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
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
SPELLING ENTERTAINMENT GROUP INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
SPELLING ENTERTAINMENT GROUP INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $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:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
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was determined.
/ / 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,
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[LOGO]
SPELLING ENTERTAINMENT GROUP INC.
200 SOUTH ANDREWS AVENUE, FORT LAUDERDALE, FLORIDA 33301
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 18, 1994
---------------------
You are cordially invited to attend the annual meeting of shareholders of
Spelling Entertainment Group Inc. (the "Company") which will be held at the
Peninsula Hotel, 9882 Little Santa Monica Boulevard, Beverly Hills, California
90212, on May 18, 1994 at 10:00 a.m., Pacific Time, for the following purposes:
Proposal 1. To elect directors.
Proposal 2. To consider and vote upon a proposal to approve an amendment to
the Company's Amended and Restated Articles of Incorporation,
as amended, which would increase the number of authorized
shares of common stock of the Company from 200,000,000 shares
to 300,000,000 shares.
Proposal 3. To consider and vote upon a proposal to approve the Company's
1994 Stock Option Plan. A copy of the plan is included as Annex
A to the proxy statement.
Proposal 4. To transact such other business as may properly come before the
annual meeting.
Only shareholders of record at the close of business on March 18, 1994 are
entitled to vote at the annual meeting or any postponements or adjournments
thereof. A list of such shareholders will be available for examination by any
shareholder for any purpose germane to the meeting, during normal business
hours, at the principal office of the Company, 200 South Andrews Avenue, Fort
Lauderdale, Florida, for a period of ten days prior to the annual meeting.
It is important that your shares be represented at the annual meeting
regardless of the size of your holdings. Whether or not you intend to be present
at the meeting in person, we urge you to please mark, date and sign the enclosed
proxy and return it in the envelope provided for that purpose, which does not
require postage if mailed in the United States.
THOMAS W. HAWKINS
SECRETARY
Fort Lauderdale, Florida
April , 1994
YOU ARE URGED TO MARK, DATE AND SIGN THE ENCLOSED
PROXY AND RETURN IT PROMPTLY.
SPELLING ENTERTAINMENT GROUP INC.
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF SHAREHOLDERS
MAY 18, 1994
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Spelling Entertainment Group Inc. (the "Company") of
proxies for use at the annual meeting of shareholders of the Company to be held
at the Peninsula Hotel, 9882 Little Santa Monica Boulevard, Beverly Hills,
California 90212 at 10:00 a.m., Pacific Time, on May 18, 1994, and at any
postponements or adjournments thereof. Proxies properly executed and returned in
a timely manner will be voted at the annual meeting in accordance with the
directions noted thereon. If no direction is indicated, they will be voted for
the election of the nominees named herein as directors, for the proposal to
approve the amendment to the Company's Amended and Restated Articles of
Incorporation, as amended (the "Articles of Incorporation"), for the proposal to
approve the Company's 1994 Stock Option Plan (the "1994 Option Plan") and, on
other matters presented for a vote, in accordance with the judgment of the
persons acting under the proxies. Any shareholder giving a proxy has the power
to revoke it any time before it is voted, by giving written notice to the
Secretary of the Company at the address below so that it is received no later
than the closing of the polls at the annual meeting, or by attending the annual
meeting in person and voting thereat or by executing a later-dated proxy
delivered prior to the closing of the polls at the annual meeting.
The Company's executive offices are located at 200 South Andrews Avenue,
Fort Lauderdale, Florida 33301 (telephone 305-832-3000). Proxy materials are
being mailed to shareholders beginning on or about April , 1994.
SHARES OUTSTANDING AND VOTING RIGHTS
Only shareholders of record at the close of business on March 18, 1994, are
entitled to vote at the annual meeting. The only voting stock of the Company
outstanding is its common stock, $.10 par value per share (the "Common Stock"),
of which 64,597,268 shares were outstanding of record as of the close of
business on March 18, 1994. Each share of Common Stock issued and outstanding is
entitled to one vote on each matter to be presented at the annual meeting.
The presence, in person or by proxy, of the holders of a majority of the
total issued and outstanding shares of Common Stock entitled to vote at the
annual meeting is necessary to constitute a quorum for the transaction of
business at the annual meeting. Votes cast by proxy or in person at the annual
meeting will be tabulated by the election inspectors appointed for the meeting,
who will also determine whether or not a quorum is present. A proxy submitted by
a shareholder may indicate that all or a portion of the shares represented by
such proxy are not being voted by such shareholder with respect to a particular
matter. This could occur, for example, when a broker is not permitted to vote
shares held in street name on certain matters in the absence of instructions
from the beneficial owner of the shares. The shares subject to any such proxy
which are not being voted with respect to a particular matter will be considered
shares not present and entitled to vote on such matter, although such shares may
be considered present and entitled to vote for other purposes and will count for
purposes of determining the presence of a quorum. Shares voted to abstain as to
a particular matter, and directions to "withhold authority" to vote for
directors, will be considered voted shares, and will count for purposes of
determining the presence of a quorum. Directors will be elected by a plurality
of the votes of the shares present or represented by proxy at the meeting and
entitled to vote on the election of directors. Approval of the amendment to the
Articles of Incorporation requires the affirmative vote of a majority of shares
present or represented by proxy at the meeting entitled to vote on such proposal
and actually voted for or against such proposal. If a quorum is present,
non-votes and abstentions will have no effect on the voting for the election of
directors or the amendment to the
Articles of Incorporation. Approval of the 1994 Option Plan requires the
affirmative vote of the holders of a majority of the shares present or
represented by proxy at the meeting entitled to vote on such proposal. If a
quorum is present, non-votes will have no effect on the voting for the 1994
Option Plan; however, abstentions will have the effect of a negative vote
because the affirmative vote of the holders of a majority of the shares present
or represented by proxy at the meeting and entitled to vote is required to
approve such proposal.
As of the record date, Blockbuster Entertainment Corporation ("Blockbuster")
was the beneficial owner of 45,658,640 shares of Common Stock representing %
of the outstanding shares. Blockbuster has advised the Company of its intention
to vote such shares in favor of the below listed nominees for directors, in
favor of approval of the amendment to the Articles of Incorporation and in favor
of approval of the 1994 Option Plan which would assure shareholder approval of
proposals 1, 2 and 3.
ELECTION OF DIRECTORS
By resolution of the Board of Directors of the Company, the number of
directors constituting the Board is set at seven directors. Proxies may not be
voted for more than seven persons. In the election of directors, shareholders do
not have cumulative voting rights.
The persons named below have been designated by the Board as nominees for
election as directors for terms expiring at the Company's annual meeting of
shareholders in 1995. All nominees are currently serving as directors.
H. WAYNE HUIZENGA, age 56, became a director of the Company and was elected
Chairman of the Board of the Company in April 1993. Mr. Huizenga has been
Chairman of the Board and Chief Executive Officer of Blockbuster since 1987. He
is a cofounder of Waste Management, Inc. (now WMX Technologies, Inc.), a waste
disposal and collection company, where he served in various capacities,
including President, Chief Operating Officer and a director, until May 1984.
From May 1984 to present, Mr. Huizenga has been an investor in other businesses
and is the sole shareholder and Chairman of the Board of Huizenga Holdings, Inc.
("Holdings"), a holding and management company with various business interests.
In connection with these business interests, Mr. Huizenga has been actively
involved in strategic planning for, and executive management of, these
businesses. He also has a majority ownership interest in Florida Marlins
Baseball, Ltd., a Major League Baseball sports franchise, a majority ownership
interest in Florida Panthers Hockey Club, Ltd., a National Hockey League sports
franchise, a limited partnership interest in Miami Dolphins, Ltd., a National
Football League sports franchise, and an ownership interest in Robbie Stadium
Corporation and certain affiliated entities, which own and operate Joe Robbie
Stadium in South Florida. Mr. Huizenga has entered into an agreement to purchase
the remaining ownership interest in the Miami Dolphins. Mr. Huizenga is also a
member of the Boards of Directors of Republic Pictures Corporation ("Republic
Pictures"), Viacom, Inc. ("Viacom"), Viacom International, Inc., Paramount
Communications, Inc. and Discovery Zone, Inc.
AARON SPELLING, age 71, became a director of the Company in 1992 and was
elected Vice Chairman of the Board of the Company in April 1993. Mr. Spelling
has been Chairman of the Board of Aaron Spelling Productions, Inc. ("ASP"), a
subsidiary of the Company, since its formation in 1965. Mr. Spelling also served
as President of ASP from its inception until July 31, 1986, and as Chief
Executive Officer thereafter. Mr. Spelling's career includes involvement as a
writer, creator and producer of over 100 movies-for-television and over 30
television series including THE DANNY THOMAS HOUR, THE GUNS OF WILL SONNETT, THE
MOD SQUAD, CHARLIE'S ANGELS, THE ROOKIES, STARSKY & HUTCH, HART TO HART, FANTASY
ISLAND, FAMILY, THE LOVE BOAT, VEGAS, MATT HOUSTON, HOTEL, DYNASTY, THE COLBYS,
BEVERLY HILLS, 90210, MELROSE PLACE AND BURKE'S LAW, encompassing more than
2,000 hours of television programming over more than 30 years. Mr. Spelling
currently serves as the Chairman of the Board and Chief Executive Officer of
Spelling Television Inc. and most of the Company's other significant production
subsidiaries.
