares relating to PSAs which are not issued will again be available for issuance under the Plan. An Option may be an incentive stock option ("ISO") or a nonqualified Option. The exercise price for Options is to be determined by the Committee, but in the case of an ISO is not to be less than fair market value on the date the Option is granted (110% of fair market value in the case of an ISO granted to any person who owns more than 10% of the Common Stock). The award agreement may provide for "cashless" exercise and payment. Subject to early termination or acceleration provisions, an Option is exercisable, in whole or in part, from the date specified in the related award agreement (which any be six months after the date of grant) until the expiration date determined by the Committee. An SAR is the right to receive payment based on the appreciation in the fair market value of Common Stock from the date of grant to the date of exercise. In its discretion, the Committee any grant an SAR concurrently with the grant of an Option. An SAR is only exercisable at such time, and to the extent, that the related Option is exercisable. Upon exercise of an SAR, the holder receives for each share with respect to which the SAR is exercised an amount equal to the difference between the exercise price under the related Option and the fair market value of a share of Common Stock on the date of exercise of the SAR. The Committee in its discretion may pay the amount in cash, shares of Common Stock, or a combination thereof. An RSA is an award of a fixed number of shares of Common Stock subject to restrictions. The Committee specifies the prices, if any, the recipient must pay for such shares. Shares included in an RSA may not be sold, assigned, transferred, pledged or otherwise disposed of or encumbered until they have vested. These restrictions may not terminate earlier than six months after the award date. The recipient is entitled to dividend and voting rights pertaining to such RSA shares even though they have not vested, so long as such shares have not been forfeited. A PSA is an award of a fixed number of shares of Common Stock, the issuance of which is contingent upon the attainment of such performance objectives, and the payment of such consideration, if any, as is specified by the Committee. Issuance shall in any case not earlier than six months after the award date. To date, no SAR, RSA or PSA awards have been granted by the Company. 10 14 The options granted under the Plan are not transferable other than by will or the laws of descent and distribution. Unexercised options generally lapse 3 months after termination of employment other than be reason of retirement, disability or death in which case it terminates one year thereafter. The Plan provides for anti-dilution adjustments which are applicable in the event of a reorganization, merger, combination recapitalization, reclassification, stock dividend, stock split or reverse stock split; however, no such adjustment need be made if it determined that the adjustment may result in the receipt of federal taxable income to optionees or the holders of Common Stock or other classes of the Company's securities. Upon the dissolution or liquidation of the Company, or upon a reorganization, merger or consolidation of the Company as a result of which the Company is not the surviving entity, the Plan shall terminate, and any outstanding awards shall terminate and be forfeited unless assumed by the successor corporation. THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AMENDMENTS TO THE 1994 STOCK INCENTIVE PLAN Proposal 5 INDEPENDENT ACCOUNTANTS On July 24, 1995, Ernst & Young LLP, successor to Kenneth Leventhal & Company, resigned as the Company's independent accountants. Kenneth Leventhal & Company audited the Company's 1992, 1993 and 1994 financial statements and effective June 1, 1995 was merged into Ernst & Young LLP. In connection with the Company's fiscal year ended December 31, 1994, there were no disagreements with Kenneth Leventhal & Company on any manner of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to their satisfaction, would have caused them to make reference to the subject matter of the disagreement in connection with the Company's Report on Form 8-K filed July 26, 1995. The audit reports of Kenneth Leventhal & Company on the consolidated financial statements of the Company for the fiscal year ended December 31, 1994 did not contain any adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope, or accounting principles. The Company engaged KPMG Peat Marwick LLP as its principal accountants as of September 18, 1995. 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 ending December 31, 1996. Services provided to the Company by KPMG Peat Marwick LLP during fiscal year 1995 included the examination of the Company's consolidated financial statements, tax return preparation and certain additional accounting services provided in connection with acquisition 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. 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. 11 15 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 1997 ANNUAL MEETING OF SHAREHOLDERS A proper proposal submitted by a shareholder for presentation at the Company's 1997 Annual Meeting and received at the Company's executive offices no later than July 1, 1997 will be included in the Company's proxy statement and form of proxy relating to the 1997 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 be voted 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 ten percent (10%) of the Company's stock, to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission ("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 furnished to the Company and written representations from the executive officers and directors, the Company believes that all Section 16(a) filing requirements applicable to its executive officers, directors and greater than ten percent (10%) beneficial owners have been satisfied with the exception of the late filing of one Form 4 Report by Michael Viner, President and Chief Executive Officer with respect to two transactions. 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. Copies of the 10-KSB will be provided, without charge, to any shareholder of the Company. Written requests for a copy of the 10-KSB should be directed to Dove Audio, Inc., 8955 Beverly Boulevard, West Hollywood, California 90048. 12 16 EXHIBIT A AMENDMENT NUMBER 1 TO ARTICLES OF INCORPORATION OF DOVE AUDIO, 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 Dove Entertainment, Inc." 13 17 EXHIBIT B AMENDMENT NUMBER 1 TO BYLAWS OF DOVE AUDIO, INC. ARTICLE III, SECTION 2 OF THE CORPORATION'S BYLAWS SHALL BE STRICKEN AND AMENDED TO READ AS FOLLOWS: Section 2. Number and Qualifications. The size of the Board of Directors of the corporation shall be not less than five (5) nor more than nine (9), subject to vacancies from time to time. The exact number of directors within the limits specified shall be seven (7) until changed by an amendment to these bylaws duly adopted by the board of directors or by the shareholders. Such indefinite number may be changed, or a definite number fixed without provision for an indefinite number, by an amendment to these bylaws duly adopted by the vote or written consent of the shareholders provided, however, that a bylaw reducing the minimum number of directors to a number less than five (5) cannot be adopted if the votes cast against its adoption at a meeting or the shares not consenting in the case of action by written consent are equal to more than 16-2/3% of the outstanding shares entitled to vote. No amendment may change the stated maximum number of authorized directors to a number greater than two times the stated minimum number of directors minus one. 14 18 EXHIBIT C FIRST AMENDMENT TO THE DOVE AUDIO, INC. 1994 STOCK INCENTIVE PLAN FIRST The Plan is hereby renamed the "Dove Entertainment, Inc. 1994 Stock Incentive Plan," and all references to "Dove Audio, Inc." in the Plan are hereby amended to refer to "Dove Entertainment, Inc." SECOND The definition of "Committee" in Section 1.1(i) of the Plan is hereby amended in its entirety, to read as follows: (i) "Committee" shall mean either a committee appointed by the Board, consisting of two or more members, each of whom is a Non- Employee Director, or the entire Board if each member is a Non-Employee Director (except as otherwise permitted under Rule 16b-3 promulgated under the Exchange Act). If there are two or more members of the Board who are 15 19 "outside directors" within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder, then the Committee shall consist only of such members. THIRD Section 1.1 of the Plan is hereby amended by deleting the definition of "Disinterested" in Section 1.1(m) in its entirety, and the remaining subsections of Section 1.1 are hereby renumbered accordingly, to the extent necessary. FOURTH Section 1.1 of the Plan is hereby amended by adding the following definition thereto as Section 1.1(r), and the remaining subsections are hereby renumbered accordingly, to the extent necessary : (r) "Non-Employee Director" shall mean a Non-Employee Director within the meaning of the applicable regulatory requirements promulgated under Section 16 of the Exchange Act. FIFTH Section 2.3 of the plan is hereby amended in its entirety to read as follows: Awards my be granted only to Eligible Persons. An Eligible Person