SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule14a-11(c) or Rule14a-12
NETTER DIGITAL ENTERTAINMENT, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
_________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
_________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
_________________________________________________________________
(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.:
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(3) Filing Party:
__________________________________________________________________
(4) Date Filed:
__________________________________________________________________
NETTER DIGITAL ENTERTAINMENT, INC.
_______________________
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
To Be Held on November 16, 1998
_______________________
To the Stockholders of Netter Digital Entertainment, Inc.:
The 1998 Annual Meeting of Stockholders of Netter Digital Entertainment,
Inc., a Delaware corporation, will be held on Monday, November 16, 1998, at
10:00 a.m., P.S.T., at the Holiday Inn - Beverly Garland's, 4222 Vineland
Avenue, North Hollywood, California, for the following purposes:
(1) To elect a Board of Directors;
(2) To transact any other business that may properly come before the
meeting.
Only stockholders of record at the close of business on October 2, 1998 are
entitled to notice of and to vote at the meeting and any adjournments thereof.
All stockholders are cordially invited to attend the meeting in person.
Whether or not you expect to attend the meeting, PLEASE COMPLETE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. The giving of
your proxy will not affect your right to vote in person should you later decide
to attend the meeting.
By Order of the Board of Directors
/s/John Copeland
---------------------------
John Copeland
Secretary
North Hollywood, California
October 16, 1998
NETTER DIGITAL ENTERTAINMENT, INC.
5125 Lankershim Boulevard
North Hollywood, California 91601
(818) 753-1990
PROXY STATEMENT
October 16, 1998
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Netter Digital Entertainment, Inc. ("Netter
Digital" or the "Company") for the 1998 Annual Meeting of Stockholders to be
held on November 16, 1998 and any postponements or adjournments thereof. This
Proxy Statement and the accompanying Notice of Annual Meeting and form of proxy
were first mailed to stockholders on or about October 16, 1998.
The execution and return of the enclosed proxy will not in any way affect a
stockholder's right to attend the Annual Meeting in person. Any stockholder
giving a proxy may revoke it before it is voted by so notifying the Secretary of
Netter Digital in writing before or at the meeting, by providing a proxy bearing
a later date or by attending the meeting and expressing a desire to vote in
person. Your cooperation in promptly returning the enclosed proxy will reduce
Netter Digital's expenses and enable its management and employees to continue
their normal duties for your benefit with minimum interruption for follow-up
proxy solicitation.
Only stockholders of record at the close of business on October 2, 1998 are
entitled to receive notice of and to vote at the meeting. On that date, Netter
Digital had outstanding and entitled to vote at the Annual Meeting 3,334,405
shares of Common Stock, each of which is entitled to one vote at the meeting,
except as noted below with respect to the election of directors, and 54,550
shares of Series A Preferred Stock ("Preferred Stock") each of which is entitled
to three votes at the meeting, except as noted below with respect to the
election of directors. The presence at the Annual Meeting, either in person or
by proxy, of the holders of a majority of the shares of Common Stock and
Preferred Stock outstanding on the record date is necessary to constitute a
quorum for the transaction of business.
Abstentions and broker non-votes (which occur if a broker or other nominee
does not have discretionary authority and has not received voting instructions
from the beneficial owner with respect to the particular item) are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business. Abstentions are counted in tabulations of the votes cast on
proposals presented to the stockholders and have the same legal effect as a vote
against a particular proposal. Broker non-votes are not taken into account for
purposes of determining whether a proposal has been approved by the requisite
stockholder vote.
All proxies will be voted as directed by the stockholder on the proxy card.
If no choice is specified, proxies will be voted "FOR" the directors nominated
by the Board of Directors.
If any other matters are properly presented at the Annual Meeting,
including, among other things, consideration of a motion to adjourn the Annual
Meeting to another time or place for the purpose of soliciting additional
proxies, the persons named in the enclosed form of proxy and acting thereunder
will have discretion to vote on those matters in accordance with their best
judgment, subject to direction by the Board of Directors, to the same extent as
the person signing the proxy. It currently is not anticipated that any other
matters will be raised at the Annual Meeting.