2
STEVEN R. BERRARD, age 39, became a director of the Company and was elected
President and Chief Executive Officer of the Company in April 1993. Mr. Berrard
has been Vice Chairman of the Board of Blockbuster since November 1989 and
President and Chief Operating Officer of Blockbuster since January 1993. He has
served in various other executive positions with Blockbuster since June 1987.
Mr. Berrard is a member of the Board of Directors of Republic Pictures. He is
also a limited partner of Florida Marlins Baseball, Ltd. Prior to his tenure
with Blockbuster, Mr. Berrard served as President of Holdings, which was known
prior to June 1988 as Waco Services, Inc. From January 1983 to April 1985, Mr.
Berrard served in various positions with Waco Leasing Company and Port-O-Let
International, Inc., including President, Chief Financial Officer, Treasurer and
Secretary. Prior to January 1983, Mr. Berrard was employed by Coopers & Lybrand,
an international public accounting firm, for over five years.
JOHN T. LAWRENCE III, age 42, became a director of the Company in 1992. He
has been a Senior Vice President of Kidder Peabody & Company Incorporated since
January 1993 and served as a Senior Vice President of Prudential Securities Inc.
for more than five years prior to that time.
S. CRAIG LINDNER, age 39, became a director of the Company in 1987. He
served as President and Chief Operating Officer of the Company from June 1991
until April 1993. He has been Senior Executive Vice President of American Money
Management Corporation ("AMM"), a subsidiary of American Financial Corporation
("AFC"), for more than five years. AMM provides investment services to AFC and
certain of its affiliated companies. He is also a director of American Annuity
Group, Inc. ("AAG"), Chiquita Brands International, Inc., General Cable
Corporation, Great American Communications Company and The Penn Central
Corporation ("PCC").
ALFRED W. MARTINELLI, age 66, became a director of the Company in 1988. He
has served for more than five years as Vice Chairman of the Board of Directors
of PCC and Chairman of the Board and Chief Executive Officer of Buckeye
Management Company, a PCC subsidiary which manages various energy businesses.
Mr. Martinelli served as President and Chief Executive Officer of PCC from May
1982 until March 1987. He is also a director of AAG.
JOHN L. MUETHING, age 72, became a director of the Company in 1992. He has
been, for more than five years, of counsel to the law firm of Keating, Muething
& Klekamp, located in Cincinnati, Ohio.
Set forth below is information regarding those persons who serve as
executive officers of the Company, but who do not serve as directors of the
Company.
GREGORY K. FAIRBANKS, age 40, joined the Company as Senior Vice President,
Chief Financial Officer and Treasurer in April 1993 and currently serves as
Senior Vice President of the Company. Mr. Fairbanks joined Blockbuster in June
1992 as Senior Vice President and Chief Financial Officer and became Treasurer
of Blockbuster in March 1993. From October 1980 until he joined Blockbuster, Mr.
Fairbanks served in a number of finance related capacities, including Executive
Vice President and Chief Financial Officer of Waste Management International
plc. Prior to 1980, Mr. Fairbanks was employed by Arthur Andersen & Co., an
international public accounting firm, for approximately four years.
THOMAS P. CARSON, age 47 became Senior Vice President and Chief Financial
Officer of the Company in November 1993 and Treasurer of the Company in February
1994. From December 1985 to November 1990 and from August 1991 to September
1993, Mr. Carson served as Chief Financial Officer of Metro-Goldwyn-Mayer Inc.
Under Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Company's directors, executive officers and any persons
holding more than ten percent of the Common Stock are required to report their
initial ownership of Common Stock and any changes in that ownership to the
Securities and Exchange Commission, the New York Stock Exchange and the Pacific
Stock Exchange. Specific due dates have been established and the Company is
required to disclose in this Proxy Statement any failure to file by these dates.
Based solely on a review of the copies of the forms furnished to the Company, or
written representations that no Form 5's were required, the
3
Company believes that in 1993 and through the date of this Proxy Statement, all
Section 16(a) filing requirements applicable to its directors, executive
officers and greater than ten percent shareholders were complied with, except
that John L. Muething, a director of the Company, filed on December 28, 1993 a
report on Form 4 required to be filed on December 10, 1993.
SECURITIES OWNERSHIP OF MANAGEMENT
Information concerning the Common Stock of the Company beneficially owned by
each director, each Named Officer in the Summary Compensation Table below, each
person (or group) known to the Company to beneficially own more than five
percent of the outstanding Common Stock, and the directors and executive
officers as a group on January 31, 1994, is shown in the following table:
NUMBER OF SHARES OF
NAME OF DIRECTOR, EXECUTIVE COMMON STOCK PERCENT OF
OFFICER OR SHAREHOLDER BENEFICIALLY OWNED (1) CLASS
- ---------------------------------------- ----------------------- ----------
H. Wayne Huizenga (2) -- --
Aaron Spelling 148,500(3) *
Steven R. Berrard (2) -- --
John T. Lawrence III 2,200 *
S. Craig Lindner -- --
Alfred W. Martinelli 1,000 *
John L. Muething 2,000 *
Ronald Lightstone (4) 308,549(5) *
Carl H. Lindner (6) -- --
SEGI Holding Co. (Blockbuster) (7) 45,658,640 70.7%
All directors and executive officers as
a group (10 persons) 153,700(2)(3) *
- ------------------------
* Less than one percent of the class of securities
(1) Unless otherwise indicated, each holder named has sole voting and investment
power with respect to the shares of Common Stock owned by such holder.
(2) Does not include any shares of Common Stock beneficially owned by SEGI
Holding Co. ("SHC"), an indirect wholly owned subsidiary of Blockbuster.
Each of Messrs. Huizenga and Berrard is an officer and director of each of
Blockbuster, SHC and SHC's immediate parent corporation, Blockbuster
Pictures Holding Corporation ("BPHC"). As of January 31, 1994, Mr. Huizenga,
Mr. Berrard and one other executive officer of the Company who is not a
Named Officer beneficially owned 16,254,938, 678,685 and 45,714 shares of
common stock, $.10 par value per share, of Blockbuster (the "Blockbuster
Stock"), respectively, or approximately 6.1%, less than one percent and less
than one percent of the Blockbuster Stock issued and outstanding. Such
number of shares and percentages of Blockbuster Stock owned by such persons
include 5,349,053, 673,715 and 45,714 shares which may be acquired within 60
days of January 31, 1994 by Mr. Huizenga, Mr. Berrard and the other
executive officer of the Company who is not a Named Officer, respectively,
upon exercise of stock options and warrants.
(3) Includes 100,000 shares of Common Stock which may be acquired within 60 days
by Mr. Spelling upon exercise of stock options.
(4) Resigned office and directorship in October 1993. Information with respect
to the securities ownership of Mr. Lightstone is to the best knowledge of
the Company based upon copies provided to the Company of reports filed by
Mr. Lightstone under Section 16(a) of the Exchange Act.
(5) Includes 277,500 shares of Common Stock which may be acquired within 60 days
by Mr. Lightstone upon exercise of stock options.
(6) Resigned office and directorship in April 1993.
4
(7) SHC, Blockbuster and BPHC may be deemed to be a "group", as that term is
defined under Rule 13d-5 promulgated under the Securities Exchange Act of
1934, as amended, causing each of SHC, Blockbuster and BPHC to be deemed a
beneficial owner of the shares held by SHC. The address of SHC, Blockbuster
and BPHC is One Blockbuster Plaza, Fort Lauderdale, Florida 33301. In this
Proxy Statement (other than in this section) the shares of Common Stock
owned by SHC are attributed to Blockbuster.
On January 7, 1994, Blockbuster entered into an Agreement and Plan of Merger
with Viacom pursuant to which Blockbuster would be merged with and into Viacom
with Viacom being the surviving corporation (the "Viacom Merger"). As a result
of the Viacom Merger, SHC will continue to own the shares of Common Stock that
it currently owns; however, both SHC and the Company would become subsidiaries
of Viacom. Consummation of the Viacom Merger is subject to various conditions,
including approval by the stockholders of Blockbuster.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors has, pursuant to its powers, designated several
committees of the Board, including an Executive Committee, Audit Committee,
Compensation Committee and Nominating Committee, the functions and membership of
which are described below.