who has been granted an Award may, if otherwise eligible, be granted additional Awards if the Committee shall so determine. Section 2.4 of the Plan is hereby amended in its entirety, to read as follows: 2.4 Stock Subject to the Plan The stock to be offered under this Plan shall be shares of the Corporation's authorized but unissued Common Stock. The aggregate amount of Common Stock that may be issued or transferred pursuant to Awards granted under this Plan shall not exceed 250,000 shares (750,000, effective as of October 30, 1996), subject to adjustment as set forth in Section 7.2; provided that any Stock Appreciation Rights granted concurrently in accordance with Section 4.1 are not subject to the foregoing limitation. If an Option and any Stock Appreciation Right shall lapse or terminate without having been exercised in full, or any Common Stock subject to a Restricted Stock Award shall not vest or any 16 20 Common Stock subject to a Performance Share Award shall not have been transferred, the unpurchased or nontransferred shares subject thereto shall again be available for purposes of this Plan; provided, however, that the counting of shares subject to Awards granted under the Plan against the number of shares available for further Awards shall in all cases conform to the requirements of Rule 16b-3 under the Exchange Act; and provided, further, that with respect to any Option and any Stock Appreciation Right granted to any Eligible Person who is a "covered employee," as defined in Section 162(m) of the Code and the regulations promulgated thereunder, that is canceled, the number of shares subject to such Option and Stock Appreciation Right shall continue to count against the maximum number of shares which may be the subject of Options and Stock Appreciation Rights granted to such Eligible Person. For purposes of the preceding sentence, if, after grant, the exercise price of an Option and/or the base amount of any Stock Appreciation Right is reduced, such reduction shall be treated as a cancellation of such Option and Stock Appreciation Right and the grant of a new Option and Stock Appreciation Right (if any), and both the cancellation of the Option and Stock Appreciation Right and the new Option and Stock Appreciation Right shall reduce the maximum number of shares for which Options and Stock Appreciation Rights may be granted to the holder of such Option and Stock Appreciation Right, to the extent required by Section 162(m) of the Code and the regulations promulgated thereunder. SIXTH The first sentence of Section 2.5 of the Plan is hereby amended in its entirety, to read as follows: Subject to the express provisions of the Plan, the Committee shall determine from the class of Eligible Persons those individuals to whom Awards under the Plan shall be granted, the terms of Awards (which need not be identical) and the number of shares of Common Stock subject to each Award; provided, however, that no Eligible Person may be granted Options and Stock Appreciation Rights relating in the aggregate to more than 250,000 shares of Common Stock (subject to adjustment as provided in Section 7.2) in any calendar year; and provided, further, that any shares of Common Stock relating to Stock Appreciation Rights granted concurrently with one or more Options in accordance with Section 4.1 shall only be counted once for purposes of such limit. 17 21 SEVENTH The first sentence of Section 3.4 of the Plan is hereby amended in its entirety, to read as follows: Except as otherwise provided in Section 7.4, an Option may become exercisable, in whole or in part, on the date or dates specified in the Award Agreement, and thereafter shall remain exercisable until the expiration or earlier termination of such Option. EIGHTH Section 4.2(d) of the Plan is hereby amended in its entirety, to read as follows: (d) A Stock Appreciation Right granted independently of any Option shall be exercisable pursuant to the terms of the Award Agreement. NINTH The second sentence of Section 5.1 of the Plan is hereby amended in its entirety, to read as follows: Each Restricted Stock Award Agreement shall specify the number of shares of Common Stock to be issued to the Participant, the date of such issuance, the price, if any, to be paid for shares and the restrictions imposed on such shares. TENTH The second sentence of Section 6.1 of the Plan is hereby amended in its entirety, to read as follows: A Performance Share Award Agreement shall specify the number of shares of Common Stock subject to the Performance Share Award, the price, if any, to be paid for such shares by the Participant and the conditions upon which issuance to the Participant shall be based. 18 22 ELEVENTH The first sentence of Section 7.4 of the Plan is hereby amended in its entirety, to read as follows: Unless prior to an Event the Committee determines that, upon its occurrence, there shall be no acceleration of Awards or determines those Awards which shall be accelerated and the extent to which they shall be accelerated upon the occurrence of an Event (i) each Option and each Stock Appreciation Right shall become immediately exercisable to the full extent theretofore not exercisable, (ii) Restricted Stock shall immediately vest free of restrictions, and (iii) the number of shares covered by each Performance Share Award shall be issued to the Participant. TWELFTH Section 7.7(b) of the Plan is hereby amended in its entirety, to read as follows: (b) If an amendment would (i) materially increase the benefits accruing to Participants within the meaning of Rule 16b-3(a) under the Exchange Act or any successor thereto, (ii) increase the aggregate number of shares which may be issued under this Plan or to any individual, (iii) modify the requirements of eligibility for participation in this Plan, or (iv) require shareholder approval in order to qualify Options and Stock Appreciation Rights as "performance-based compensation," within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder, the amendment shall be approved by the Board or the Committee and a majority of the shareholders. If the provisions of Rule 16b-3 under the Exchange Act or any successor thereto or Section 162(m) of the Code and the regulations promulgated thereunder are amended after the effective date of this Plan to permit the 19 23 amendment of stock option plans without compliance with the shareholder approval requirements then set forth therein, the foregoing restrictions on the ability of the Board and the Committee to amend the Plan shall terminate to the extent such approval is no longer required thereunder (or under any other applicable law or regulation), and the Board and the Committee shall thereafter be empowered to amend the Plan without regard to the terminated restrictions in appropriate circumstances. 20 24 EXHIBIT 4.1 DOVE AUDIO, INC. 1994 STOCK INCENTIVE PLAN 25 TABLE OF CONTENTS
Page ---- I. DEFINITIONS............................................................ 1 1.1 Definitions................................................. 1 II. THE PLAN............................................................... 4 2.1 Purpose..................................................... 4 2.2 Administration.............................................. 5 2.3 Participation............................................... 5 2.4 Stock Subject to the Plan................................... 6 2.5 Grant of Awards............................................. 6 2.6 Exercise of Awards.......................................... 7 III. OPTIONS................................................................ 7 3.1 Grants...................................................... 7 3.2 Option Price................................................ 9 3.3 Option Period............................................... 10 3.4 Exercise of Options......................................... 10 3.5 Limitations on Grant of Incentive Stock Options .................................................... 11 3.6 Additional Rights........................................... 11 IV. STOCK APPRECIATION RIGHTS.............................................. 12 4.1 Grants...................................................... 12 4.2 Exercise of Stock Appreciation Rights....................... 12 4.3 Payment..................................................... 13 V. RESTRICTED STOCK AWARDS................................................ 14 5.1 Grants...................................................... 14 5.2 Restrictions................................................ 14 VI. PERFORMANCE SHARE AWARDS............................................... 15 6.1 Grants...................................................... 15 VII. OTHER PROVISIONS....................................................... 15 7.1 Rights of Eligible Persons, Participants and Beneficiaries............................................... 15 7.2 Adjustments Upon Changes in Capitalization.................. 16 7.3 Termination of Employment................................... 17 7.4 Acceleration of Awards...................................... 18 7.5 Government Regulations...................................... 19 7.6 Tax Withholding............................................. 19 7.7 Amendment, Termination and Suspension....................... 20
-i- 26 TABLE OF CONTENTS (Continued) 7.8 Privileges of Stock Ownership; Nondistributive Intent...................................................... 21 7.9 Effective Date of the Plan.................................. 21 7.10 Term of the Plan............................................ 21 7.11 Governing Law............................................... 21