1
The cost of preparing, printing and mailing the Proxy Statement, the Notice
and the enclosed form of proxy, as well as the cost of soliciting proxies
relating to the Annual Meeting, will be borne by Netter Digital. The original
solicitation of proxies by mail may be supplemented by telephone, telegram and
personal solicitation by officers and other regular employees of Netter Digital,
but no additional compensation will be paid to such individuals on account of
such activities. Netter Digital will reimburse banks, brokerage houses and
other custodians, nominees and fiduciaries for their reasonable expenses in
forwarding proxy materials to their principals.
ELECTION OF DIRECTORS
Nominees and Voting
Six directors are to be elected at the Annual Meeting. All directors hold
office until the next Annual Meeting and until their respective successors are
elected and qualified. Directors need not be stockholders.
Cumulative voting applies to this election. This means that, in the
election of directors, each holder of Common Stock is entitled to a number of
votes equal to the number of his or her shares of Common Stock multiplied by the
number of directors to be elected, and each holder of Preferred Stock is
entitled to a number of votes equal to three times the number of his or her
shares of Preferred Stock multiplied by the number of directors to be elected.
A stockholder may cast all of such votes for a single nominee or distribute them
among the nominees as he or she sees fit. However, no stockholder is entitled
to cumulate votes for a nominee unless the nominee's name has been placed in
nomination prior to the vote and a stockholder has given notice at the meeting,
prior to the voting, of the stockholder's intention to cumulate his or her
votes. If any one stockholder gives such notice, all stockholders may cumulate
their votes for nominees. The persons named in the enclosed form of Proxy may,
in their discretion, cumulate votes pursuant to the proxies for any one or more
nominees.
The Board of Directors has nominated for election as directors six persons
named below, all of whom are incumbent directors. All of the nominees have
indicated that they are able and willing to serve as a director.
Douglas Netter, the Company's Chairman of the Board, President and Chief
Executive Officer, and Paul Costa, a director, own, in the aggregate, 1,930,730
shares of Common Stock, representing 55.2% of the votes entitled to be cast at
the Annual Meeting, which will allow them to elect a majority of the members of
the Company's Board of Directors. Messrs. Netter and Costa have advised the
Board of Directors that they intend to vote all of their shares for the election
of the Board's nominees.
The Board of Directors recommends that the stockholders vote "FOR" the
election of its nominees. Unless otherwise instructed, the Board's proxies
intend to vote the shares of Common Stock represented by the proxies in favor of
the election of these nominees. If for any reason any of these nominees will be
unable to serve, the Board's proxies will vote instead for such other person or
persons as the Board of Directors may recommend.
2
The following table sets forth certain information as of October 2, 1998
with respect to the Board's current members, all of whom are also nominees for
the Board of Directors:
Director
Name Age Since
---- --- --------
Douglas Netter ........... 77 1995
John Copeland ............ 47 1995
Kate Netter Forte ........ 43 1995
Leonard Silverman ........ 58 1996
Paul Costa ............... 51 1997
Lennart Ringquist ........ 68 1997
Business Experience of Directors and Nominee During the Past Five Years
Douglas Netter is the founder of the Company and has been its President,
Chief Executive Officer and member of its Board of Directors since its
inception. Mr. Netter was appointed Chairman of the Board in September 1995.
John Copeland has been with the Company since its inception serving as a
producer on many of the Company's television movies, series and documentaries.
He has been the Executive Vice President and Secretary of the Company since
September 1995.
Kate Netter Forte joined the Board of Directors in September 1995. From
1991 to the present, Ms. Netter Forte has been the Executive Vice President of
Oprah Winfrey's Harpo Films, Inc. Ms. Netter Forte is the daughter of Douglas
Netter.
Leonard Silverman joined the Board of Directors in June 1996. Dr.
Silverman spent most of his professional career at the University of Southern
California ("USC") and since 1977 has been a Full Professor of Electrical
Engineering. He is currently the Dean of the School of Engineering at USC.
Dr. Silverman is internationally known for his pioneering work in the theory
and application of multivariable control systems and signal processing and has
more than 100 publications to his credit. Dr. Silverman is also a director of
Advanced Micro Devices and Diodes, Inc.
Paul Costa joined the Board of Directors in March 1997. Mr. Costa founded
and is presently President of Videssence, Inc., which designs, manufactures and
distributes media lighting products incorporating the patented and trademarked
SRGB light technology. Videssence, Inc. became a wholly owned subsidiary of
Netter Digital in January 1997.