The Executive Committee is permitted under Florida law and the Company's
by-laws to perform substantially all of the functions of the Board of Directors,
except: to approve or recommend to shareholders actions or proposals required to
be approved by shareholders, to fill Board or committee vacancies, to adopt,
amend or repeal the by-laws, to authorize reacquisition of the Company's shares,
or to authorize the issuance or to contract for the sale of shares or to
determine rights of the Company's shares, except within limits specifically
prescribed by the Board. The Audit Committee is responsible for certain
financial affairs of the Company and its subsidiaries, including the selection
of the Company's auditors, the review of the adequacy of internal controls and
reporting, and the performance of any other duties or functions deemed
appropriate by the Board. The Compensation Committee is responsible for the
matters discussed under the heading "Report of the Compensation Committee" set
out below. The Nominating Committee's function is to identify and propose to the
full Board nominees to fill vacancies as they occur. The Nominating Committee
will consider persons brought to its attention by officers, directors and
shareholders. Proposals may be addressed to the Nominating Committee at the
address shown on the cover of this Proxy Statement, attention of the Secretary
of the Company. Messrs. Huizenga, Berrard and Spelling are currently members of
the Executive Committee; Messrs. Lawrence, Lindner, Martinelli and Muething are
currently members of the Audit Committee, the Compensation Committee and the
Nominating Committee. During 1993, the Executive Committee met, or took action
by unanimous written consent, three times and the Compensation Committee met
once. The Audit Committee did not meet in 1993 and the Nominating Committee was
not formed until 1994.
During 1993, the Board of Directors took action by unanimous written consent
on 11 occasions and held five Board meetings. Each director, other than Mr.
Martinelli, attended at least 75% of the combined number of meetings held by the
Board of Directors and the committee(s) thereof on which each such director
served.
5
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation for services rendered in all
capacities to the Company for the years ended December 31, 1993, 1992 and 1991,
of those persons who were (i) the Company's Chief Executive Officer during 1993,
(ii) the executive officers of the Company at December 31, 1993 whose 1993
salary and bonus exceeded $100,000 and (iii) Ronald Lightstone, who was an
executive officer of the Company until October 1993 (such persons being referred
to herein collectively as the "Named Officers").
LONG-TERM
COMPENSATION
ANNUAL -------------
COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- -------------------------------------------------- ---- ------------- ------------- ------------- --------------
Steven R. Berrard (a) 1993 $ 43,987(b) $ 7,763(b) -- $ --
President and Chief 1992 -- -- -- --
Executive Officer 1991 -- -- -- --
Carl H. Lindner (a) 1993 -- -- -- $ 9,750(c)
Chairman of the Board 1992 -- -- -- 17,250(c)
& Chief Executive Officer 1991 -- -- -- 16,500(c)
Aaron Spelling (d)
Chairman of the Board & 1993 858,654 -- 700,000 1,693,943(e)
Chief Executive Officer of 1992 861,074 -- -- 1,615,618(f)
Spelling Television Inc. 1991 791,539 -- -- 495,611(g)
Ronald Lightstone (d) 1993 503,531 -- 225,000 28,494(h)
Chief Operating Officer 1992 482,693 217,500(i) -- 15,943(j)
of Spelling Entertainment Inc. 1991 388,942 150,000 -- 11,111(k)
- ------------------------
(a) Steven R. Berrard became an officer and director of the Company in April
1993. Carl H. Lindner resigned his positions as an officer and director of
the Company in April 1993.
(b) Represents amounts received from Blockbuster allocable to Mr. Berrard's
service to the Company in 1993, which payment was reimbursed to Blockbuster
by the Company.
(c) These amounts represent corporate directors' fees.
(d) Amounts for 1991 include compensation paid to Messrs. Spelling and
Lightstone by SEI prior to SEI becoming a subsidiary of the Company in May
1991. Mr. Lightstone resigned his positions as an officer and director of
the Company in October 1993.
(e) Consists of fees in the amount of $1,665,009 earned in his capacity as
producer or executive producer on Company productions, corporate directors'
fees of $19,500 and $9,434 accrued under a profit sharing plan of a Company
subsidiary.
(f) Consists of fees in the amount of $1,599,575 earned in his capacity as
producer or executive producer on Company productions, corporate directors'
fees of $4,500 and $11,443 accrued under a profit sharing plan of a Company
subsidiary.
(g) Consists of fees in the amount of $484,500 earned in his capacity as
producer or executive producer on Company productions and $11,111 accrued
under a profit sharing plan of a Company subsidiary.
(h) Consists of $8,994 accrued under a profit sharing plan of the Company and
$19,500 of corporate directors' fees.
(i) Includes 10,000 shares of Common Stock granted to Mr. Lightstone on December
21, 1992, which had a market value of approximately $70,000 on the date of
grant.
(j) Consists of $11,443 accrued under a profit sharing plan of a Company
subsidiary and corporate directors' fees of $4,500.
(k) Represents the amount accrued under a profit sharing plan of a Company
subsidiary.
6
STOCK OPTION GRANT TABLE
Set forth below is information with respect to grants of stock options
during the fiscal year ended December 31, 1993, to the Named Officers. Stock
appreciation rights are not available under the Company's stock option plans.
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
INDIVIDUAL GRANTS RATES
- ---------------------------------------------------------------------------------- OF STOCK PRICE
NUMBER OF % OF TOTAL APPRECIATION FOR
SECURITIES OPTIONS GRANTED OPTION TERM
UNDERLYING TO EMPLOYEES EXERCISE EXPIRATION ---------------------
NAME OPTIONS GRANTED IN FISCAL YEAR PRICE DATE 5% 10%
- ------------------------------ ---------------- ----------------- -------- ---------------- -------- ----------
Steven R. Berrard -- -- -- -- -- --
Carl H. Lindner -- -- -- -- -- --
Aaron Spelling 200,000(1) 6.4 % $ 6.50 July 12, 2003 $2,117,570 $3,371,810
500,000(2)(3) 15.9 6.00 January 13, 2003 4,886,700 7,781,100
Ronald Lightstone 225,000(2)(4) 7.2 6.00 October 26, 1998 2,199,015 3,501,495
- ------------------------
(1) Grant vests in equal amounts over a period of four years.
(2) Grant vests 20% on the first anniversary of the grant and 10% each six
months thereafter.
(3) The Compensation Committee of the Board of Directors may accelerate the
exercisability of any option subject to such terms and conditions as the
Committee deems necessary and appropriate.
(4) The original terms of this grant have been modified by Mr. Lightstone's
Consulting Agreement. See "Employment Contracts."
STOCK OPTION EXERCISES AND YEAR-END HOLDINGS
The following table sets forth certain information pertaining to stock
options (i) exercised during 1993 and (ii) held as of December 31, 1993 by the
Named Officers. The Company has no plans pursuant to which stock appreciation
rights may be awarded.
NUMBER OF UNEXCERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS AT
SHARES 1993 DECEMBER 31, 1993
ACQUIRED ON VALUE -------------------------- --------------------------
NAMED OFFICERS EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- ----------- ----------- ----------- ------------- ----------- -------------
Steven R. Berrard -- -- -- -- -- --
Carl H. Lindner -- -- -- -- -- --
Aaron Spelling -- -- -- 700,000 -- $ 2,700,000
Ronald Lightstone -- -- 232,500 225,000 $ 948,663 $ 900,000
DIRECTOR COMPENSATION
Each member of the Board (excluding Messrs. Huizenga and Berrard) is
currently paid an annual fee of $15,000 plus $750 for each meeting attended,
including Committee meetings.
EMPLOYMENT CONTRACTS
Pursuant to an Employment Agreement dated as of March 1, 1989, as amended
(the "Employment Agreement"), Aaron Spelling is employed by the Company as
Chairman of the Board and Chief Executive Officer of all significant
subsidiaries involved in television production other than Laurel Entertainment
Inc. ("Laurel"), and serves as Executive Producer or Producer of substantially
all television programs and filmed entertainment produced by the Company's
significant subsidiaries other than Laurel. As compensation for serving as an
officer, Mr. Spelling currently receives an annual base salary of [$950,000]
which will increase ten percent in 1995. As compensation for serving as an
Executive Producer or Producer, Mr. Spelling receives producer's fees consistent
with the applicable budget.
7
Mr. Spelling has the right to terminate the Employment Agreement in the
event that the Company materially breaches its obligations under the Employment
Agreement or upon certain circumstances involving a change of control of the
Company. If such termination is premised solely on a change in control, the
Company has the right to retain Mr. Spelling as a consultant for a period of
time thereafter. Compensation for such consulting services would be based on a
percentage of the compensation that Mr. Spelling would have received but for
termination of the Employment Agreement. If Mr. Spelling terminates the
Employment Agreement based on a material breach by the Company, Mr. Spelling has
the right to cease providing services and receive his base salary for the
remainder of the term as well as service fees payable in accordance with a
formula provided in the Employment Agreement. Mr. Spelling's Employment
Agreement extends through April 30, 1996.
