SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant x
Filed by a Party other than the Registrant Check the
appropriate box:
Preliminary Proxy Statement
x Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Confidential, for the use of the Commission Only (as permitted by Rule 14a-6
(e)(2)
AVENUE ENTERTAINMENT GROUP, INC.
(Name of Registrant as Specified In Its Charter)
Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x No fee required
Fee computed on table below per Exchange 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:
AVENUE ENTERTAINMENT GROUP, INC.
11755 WILSHIRE BOULEVARD, SUITE 2200
LOS ANGELES, CA 90025
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To The Stockholders:
You are cordially invited to attend the Annual Meeting of the Stockholders of
Avenue Entertainment Group, Inc. (the "Company") which will be held at the
offices of GP Strategies Corporation, 9 West 57th Street, Suite 4170, New York,
New York on December 10, 1998 at 11:00 A.M. New York City Time for the following
purposes:
To elect two Class I Directors for a term of three years.
To transact any such other business as may properly come
before the meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on October 26,
1998 as the record date for the determination of stockholders entitled to
receive notice of, and to vote at, the meeting or at any adjournments or
postponements thereon. A list of such stockholders shall be open to the
examination of any stockholder during ordinary business hours, for a period of
ten days prior to the meeting, at the place where the meeting is to be held.
By Order of the Board of Directors
Gene Feldman
Chairman of the Board
New York, New York
November , 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING OF STOCKHOLDERS IN PERSON,
PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE PAID ENVELOPE.
AVENUE ENTERTAINMENT GROUP, INC.
11755 WILSHIRE BOULEVARD, SUITE 2200
LOS ANGELES, CA 90025
PROXY STATEMENT
November ___, 1998
This accompanying Proxy is solicited by and on behalf of the Board of
Directors of Avenue Entertainment Group, Inc. (the "Company") for use only at
the Annual Meeting of Stockholders to be held at the offices of GP Strategies
Corporation, 9 West 57th Street, Suite 4170, New York, New York on the 10th day
of December, 1998 and any adjournments or postponements thereof. The approximate
date on which this Proxy Statement and the accompanying Proxy were first given
or sent to security holders was November ____, 1998.
Each Proxy executed and returned by a Stockholder may be revoked at any
time thereafter, by written notice to that effect to the Company, attention of
the Secretary, prior to the Annual Meeting, or to the Chairman, or to the
Inspector of Election, at the Annual Meeting, or by the execution and return of
a later-dated Proxy, except as to any matter voted upon prior to such
revocations.
The shares represented by each properly executed proxy solicited by the
Board of Directors and received by the Company will be voted as specified by the
stockholder on the proxy. If no such specification is made, shares will be voted
FOR the two nominees for election as Directors named herein. In the discretion
of the proxy holders, the Proxies will also be voted FOR or AGAINST such other
matters as may properly come before the meeting. The management of the Company
is not aware that any other matters are to be presented for action at the
meeting. Although it is intended that the proxies will be voted for the nominees
named herein, the holders of the Proxies reserve discretion to cast votes for
individuals other than such nominees in the event of the unavailability of such
nominee. The Company has no reason to believe that any of the nominees will
become unavailable for election. The Proxies may not be voted for a greater
number of persons than the number of nominees named. The election of directors
will be determined by a plurality of the votes of the shares of common stock,
par value $.01 per share (the "Common Stock"), present in person or represented
by Proxy at the Annual Meeting and entitled to vote on the election of
directors. Accordingly, in the case of shares that are present or represented at
the meeting for quorum purposes, not voting such shares for a particular nominee
for director, including by withholding authority on the Proxy, will not operate
to prevent the election of such nominee if he or she otherwise received a
plurality of the votes.