Lennart Ringquist joined the Board of Directors in November 1997. Mr.
Ringquist served as President of Four Star International, Inc. from 1989 to
1996. Mr. Ringquist also directed the worldwide activities of Metromedia
Producers Corporation as its President. Mr. Ringquist was President of
Blairspan; Executive Vice President of John Blair Television Stations Division;
Corporate Vice President for Television, Walt Disney Productions; Director of
Domestic Sales for MGM-TV; and was a network sales executive for NBC-TV and
ABC-TV.
The sole family relationship that exists between any of the directors or
officers of Netter Digital is that between Douglas Netter and Kate Netter Forte,
his daughter.
3
Meetings of the Board of Directors and Committees
Netter Digital maintains an Audit Committee whose current members are Ms.
Forte, Dr. Silverman and Mr. Ringquist. The Audit Committee's responsibilities
include approval of the selection and engagement of independent accountants and
review of the plan and scope of their audit for each year, the results of such
audit when completed and their fees for services performed. The Audit Committee
also assists and makes recommendations to the Board of Directors in fulfilling
the Board's responsibilities relating to Netter Digital's accounting, financial
reporting and internal control functions and reviews and passes upon all
transactions with affiliates and other persons having a material financial
interest in Netter Digital. This committee met three times during fiscal 1998.
Netter Digital maintains a Compensation Committee whose current members are
Dr. Silverman and Mr. Ringquist. The Compensation Committee approves the
compensation of the executive officers of Netter Digital, formulates and reviews
significant compensation policies and decisions and administers Netter Digital's
stock option plan. The Compensation Committee met two times during fiscal 1998.
Netter Digital's Board of Directors met five times during fiscal 1998.
Each director attended at least 75% of the meetings of the Board of Directors
and all of the committees on which he or she served. Netter Digital does not
maintain a nominating committee.
Compensation of Directors
Netter Digital does not currently pay or intend to pay cash compensation to
its directors for their services in that capacity; however, directors who are
not employees are reimbursed for out-of-pocket expenses incurred in connection
with their attendance at Board of Directors or committee meetings. Prior to its
amendment in September 1997 to eliminate further option grants thereunder to
non-employee directors, the Netter Digital Entertainment, Inc. 1995 Stock Option
Plan (the "1995 Plan") provided that each non-employee director: (a) within six
months after taking office as a member of the Board of Directors of the
Corporation (whether elected by the stockholders or the Board of Directors),
automatically would be granted a stock option to purchase 30,000 shares of
Common Stock at an exercise price equal to the fair market value of the Common
Stock on the date of grant; and (b) would receive additional options to acquire
10,000 shares of Common Stock on the first anniversary of taking office and
another set of options to acquire 10,000 shares of Common Stock on the second
anniversary of such director taking office, provided the director still held
office on such anniversary dates. As reported in the footnotes to "Ownership
of Common Stock" below, certain grants have been made to the current
non-employee directors of Netter Digital under the 1995 Plan.
Pursuant to the provisions of the Netter Digital Entertainment, Inc. 1997
Directors' Stock Option Plan (the "1997 Directors' Plan"), (a) each new
non-employee director, on the date of his or her election to the Board of
Directors (whether elected by the stockholders or the Board of Directors), will
be granted an initial stock option to purchase 30,000 shares of Common Stock at
an exercise price equal to the fair market value of the Common Stock on the date
of grant and (b) each non-employee director continuing to serve on the Board
automatically will be granted an additional stock option to purchase 10,000
shares of Common Stock, at an exercise price equal to the fair market value of
the Common Stock on the date of grant, on each successive anniversary of the
date on which such non-employee director was granted an initial stock option
under the 1997 Directors' Plan; provided, however, that in no event shall any
non-employee director receive more than four such additional stock options. As
reported in the footnotes to "Ownership of Common Stock" below, certain grants
have been made to the current non-employee directors of Netter Digital under the
1997 Directors' Plan.
4
EXECUTIVE OFFICERS
The current executive officers of Netter Digital, their ages and
positions are as follows:
Name Age Position
---- --- --------
Douglas Netter ......... 77 Chairman of the Board, President and Chief
Executive Officer
John Copeland .......... 47 Executive Vice President, Secretary and Director
Thomas Jorgenson ....... 43 Executive Vice President, Chief Operating Officer
Paul Costa ............. 51 President, Videssence, Inc., Director
Chad Kalebic ........... 27 Chief Financial Officer
For a description of the business experience of Messrs. Netter, Copeland,
and Costa during the past five years, see "Election of Directors - Business
Experience of Directors and Nominee During the Past Five Years," above.