Pursuant to a now terminated employment agreement dated as of February 19,
1988, as amended (the "Lightstone Agreement"), Ronald Lightstone was employed as
Chief Operating Officer of the Company's subsidiary, SEI. Mr. Lightstone's
annual base salary was $500,000 and he was entitled to receive an annual bonus,
based upon the profitability of the Company, of not less than $50,000.
On October 26, 1993, Mr. Lightstone, the Company and SEI entered into a
Consulting Agreement (the "Consulting Agreement") which terminates on January
13, 1996. The Consulting Agreement provides that during the term thereof Mr.
Lightstone will be employed by SEI as a consultant. During such term, Mr.
Lightstone is entitled to receive an aggregate of $676,450 as payment for his
services.
As of October 26, 1993, Mr. Lightstone was indebted to SEI in the principal
amount of $500,000 plus accrued interest in the amount of $ 215,928.88 on
account of a loan made to Mr. Lightstone under the Lightstone Agreement for the
purchase of a residence. Such loan bore interest at 7.99% per year. Under the
Consulting Agreement, SEI waived the outstanding accrued interest and accepted a
promissory note in the principal amount of $357,964.50 in satisfaction of the
principal amount of such loan. This new loan, which bears interest at 6% per
year, is secured by a deed of trust on the residence of Mr. Lightstone and a
security interest, pledge and assignment of Mr. Lightstone's right, title and
interest in his options to acquire Common Stock. The final installment of
principal and accrued interest is due October 26, 1996.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors at March 18, 1994
consisted of four non-employee directors: John T. Lawrence, S. Craig Lindner,
Alfred W. Martinelli and John L. Muething. George E. Castrucci and Carl H.
Lindner, former directors of the Company, served as members of the Compensation
Committee for a portion of 1993. The Compensation Committee's functions include
reviewing and approving compensation recommendations for both executive and
non-executive officers of the Company and administering the Company's stock
option plans, including determining eligibility, the number of shares to be
granted under options and the terms of such grants.
Since April 1993, Steven R. Berrard has served as Chief Executive Officer of
the Company, and from March 1987 to April 1993, Carl H. Lindner served as Chief
Executive Officer of the Company. Mr. Lindner did not receive any compensation
for his service as Chief Executive Officer nor was he granted any stock options
by the Company in 1993. Mr. Lindner did, however, receive corporate directors'
fees of $19,500 for his service as a director of the Company in 1993 through his
resignation in April 1993. Mr. Berrard received $51,750 (including $7,763 in
bonus) from Blockbuster allocable to his service to the Company in 1993, which
payment was reimbursed to Blockbuster by the Company. Such payment was equal to
the allocable portion of the base salary and bonus received by Mr. Berrard from
Blockbuster attributable to his services provided to the Company. Mr. Berrard's
base salary for 1993 was determined by Blockbuster prior to its majority
investment in the Company. Mr. Berrard did not receive fees for his service as a
director of the Company during 1993, nor was he granted any stock options by the
Company in 1993.
In approving the reimbursement to Blockbuster of the payment to Mr. Berrard
for services to the Company as Chief Executive Officer, the Compensation
Committee considered a number of factors
8
relating to individual performance including managerial effectiveness,
leadership, executive development and expansion of the Company's businesses.
Company performance criteria evaluated in connection with the approval of the
reimbursement included an increase in Company revenue of 6.7%, an increase in
net income of 80%, an increase in net income per share of 63%, and an increase
in income from continuing operations of 200% in 1993 over 1992. The Compensation
Committee believes that the payment for Mr. Berrard's services to the Company as
Chief Executive Officer are well below competitive market rates considering the
magnitude of his responsibilities and the levels of performance achieved by the
Company.
H. Wayne Huizenga, Chairman of the Board of the Company and Chairman of the
Board and Chief Executive Officer of Blockbuster, presently is not compensated
by the Company and was not compensated by the Company in 1993 for his services
as an executive officer or a member of the board of directors, nor was
compensation paid to Mr. Huizenga by Blockbuster with respect to services
performed for the Company.
Gregory K. Fairbanks, Senior Vice President of the Company and Senior Vice
President, Treasurer and Chief Financial Officer of Blockbuster, was compensated
by Blockbuster for services to the Company, which payment was reimbursed by the
Company. The amount paid to Mr. Fairbanks relating to his service to the Company
was determined in the same manner as Mr. Berrard's payment.
The Company's executive compensation policies relating to executive officers
not also employed by Blockbuster have been designed to provide a total
compensation program that will attract, retain and motivate superior executive
personnel while integrating such compensation with Company performance and
shareholder interests. The Company's compensation program for executive officers
had three principal components: annual base salary, annual incentive bonuses
(including both cash and stock) and stock option grants. Under this program, a
portion of an executive's compensation, in both the short term and the long
term, is linked to the Company's performance. In addition, each of the Company's
employees including its executive officers is permitted, when eligible, to
participate in the Company's Savings Plan by making voluntary contributions to
his or her account. The Company contributes to individual employee accounts
based on the amount of the employee's contributions and, in addition, the
Company annually contributes to the plan an amount equal to four percent of the
total compensation paid to participants in such plan, which amount is
distributed ratably to participants' individual accounts based on the
participants' base salaries.
The base salaries of Aaron Spelling and Ronald Lightstone in 1993 and the
bonus opportunity for Mr. Lightstone in 1993 were fixed by employment
agreements. Mr. Spelling also receives producer's fees, which is a standard
practice in the filmed entertainment industry. In October 1993, the Company
entered into a consulting arrangement with Mr. Lightstone. Mr. Spelling's
employment agreement and Mr. Lightstone's previous employment agreement and the
consulting arrangement are further discussed under the caption "EXECUTIVE
COMPENSATION -- Employment Contracts." The 1993 base salary of one other
executive officer of the Company was also fixed by an employment agreement.
The Committee's policy is to approve annual base salaries for other
executive officers that are appropriate for their respective positions and
levels of responsibility. The Compensation Committee reviews management's annual
base salary recommendations for the Company's executives. Annual salary
recommendations are based on industry, peer group and national surveys of total
compensation packages, as well as evaluations of the individual executive's past
and expected future performance. Annual salary levels are generally targeted to,
and in 1993, corresponded to, the lower end of the range of salaries paid to
executives with comparable qualifications, experience and responsibilities at
other similarly situated companies. In establishing salary levels against such
range, the Compensation Committee considers the competitiveness of the
executives' entire compensation packages rather than limiting its base salary
guidelines include the companies appearing in the Peer Group Index which is
referenced below in the Stock Price Performance Graph.
The Compensation Committee also determines, based on the recommendations of
management, the annual bonus to be paid to executive officers. The bonus is
discretionary with the Compensation
9
Committee (other than bonuses provided for by contract) and is determined based
primarily upon individual performance, though increases in the Company's
revenue, net income, net income per share, competitive position and improvements
in operating efficiencies are also considered in determining the annual bonus to
be paid. Bonuses are not based on preestablished performance goals. Bonuses in
respect of 1993 were paid primarily in recognition of the progress made by the
Company during the year toward improving the Company's competitive position as
well as the number and level of sophistication and complexity of the issues
presented to the executive officers during the course of the year.
Stock options represent an important part of the Company's compensation
program. The Committee believes that the Company's shareholders' interests are
well served by aligning the Company's senior executives' interests with those of
the shareholders by the grant of stock options. Options under the Company's
stock option plan are granted at exercise prices equal to the fair market value
of the Common Stock on the date of the grant, and will only have value if the
Company's stock price increases. Options granted subsequent to July 1993
generally become exercisable at the rate of 25% per year and executives
generally must be employed at the time options vest in order to exercise the
options. The Compensation Committee believes that these features provide the
optionee with substantial incentives to maximize the Company's long term
success. Grants of stock options generally are based upon the executive's
position with the Company and an evaluation of the executive's past and expected
future performance, without regard to the executive's stock ownership or grants
made to the executive in prior years. The number of shares subject to a stock
option grant is generally determined by dividing a multiple of the executive's
base salary by the market price of the Common Stock on the date of the grant. No
stock options were granted in 1993 under the Company's stock option plan to
Messrs. Huizenga, Berrard or Fairbanks.
The Omnibus Budget Reconciliation Act of 1993 added a provision to the
Internal Revenue Code limiting to $1,000,000 the deductibility of compensation
(including stock-based compensation, such as stock options) paid to certain
executives by public companies. The tax law change includes an exclusion for
"performance-based" compensation, provided such compensation meets certain
requirements, including outside director and shareholder approval of the
performance goals. The proposed Spelling Entertainment Group Inc. 1994 Stock
Option Plan has been designed to comply with such changes to the tax law,
assuming shareholder approval of such plan at the annual meeting. See "PROPOSAL
TO APPROVE THE SPELLING ENTERTAINMENT GROUP INC. 1994 STOCK OPTION PLAN". The
Company is not currently contemplating any other actions with respect to the tax
law change.