VOTING SECURITIES
The Board of Directors has fixed the close of business on October 26,
1998 as the record date for the determination of stockholders entitled to
receive notice of and to vote at the Annual Meeting. The issued and outstanding
stock of the Company on October 26, 1998 consisted of 4,108,838 shares of Common
Stock, each entitled to one vote. A quorum of the stockholders is constituted by
the presence, in person or by proxy, of holders of record of Common Stock,
representing a majority of the number of votes entitled to be cast. Cary Brokaw,
President and Chief Executive Officer of the Company and GP Strategies
Corporation ("GP Strategies"), who beneficially own 1,411,350 and 1,067,900
shares, respectively, of the outstanding Common Stock as of October 26, 1998
(representing approximately 34.3% and 26.0%, respectively, of the votes entitled
to be cast at the meeting), have advised the Company that they currently intend
to vote all of the shares of Common Stock they beneficially own for the election
of the two Class I directors named herein.
PRINCIPAL STOCKHOLDERS
The following table sets forth the number of shares of the Common Stock
beneficially owned as of October 26, 1998 by each person who is known by the
Company to own beneficially more than 5% of the Company's outstanding Common
Stock.
Name and Address Amount and Nature
of Beneficial Owner of Beneficial Ownership* Percent of Class(1)
Cary Brokaw 1,631,350(2) 37.7
c/o Avenue Entertainment Group, Inc.
11755 Wilshire Boulevard
Suite 2200
Los Angeles, CA 90025
GP Strategies Corporation 1,067,900 26.0
9 West 57th Street
New York, New York 10019
Gene Feldman 396,700(3) 9.1
c/o Avenue Entertainment Group, Inc.
9 West 57th Street - Suite 4170 New York, NY 10019
* As used in this Proxy Statement, "beneficial ownership" means the sole or
shared power to vote, or to direct the voting of the Common Stock or the sole or
shared investment power with respect to such Common Stock.
The percentage of class calculation assumes for each beneficial owner
that all the options are exercised in full only by the named beneficial owner
and that no other options are deemed to be exercised by any other stockholder.
Includes vested options to purchase up to 180,000 shares of Common
Stock at a price of $1.70 per share, exercisable until September 30, 2006 and
vested options to purchase up to 40,000 shares of Common Stock at a price of
$3.00 per share, exercisable until February 19, 2007. Does not include unvested
options to purchase up to 120,000 shares of Common Stock at a price of $1.70 per
share, exercisable until September 30, 2006 and unvested options to purchase up
to 60,000 shares of Common Stock at a price of $3.00 per share, exercisable
until February 19, 2007.
Does not include 17,500 shares of Common Stock and 40,000 vested stock
options which are owned by Mr. Feldman's wife, Suzette St. John Feldman, as to
which Mr. Feldman disclaims beneficial ownership. Includes vested options to
purchase up to 200,000 shares of Common Stock at a price of $0.32 per share,
exercisable until August 11, 2000 and vested options to purchase up to 30,000
shares of Common Stock at a price of $3.00 per share, exercisable until February
19, 2007. Does not include unvested options to purchase up to 45,000 shares of
the Common Stock at a price of $3.00 per share, exercisable until February 19,
2007.
SECURITY OWNERSHIP OF DIRECTORS AND NAMED EXECUTIVE OFFICERS
The following table sets forth as of October 26, 1998, beneficial
ownership of shares of Common Stock of the Company by each director, each of the
named executive officers and all directors and executive officers as a group.
Total Number of Shares Percent of
of Common Stock Common
Name Beneficially Owned Stock(1)
Cary Brokaw 1,631,350(2) 37.7
Gene Feldman 396,700(3) 9.1
Michael Feldman 141,500(4)(5) 2.4
Sheri L. Halfon 30,100(6) *
Doug Rowan 5,000(7) *
James A. Janowitz 0(8) *
Directors and Executive 2,214,650(9) 45.71
Officers as a Group
(7 persons)
- ----------
* The number of shares owned is less than one percent of the outstanding shares.
The percentage of class calculation assumes for each beneficial owner
that all of the options exercised in full only by the named beneficial owner and
that no other options are deemed to be exercised by any other stockholder.
See footnote (2) to Principal Stockholders table.
See footnote (3) to Principal Stockholders table.