Mr. Jorgenson joined the Company as Chief Operating Officer in August 1996.
From 1994 to 1996, Mr. Jorgenson was Co-Chairman of the Board, Chief Operating
Officer and Chief Financial Officer of Spectral, Inc., a manufacturer of digital
audio editing hardware and software products. From 1984 to 1994, Mr. Jorgenson
held various financial, business planning and operations management positions in
the operating business units and the corporate office at Harman International
Industries, Inc., a Fortune 500 manufacturer of audio equipment.
Mr. Kalebic joined the Company as Controller in December 1996 and became
its Chief Financial Officer in November 1997. Previously, Mr. Kalebic served as
a financial consultant to a major multinational manufacturing company, General
Binding Corporation, and was a general partner and founder of an entertainment
production company, Windrock Entertainment. From 1993 to 1995, Mr. Kalebic
worked for Arthur Andersen & Co. in New York.
OWNERSHIP OF COMMON STOCK
The following table sets forth information with respect to the beneficial
ownership of Netter Digital Common Stock as of October 2, 1998 by (i) each
director of the Company, (ii) the Chief Executive Officer of the Company and the
three most highly compensated executive officers whose compensation and bonus
exceeds $100,000 per annum (the "Named Executive Officers"), and (iii) all of
the executive officers and directors as a group. The Company is not aware of
any other person who is a beneficial owner of more than 5% of its outstanding
Common Stock. Unless otherwise indicated, each of the entities and persons
named in the table has sole voting and investment power with respect to all
shares of Common Stock beneficially owned by him or her, except to the extent
that authority is shared by spouses under applicable law.
5
Shares Beneficially Percent
Owned Voting
Name and Address Number Percent (1) Power (2)
---------------- ------ ------- ---------
Douglas Netter (3)(7) 1,609,000 48.0% 45.4%
Paul Costa (4) 381,730 11.3% 9.8%
John Copeland (3)(8) 162,000 4.8% 0%
Leonard Silverman (5) 60,000 1.8% 0%
Kate Forte (5) 60,000 1.8% 0%
Thomas Jorgenson (6) 54,700 1.6% *
Lennart Ringquist (5) 30,000 * 0%
All Directors and Officers as a group (9) 2,225,430 61.4% 55.3%
_________________
The address for all persons listed is 5125 Lankershim Blvd., North Hollywood, CA
91601
* Indicates ownership of less than 1%
(1) Based on an aggregate of 3,334,405 shares of Common Stock outstanding and,
with respect to particular persons, shares underlying options or warrants
exercisable now or within the next 60 days.
(2) Based on an aggregate of 3,334,405 shares of Common Stock outstanding and,
as of October 2, 1998, 54,550 shares of Preferred Stock outstanding, each of
which is entitled to three votes.
(3) In December 1989, Mr. Netter granted Mr. Copeland an option to purchase
100,000 shares owned by Mr. Netter, exercisable at $0.01 per share, and in
September 1995, Mr. Netter granted Mr. Copeland an option to purchase 50,000
shares owned by Mr. Netter, exercisable at $4.00 per share. All of such options
are presently exercisable and are included in this table. Mr. Copeland's
options remain unexercised.
(4) In association with the Company's merger with Videssence, Inc. in January
1997 (the "Videssence Merger"), Mr. Costa was issued 341,730 shares of the
Company's common stock and a non-statutory option to purchase 90,000 shares of
the Company's Common Stock, of which 36,000 are currently exercisable or
exercisable within 60 days of October 2, 1998, at an exercise price of $3.00
per share. Under the 1997 Incentive Stock Option Plan (the "1997 Plan"), Mr.
Costa was granted 20,000 options in September 1998 of which 4,000 are currently
exercisable or exercisable within 60 days of October 2, 1998, at $1.75 per
share. These options remain unexercised.
(5) Under the 1995 Plan, Ms. Forte and Mr. Silverman were each granted options
to purchase from the Company 50,000 shares of the Company's Common Stock. Of
these options, 50,000 are currently exercisable at $10.25 per share by Ms.