The Compensation Committee continually evaluates the Company's compensation
policies and procedures with respect to executives. Although the Compensation
Committee believes that current compensation policies have been successful in
aligning the financial interests of executive officers with those of the
Company's shareholders and with Company performance, it continues to examine
what modifications, if any, should be implemented to further link executive
compensation with both individual and Company performance.
The Compensation Committee
John T. Lawrence
S. Craig Lindner
Alfred W. Martinelli
John L. Muething
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
John L. Muething, George E. Castrucci, a former director, and Carl H.
Lindner, a former director and former Chief Executive Officer, were members of
the Compensation Committee in 1993.
10
During the fiscal year ended December 31, 1993, the Company retained the law
firm of Keating, Muething & Klekamp to represent the Company on various matters.
John L. Muething, a director of the Company, is of counsel to the firm.
For 1993, the Company was charged an aggregate of $854,208 by AMM for
investment services pursuant to an Investment Service Agreement entered into in
1987. Such agreement was terminated in [April] 1993. AFC and AMM provided the
Company with other services such as preparation of financial reports,
accounting, legal, data processing and tax services for which the Company was
charged $336,041 and $92,751, respectively, in 1993. Prior to April 1, 1993, AFC
beneficially owned approximately 51% of the Common Stock of the Company. Carl H.
Lindner is Chairman of the Board and Chief Executive Officer of AFC and owns in
excess of 10% of the equity of AFC. The Company believes that the terms of its
service agreements with AMM and AFC were as favorable to the Company as terms
that could be obtained from an unaffiliated party.
During 1993, AFC guaranteed amounts due under a now terminated line of
credit which the Company had with certain lenders for which AFC was paid a fee
of $49,377. The Company believes that such payment was on terms as favorable to
the Company as could have been obtained from an unaffiliated party.
Certain subsidiaries of PCC provided environmental engineering and
consulting services to the Company in 1993 for which the Company was billed an
aggregate of approximately $1,714,195. The Company believes the terms for these
services were as favorable to the Company as could have been obtained from an
unaffiliated party.
In 1993, the Company utilized the services of Provident Travel Corporation,
an AFC travel agency subsidiary, to facilitate travel by certain Company
employees on terms and conditions customarily offered by commercial travel
agencies.
In connection with the sale of AFC's investment in the Company to
Blockbuster in April 1993, the Company purchased insurance-type indemnity
protection from AFC to limit its exposure to potential material loss from
certain claims related to former oil operations. In exchange for a one-time
payment of $5 million, AFC agreed to indemnify the Company for certain costs it
may have to pay in resolving certain environmental and bankruptcy related claims
over the next twelve years. The indemnity covers up to $35 million of such
liabilities in excess of a threshold amount of $25 million, subject to certain
adjustments.
11
STOCK PRICE PERFORMANCE GRAPH
The graph below compares the cumulative total return on investment (based on
change in year-end stock price and assuming reinvestment of all dividends)
assuming a $100 investment in the Common Stock of the Company, the Standard &
Poor's 500 Stock Index and an index of peer companies selected by the Company
(the "Peer Group Index") for the five year period commencing December 31, 1988
and ended December 31, 1993.
PERFORMANCE GRAPH
The Peer Group Index consists of common stock of Carolco Pictures Inc.,
International Movie Group Inc., AMC Entertainment Inc., Samuel Goldwyn Company,
Paramount Communications Inc., King World Productions Inc., American Film
Technologies Inc., Congress Video Group, International Broadcast Systems Ltd.,
Kushner Locke Company, Lancit Media Productions Ltd., Live Entertainment Inc.,
Sandy Corporation, Unitel Video Inc., RHI Entertainment Inc., Prism
Entertainment Corporation, New Line Cinema Corp., Carmike Cinemas Inc., CST
Entertainment Imaging Inc. and the Company. These companies are the same
companies which were included in the Bridge Information Systems, Inc. Motion
Picture Index (the "Bridge Index") which was included in the Company's stock
price performance graph presentation in its proxy statement relating to the 1993
annual meeting of shareholders. Publication of the Bridge Index has been
discontinued.
CERTAIN TRANSACTIONS
In this section references to Blockbuster are to Blockbuster and its
subsidiaries.
Effective April 1, 1993, Blockbuster acquired 24,522,375 shares of Common
Stock of the Company from AFC and certain related entities (collectively, the
"Sellers"). These shares, together with shares previously acquired by
Blockbuster, represented approximately 53.8% of the outstanding Common Stock as
of such date. At the closing of the transaction, Blockbuster issued 7,601,937
shares of Blockbuster Stock to the Sellers for the acquired shares. In addition,
Blockbuster issued to the Sellers warrants to acquire an aggregate of two
million shares of Blockbuster Stock at an exercise price of $25 per share. The
warrants will expire at the earlier of the third anniversary of the closing or
at such time as the Sellers own, in the aggregate, less than 50% of the shares
of Blockbuster Stock issued to the Sellers at the closing.
Following the acquisition in April 1993 by Blockbuster of Company Common
Stock from the Sellers, the Company's Board of Directors elected H. Wayne
Huizenga as Chairman of the Board and Steven R. Berrard as President and Chief
Executive Officer.
On September 17, 1993, the Company and Blockbuster entered into a Stock
Purchase Agreement pursuant to which, on October 5, 1993, the Company sold to
Blockbuster 13,362,215 shares of Common Stock for the aggregate purchase price
of $100,216,612 which was paid in full by delivery of 3,652,542 shares of
Blockbuster Stock. This transaction increased Blockbuster's beneficial ownership
to 45,658,640 shares, or approximately 70.5% of the Common Stock issued and
outstanding on such date.
On December 8, 1993, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Republic Pictures and DE Acquisition
Corporation, a wholly owned subsidiary of the Company ("Merger Sub"), pursuant
to which Republic Pictures will be merged with and into Merger Sub (the
"Merger"), and Republic Pictures will become a wholly-owned subsidiary of the
Company. The Merger Agreement provides that at the time the Merger becomes
effective (the "Effective Time") each share of Republic Pictures common stock
outstanding immediately prior to the Effective Time will be converted into the
right to receive $13.00 in cash, without interest (the "Cash Merger
Consideration"). Options and warrants to acquire Republic Pictures common stock
outstanding immediately prior to the Effective Time will be converted into the
right to receive, upon payment of the exercise price (as adjusted as set forth
below), 1.6508 shares of Common Stock for each share of Republic Pictures common
stock into which such option or warrant was exercisable immediately prior
12
to the Effective Time. The exercise price of such options and warrants will be
adjusted by multiplying such exercise price by 0.6058. H. Wayne Huizenga and
Steven R. Berrard, directors of the Company and of Republic Pictures, abstained
from voting in their capacity as such on approval of the Merger Agreement.
Blockbuster currently owns 2,550,000 shares of Republic Pictures common
stock and warrants to acquire an aggregate of 810,000 shares of Republic
Pictures common stock at an exercise price of $11.50 per share, which shares and
warrants, as a result of the Merger, will be converted into the right to receive
an aggregate of $33,150,000 and a warrant to acquire 1,337,148 shares of Common
Stock, respectively. The exercise price for such warrant will be $6.9667 per
share. It is currently anticipated that the Merger will be consummated prior to
April 30, 1994.
Effective January 31, 1994 the Company and certain of its subsidiaries
entered into a Credit Agreement (the "Credit Agreement") with Blockbuster and
related agreements pursuant to which Blockbuster has agreed to advance to the
Company and/or certain of its subsidiaries an aggregate of $175,000,000,
consisting of a term loan in the amount of $100,000,000 (the "Term Loan"), the
proceeds of which may be used only to pay all or a portion of the Cash Merger
Consideration in the Republic Merger, and revolving loans in an aggregate
principal amount of $75,000,000 (the "Revolving Loans"). The Term Loan will bear
interest at a fixed rate of 6 5/8%. The Revolving Loans will bear interest at
the one, two and three month LIBOR rate (as selected by the Company) plus 1%.
The Company is obligated to pay an annual fee of 0.175% of the unused amount
available for Revolving Loans and certain facility and administration fees.
Borrowings under the Credit Agreement are secured by all of the assets of
the Company. The Company has agreed to guarantee the obligations of Blockbuster
under Blockbuster's credit facility (the "Blockbuster Credit Facility") up to
the amount of the Company's borrowings under the Credit Agreement outstanding at
the time enforcement of such guaranty of the Company is sought. The fees and
interest rate applicable to the Revolving Loans are subject to renegotiation
should the Blockbuster Credit Facility be terminated, repaid or restructured,
and the entire amount outstanding under the Credit Agreement may be accelerated
if the Blockbuster Credit Facility is accelerated by Blockbuster's lenders.