Includes vested options to purchase up to 90,000 shares of Common
Stock at a price of $1.70 per share, exercisable until September 30, 2006 and
vested options to purchase up to 30,000 shares of Common Stock at a price of
$3.00 per share, exercisable until February 19, 2007. Does not include unvested
options to purchase up to 60,000 shares of Common Stock at a price of $1.70 per
share, exercisable until September 30, 2006 and unvested options to purchase up
to 45,000 shares of Common Stock at a price of $3.00 per share, exercisable
until February 19, 2007.
Michael Feldman is Gene Feldman's nephew.
Includes vested options to purchase up to 30,000 shares of Common
Stock at a price of $3.00 per share, exercisable until February 19, 2007. Does
not include unvested options to purchase up to 45,000 shares of Common Stock at
a price of $3.00 per share, exercisable until February 19, 2007.
Includes vested options to purchase up to 4,000 shares of Common Stock
at a price of $5.00 per share, exercisable until July 1, 2007. Does not include
unvested options to purchase up to 6,000 shares of Common Stock at a price of
$5.00 per share, exercisable until July 1, 2007.
Does not include 25,000 shares of Common Stock which are owned by
Pryor, Cashman, Sherman & Flynn, LLP a law firm in which Mr. Janowitz is a
senior partner, as to which Mr. Janowitz disclaims beneficial ownership.
Includes 614,000 shares of Common Stock issuable upon exercise of
currently exercisable stock options.
Except for the shares of Common Stock subject to the options described in
footnotes 2 through 4, and 6 and 7 above, none of such shares is known by the
Company to be shares with respect to which such beneficial owner has the right
to acquire beneficial ownership. The Company believes the beneficial holders
listed above have sole voting and investment power regarding the shares shown as
being beneficially owned by them.
ELECTION OF DIRECTORS
Directors of the Company are divided into three classes. At each annual
meeting of stockholders, directors are elected to succeed those directors whose
terms expire and are elected for a term of office to expire at the third
succeeding annual meeting of stockholders after their election. The terms of
Douglas Rowan and James A Janowitz expire this year. Certain information with
respect to nominees for election as directors and directors whose term of office
will continue after the Annual Meeting is set forth below.
Douglas Rowan has served as the President of Imaging Solutions, a high
technology consulting company, since 1997 and was President and Chief Executive
Officer of Corbis Corporation, a company which is building a library of digital
images, from April 1994 to May 1997; Senior Vice President of Worldwide Customer
Operations of Ungermann-Bass, Inc., a networking product company, from November
1993 to April 1994, and President of AXS, a software corporation for the new
digital content industry from April 1, 1991 through December 31, 1992. Doug
Rowan is a Class I Director whose term expires at the 1998 annual meeting of the
Company. Age 59
James A. Janowitz has been a senior partner in the litigation department at
Pryor, Cashman, Sherman & Flynn, LLP and head of its motion picture group for
more than the past five years. Mr. Janowitz is a Class I Director whose term
expires at the 1998 annual meeting of the Company. Age 51
Gene Feldman has served as Chairman of the Board of the Company and President of
Wombat Productions, Inc., a subsidiary of the Company ("Wombat") since their
respective formations on March 7, 1997. Prior to the Company's reincorporation,
Gene Feldman served as Chairman of the Board of The CineMasters Group, Inc.
("CineMasters") and President of the Wombat Division for more than the past five
years. Mr. Gene Feldman is a Class III Director whose term expires at the 2000
annual meeting of the Company. Age 73
Cary Brokaw has served as President, Chief Executive Officer and Director of the
Company since its formation on March 7, 1997. Prior to the Company's
reincorporation, Mr. Brokaw served as President, Chief Executive Officer and
Director of CineMasters from September 30, 1996 and President and Chief
Executive Officer of Avenue Pictures since its formation in 1991. Mr. Brokaw is
a Class III Director whose term expires at the 2000 annual meeting of the
Company. Age 47
Michael Feldman has served as Executive Vice President and Director of the
Company since its formation on March 7, 1997. Prior to the Company's
reincorporation, Michael Feldman had served as Executive Vice President and
Director of CineMasters from September 30, 1996. Michael Feldman served as an
officer of General Physics Corporation from 1991 to 1996 and has been a Director
of International Business Development at GP Strategies Corporation since 1995.