-ii- 27 DOVE AUDIO, INC. 1994 Stock Incentive Plan I. DEFINITIONS. 1.1 Definitions. (a) "Award" shall mean an Option, which may be designated as a Nonqualified Stock Option or an Incentive Stock Option, a Stock Appreciation Right, a Restricted Stock Award or Performance Share Award, in each case granted under this Plan. (b) "Award Agreement" shall mean a written agreement setting forth the terms of an Award. (c) "Award Date" shall mean the date upon which the Committee took the action granting an Award or such later date as is prescribed by the Committee. (d) "Award Period" shall mean the period beginning on an Award Date and ending on the expiration date of such Award. (e) "Beneficiary" shall mean the person, persons, trust or trusts entitled by will or the laws of descent and distribution to receive the benefits specified under this Plan in the event of a Participant's death. (f) "Board" shall mean the Board of Directors of the Corporation. (g) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (h) "Commission" shall mean the Securities and Exchange Commission. (i) "Committee" shall mean either a committee appointed by the Board and consisting of two or more members, each of whom is a director and Disinterested or the entire Board, if each member is Disinterested (except as otherwise permitted under Rule 16b-3 promulgated under the Exchange Act). If there are two or more members of the Board who are "outside directors" within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder, then the Committee shall consist only of such members. Notwithstanding anything to the 28 contrary herein, no person may be a member of the Committee if such person has received an Award hereunder for the period of one year prior to serving on the Committee, and no member of the ommittee may receive an Award hereunder while serving on the Committee, other than in accordance with Section 3.1(b). (j) "Common Stock" shall mean the Common Stock of the Corporation. (k) "Company" shall mean, collectively, the Corporation and its Subsidiaries. (l) "Corporation" shall mean Dove Audio, Inc., a California corporation, and its successors. (m) "Disinterested" shall mean disinterested within the meaning of the applicable regulatory requirements promulgated under Section 16 of the Exchange Act. (n) "Eligible Person" shall mean an employee, director, officer or key employee of the Company or any other person who, in the opinion of the Committee, is rendering valuable services to the Company, including, without limitation, as an independent contractor, outside consultant or advisor to the Company. (o) "Event" shall mean any of the following: (1) Approval by the shareholders of the Corporation of the dissolution or liquidation of the Corporation; (2) Approval by the shareholders of the Corporation of an agreement to merge or consolidate, or otherwise reorganize, with or into one or more entities which are not Subsidiaries, as a result of which less than 50% of the outstanding voting securities of the surviving or resulting entity are, or are to be, owned by former shareholders of the Corporation; (3) Approval by the shareholders of the Corporation of the sale of substantially all of the Corporation's business and/or assets to a person or entity which is not a Subsidiary; or -2- 29 (4) A Change in Control. A "Change in Control" shall be deemed to have occurred if (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 35% or more of the combined voting power of the Corporation's then outstanding securities; or (B) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Corporation's shareholders, of each new Board member was approved by a vote of at least three-fourths of the Board members then still in office who were Board members at the beginning of such period. (p) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (q) "Fair Market Value" shall mean (i) if the stock is listed or admitted to trade on a national securities exchange, the closing price of the stock on the Composite Tape, as published in The Wall Street Journal, of the principal national securities exchange on which the stock is so listed or admitted to trade, on such date, or, if there is no trading of the stock on such date, then the closing price of the stock as quoted on such Composite Tape on the next preceding date on which there was trading in such stock; (ii) if the stock is not listed or admitted to trade on a national securities exchange, the last price for the stock on such date, as furnished by the National Association of Securities Dealers, Inc. ("NASD") through the NASDAQ National Market Reporting System or a similar organization if the NASD is no longer reporting such information; (iii) if the stock is not listed or admitted to trade on a national securities exchange and is not reported on the National Market Reporting System, the average of the closing bid and asked prices for the stock on such date, as reported or furnished by the NASDAQ; (iv) if the stock is not listed or admitted to trade on a national securities exchange, is not reported on the National Market Reporting System and if bid and asked prices for the stock are not reported or furnished by the NASDAQ or a similar organization, the values established by the Committee for purposes of granting Options under the Plan. -3- 30 (r) "Incentive Stock Option" shall mean an option which is designated as an incentive stock option within the meaning of Section 422 of the Code, the award of which contains such provisions as are necessary to comply with that section. (s) "Nonqualified Stock Option" shall mean an option which is designated a Nonqualified Stock Option. (t) "Option" shall mean an option to purchase Common Stock under this Plan. An option shall be designated by the Committee as a Nonqualified Stock Option or an Incentive Stock Option. (u) "Participant" shall mean an Eligible Person, who has been awarded an Award. (v) "Performance Share Award" shall mean an award of shares of Common Stock, issuance of which is contingent upon attainment of performance objectives specified by the Committee. (w) "Personal Representative" shall mean the person or persons who, upon the disability or incompetence of a Participant, shall have acquired on behalf of the Participant by legal proceeding or otherwise the power to exercise the rights and receive the benefits specified in this Plan. (x) "Plan" shall mean Dove Audio, Inc. 1994 Stock Incentive Plan. (y) "Restricted Stock" shall mean those shares of Common Stock issued pursuant to a Restricted Stock Award which are subject to the restrictions set forth in the related Award Agreement. (z) "Restricted Stock Award" shall mean an award of a fixed number of shares of Common Stock to the Participant subject, however, to payment of such consideration, if any, and such forfeiture provisions, as are set forth in the Award Agreement. (aa) "Retirement" shall mean retirement as defined in termination of employment with the Company pursuant to the Company's retirement policy, as in effect from time to time. -4- 31 (bb) "Securities Act" shall mean the Securities Act of 1933, as amended. (cc) "Stock Appreciation Right" shall mean a right to receive a number of shares of Common Stock or an amount of cash, or a combination of shares and cash, determined as provided in Section 4.3(a). (dd) "Subsidiary" shall mean any corporation or other entity fifty percent or more of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by the Corporation. (ee) "Tax-Offset Bonus" shall mean a bonus payable pursuant to a disqualifying disposition of Common Stock acquired pursuant to the exercise of an Incentive Stock Option, determined as provided in Section 3.6. (ff) "Total Disability" shall mean a "permanent and total disability" within the meaning of Section 22(e)(3) of the Code. II. THE PLAN. 2.1 Purpose. The purpose of this Plan is to promote the success of the Company by providing an additional means to attract and retain key personnel through added long term incentives for high levels of performance and for significant efforts to improve the financial performance of the Company by granting Awards. 