The Company believes that the terms of the Credit Agreement and the related
agreements are more favorable to the Company as terms that could be obtained
from an unaffiliated party.
During the fiscal year ended December 31, 1993, Blockbuster paid the Company
approximately $3,100,000 for the purchase of prerecorded videocassettes in
connection with Blockbuster's home video retailing business. The Company
believes that the terms of the sale of videocassettes to Blockbuster were as
favorable to the Company as could have been obtained from an unaffiliated party.
The Company expects to continue to sell videocassettes to Blockbuster upon
similar terms in the future.
In 1993, Blockbuster provided the Company with various services such as
accounting, legal and tax services for which the Company was charged an
aggregate of $380,437, which amount also includes amounts charged by Blockbuster
for services provided to the Company by Steven R. Berrard, the President and
Chief Executive Officer of the Company, Gregory K. Fairbanks, a Senior Vice
President of the Company, and J. Ronald Castell, an officer of the Company.
Messrs. Berrard, Fairbanks and Castell are also executive officers of
Blockbuster and are compensated by Blockbuster. The amount of their compensation
charged to the Company represents the allocable portion of their base salary and
bonus attributable to their services provided to the Company. The Company
believes that the terms of the foregoing arrangement are more favorable to the
Company as terms that could be obtained from an unaffiliated party.
Aaron Spelling, Vice Chairman of the Board of the Company, held $18,287,500
principal amount of the Company's 10% Senior Subordinated Notes from the time of
their issuance in May 1991 until the time of their prepayment in October 1993.
The Company paid $1,781,000, $1,828,000 and $914,000 in interest on these
obligations during 1993, 1992 and 1991, respectively.
13
PROPOSAL TO INCREASE THE COMPANY'S
AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has declared advisable and has unanimously
recommended the adoption by the shareholders of the following amendment to the
Company's Articles of Incorporation, which would increase the number of
authorized shares of Common Stock from 200,000,000 to 300,000,000:
"In order to increase the number of shares of common stock which the Company
is authorized to issue, Part 2 of Section A, Article III of the Amended and
Restated Articles of Incorporation, as amended, is hereby amended to read as
follows:
The maximum number of shares of capital stock which the Corporation is
authorized to have outstanding at any one time is:
2. COMMON STOCK -- 300,000,000 shares, par value $.10 per share ("Common
Stock")."
The Company at present has authorized capital stock consisting of
200,000,000 shares of Common Stock, and 20,000,000 shares of preferred stock,
$.10 par value per share (the "Preferred Stock"). On March 1, 1994, 64,590,588
shares of Common Stock were outstanding and shares were reserved for issuance
upon exercise of certain options and warrants. No shares of the Preferred Stock
were outstanding on such date.
If the proposed amendment is adopted, 100,000,000 additional shares of
Common Stock will be available for issuances by the Board of Directors without
any requirement of further shareholder approval, although certain large
issuances of shares may require shareholder approval to maintain the listing of
the Common Stock under New York Stock Exchange listing provisions. The proposed
amendment does not affect the Preferred Stock.
The additional shares of Common Stock might be issued to provide additional
funds for working capital and capital expenditures, for other purposes including
acquisitions of other businesses, and for stock dividends or stock splits. The
Board of Directors believes it desirable that the Company have the flexibility
of being able to issue the additional shares without further shareholder
approval. However, it does not have any present plans with respect to the
issuance of these additional shares except to the extent such shares may be
issued under the Company's 1994 Stock Option Plan, if shareholder approval of
the 1994 Stock Option Plan is received. Shareholders have no preemptive rights
to purchase any stock of the Company. The additional shares might be issued at
such times and under such circumstances as to have dilutive effect on earnings
per share and on the equity ownership of the present holders of Common Stock.
The Board of Directors recognizes that an increase in the number of
authorized shares could also be used to preclude an attempt to effect a change
in control of the Company. However, the Board of Directors is not presently
aware of any such attempt.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE PROPOSED AMENDMENT TO THE
ARTICLES OF INCORPORATION BY THE SHAREHOLDERS. UNLESS OTHERWISE INSTRUCTED,
SIGNED PROXIES WHICH ARE RETURNED IN A TIMELY MANNER WILL BE VOTED IN FAVOR OF
THE AMENDMENT.
PROPOSAL TO APPROVE THE SPELLING ENTERTAINMENT
GROUP INC. 1994 STOCK OPTION PLAN
On February 15, 1994, the Board of Directors of the Company adopted, subject
to shareholder approval at the annual meeting, the 1994 Option Plan. The purpose
of the 1994 Option Plan is to offer certain present and future key employees a
favorable opportunity to become holders of Common Stock, thereby giving them a
stake in the growth and prosperity of the Company and encouraging the
continuance of their involvement with the Company. As of the date of adoption of
the 1994 Option Plan, there were approximately 46 employees who were eligible to
participate in the 1994 Option Plan. A copy of the 1994 Option Plan is attached
to this Proxy Statement as Annex A.
14
The total number of shares of Common Stock issuable over the term of the
1994 Option Plan may not exceed 4,500,000 shares of Common Stock; provided that
the Option Committee (as defined below) may not grant to any individual options
to purchase more than 1,215,000 shares of Common Stock or more than 27% of the
total number of options to purchase shares of Common Stock granted under the
1994 Option Plan.
On or after February 15, 1994, the Option Committee of the Board of
Directors of the Company (the "Option Committee"), consisting of two or more
non-employee directors, may grant options to key employees of the Company
(including officers) under the 1994 Option Plan, subject to shareholder approval
of the plan. The price at which shares of Common Stock may be purchased pursuant
to the options granted by the Option Committee is determined by the Option
Committee, but will in no event be less than the fair market value of the shares
at the time the option is granted. Generally, each option will be for a term of
not less than five nor more than ten years from the date of grant, and will
become exercisable with respect to 25% of the total number of shares subject to
the option twelve months after the date of the grant and with respect to an
additional 25% at the end of each twelve-month period thereafter on a cumulative
basis during the succeeding three years.
The Option Committee, in its discretion, may provide at the date of grant
for another time or times of exercise or accelerate the exercisability of any
such option subject to such terms and conditions as the Option Committee deems
necessary and appropriate, including a requirement that the optionee grant the
Company an option to repurchase all or a portion of the number of shares
acquired upon exercise of the accelerated option. In addition, the Option
Committee may, at any time prior to the expiration or termination of an option
previously granted, extend the term of such option for such additional period as
it shall, in its discretion, determine (but only insofar as the aggregate option
period with respect to an option does not exceed ten years).
Upon exercise of an option under the 1994 Option Plan, the exercise price
for the purchased shares will be immediately payable in cash, by check, by a
promissory note in a form specified by the Company payable to the Company no
later than 15 business days after the date of exercise of the option, if
applicable, or, if approved by the Option Committee, in shares of Common Stock
valued at fair market value on the date of exercise, or by a combination of
these methods. An option may be exercised only if the closing sale price per
share of Common Stock on the date of exercise on the stock exchange upon which
Common Stock is listed is equal to or greater than the option price.
Options are not assignable or transferable other than by will or the laws of
descent and distribution, or by a qualified domestic relations order, and,
during the optionee's lifetime, the option may be exercised only by such
optionee.
Options granted under the 1994 Option Plan terminate immediately if the
optionee's employment terminates for any reason other than death, disability or
retirement. Under appropriate circumstances, the Company may permit outstanding
options to be exercised for a period after termination of employment but in no
event after the expiration date of the option. In the event of the optionee's
death or disability or retirement, the optionee or, if he is not living, the
personal representative of the optionee or the optionee's estate or the person
inheriting the option will have three years (or such longer period as the Option
Committee may prescribe) after the date of the optionee's death, disability or
retirement to exercise the option in full, but under no circumstances may the
option be exercised after the specified date of the option term.
If any option granted under the 1994 Option Plan expires or is terminated or
cancelled unexercised as to any shares of Common Stock, such released shares may
again be optioned (including a grant in substitution for a cancelled option).
In the event any change is made to the Common Stock issuable under the 1994
Option Plan (by reason of any stock split, stock dividend, combination of
shares, merger, consolidation, reorganization or other change in the
capitalization of the Company), appropriate adjustments will be made as
necessary to (i) the aggregate number of shares of Common Stock and/or the kind
of securities
15
available for issuance under the 1994 Option Plan, (ii) the number of shares of
Common Stock and/or the kind of securities to be made the subject of each
subsequent grant, (iii) the exercise price and (iv) the number of shares of
Common Stock and/or the kind of securities purchasable under each outstanding
option and the exercise price payable per share so that no dilution or
enlargement of benefits will occur under such option.