Mr. Michael Feldman is a Class II Director whose term expires at the 1999 annual
meeting of the Company. Age 31
Sheri L. Halfon has served as Senior Vice President, Chief Financial Officer and
Director of the Company since its formation on March 7, 1997. Prior to the
Company's reincorporation, Ms. Halfon had served as Chief Financial Officer,
Senior Vice President and Director of CineMasters from September 30, 1996 and
Chief Financial Officer and Senior Vice President of Avenue Pictures since its
formation in 1991. Ms. Halfon is a Class II Director whose term expires at the
1999 annual meeting of the Company. Age 42
Section 16(a) Beneficial Ownership Reporting Compliance
The Company believes that during the most recent fiscal year, all
filing requirements applicable to its officers, directors and greater than 10%
beneficial owners were complied with, except that Michael Feldman filed an
untimely report on Form 4.
Board of Directors
The Board of Directors has the responsibility for establishing broad
corporate policies and for the overall performance of the Company, although it
is not involved in day-to-day operating details. Members of the Board are kept
informed of the Company's business by various reports and documents sent to them
as well as by operating and financial reports made at Board and Committee
meetings. The Board held two meetings in 1997, at which all of the directors
attended all of the meetings. In addition, the Board acted through unanimous
written consent on three occasions. All of the Directors attended the meetings
of the Committees on which they served.
Directors Compensation
The Company does not currently pay compensation to directors for
service in that capacity.
Audit Committee
The Audit Committee reviews the internal controls of the Company and the
objectivity of its financial reporting. It meets with appropriate Company
financial personnel and the Company's independent certified public accountants
in connection with these reviews. This committee recommends to the Board the
appointment of the independent certified public accountants to serve as auditors
for the following year in examining the books and records of the Company. The
Audit Committee currently consists of Doug Rowan and James Janowitz.
EXECUTIVE COMPENSATION
The following table and notes present the aggregate compensation paid or
accrued by the Company and subsidiaries to its President and Chief Executive
Officer and the Company's most highly compensated executive officers.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Awards
Annual Compensation Stock All Other
Salary Bonus Options Compensation
Name and Principal Position Year ($) ($) (#) ($)
- --------------------------- ---- --- --- --- ---
Cary Brokaw 1997 450,000 -0- 100,000(1) -
President, Chief Executive 1996 450,000(2) -0- 300,000(1) -
Officer and Director 1995 391,000 -0- -0- -
Gene Feldman 1997 150,000 -0- 75,000(3) -
Chairman of the Board, 1996 150,000 -0- -0- -
President of Wombat 1995 101,115 4,225 200,000(3) -
Sheri L. Halfon 1997 120,000(4) -0- 75,000(5) -
Chief Financial Officer, 1996 95,000(2)(4) -0- -0- -
Senior Vice President and 1995 95,000(2)(4) -0- -0- -
Director
- -------------------
(1) Of the 100,000 stock options granted to Mr. Brokaw in 1997, 40,000 are
currently vested and of the 300,000 stock options granted to Mr. Brokaw in 1996,
180,000 are currently vested.
(2) Prior to completion of the business combination of the Company and
CineMasters on September 30, 1996 (the "Business Combination"), Mr. Brokaw's and
Ms. Halfon's compensation was paid directly by Avenue Pictures, Inc.
(3) Of the 75,000 stock options granted to Mr. Feldman in 1997, 30,000 are
currently vested and of the 200,000 stock options granted to Mr. Feldman in
1995, all are currently vested.
(4) Includes $65,539, $8,400 and $56,763 for 1997, 1996 and 1995, respectively,
paid to Ms. Halfon by certain companies whose shows were in production or
post-production by the Company.
(5) Of the 75,000 stock options granted to Ms. Halfon in 1997, 30,000 are
currently vested.