2.2 Administration. (a) This Plan shall be administered by the Committee. Action of the Committee with respect to the administration of this Plan shall be taken pursuant to a majority vote or the written consent of a majority of its members. In the event action by the Committee is taken by written consent, the action shall be deemed to have been taken at the time specified in the consent or, if none is specified, at the time of the last signature. The Committee may delegate administrative functions (other than functions which are required to be performed by the Committee pursuant to requirements promulgated under Section 16 -5- 32 of the Exchange Act and Section 162(m) of the Code) to individuals who are officers or employees of the Company. (b) Subject to the express provisions of this Plan, the Committee shall have the authority to construe and interpret this Plan and any agreements defining the rights and obligations of the Company and Participants under this Plan, to further define the terms used in this Plan, to prescribe, amend and rescind rules and regulations relating to the administration of this Plan, to determine the duration and purposes of leaves of absence which may be granted to Participants without constituting a termination of their employment for purposes of this Plan and to make all other determinations necessary or advisable for the administration of this Plan. The determinations of the Committee on the foregoing matters shall be conclusive. (c) Any action taken by, or inaction of, the Corporation, any Subsidiary, the Board or the Committee relating to this Plan shall be within the absolute discretion of that entity or body and shall be conclusive and binding upon all persons. No member of the Board or Committee, or officer of the Corporation or Subsidiary, shall be liable for any such action or inaction of the entity or body, of another person or, except in circumstances involving bad faith, of himself or herself. Subject only to compliance with the express provisions hereof, the Board and Committee may act in their absolute discretion in matters related to this Plan. (d) Subject to the requirements of Section 1.1(i), the Board, at any time it so desires, may increase or decrease the number of members of the Committee, may remove from membership on the Committee all or any portion of its members, and may appoint such person or persons as it desires to fill any vacancy existing on the Committee, whether caused by removal, resignation or otherwise. 2.3 Participation. Awards may be granted only to Eligible Persons. An Eligible Person who has been granted an Award may, if otherwise eligible, be granted additional Awards if the Committee shall so determine. Members of the Committee shall not be eligible to receive Awards, other than in accordance with Section 3.1(b). 2.4 Stock Subject to the Plan. -6- 33 The stock to be offered under this Plan shall be shares of the Corporation's authorized but unissued Common Stock. The aggregate amount of Common Stock that may be issued or transferred pursuant to Awards granted under this Plan shall not exceed 400,000 shares, subject to adjustment as set forth in Section 7.2; provided that any Stock Appreciation Rights granted concurrently in accordance with Section 4.1 are not subject to the foregoing limitation. If an Option and any Stock Appreciation Right shall lapse or terminate without having been exercised in full, or any Common Stock subject to a Restricted Stock Award shall not vest or any Common Stock subject to a Performance Share Award shall not have been transferred, the unpurchased or nontransferred shares subject thereto shall again be available for purposes of this Plan; provided, however, that the counting of shares subject to Awards granted under the Plan against the number of shares available for further Awards shall in all cases conform to the requirements of Rule 16b-3 under the Exchange Act; and provided, further, that with respect to any Option and any Stock Appreciation Right granted to any Eligible Person who is a "covered employee" as defined in Section 162(m) of the Code and the regulations promulgated thereunder that is canceled, the number of shares subject to such Option and Stock Appreciation Right shall continue to count against the maximum number of shares which may be the subject of Options and Stock Appreciation Rights granted to such Eligible Person. For purposes of the preceding sentence, if, after grant, the exercise price of an Option and/or the base amount of any Stock 6 Appreciation Right is reduced, such reduction shall be treated as a cancellation of such Option and Stock Appreciation Right and the grant of a new Option and Stock Appreciation Right (if any), and both the cancellation of the Option and Stock Appreciation Right and the new Option and Stock Appreciation Right shall reduce the maximum number of shares for which Options and Stock Appreciation Rights may be granted to the holder of such Option and Stock Appreciation Right. 2.5 Grant of Awards. Subject to the express provisions of the Plan, the Committee shall determine from the class of Eligible Persons those individuals to whom Awards under the Plan shall be granted, the terms of Awards (which need not be identical) and the number of shares of Common Stock subject to each Award. Each Award shall be subject to the terms and conditions set forth in the Plan and such other terms and conditions established by the -7- 34 Committee as are not inconsistent with the purpose and provisions of the Plan. The grant of an Award is made on the Award Date. 2.6 Exercise of Awards. An Option or Stock Appreciation Right shall be deemed to be exercised when the Secretary of the Corporation receives written notice of such exercise from the Participant, together with payment of the purchase price made in accordance with Section 3.2(a), except to the extent payment may be permitted to be made following delivery of written notice of exercise in accordance with Section 3.2(b). Notwithstanding any other provision of this Plan, the Committee may impose, by rule and in Award Agreements, such conditions upon the exercise of Awards (including, without limitation, conditions limiting the time of exercise to specified periods) as may be required to satisfy applicable regulatory requirements, including, without limitation, Rule 16b-3 (or any successor rule) promulgated by the Commission pursuant to the Exchange Act. III. OPTIONS. 3.1 Grants. (a) One or more Options may be granted to any Eligible Person other than members of the Committee. Each Option so granted shall be designated by the Committee as either a Nonqualified Stock Option or an Incentive Stock Option. Members of the Committee shall be granted Options in accordance with Section 3.1(b). (b) Notwithstanding any other provision of the Plan, effective on November 1, 1994 and on each subsequent date a director who is not also an employee of the Company is appointed, elected or, commencing in 1995, re-elected to the Board, such director will automatically be granted a Nonqualified Stock Option, having a duration of ten years, to purchase 5,000 shares of Common Stock for a purchase price per share equal to the Fair Market Value of the Common Stock on the date of grant, to vest as to twenty percent (20%) of such shares on each of the first five (5) anniverseries of the date of grant. The purchase price of any shares purchased pursuant to any such Option shall be paid in full at the time of each purchase in cash or by certified or -8- 35 cashier's check payable to the order of the Corporation. Notwithstanding anything to the contrary contained in Section 7.2 or 7.4, each such Option shall be adjusted and shall accelerate, respectively, in the following events: (i) If the outstanding shares of Common Stock are increased, decreased or changed into, or exchanged for, a different number or kind of shares or securities of the Corporation through a reorganization or merger in which the Corporation is the surviving entity, or through a combination, recapitalization, reclassification, stock split, stock dividend, stock consolidation or otherwise, an appropriate adjustment shall be made in the number and kind of shares that may be issued pursuant to each Option. Any such adjustment, however, shall be made without change in the total payment, if any, applicable to the portion of the Option not exercised but with a corresponding adjustment in the price for each share. (ii) Upon the dissolution or liquidation of the Corporation, or upon a reorganization, merger or consolidation of the Corporation with one or more corporations as a result of which the Corporation is not the surviving corporation, any such Option then outstanding shall terminate and be forfeited. In the event the Options terminate as aforesaid in connection with such a dissolution, liquidation, reorganization, merger or consolidation, the holder of any such Option shall be entitled to receive from the Corporation cash in an amount equal to the excess of (A) the Fair Market Value (determined on the basis of the amount received by shareholders in connection with such transaction) of the shares of Common Stock subject to the portion of the Option not theretofore exercised (whether or not the Option is then exercisable pursuant to its terms or otherwise), over (B) the aggregate purchase price which would be payable for such shares upon the exercise of the Option. (iii) In adjusting Options to reflect the changes described in this Section 3.1(b) or in determining that no such adjustment is necessary, the Committee shall make only such adjustment as shall be necessary to maintain the proportionate interest of the holder and preserve the value of the respective Option and may rely upon the advice of independent counsel and accountants of the Corporation, -9- 36 and the determination of the Committee shall be conclusive. No fractional shares of stock shall be issued under this Plan on account of any such adjustment. (iv) Upon the occurrence of an Event, each such Option shall become immediately exercisable to the full extent theretofore not exercisable. Acceleration of Awards shall comply with applicable regulatory requirements, including, without limitation, Rule 16b-3 promulgated by the Commission pursuant to the Exchange Act. All or any part of any remaining unexercised Options granted pursuant to this Section 3.1(b) may be exercised (after approval of the Plan by shareholders of the Corporation but in no event during the six-month period commencing on the later of the date of grant or the date of such shareholder approval) in the event