The Board of Directors may amend or discontinue the 1994 Option Plan at any
time, provided that no amendment may be made without the requisite approval of
the shareholders of the Company if shareholder approval is required as a
condition to the 1994 Option Plan continuing to comply with the provisions of
Rule 16b-3 under the Exchange Act (or, to the extent that the 1994 Option Plan
continues to be governed by former Rule 16b-3 of the Exchange Act, by former
Rule 16b-3) or Section 162(m) of the Internal Revenue Code of 1968, as amended.
If the 1994 Option Plan is approved by the shareholders, it will become
effective as of the date of its adoption by the Company's Board. Any options
granted on or after the effective date and prior to shareholder approval will be
cancelled and void if the 1994 Option Plan is not approved by the shareholders.
The 1994 Option Plan will terminate on the date that all shares available for
issuance under the plan are issued or cancelled pursuant to the exercise or
cancellation of options granted under such plan.
CERTAIN FEDERAL INCOME TAX MATTERS
The Company understands that under existing federal income tax laws, with
respect to options granted under the 1994 Option Plan, (i) no income will be
recognized to the optionee at the time of grant; (ii) upon exercise of an option
or the occurrence of an Alternate Valuation Date (as defined below), the
optionee must treat as ordinary income the difference between the exercise price
and the fair market value of the stock purchased on the date of exercise or, if
applicable, on the Alternate Valuation Date, and the Company generally will be
entitled to a deduction equal to such amount; and (iii) assuming the shares
received upon exercise of such option constitute capital assets in the
optionee's hands, any gain or loss upon disposition of shares (measured by
reference to the fair market value of the shares on the date of exercise or, if
applicable, on the Alternate Valuation Date) will be treated as capital gain or
loss, which will be long-term if the shares have been held more than one year
from the date of exercise or, if applicable, the Alternate Valuation Date.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE 1994 OPTION PLAN. UNLESS
OTHERWISE INSTRUCTED, SIGNED PROXIES WHICH ARE RETURNED IN A TIMELY MANNER WILL
BE VOTED IN FAVOR OF THE 1994 OPTION PLAN.
INDEPENDENT PUBLIC ACCOUNTANTS
On June 1, 1993, the Company engaged the accounting firm of Arthur Andersen
& Co. as its independent accountants for the fiscal year ending December 31,
1993. This engagement was authorized by the Company's Board of Directors upon
the recommendation of the Board's Audit Committee. The determination of the
Company to select Arthur Andersen & Co. was made in order to enable the Company
to better coordinate financial reporting matters with its majority shareholder,
Blockbuster. Arthur Andersen & Co. serves as independent accountants to
Blockbuster.
On June 1, 1993, the Company informed Ernst & Young, its independent
accountants for the fiscal year ended December 31, 1992, of its action. The
accountant's reports on the Company's financial statements for the past two
fiscal years preceding the determination not to reappoint Ernst & Young did not
contain an adverse opinion or disclaimer of opinion, or a qualification
regarding audit scope or accounting principles. Moreover, during the two most
recent fiscal years and the subsequent period prior to the change in
accountants, there were no disagreements with Ernst &
16
Young on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure. Furthermore, no "reportable events,"
as defined in Item 304(a)(1)(v) of Regulation S-K of the Securities and Exchange
Commission, occurred during such period.
The Board has selected Arthur Andersen & Co. to continue to serve as the
independent accountants of the Company for the current fiscal year ending
December 31, 1994. Representatives of Arthur Andersen & Co. are expected to be
present at the 1994 annual meeting of shareholders. They will have the
opportunity to make a statement if they desire to do so, and will be available
to respond to appropriate questions.
FINANCIAL STATEMENTS
The Company has either previously sent or is enclosing its Annual Report to
Shareholders for the year ended December 31, 1993. Shareholders are referred to
the report for financial and other information about the Company, but such
report is not incorporated in this Proxy Statement and is not a part of the
proxy soliciting material.
PROPOSALS BY SHAREHOLDERS
Any proposals by shareholders intended to be presented at the 1995 annual
meeting must be received by the Company no later than December , 1994.
17
OTHER MATTERS
You are again urged to attend the annual meeting at which management of the
Company will present a review of the Company's operations. Proxies will be
solicited by the Board of Directors through use of the mails. Proxies may also
be solicited by directors, officers and a small number of other employees of the
Company personally or by mail, telephone, telegraph, or otherwise, but such
persons will not be compensated for such services. Brokerage firms, banks,
fiduciaries, voting trustees or other nominees will be requested to forward the
soliciting material to each beneficial owner of stock held of record by them,
and the Company has hired Corporate Investors Communications, Inc. to coordinate
the solicitation of proxies by and through such holders for a fee of
approximately $3,000 plus expenses. The entire cost of the solicitation will be
borne by the Company.
The Board of Directors does not intend to present, and does not have any
reason to believe that others will present, any item of business at the annual
meeting other than those specifically set forth in the notice of the meeting.
However, if other matters are presented for a vote, the proxies will be voted
for such matters in accordance with the judgment of the persons acting under the
proxies.
By Order of the Board of Directors
THOMAS W. HAWKINS
SECRETARY
18
ANNEX A
SPELLING ENTERTAINMENT GROUP INC.
1994 STOCK OPTION PLAN
1. STATEMENT OF PURPOSE. The purpose of this Stock Option Plan (the
"Plan") is to benefit Spelling Entertainment Group Inc., a Florida corporation
(the "Company"), and its subsidiaries through the maintenance and development of
their respective businesses by offering certain present and future key
individuals and employee members of the Board of Directors of the Company
(individually an "Employee Director" and collectively "Employee Directors") a
favorable opportunity to become holders of stock in the Company over a period of
years, thereby giving them a permanent stake in the growth and prosperity of the
Company and encouraging the continuance of their involvement with the Company or
its subsidiaries.
2. ADMINISTRATION. The Plan shall be administered by the Compensation
Committee (the "Committee"), consisting of two or more non-employee directors of
the Company appointed by the Board of Directors, whose interpretation of the
terms and provisions of the Plan shall be final and conclusive. The selection of
officers and Employee Directors for participation in the Plan and all decisions
concerning the timing, pricing and amount of any grant or award under the Plan
shall be made solely by the Committee.
3. ELIGIBILITY. Options shall be granted only to key employees of the
Company and its subsidiaries (including officers of the Company and its
subsidiaries and Employee Directors but excluding non-employee directors of the
Company) selected initially and from time to time by the Committee on the basis
of their importance to the business of the Company or its subsidiaries.
4. GRANTING OF OPTIONS. The Committee may grant options under which a
total of not in excess of 4,500,000 shares of the $.10 par value common stock of
the Company ("Common Stock") may be purchased from the Company, subject to
adjustment as provided in Section 11; provided that the Committee may not grant
to any individual options to purchase more than 1,215,000 shares of Common Stock
or more than 27% of the total number of options to purchase shares of Common
Stock granted under the Plan. Options granted under the Plan are intended not to
be treated as incentive stock options as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
In the event that an option expires or is terminated or cancelled
unexercised as to any shares, such released shares may again be optioned
(including a grant in substitution for a cancelled option); provided that none
of such options may be granted to any of the top employees of the Company (as
determined pursuant to the Code). Shares subject to options may be made
available from unissued or reacquired shares of Common Stock.
Nothing contained in the Plan or in any option granted pursuant thereto
shall confer upon any optionee any right to be continued in the employment of
the Company or any subsidiary of the Company, or interfere in any way with the
right of the Company or its subsidiaries to terminate his employment at any
time.
5. OPTION PRICE. The option price shall be determined by the Committee
and, subject to the provisions of Section 11 hereof, shall be not less than the
fair market value, at the time the option is granted, of the shares of Common
Stock subject to the option.
6. DURATION OF OPTIONS, INCREMENTS AND EXTENSIONS. Subject to the
provisions of Section 9 hereof, each option shall be for such term of not less
than five years nor more than ten years, as shall be determined by the
Committee. Each option shall become exercisable with respect to 25% of the total
number of shares subject to the option twelve months after the date of its grant
and with respect to each additional 25% at the end of each twelve-month period
thereafter during the succeeding three years. Notwithstanding the foregoing, the
Committee may in its discretion (i) specifically provide for another time or
times of exercise; (ii) accelerate the exercisability of any option subject to
such terms
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and conditions as the Committee deems necessary and appropriate; or (iii) at any
time prior to the expiration or termination of any option previously granted,
extend the term of any option (including such options held by officers or
Employee Directors) for such additional period as the Committee in its
discretion shall determine. In no event, however, shall the aggregate option
period with respect to any option, including the original term of the option and
any extensions thereof, exceed ten years. Subject to the foregoing, all or any
part of the shares to which the right to purchase has accrued may be purchased
at the time of such accrual or at any time or times thereafter during the option
period.