Forte, while 50,000 are currently exercisable at $5.00 per share by Mr.
Silverman. Under the 1997 Directors' Plan, Ms. Forte and Dr. Silverman were
granted 10,000 options each, while Mr. Ringquist was granted 30,000 options.
These options are all currently exercisable at a price of $2.88 per share. All
of such options are included in this table. These options remain unexercised.
(6) Under the 1995 Plan, Mr. Jorgenson was given two grants of 50,000 options
each, of which 40,000 are currently exercisable or exercisable within 60 days of
October 2, 1998; 20,000 at $3.00 per share and 20,000 at $4.13 per share. Under
the 1997 Plan, Mr. Jorgenson was given grants of 20,000 options in January 1998
and 30,000 options in September 1998, of which 10,000 are currently exercisable
or exercisable within 60 days of October 2, 1998; 4,000 at $2.25 per share and
6,000 at $1.75 per share. All are included in this table. These options
remain unexercised.
(7) Under the 1997 Plan, Mr. Netter was given two grants of 50,000 options each,
one in January 1998 and one in September 1998, of which 20,000 are currently
exercisable or exercisable within 60 days of October 2, 1998; 10,000 at $2.25
per share and 10,000 at $1.75 per share. All are included in this table. These
options remain unexercised.
(8) Under the 1997 Plan, Mr. Copeland was given two grants of 30,000 options
each, one in January 1998 and one in September 1998, of which 12,000 are
currently exercisable or exercisable within 60 days of October 2, 1998; 6,000 at
$2.25 per share and 6,000 at $1.75 per share. All are included in this table.
These options remain unexercised.
(9) Includes eight persons. Of the shares included as beneficially owned by all
directors and executive officers as a group, 290,000 shares may be acquired by
exercise of options now or within 60 days from October 2, 1998, not including
the 150,000 options granted by Mr. Netter to Mr. Copeland.
6
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes all compensation paid to the Named Executive
Officers for services rendered in all capacities to Netter Digital for the
fiscal year ended June 30, 1998.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation Awards
Name and Securities Underlying All Other
Principal Positions Year Salary Bonus (1) Options/SARs Compensation
------------------- ---- ------ --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Douglas Netter 1998 $266,769 $28,571 50,000 $50,535 (2)
CEO/President/Chairman 1997 $228,365 $27,404 N/A $50,535 (3)
of the Board 1996 $234,753 $55,417 N/A $30,052 (4)
John Copeland 1998 $142,881 $51,909 30,000 $42,169 (5)
Executive Vice 1997 $140,394 $49,606 N/A $26,708 (6)
President 1996 $195,156 $29,167 50,000 $4,223 (7)
Thomas Jorgenson 1998 $164,320 N/A 20,000 N/A
Executive Vice 1997 $118,448 N/A 100,000 N/A
President, Chief
Operating Officer
Paul Costa 1998 $150,000 N/A N/A N/A
President, 1997 $75,000 (8) N/A 90,000 N/A
Videssence, Inc.
_________________
<FN>
<F1>
(1) Participation in producer fees of projects produced.
<F2>
(2) Automobile allowance of $13,000 and personal life insurance of $37,535.
<F3>
(3) Automobile allowance of $13,000 and personal life insurance of $37,535.
<F4>
(4) Automobile allowance of $11,284 and personal life insurance of $18,768.
<F5>
(5) Automobile allowance of $6,500 and personal life insurance of $1,255, a
television director's fee of $30,374, which was paid to Mr. Copeland by one
of the Company's subsidiaries, and earnings participation of $4,040.
<F6>
(6) Automobile allowance of $6,500, personal life insurance of $1,255, a
television director's fee of $14,673, which was paid to Mr. Copeland by one
of the Company's subsidiaries, and earnings participation of $4,280.
<F7>
(7) Automobile allowance of $3,500 and personal life insurance of $723.
<F8>
(8) Mr. Costa joined the Company through the acquisition of Videssence in
January 1997.
</FN>
</TABLE>
Option Grants in Last Fiscal Year
The following table sets forth certain information at June 30, 1998, and
for the fiscal year then ended, with respect to stock options granted to Named
Executive Officers.