The following table and notes contain information concerning the grant of
non-qualified stock options in 1997 to the named executive officers pursuant to
the 1997 Plan.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
% of Total
Number of Options
Securities Granted to
Underlying Employees Exercise
Options in Fiscal Price Expiration
Name Granted (1) Year ($ per share) Date
- ---- ----------- ---- ------------- ----
Cary Brokaw 100,000 17 3.00 2/19/07
Gene Feldman 75,000 13 3.00 2/19/07
Sheri Halfon 75,000 13 3.00 2/19/07
- -------------
The options were granted pursuant to the terms of the Company's Stock
Option and Long Term Incentive Compensation Plan. The options are exercisable at
the rate of 20% per annum commencing on the February 19, 1997, date of grant and
expire on February 19, 2007.
The following table sets forth information concerning the value of unexercised
options as of December 31, 1997 held by the executives named in the Summary
Compensation Table above. No options were exercised during 1997.
AGGREGATED OPTION EXERCISES AT DECEMBER 31, 1997
AND YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at Fiscal Year End Fiscal Year End
Name Exercisable/Unexercisable Exercisable/Unexercisable(1)
Gene Feldman 215,000 60,000 1,207,875 $ 187,500
Cary Brokaw 140,000 260,000 593,500 1,046,500
Sheri Halfon 15,000 60,000 46,875 187,500
- ----------
(1) Calculated based on the closing price of the Common Stock $6.125 as reported
by the American Stock Exchange on December 31, 1997, which price was higher than
the exercise price.
Employment Contracts and Termination of Employment and Change in Control
Arrangements
Brokaw Employment Agreement. In connection with the Business
Combination, Mr. Brokaw entered into a five-year employment agreement (the
"Brokaw Employment Agreement") with the Company pursuant to which, among other
things, Mr. Brokaw became the President and Chief Executive Officer of the
Company. The Brokaw Employment Agreement provides Mr. Brokaw with an annual base
salary of $450,000 (which base salary may be paid from any Company source other
than net cash flow generated by Wombat). Mr. Brokaw is also eligible for annual
bonuses based upon the performance of Mr. Brokaw and the Company during the
previous fiscal year, to be determined in the discretion of the Board of
Directors. The dollar amount of the annual bonus will not exceed two times the
annual base salary. The Brokaw Employment Agreement provides that the Company
may only terminate Mr. Brokaw's employment with the Company for "cause." If Mr.
Brokaw's employment is terminated due to death or disability, he will receive
his base salary through the date of termination of employment. Any vested
options not exercised prior to the termination of employment for this reason
will remain exercisable for the six month period beginning on the date of
termination. If his employment is terminated for "Cause" as defined in the
Brokaw Employment Agreement, he will be entitled to the base salary and any
accrued annual bonus that has been determined and awarded, but not paid, through
the date of termination of his employment. Any vested options not exercised
prior to the termination of employment for Cause will remain exercisable until
the end of the ninetieth day following the date of termination. If Mr. Brokaw
terminates his employment following a "Change of Control" as defined in the
Brokaw Employment Agreement, he will receive (i) his earned but unpaid
compensation as of the date of the Change of Control; (ii) continued benefits
for the remaining unexpired employment term; (iii) a lump sum payment on the
date of the Change of Control equal to the future base salary that he would have
earned if he had continued working for the remaining unexpired employment term;
and (iv) bonus payments that would have been made to Mr. Brokaw if he had
continued working for the Company during the remaining unexpired employment
term. The Company is entitled to seek to obtain, and has obtained, $2,000,000 in
"key-man" life insurance on his life. Pursuant to the Brokaw Employment
Agreement, Mr. Brokaw was granted options to purchase up to 300,000 shares of
Common Stock for an exercise price of $1.70 per share. Such stock options will
vest in equal installments over the first five years of Mr. Brokaw's employment
with the Company and will be exercisable for a period of ten years from the date
of grant. The Brokaw Employment Agreement provides for accelerated vesting of
all of Mr. Brokaw's stock options upon a "change of control" of the Company or
upon a material breach of the Brokaw Employment Agreement by the Company. As
President and Chief Executive Officer of the Company, Mr. Brokaw is entitled to
certain customary perquisites, including, without limitation, a car allowance,
term life insurance, and reimbursement of all reasonable travel and
entertainment expenses. In addition, Mr. Brokaw is entitled to participate in
all employee benefit plans offered to executive officers of the Company.