7. RIGHT OF COMPANY TO REPURCHASE. Notwithstanding any other provision in
the Plan to the contrary, in the event the employment of the optionee (or former
optionee) with the Company or any of its subsidiaries is terminated for any
reason other than death, permanent disability or retirement, the Company shall
have the right to purchase from the optionee, at the option price paid by him,
any shares acquired upon the exercise of an option granted to any employee or
Employee Director hereunder which the optionee could not have acquired if such
option had become exercisable with respect to 25% of the total number of shares
subject to the option twelve months after the date of its grant and with respect
to an additional 25% at the end of each twelve-month period thereafter during
the succeeding three years. If not sooner exercised, the Company's right to
repurchase shall expire with respect to 25% of the total number of shares
subject to the option twelve months after the date of its grant and with respect
to an additional 25% at the end of each of the next three twelve-month periods
thereafter.
8. EXERCISE OF OPTION. As a condition to the exercise of any option, the
"Quoted Price" (as defined below) per share of Common Stock on the date of
exercise must equal or exceed the option price referred to in Section 5 hereof.
An option may be exercised by giving written notice to the Company, attention of
the Secretary, specifying the number of shares to be purchased, accompanied by
the full purchase price for the shares to be purchased either in cash, by check,
by a promissory note in a form specified by the Company and payable to the
Company no later than 15 business days after the date of exercise of the option
or, if so approved by the Committee, by shares of the Common Stock of the
Company or by a combination of these methods of payment. The "Quoted Price" and
the per share value of Common Stock for purposes of paying the option price in
accordance with the immediately preceding sentence shall equal the closing
selling price per share of Common Stock on the date in question on the stock
exchange upon which the Company's Common Stock is listed (the "Exchange"). The
right to pay the purchase price of shares by delivery of a promissory note shall
not be available to any optionee who is a person described in Section 16(a) of
the Securities Exchange Act of 1934 (the "1934 Act").
At any time of any exercise of any option, the Company may, if it shall
determine it necessary or desirable for any reason, require the optionee (or his
heirs, legatees, or legal representative, as the case may be) as a condition
upon the exercise thereof, to deliver to the Company a written representation of
present intention to purchase the shares for investment and not for
distribution. In the event such representation is required to be delivered, an
appropriate legend may be placed upon each certificate delivered to the optionee
upon his exercise of part or all of the option and a stop transfer order may be
placed with the transfer agent. Each option shall also be subject to the
requirement that, if at any time the Company determines, in its discretion, that
the listing, registration or qualification of the shares subject to the option
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental regulatory body is necessary or desirable as a
condition of or in connection with, the issue or purchase of shares thereunder,
the option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Company.
At the time of the exercise of any option the Committee may require, as a
condition of the exercise of such option, the optionee to (x) pay the Company an
amount equal to the amount of tax the Company may be required to withhold to
obtain a deduction for federal income tax purposes as a result of the exercise
of such option by the optionee or (y) make such other arrangements with the
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Company which would enable the Company to pay such withholding tax, including,
without limitation, holding back a number of shares issuable upon exercise of
the option equal to the amount of such withholding tax, or permitting the
optionee to deliver a promissory note in a form specified by the Committee, or
(z) a combination of the foregoing.
9. TERMINATION OF RELATIONSHIP-EXERCISE THEREAFTER. In the event the
relationship between the Company and an officer or employee or Employee Director
who is an optionee is terminated for any reason other than death, permanent
disability or retirement such optionee's option shall expire and all rights to
purchase shares pursuant thereto shall terminate immediately. The Committee may,
in its sole discretion, permit any option to remain exercisable for such period
after such termination as the Committee may prescribe, but in no event after the
expiration date of the option. Temporary absence from employment because of
illness, vacation, approved leaves of absence, and transfers of employment among
the Company and its subsidiaries, shall not be considered to terminate
employment or to interrupt continuous employment.
In the event of termination of said relationship because of death, permanent
disability (as that term is defined in Section 22(e)(3) of the Code, as now in
effect or as subsequently amended), or retirement the option may be exercised in
full, without regard to any installments established under Section 6 hereof, by
the optionee or, if he is not living, by his heirs, legatees or legal
representative (as the case may be) during its specified term prior to three
years after the date of death, permanent disability or retirement, or such
longer period as the Committee may prescribe, but in no event after the
expiration date of the option.
10. NON-TRANSFERABILITY OF OPTIONS. During the lifetime of the optionee,
options shall be exercisable only by the optionee, and options shall not be
assignable or transferable by the optionee otherwise than by will or by the laws
of descent and distribution, or pursuant to a qualified domestic relations order
as defined by the Code, or Title I of the Employee Retirement Income Security
Act of 1974, as amended, or the rules thereunder.
11. ADJUSTMENT. The number of shares subject to the Plan and to options
granted under the Plan shall be adjusted as follows: (a) in the event that the
outstanding shares of Common Stock of the Company is changed by any stock
dividend, stock split or combination of shares, the number of shares subject to
the Plan and to options granted hereunder shall be proportionately adjusted; (b)
in the event of any merger, consolidation or reorganization of the Company with
any other corporation or corporations, there shall be substituted, on an
equitable basis as determined by the Committee, for each share of Common Stock
then subject to the Plan, whether or not at the time subject to outstanding
options, the number and kind of shares of stock or other securities to which the
holders of shares of Common Stock of the Company will be entitled pursuant to
the transaction; and (c) in the event of any other relevant change in the
capitalization of the Company, the Committee shall provide for an equitable
adjustment in the number of shares of Common Stock then subject to the Plan,
whether or not then subject to outstanding options. In the event of any such
adjustment the purchase price per share shall be proportionately adjusted.
12. NO IMPAIRMENT OF RIGHTS. Nothing contained in the Plan or any option
granted pursuant to the Plan shall confer upon any optionee any right to be
continued in the employment of the Company or any subsidiary of the Company or
interfere in any way with the right of the Company or its subsidiaries to
terminate such employment and/or to remove any optionee who is an Employee
Director from service on the Board of Directors of the Company at any time in
accordance with the provisions of applicable law.
13. AMENDMENT OF PLAN. The Board of Directors of the Company may amend or
discontinue the Plan at any time. However, no such amendments or discontinuance
shall be made without the requisite stockholder approval of the stockholders of
the Company if stockholder approval is required as a condition to the Plan
continuing to comply with the provisions of Rule 1 6b-3 or Section 1 62(m) of
the Code.
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14. GOVERNANCE BY RULE 16B-3. The Plan is intended to and shall be
governed by Rule 16b-3 promulgated under the 1934 Act.
15. EFFECTIVE DATE. On February 15, 1994 this Plan was adopted and
authorized by the Board of Directors of the Company for submission to the
stockholders of the Company. If this Plan is approved by the affirmative vote of
the holders of a majority of the outstanding shares of Common Stock voting in
person or by proxy at a duly held stockholders' meeting, this Plan shall be
deemed to have become effective on February 15, 1994. With respect to any
options granted on or after such effective date and prior to stockholder
approval, if this Plan is not approved by stockholders all such options shall be
cancelled and void.
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PLEASE MARK YOUR CHOICES LIKE THIS
x
COMMON D.R.S. PFD.1 PFD.2
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 FOR THE ELECTION OF ALL NOMINEES AND FOR PROPOSAL 2.
1. ELECTION OF DIRECTORS
FOR all nominees listed below (except as marked to the contrary below)
WITHHOLD AUTHORITY to vote for all nominees listed below
Instructions: To withhold authority for an individual nominee draw a line
through his name.
NOMINEES: H. WAYNE HUIZENGA, AARON SPELLING, STEVEN R. BERRARD, JOHN E.
LAWRENCE III, S. CRAIG LINDNER, ALFRED W. MARTINELLI AND JOHN L. MUETHING
A VOTE FOR ALL NOMINEES IS RECOMMENDED BY THE BOARD OF DIRECTORS.
2. Adopt the Amendment to the Company's Articles of Incorporation.
A VOTE FOR IS RECOMMENDED BY THE BOARD OF DIRECTORS.
FOR AGAINST ABSTAIN
3. Adopt the Company's 1994 Stock Option Plan.
A VOTE FOR IS RECOMMENDED BY THE BOARD OF DIRECTORS.
4. In their discretion, on such other business as may properly come before the
meeting.
Please sign this proxy exactly as your name appears below. When shares are held
jointly, each holder should sign. When signing as attorney, executor,
administrator, trustee or in another representative capacity, please give full
title or such. If a corporation, please sign in full corporate name by the
president or other authorized officer. If a partnership, please sign in
partnership name by an authorized person.
Date__________________________,1994.
____________________________________
(Signature)
____________________________________
(Signature, if held jointly)
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
SPELLING ENTERTAINMENT GROUP INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
H.Wayne Huizenga and Aaron Spelling, or either of them, each with power of
substitution, are hereby authorized to vote all stock which the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Shareholders of Spelling Entertainment Group Inc. to be held on Wednesday, May
18, 1994, and at any postponements or adjournments thereof as follows:
See Reverse Side