of the holder's cessation of service as a director of the Company due to the holder's death, during the period beginning on the date of death and ending 12 months thereafter, but in no event after the expiration of the term of the Option. Any Option granted pursuant to this Section 3.1(b), to the extent unexercised, shall terminate immediately upon the holder's ceasing to serve as a director of the Company due to Total Disability, except that the holder or the holder's Personal Representative shall have 12 months following such cessation of service to exercise any unexercised Option that the holder could have exercised on the day on which such service terminated; provided that such exercise must be accomplished prior to the expiration of the term of such Option. Any Option granted pursuant to this Section 3.1(b), to the extent unexercised, shall terminate immediately upon the holder's ceasing to serve as a director of the Company (for reasons other than Total Disability or death), except that the holder shall have three months from the date of such cessation of service to exercise any unexercised Option that he or she could have exercised on the day on which such service terminated; provided that such exercise must be accomplished prior to the expiration of the term of such Option. Notwithstanding the preceding, if the service as a director of any holder of an Option granted pursuant to this Section 3.1(b) shall be terminated because of the holder's (a) fraud or intentional misrepresentation, or (b) embezzlement, misappropriation or conversion of assets or opportunities of the Company, then all such unexercised Options of the holder shall terminate immediately upon such holder's ceasing to serve as a director. -10- 37 Subject to the limitations of Section 7.7, this award formula may be amended from time to time by the Board with respect to timing and amount; provided that such formula will not be modified to provide an award in excess of Options to acquire 5,000 shares of Common Stock per year; and provided, further, that the provisions of this Section 3.1(b) shall not be amended more than once every six months, other than to comport with changes in the Code or the Employee Retirement Income Security Act of 1974, as amended (and to such extent, if any, as it may be applicable to the Plan) or the rules and regulations thereunder. 3.2 Option Price. (a) The purchase price per share of the Common Stock covered by each Option shall be determined by the Committee, but in the case of Incentive Stock Options shall not be less than 100% (110% in the case of a Participant who owns more than 10% of the total combined voting power of all classes of stock of the Company) of the Fair Market Value of the Common Stock on the date the Incentive Stock Option is granted. The purchase price of any shares purchased shall be paid in full at the time of each purchase in one or a combination of the following methods: (i) in cash, or by certified or cashier's check payable to the order of the Corporation; (ii) if authorized by the Committee or specified in the Option being exercised, by a promissory note made by the Participant in favor of the Corporation, upon the terms and conditions determined by the Committee but at a rate of interest at least equal to the imputed interest specified under Section 483 or Section 1274, whichever is applicable, of the Code, and secured by the Common Stock issuable upon exercise in compliance with applicable law (including, without limitation, state corporate law and federal margin requirements); or (iii) by shares of Common Stock of the Corporation already owned by the Participant; provided, however, the Committee may in its absolute discretion limit the Participant's ability to exercise an Option by delivering shares, and any shares delivered which were initially acquired upon exercise of a stock option must have been owned, or deemed to have been owned, by the Participant at least six months as of the date of delivery. Shares of Common Stock used to satisfy the exercise price of an Option shall be valued at their Fair Market Value on the date of exercise. (b) In addition to the payment methods described in subsection (a), the Option may provide that the Option can be -11- 38 exercised and payment made by delivering a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Corporation the amount of sale or loan proceeds necessary to pay the exercise price and, unless otherwise disallowed by the Committee, any applicable tax withholding under Section 7.6. The Corporation shall not be obligated to deliver certificates for the shares unless and until it receives full payment of the exercise price therefor. 3.3 Option Period. Each Option and all rights or obligations thereunder shall expire on such date as shall be determined by the Committee, but not later than 10 years after the Award Date of an Incentive Stock Option or 10 years and one day after the Award Date of a Nonqualified Stock Option, and shall be subject to earlier termination as hereinafter provided. 3.4 Exercise of Options. Except as otherwise provided in Section 7.4, an Option may become exercisable, in whole or in part, on the date or dates specified in the Award Agreement which date(s) shall not be earlier than six months after the later of (i) the Award Date, or (ii) the date of shareholder approval of the Plan pursuant to Section 7.9, and thereafter shall remain exercisable until the expiration or earlier termination of the Participant's Option. The Committee may, at any time after grant of the Option and from time to time, increase the number of shares purchasable at any time so long as the total number of shares subject to the Option is not increased. No Option shall be exercisable except in respect of whole shares, and fractional share interests shall be disregarded. Not less than 100 shares of Common Stock may be purchased at one time unless the number purchased is the total number at the time available for purchase under the terms of the Option. 3.5 Limitations on Grant of Incentive Stock Options. (a) The aggregate Fair Market Value (determined as of the Award Date) of the Common Stock for which Incentive Stock Options may first become exercisable by any Participant during any calendar year under this Plan (other than as a result of acceleration pursuant to Section 7.4 or 7.2), together with that of common stock subject to incentive stock options first -12- 39 exercisable by such Participant under any other plan of the Corporation or any Subsidiary, shall not exceed $100,000; to the extent such limitation is exceeded as a result of acceleration, Options shall be treated as Nonqualified Stock Options. (b) There shall be imposed in the Award Agreement relating to Incentive Stock Options such terms and conditions as are required in order that the Option be an "incentive stock option" as that term is defined in Section 422 of the Code. (c) No Incentive Stock Option may be granted to any person who, at the time the Incentive Stock Option is granted, owns shares of stock possessing more than 10% of the total combined voting power of all classes of stock of the Corporation or any Subsidiary, unless the exercise price of such Option is at least 110% of the Fair Market Value of the stock subject to the Option and such Option by its terms is not exercisable after the expiration of five years from the date such Option is granted. (d) No Incentive Stock Option may be granted to any person who is not an employee of the Company. 3.6 Additional Rights. In its discretion the Committee may, in the Award Agreement, provide for a Tax-Offset Bonus to any Participant who elects to make a disqualifying disposition (as defined in Section 422(a)(1) of the Code) of Common Stock acquired pursuant to the exercise of an Incentive Stock Option. The Tax-Offset Bonus shall be in the form of a cash payment equal to a percentage of the difference between the exercise price and the lesser of (i) the Fair Market Value on the date of exercise of the Common Stock with respect to which the disqualifying disposition occurs, or (ii) the amount realized from such disqualifying disposition. Such percentage shall be set out in the Award Agreement and shall be designed to offset the impact of additional taxes which result from the disqualifying disposition. Notwithstanding the preceding sentence, the Committee may reserve the right to from time to time change the percentage applicable with respect to the Award Agreement. -13- 40 IV. STOCK APPRECIATION RIGHTS. 4.1 Grants. In its discretion, the Committee may grant Stock Appreciation Rights concurrently with the grant of Options. A Stock Appreciation Right shall extend to all or a portion of the shares covered by the related Option. A Stock Appreciation Right shall entitle the Participant who holds the related Option, upon exercise of the Stock Appreciation Right and surrender of the related Option, or portion thereof, to the extent the Stock Appreciation Right and related Option each were previously unexercised, to receive payment of an amount determined pursuant to Section 4.3. Any Stock Appreciation Right granted in connection with an Incentive Stock Option shall contain such terms as may be required to comply with the provisions of Section 422 of the Code and the regulations promulgated thereunder. In its discretion, the Committee may also grant Stock Appreciation Rights independently of any Option subject to such conditions as the Committee may in its absolute discretion provide. 