Gene Feldman Employment Agreement. In connection with the Business
Combination, Gene Feldman entered into a five-year employment agreement (the
"Feldman Employment Agreement") with the Company pursuant to which, among other
things, Gene Feldman became the Chairman of the Company and President of Wombat.
The Feldman Employment Agreement provides Gene Feldman with an annual base
salary of $150,000 (provided that such base salary is funded solely out of net
cash flow generated by Wombat. Gene Feldman is also eligible for annual bonuses
based upon the performance of Gene Feldman and the Company during the previous
fiscal year, to be determined in the discretion of the Board of Directors. The
dollar amount of the annual bonus will not exceed two times the annual base
salary. The Feldman Employment Agreement provides that the Company may only
terminate Gene Feldman's employment with the Company for "cause." If Mr.
Feldman's employment is terminated due to death or disability, he will receive
his base salary through the date of termination of employment. Any vested
options not exercised prior to the termination of employment for this reason
will remain exercisable for the six month period beginning on the date of
termination. If his employment is terminated for "Cause" as defined in the
Feldman Employment Agreement, he will be entitled to the base salary and any
accrued annual bonus that has been determined and awarded, but not paid, through
the date of termination of his employment. Any vested options not exercised
prior to the termination of employment will remain exercisable until the end of
the ninetieth day following the date of termination. If Mr. Feldman terminates
his employment following a "Change of Control" as defined in the Feldman
Employment Agreement, he will receive (i) his earned but unpaid compensation as
of the date of the Change of Control; (ii) continued benefits for the remaining
unexpired employment term; (iii) a lump sum payment on the date of the Change of
Control equal to the future base salary that he would have earned if he had
continued working for the remaining unexpired employment term; and (iv) bonus
payments that would have been made to Mr. Feldman if he had continued working
for the Company during the remaining unexpired employment term. As Chairman of
the Company and President of Wombat, Gene Feldman is entitled to certain
customary perquisites, including, without limitation, a car allowance, term life
insurance, and reimbursement of all reasonable travel and entertainment
expenses. In addition, Gene Feldman is entitled to participate in all employee
benefit plans offered to executive officers of the Company.
Certain Transactions
Gene Feldman Exit Option Agreement. In connection with the Business
Combination, Gene Feldman entered into an agreement with the Company pursuant to
which, among other things, he was given an option, exercisable during the
six-month period commencing on the date of termination of his employment, to
purchase the production assets of Wombat for a cash purchase price equal to the
book value of such assets. This option does not include the Wombat film library.
In addition, the Company retained the right to acquire any future production of
Mr. Feldman for nominal consideration, subject to (i) the rights of Mr. Feldman
to receive commercially reasonable producer fees, (ii) the rights, if any, of
A&E, as licensee, consistent with past practice, and (iii) the distribution
rights pursuant to the Distribution Agreement, dated July 1, 1995 and April 28,
1996 between Janson Associates, Inc. and Wombat. Upon the exercise of such
option, Gene Feldman will no longer be employed by the Company but will be
entitled to receive annual payments for the remainder of his life equal to the
lesser of (i) 25% of the annual net income (which shall be determined without
deduction for general and administrative expenses) derived by the Company from
the original Wombat library and (ii) $100,000 annually. If Gene Feldman shall
die prior to the exercise of such option, Gene Feldman's wife, Suzette St. John
Feldman, shall following Gene Feldman's death have the right to exercise such
option and to receive such annual payments for a period of five years following
the date of such exercise. If Gene Feldman shall die after the exercise of such
option but prior to the fifth anniversary of the date of such exercise, Suzette
St. John Feldman shall following Gene Feldman's death be entitled to receive
such annual payments for a period of five years following the date of Gene
Feldman's death; provided, however, that such annual payments shall be reduced
from $100,000 to $75,000 following the fifth anniversary of the date of Gene
Feldman's exercise of such option. In addition, if the Company shall determine
to sell its library during the first five years following the exercise of such
option by Gene Feldman, the Company shall first offer to sell its library to
Gene Feldman based upon a specific price and upon specific terms. If Gene
Feldman does not accept such offer within a reasonable period of time, the
Company will then have a limited period of time in which to sell its library to
a third party for a price and upon terms no less favorable to the Company than
those offered to Gene Feldman.