7
Number of Percent
Securities of Total Grant
Underlying Granted to Exercise Date
Options Employees in Price Per Market Expiration
Name Granted(1) Fiscal 1997 Share (2) Price Date
- ---- ---------- ------------ --------- ------ ----------
Douglas Netter 50,000 19.1% $2.25 $2.25 1/23/08
John Copeland 30,000 11.5% $2.25 $2.25 1/23/08
Thomas Jorgenson 20,000 7.6% $2.25 $2.25 1/23/08
________________
(1) All options have a ten-year term and are subject to vesting over a five-year
period, with 20% of the options becoming exercisable on each successive
anniversary of the date of grant.
(2) The exercise price may be paid by delivery of owned shares of Common Stock
valued at fair market value on the date of exercise.
Option Exercises in Last Fiscal Year and Fiscal Year End Value of
Unexercised Options
None of the Named Executive Officers exercised any stock options for Common
Stock of the Company during the fiscal year ended June 30, 1998. The following
table sets forth information with respect to the Named Executive Officers with
respect to the unexercised stock options held by them as of the end of the
fiscal year ended June 30, 1998.
Number of Securities
Underlying Value of Unexercised
Unexercised Options held at In-the-Money Options at
June 30, 1998 June 30, 1998 (1)
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
Douglas Netter 10,000 40,000 $11,900 $47,600
John Copeland 6,000 24,000 $7,140 $28,560
Thomas Jorgenson 44,000 76,000 $13,560 $32,240
Paul Costa 36,000 54,000 $15,840 $23,760
_________________
(1) Based upon the difference between the closing price of the Common Stock on
June 30, 1998 of $3.44 and the option exercise price.
Employment Agreements
In September 1995, the Company entered into a five year employment
agreement with Douglas Netter. The Company and Mr. Netter modified his
employment agreement, effective October 1, 1996, to provide (a) for a base
salary of $250,000 and (b) that Mr. Netter will be entitled to warrants to
purchase 10,000 shares of Common Stock in any year the Company attains a net
income level determined by the Compensation Committee. Mr. Netter will be
granted "piggyback" registration rights in conjunction with any such warrant
grant. Mr. Netter was not entitled to receive any such warrants for fiscal
1998. Mr. Netter is entitled to 25% of the executive producer fees earned by
the Company for his services rendered in that capacity for each production
("Netter Producer Fees"). Pursuant to a September 1998 amendment to his
employment agreement, Mr. Netter's total base salary plus Netter Producer Fees
is capped at an aggregate of $300,000 per year. He also receives customary
executive benefits and a $2,000,000 life insurance policy for his designated
beneficiary's benefit.
8
In September 1995, the Company also entered into a five year employment
agreement with John Copeland. Under this agreement, his base salary is
$140,000, and he is entitled to 25% of the executive producer fees earned by the
Company for his services rendered in that capacity for each production
("Copeland Producer Fees"). Mr. Copeland's total base salary plus Copeland
Producer Fees were capped at $190,000 for the first year of service and,
pursuant to a September 1998 amendment to his employment agreement, is now
capped at an aggregate of $210,000 per year. The Compensation Committee may
adjust Mr. Copeland's base salary and base salary cap in its reasonable
discretion in any year. Under the agreement, Mr. Copeland is also entitled to
(a) an annual bonus of 2% of the Company's net income before taxes and (b) 2,500
warrants in any year the Company attains a net income level determined by the
Compensation Committee. Mr. Copeland will be granted "piggyback" registration
rights in conjunction with any such warrant grant. Mr. Copeland was not
entitled to receive any such warrants for fiscal 1998. He also receives
customary executive benefits and a $1,000,000 life insurance policy for his
designated beneficiary's benefit.
In December 1996, the Company entered into a five year employment agreement
with Paul Costa. The agreement provides for a base salary of $150,000. The
Compensation Committee may adjust Mr. Costa's base salary in its reasonable
discretion in any year. Mr. Costa also receives customary executive benefits
and a $1,000,000 life insurance policy for his designated beneficiary's benefit.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 20, 1995, Douglas Netter, the Company's Chairman of the Board,
Chief Executive Officer, and President, entered into a promissory note with the
Company in the amount of $194,876, bearing interest at 7.25% per annum. In May
1997, the Board of Directors elected to extend the term of the note by one year.