4.2 Exercise of Stock Appreciation Rights. (a) A Stock Appreciation Right granted concurrently with an Option shall be exercisable only at such time or times, and to the extent, that the related Option shall be exercisable and only when the Fair Market Value of the stock subject to the related Option exceeds the exercise price of the related Option. (b) In the event that a Stock Appreciation Right granted concurrently with an option is exercised, the number of shares of Common Stock subject to the related Option shall be charged against the maximum amount of Common Stock that may be issued or transferred pursuant to Awards under this Plan. The number of shares subject to the Stock Appreciation Right and the related Option of the Participant shall be reduced by such number of shares. (c) If a Stock Appreciation Right granted concurrently with an Option extends to less than all the shares covered by the related Option and if a portion of the related Option is thereafter exercised, the number of shares subject to the unexercised Stock Appreciation Right shall be reduced only if and to the extent that the remaining number of shares covered by such related Option is less than the remaining number of shares -14- 41 subject to such Stock Appreciation Right. The number of shares subject to unexercised Stock Appreciation Rights may also be reduced proportionately. (d) A Stock Appreciation Right granted independently of any Option shall be exercisable pursuant to the terms of the Award Agreement but in no event earlier than six months after the later of (i) the Award Date, or (ii) the date of shareholder approval of the Plan pursuant to Section 7.9. (e) In order to achieve the Plan's objective of encouraging ownership of the Common Stock, the Committee may require that Stock Appreciation Rights can only be exercised if the Participant uses all or a portion of any cash received upon exercise of the Stock Appreciation Right to concurrently exercise all or a portion of the Option he or she holds. 4.3 Payment. (a) Upon exercise of a Stock Appreciation Right and surrender of an exercisable portion of the related Option, the Participant shall be entitled to receive payment of an amount determined by multiplying (i) the difference obtained by subtracting the exercise price per share of Common Stock under the related Option from the Fair Market Value of a share of Common Stock on the date of exercise of the Stock Appreciation Right, by (ii) the number of shares with respect to which the Stock Appreciation Right shall have been exercised. (b) The Committee, in its sole discretion, may settle the amount determined under paragraph (a) above solely in cash, solely in shares of Common Stock (valued at Fair Market Value on the date of exercise of the Stock Appreciation Right), or partly in such shares and partly in cash, provided that the Committee shall have determined that such exercise and payment are consistent with applicable law. In any event, cash shall be paid in lieu of fractional shares. Absent a determination to the contrary, all Stock Appreciation Rights shall be settled in cash as soon as practicable after exercise. Notwithstanding the foregoing, the Committee may, in the Award Agreement, determine -15- 42 the maximum amount of cash or stock or a combination thereof which may be delivered upon exercise of a Stock Appreciation Right. (c) Upon exercise of a Stock Appreciation Right granted independently of any Option, the Participant shall be entitled to receive payment in cash of an amount based on a percentage, specified in the Award Agreement, of the difference obtained by subtracting the Fair Market Value per share of Common Stock on the Award Date from the Fair Market Value per share of Common Stock on the date of exercise of the Stock Appreciation Right. (d) Notwithstanding any other provision of the Plan or of the Stock Appreciation Rights, for purposes of determining the amount specified in subsection (a) in the case of a holder of Stock Appreciation Rights who is a director or officer of the Company subject to Section 16(b) of the Exchange Act, the Committee, in its sole discretion, may designate a single Fair Market Value per share with respect to all such holders who exercise Stock Appreciation Rights during any single ten-day period specified in Rule 16b-3(e)(3) under the Exchange Act; provided, however, that the Fair Market Value per share designated by the Committee during any such period shall in no event be greater than the highest Fair Market Value per share on any day during such period or less than the lowest Fair Market Value per share on any day during such period. V. RESTRICTED STOCK AWARDS. 5.1 Grants. Subject to Section 2.4, the Committee may, in its discretion, grant one or more Restricted Stock Awards to any Eligible Person. Each Restricted Stock Award Agreement shall specify the number of shares of Common Stock to be issued to the Participant, the date of such issuance, the price, if any, to be paid for such shares by the Participant and the restrictions imposed on such shares, which restrictions shall not terminate earlier than six months after the later of (i) the Award Date, or (ii) the date of shareholder approval of the Plan pursuant to Section 7.9. Shares of Restricted Stock shall be evidenced by a stock certificate registered only in the name of the Participant, which stock certificate shall bear a legend making appropriate -16- 43 reference to the restrictions imposed and shall be held by the Corporation until the restrictions on such shares shall have lapsed and those shares shall have thereby vested. 5.2 Restrictions. (a) Shares of Common Stock included in Restricted Stock Awards may not be sold, assigned, transferred, pledged or otherwise disposed of or encumbered, either voluntarily or involuntarily, until such shares have vested. (b) Participants receiving Restricted Stock shall be entitled to voting rights for the shares issued even though they are not vested; provided that such rights shall terminate immediately as to any forfeited Restricted Stock; and provided further that any dividends declared and paid on the shares issued but not yet vested shall be retained for the benefit of the Participant, to be paid to the Participant when and if such shares vest or returned to the Corporation immediately as to any forfeited Restricted Stock. (c) In the event that the Participant shall have paid cash in connection with the Restricted Stock Award, the Award Agreement shall specify whether and to what extent such cash shall be returned upon a forfeiture (with or without an earnings factor). VI. PERFORMANCE SHARE AWARDS. 6.1 Grants. The Committee may, in its discretion, grant Performance Share Awards to Eligible Persons based upon such factors as the Committee shall determine. A Performance Share Award Agreement shall specify the number of shares of Common Stock subject to the Performance Share Award, the price, if any, to be paid for such shares by the Participant and the conditions upon which issuance to the Participant shall be based, which issuance shall not be earlier than six months after the later of (i) the Award Date, or (ii) the date of shareholder approval of the Plan pursuant to Section 7.9. VII. OTHER PROVISIONS. -17- 44 7.1 Rights of Eligible Persons, Participants and Beneficiaries. (a) Status as an Eligible Person shall not be construed as a commitment that any Award will be made under this Plan to an Eligible Person or to Eligible Persons generally. (b) Nothing contained in this Plan (or in Award Agreements or in any other documents related to this Plan or to Awards) shall confer upon any Eligible Person or Participant any right to continue in the employ of the Company or constitute any contract or agreement of employment, or interfere in any way with the right of the Company to reduce such person's compensation or to terminate the employment of such Eligible Person or Participant, with or without cause, but nothing contained in this Plan or any document related thereto shall affect any other contractual right of any Eligible Person or Participant. (c) Amounts payable pursuant to an Award shall be paid only to the Participant or, in the event of the Participant's death, to the Participant's Beneficiary or, in the event of the Participant's Total Disability, to the Participant's Personal Representative or, if there is none, to the Participant. Other than by will or the laws of descent and distribution, or pursuant to a "qualified domestic relations order" as defined by the Code, no benefit payable under, or interest in, this Plan or in any Award shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge and any such attempted action shall be void and no such benefit or interest shall be, in any manner, liable for, or subject to, debts, contracts, liabilities, engagements or torts of any Eligible Person, Participant or Beneficiary. The Committee shall disregard any attempted transfer, assignment or other alienation prohibited by the preceding sentence and shall pay or deliver such cash or shares of Common Stock in accordance with the provisions of this Plan. (d) No Participant, Beneficiary or other person shall have any right, title or interest in any fund or in any specific asset (including shares of Common Stock) of the Company by reason of any Award granted hereunder. Neither the provisions of this Plan (or of any documents related hereto), nor the creation or adoption of this Plan, nor any action taken pursuant to the provisions of this Plan shall create, or be construed to create, a trust of any kind or a fiduciary relationship between -18- 45 the Company and any Participant, Beneficiary or other person. To the extent that a Participant, Beneficiary or other person acquires a right to receive an Award hereunder, such right shall be no greater than the right of any unsecured general creditor of the Company. 