Stockholders Agreement. In connection with the Business Combination,
Mr. Brokaw entered into a stockholders agreement (the "Stockholders Agreement"),
amended in connection with the reincorporation, with the Company and each of GP
Strategies, Gene Feldman, Jerome Feldman, Suzette St. John Feldman, and Michael
Feldman (collectively, the "Feldman Group"), pursuant to which, among other
things, the Board of Directors of the Company was reconstituted such that Mr.
Brokaw and the Feldman Group each have three designees on a six-person Board of
Directors and, except as may be mutually agreed upon, equal representation on
any committee of the Board of Directors. The Stockholders Agreement provides
that all extraordinary transactions (i.e., any merger or consolidation involving
the Company or any subsidiary, any public offering, any sale or other
disposition of a material portion of the assets of the Company and/or its
subsidiaries, any acquisition or investment in excess of $250,000, etc.) shall
require the prior approval of the Board of Directors of the Company. In
addition, the Stockholders Agreement provides that, except for ordinary course
(i) expenditures for office rent, (ii) expenditures for selling, general, and
administrative expenses, and (iii) out-of-pocket development expenditures not in
excess of $500,000 during each of the first two fiscal years following
consummation of the Business Combination, aggregate expenditures in excess of
$250,000 in any fiscal year will require the prior approval of the Board of
Directors of the Company. The Stockholders Agreement also provides each of Mr.
Brokaw and the members of the Feldman Group with reciprocal rights of first
negotiation and refusal and tag-along rights in the event that either party
wishes to dispose of some or all of his, her, or its shares of Common Stock in a
privately-negotiated transaction. Mr. Brokaw has agreed until December 31, 1997
to maintain a balance of cash or cash equivalents (including the registered
shares of GP Strategies common stock held by the Company as described below) for
the Company of at least $500,000 and shall at all times thereafter maintain a
balance of cash or cash equivalents for the Company of at least $300,000.
Pursuant to the Stockholders Agreement, $500,000 in cash or cash equivalents was
placed in a separate account with any withdrawal from such account requiring the
signatures of each of Mr. Brokaw and a representative from the Feldman Group.
The balance of such account will be reduced to $300,000 on December 31, 1997.
Transaction with GP Strategies. In connection with the Business
Combination, GP STRATEGIES made a capital contribution valued at $815,000 to the
Company in the form of registered shares of GP Strategies common stock in
exchange for 407,500 shares of the Company's Common Stock.
Distribution Agreement. On July 1, 1995 and April 28, 1996, Wombat
entered into a distribution agreement with Janson Associates, Inc. whereby
Janson (the "Distributor") was granted sole and exclusive rights to license
essentially all the programs of the Wombat film library for all forms of
television and video worldwide for a period of ten years, subject to automatic
renewals in three year increments. In consideration of Janson's services under
the Distribution Agreement, Janson is entitled to retain a distribution fee,
ranging from 25% to 40%, depending upon whether such distribution is via
domestic television network, syndication, international television, or home
video, of the gross receipts derived from the licensing of each program. In
addition, Janson is reimbursed for certain distribution expenses out of gross
receipts. The remaining balance is remitted to Wombat as its licensor royalty.
The Distributor also gained the exclusive right to execute all contracts for the
exploitation of these rights. The President of Janson, Stephen Janson, is
related to the Company's Chairman, Gene Feldman, through marriage.