At that time, Mr. Netter paid all interest payable as well as a portion of the
principal. In 1998, the Board of Directors elected to extend the term of the
note by an additional year. Mr. Netter has paid all interest payable on the
note through June 30, 1998. The entire unpaid principal balance of $155,897 and
all the accrued interest (collectively, $158,901 as of October 6, 1998) is due
on May 20, 1999. The Board of Directors has agreed to allow for the note to be
repaid in shares of the Company's Common Stock.
During the years ended June 30, 1997 and June 30, 1998, the Company rented
trailers in connection with one of its productions for approximately $119,000
per annum from a company which is 50% owned by John Copeland, an officer and
director of the Company, and his spouse.
In March 1998, the Company entered into a one-year consulting agreement
with Mr. Rowland Perkins, a former member of the Company's Board of Directors.
The agreement has a minimum annual guarantee of $50,000 and incentives based on
projects initiated by Mr. Perkins.
In March 1996, the Company entered into a business consulting agreement
which expired in February 1997 with Geoffrey Talbot, a former member of the
Company's Board of Directors, which provided for a monthly fee of $5,000. Under
the terms of the agreement, Mr. Talbot was to locate suitable acquisitions or
joint ventures or assist the Company in consummating similar transactions. A
similar agreement was entered into with Mr. Talbot in March 1997 providing for
the payment of monthly fees of $3,000 for six months. Mr. Talbot left the Board
of Directors in March 1997. In a separate consulting agreement entered into by
Mr. Talbot and the Company in June 1996, the Company agreed to pay $10,000 per
month for two months to assist with the completion of the Videssence Merger and
to advise Videssence, Inc. with regard to its operations.
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SELECTION OF AUDITORS
The Board of Directors has selected the accounting firm of Feldman Sherb
Ehrlich & Co., P.C. (formerly Feldman Radin & Co., P.C.) to serve as independent
auditors for the current fiscal year. Feldman Sherb Ehrlich & Co., P.C. has
served as the Company's independent auditors since 1995.
It is anticipated that representatives of Feldman Sherb Ehrlich & Co., P.C.
will be present at the Annual Meeting, and such representatives will be given
the opportunity to make a statement, if they so desire, and to answer
appropriate questions.
MISCELLANEOUS
Stockholder Proposals
Stockholder proposals intended to be presented at the 1999 Annual Meeting
of Stockholders must be received by Netter Digital by June 18, 1999 to be
considered by Netter Digital for inclusion in Netter Digital's proxy statement
and form of proxy relating to that meeting. Such proposals should be directed
to the attention of the Secretary, Netter Digital Entertainment, Inc., 5125
Lankershim Blvd., North Hollywood, California 91601. Stockholders who intend
to present a proposal at the 1999 Annual Meeting of Stockholders without
inclusion of such proposal in Netter Digital's proxy statement and form of proxy
relating to that meeting are required to provide notice of such proposal to
Netter Digital no later than September 1, 1999.
Compliance with Section 16(a) of the Securities Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires Netter
Digital's officers and directors, and persons who own more than ten percent of a
registered class of Netter Digital's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten percent stockholders are required
by the Securities and Exchange Commission regulations to furnish Netter Digital
with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to Netter
Digital, or written representations that no Forms 5 were required, Netter
Digital believes that, during fiscal 1998, all Section 16(a) filing requirements
were complied with in regards to its officers, directors and greater than
ten-percent beneficial owners except that Messrs. Netter, Copeland, Jorgenson,
and Rowland Perkins, a former director of Netter Digital, and Ms. Forte are late
in filing Form 5 statements with respect to the fiscal year ended June 30, 1998.
In addition, Messrs. Silverman, Costa, Ringquist, and Kalebic are late in filing
their initial statements of beneficial ownership on Form 3.
Netter Digital's common stock is traded in the Nasdaq Small Cap Market.
Other Matters
Neither Netter Digital nor any of the persons named as proxies knows of any
matters to be voted on at the Annual Meeting other than as described in this
Proxy Statement. However, if any other matters are properly presented at the
meeting, it is the intention of the persons named as proxies to vote in
accordance with their judgment on such matters, subject to direction by the
Board of Directors.
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The 1998 Annual Report to Stockholders accompanies this Proxy Statement,
but is not to be deemed a part of the proxy soliciting material.
While you have the matter in mind, please complete, sign and return the
enclosed proxy card.
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