7.2 Adjustments Upon Changes in Capitalization. (a) If the outstanding shares of Common Stock are increased, decreased or changed into, or exchanged for, a different number or kind of shares or securities of the Corporation through a reorganization or merger in which the Corporation is the surviving entity, or through a combination, recapitalization, reclassification, stock split, stock dividend, stock consolidation or otherwise, an appropriate adjustment shall be made in the number and kind of shares that may be issued pursuant to Awards. A corresponding adjustment to the consideration payable with respect to Awards granted prior to any such change and to the price, if any, paid in connection with Restricted Stock Awards or Performance Share Awards shall also be made. Any such adjustment, however, shall be made without change in the total payment, if any, applicable to the portion of the Award not exercised but with a corresponding adjustment in the price for each share. Corresponding adjustments shall be made with respect to Stock Appreciation Rights based upon the adjustments made to the Options to which they are related or, in the case of Stock Appreciation Rights granted independently of any Option, based upon the adjustments made to Common Stock. Corresponding adjustments may also be made in particular stock grants with respect to extraordinary cash dividends. (b) Upon the dissolution or liquidation of the Corporation, or upon a reorganization, merger or consolidation of the Corporation with one or more corporations as a result of which the Corporation is not the surviving corporation, the Plan shall terminate, and any outstanding Awards shall terminate and be forfeited. Notwithstanding the foregoing, the Committee may provide in writing in connection with, or in contemplation of, any such transaction for any or all of the following alternatives (separately or in combinations): (i) for the assumption by the successor corporation of the Awards theretofore granted or the substitution by such corporation for such Awards of awards covering the stock of the successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; (ii) for the continuance of the -19- 46 Plan by such successor corporation in which event the Plan and the Awards shall continue in the manner and under the terms so provided; or (iii) for the payment in cash or shares of Common Stock in lieu of and in complete satisfaction of such Awards. (c) In adjusting Awards to reflect the changes described in this Section 7.2, or in determining that no such adjustment is necessary, the Committee may rely upon the advice of independent counsel and accountants of the Corporation, and the determination of the Committee shall be conclusive. No fractional shares of stock shall be issued under this Plan on account of any such adjustment. 7.3 Termination of Employment. (a) If the Participant's employment by the Company terminates for any reason other than Retirement, death or Total Disability, the Participant shall have, subject to earlier termination pursuant to or as contemplated by Section 3.3, three months (or up to one year if so determined by the Committee in the grant or otherwise) from the date of termination of employment to exercise any Option to the extent it shall have become exercisable on that date, and any Option not exercisable on that date shall terminate. Notwithstanding the preceding sentence, in the event the Participant is discharged for cause as determined by the Committee in its sole discretion, all Options shall lapse immediately upon such termination of employment. (b) If the Participant's employment by the Company terminates as a result of Retirement or Total Disability, the Participant or Participant's Personal Representative, as the case may be, shall have, subject to earlier termination pursuant to or as contemplated by Section 3.3, 12 months from the date of termination of employment (or 3 months from the date of termination of employment as a result of Retirement, with respect to an Incentive Stock Option) to exercise any Option to the extent it shall have become exercisable by that date, and any Option not exercisable on that date shall terminate. (c) If the Participant's employment by the Company terminates as a result of death while the Participant is employed by the Company or during the 12 month period referred to in subsection (b) above, the Participant's Option shall be exercisable by the Participant's Beneficiary, subject to earlier termination pursuant to or as contemplated by Section 3.3, during -20- 47 the 12-month period or such shorter period as is provided in the Award Agreement following the Participant's death, as to all or any part of the shares of Common Stock covered thereby, including all shares as to which the Option would not otherwise be exercisable. (d) Each Stock Appreciation Right granted concurrently with an Option shall have the same termination provisions and exercisability periods as the Option to which it relates. The termination provisions and exercisability periods of any Stock Appreciation Right granted independently of an Option shall be established in accordance with Section 4.2(d). The exercisability period of a Stock Appreciation Right shall not exceed that provided in Section 3.3 or in the related Award Agreement and the Stock Appreciation Right shall expire at the end of such exercisability period. (e) In the event of termination of employment with the Company for any reason, (i) shares of Common Stock subject to the Participant's Restricted Stock Award shall be forfeited in accordance with the provisions of the related Award Agreement to the extent such shares have not become vested on that date; and (ii) shares of Common Stock subject to the Participant's Performance Share Award shall be forfeited in accordance with the provisions of the related Award Agreement to the extent such shares have not been issued or become issuable on that date. (f) In the event of termination of employment with the Company for any reason, other than discharge for cause, the Committee may, in its discretion, increase the portion of the Participant's Award available to the Participant, or Participant's Beneficiary or Personal Representative, as the case may be, upon such terms as the Committee shall determine. (g) If an entity ceases to be a Subsidiary, such action shall be deemed for purposes of this Section 7.3 to be a termination of employment of each employee of that entity. (h) Upon forfeiture of a Restricted Stock Award pursuant to this Section 7.3, the Participant, or his or her Beneficiary or Personal Representative, as the case may be, shall transfer to the Corporation the portion of the Restricted Stock Award not vested at the date of termination of employment, without payment of any consideration by the Company for such transfer unless the Participant paid a purchase price in which -21- 48 case repayment, if any, of that price shall be governed by the Award Agreement. Notwithstanding any such transfer to the Corporation, or failure, refusal or neglect to transfer, by the Participant, or his or her Beneficiary or Personal Representative, as the case may be, such non-vested portion of any Restricted Stock Award shall be deemed transferred automatically to the Corporation on the date of termination of employment. The Participant's original acceptance of the Restricted Stock Award shall constitute his or her appointment of the Corporation and each of its authorized representatives as attorney(s)-in-fact to effect such transfer and to execute such documents as the Corporation or such representatives deem necessary or advisable in connection with such transfer. 7.4 Acceleration of Awards. Unless prior to an Event the Committee determines that, upon its occurrence, there shall be no acceleration of Awards or determines those Awards which shall be accelerated and the extent to which they shall be accelerated, upon the occurrence of an Event (i) each Option and each Stock Appreciation Right shall become immediately exercisable to the full extent theretofore not exercisable, (ii) Restricted Stock shall immediately vest free of restrictions and (iii) the number of shares covered by each Performance Share Award shall be issued to the Participant; provided, however, that Awards shall not in any event be so accelerated to a date less than six months after the later of (i) the Award Date, or (ii) the date of shareholder approval of the Plan pursuant to Section 7.9. Acceleration of Awards shall comply with applicable regulatory requirements, including, without limitation, Rule 16b-3 promulgated by the Commission pursuant to the Exchange Act and Section 422 of the Code. 7.5 Government Regulations. This Plan, the granting of Awards under this Plan and the issuance or transfer of shares of Common Stock (and/or the payment of money) pursuant thereto are subject to all applicable federal and state laws, rules and regulations and to such approvals by any regulatory or governmental agency (including, without limitation, interpretive letters of the Commission) which may, in the opinion of counsel for the Corporation, be necessary or advisable in connection therewith. Without limiting the generality of the foregoing, no Awards may be granted under this -22- 49 Plan, and no shares shall be issued by the Corporation, nor cash payments made by the Corporation, pursuant to or in connection with any such Award, unless and until, in each such case, all legal requirements applicable to the issuance or payment have, in the opinion of counsel to the Corporation, been complied with. In connection with any stock issuance or transfer, the person acquiring the shares shall, if requested by the Corporation, give assurances satisfactory to counsel to the Corporation in respect of such matters as the Corporation may deem desirable to assure compliance with all applicable legal requirements. 