Transaction with Cary Brokaw. Cary Brokaw, the President and Chief
Executive Officer and a director of the Company had a loan outstanding to the
Company aggregating approximately $107,000 (including accrued interest thereon)
commencing April 15, 1997. The loan accrues interest at the rate of 9% per
annum. As of October 26, 1998, approximately $18,000 of the loan is outstanding
(including accrued interest thereon).
STOCKHOLDER PROPOSALS
Stockholders may present proposals for inclusion in the Company's 1999 proxy
statement provided they are received by the Company no later than April 30, 1999
and are otherwise in compliance with applicable Securities and Exchange
Commission regulations.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors recommended and approved, effective January 1,
1997, the selection of KPMG Peat Marwick LLP to audit the accounts of the
Company for the five months ending December 31, 1996 and fiscal year ended
December 31, 1997. KPMG Peat Marwick LLP has no financial interest in the
Company or any of its subsidiaries, and neither it nor any member or employee of
the firm has had any connection with the Company or any of its subsidiaries in
the capacity of promoter, underwriter, voting trustee, director, officer or
employee. The decision to engage KPMG Peat Marwick LLP did not result from
disagreements with the Company's prior accountants, Israeloff, Trattner & Co.,
who were dismissed effective January 1, 1997. The accountant's reports of
Israeloff, Trattner & Co. on the financial statements of the Company for the
years ended July 31, 1996 and 1995 were unqualified and no disagreements or
reportable events occurred during such period and the subsequent interim period.
The Audit Committee has not completed its evaluation of who to select
to be the Company's independent auditors to audit the accounts of the Company
for the year ending December 31, 1998.
A representative of KPMG Peat Marwick LLP, is expected to be present at
the Annual Meeting, will have the opportunity to make a statement if he so
desires and is expected to be available to respond to appropriate questions from
stockholders.
GENERAL
So far as is now known, there is no business other than that described above
to be presented for action by the stockholders at the meeting, but it is
intended that the proxies will be voted upon any other matters and proposals
that may legally come before the meeting and any adjournments thereof in
accordance with the discretion of the persons named therein.
COST OF SOLICITATION
The cost of solicitation of proxies will be borne by the Company. It is
expected that the solicitations will be made primarily by mail, but regular
employees or representatives of the Company may also solicit proxies by
telephone or telegraph and in person, and arrange for brokerage houses and other
custodians, nominees and fiduciaries to send proxy material to their principals
at the expense of the Company.
AVENUE ENTERTAINMENT GROUP, INC.
COMMON STOCK Annual Meeting of Stockholders PROXY
To Be Held December 10,1998
This proxy is solicited on behalf of the Board of Directors
Revoking any such prior appointment, the undersigned, a stockholder of Avenue
Entertainment Group, Inc. hereby appoints Cary Brokaw and Gene Feldman, and each
of them, attorneys and agents of the undersigned, with full power of
substitution, to vote all shares of the Common Stock of the undersigned in said
Company at the Annual Meeting of Stockholders of said Company to be held at the
offices of GP Strategies Corporation, 9 West 57th Street, Suite 4170, New York,
New York on December 10, 1998, at 11:00 a.m. Local Time and at any adjournments
thereof, as fully and effectually as the undersigned could do if personally
present and voting, hereby approving, ratifying and confirming all that said
attorneys and agents or their substitutes may lawfully do in place of the
undersigned as indicated below.
This proxy when properly executed will be voted as directed. If no direction is
indicated, this proxy will be voted for proposal (1).
1. Election of Directors: Douglas Rowan, James A. Janowitz.
For Withhold For All Except
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below)
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2. Upon any other matters which may properly come before the meeting or any
adjournments thereof.
Please sign exactly as name appears below.
Dated , 1998 Signature Signature if held jointly
Please mark, sign, date and return the proxy card promptly
using the enclosed envelope. When shares are held by joint
tenants both should sign. When signing as attorney, as
executor, administrator, trustee or guardian, please give
full title as such. If signer is a corporation, please sign
in full corporate name by President or other authorized
officer. If a partnership please sign in partnership name by
authorized person.