7.6 Tax Withholding. (a) Upon the disposition by a Participant or other person of shares of Common Stock acquired pursuant to the exercise of an Incentive Stock Option prior to satisfaction of the holding period requirements of Section 422 of the Code, or upon the exercise of a Nonqualified Stock Option or a Stock Appreciation Right, the vesting of a Restricted Stock Award, the payment of a Performance Share Award, payment pursuant to a Stock Appreciation Right or payment of a Tax-Offset Bonus, the Company shall have the right to (i) require such Participant or other person to pay by cash, or certified or cashier's check payable to the Company, the amount of any taxes which the Company may be required to withhold with respect to such transactions or (ii) deduct from amounts paid in cash the amount of any taxes which the Company may be required to withhold with respect to such cash amounts. The above notwithstanding, in any case where a tax is required to be withheld in connection with the issuance or transfer of shares of Common Stock under this Plan, the Participant may elect, pursuant to such rules as the Committee may establish, to have the Company reduce the number of such shares issued or transferred by the appropriate number of shares to accomplish such withholding; provided, the Committee may impose such conditions on the payment of any withholding obligation as may be required to satisfy applicable regulatory requirements, including, without limitation, Rule 16b-3 promulgated by the Commission pursuant to the Exchange Act. (b) The Committee may, in its discretion, permit a loan from the Company to a Participant (other than a member of the Committee) in the amount of any taxes which the Company may be required to withhold with respect to shares of Common Stock received pursuant to a transaction described in subsection (a) above. Such a loan will be for a term, at a rate of interest and -23- 50 pursuant to such other terms and rules as the Committee may establish. 7.7 Amendment, Termination and Suspension. (a) The Board may, at any time, terminate or, from time to time, amend, modify or suspend this Plan (or any part hereof). In addition, the Committee may, from time to time, amend or modify any provision of this Plan and, with the consent of the Participant, make such modifications of the terms and conditions of such Participant's Award as it shall deem advisable. The Committee, with the consent of the Participant, may also amend the terms of any Option to provide that the Option price of the shares remaining subject to the original Award shall be reestablished at a price not less than 100% of the Fair Market Value of the Common Stock on the effective date of the amendment. No modification of any other term or provision of any Option which is amended in accordance with the foregoing shall be required, although the Committee may, in its discretion, make such further modifications of any such Option as are not inconsistent with or prohibited by the Plan. No Awards may be granted during any suspension of this Plan or after its termination. (b) If an amendment would (i) materially increase the benefits accruing to Participants within the meaning of Rule 16b-3(a) under the Exchange Act or any successor thereto, (ii) increase the aggregate number of shares which may be issued under this Plan or to any individual, or (iii) modify the requirements of eligibility for participation in this Plan, the amendment shall be approved by the Board or the Committee and by a majority of the shareholders. (c) In the case of Awards issued before the effective date of any amendment, suspension or termination of this Plan, such amendment, suspension or termination of the Plan shall not, without specific action of the Board or the Committee and the consent of the Participant, in any way modify, amend, alter or impair any rights or obligations under any Award previously granted under the Plan. -24- 51 7.8 Privileges of Stock Ownership; Nondistributive Intent. A Participant shall not be entitled to the privilege of stock ownership as to any shares of Common Stock not actually issued to him. Upon the issuance and transfer of shares to the Participant, unless a registration statement is in effect under the Securities Act, relating to such issued and transferred Common Stock and there is available for delivery a prospectus meeting the requirements of Section 10 of the Securities Act, the Common Stock may be issued and transferred to the Participant only if he represents and warrants in writing to the Corporation that the shares are being acquired for investment and not with a view to the resale or distribution thereof. No shares shall be issued and transferred unless and until there shall have been full compliance with any then applicable regulatory requirements (including those of exchanges upon which any Common Stock of the Corporation may be listed). 7.9 Effective Date of the Plan. This Plan shall be effective upon approval by the shareholders of the Corporation by the vote of the holders of a majority of the stock of the Corporation voting at a meeting of such holders in person or by proxy; except that this Plan is adopted and approved by the Board effective October 1, 1994 to permit the grant of Awards prior to the approval of the Plan by the shareholders of the Corporation as aforesaid. In the event that this Plan is not approved by the shareholders of the Corporation as aforesaid, this Plan and any Awards granted hereunder shall be void and of no force or effect. 7.10 Term of the Plan. Unless previously terminated by the Board, this Plan shall terminate at the close of business on October 1, 2004, and no Awards shall be granted under it thereafter, but such termination shall not affect any Award theretofore granted. 7.11 Governing Law. Except as required by Delaware corporate law, this Plan and the documents evidencing Awards and all other related documents shall be governed by, and construed in accordance with, the laws of the State of California. If any provision shall be -25- 52 held by a court of competent jurisdiction to be invalid and unenforceable, the remaining provisions of this Plan shall continue to be fully effective. -26- 53 DOVE AUDIO, INC. 8955 BEVERLY BOULEVARD WEST HOLLYWOOD, CALIFORNIA 90048 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF DOVE AUDIO, INC. The undersigned hereby appoints Michael Viner and Deborah Raffin, and each of them, acting singly or jointly, as Proxies, each with the power to appoint his or her substitute, and hereby authorizes each of them to represent and to vote as designated below, all the shares of Common Stock of Dove Audio, Inc. held of record by the undersigned on September 9, 1996, at the Annual Meeting of Shareholders of Dove Audio, Inc. to be held on October 30, 1996 and any postponements or adjournments thereof. The Board unanimously recommends a vote FOR each of the items below. 1. Amendment of Articles of Incorporation to change the name of the Company to Dove Entertainment, Inc. / / FOR / / AGAINST / / ABSTAIN 2. Amendment of the Bylaws to expand the size of Board of Directors. / / FOR / / AGAINST / / ABSTAIN 3. Election of Directors: / / FOR all nominees listed below (except as marked to / / WITHHOLD AUTHORITY to vote for the nominees the contrary below) listed below
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW Michael Viner Deborah Raffin Steven F. Mayer Freddie Fields James Belasco Gerald Leider Gary Matus 4. Amendment of 1994 Stock Incentive Plan to increase shares subject to the Plan, to provide for a maximum grant per individual of 200,000 shares and to make certain changes to the Plan to comport with new rules enacted under Section 16 of the Securities Exchange Act of 1934. / / FOR / / AGAINST / / ABSTAIN 5. Ratification of the appointment of KPMG Peat Marwick LLP as independent accountants for fiscal 1996: / / FOR / / AGAINST / / ABSTAIN 6. 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 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 6. 54 (continued on reverse side) 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 the matters described in Item 7. Date: _____________, 1996 ------------------------- Signature ------------------------- Signature (if held jointly) IMPORTANT: Please sign exactly as your name or names are set forth 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 MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY. A STAMPED AND ADDRESSED ENVELOPE HAS BEEN PROVIDED FOR YOUR USE. -----END PRIVACY-ENHANCED MESSAGE-----