<PAGE>
As filed with the Securities and Exchange Commission on April 29, 1997
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] 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 Section 240.14a-11(c) or Section 240.14a-12
FILM ROMAN, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
FILM ROMAN, INC.
12020 CHANDLER BOULEVARD
NORTH HOLLYWOOD, CA 91607
May 7, 1997
To Our Stockholders:
You are cordially invited to attend the Film Roman, Inc. Annual Meeting of
Stockholders ("Annual Meeting") which will be held on June 19, 1997, at 10:30
a.m., PDT, at the Sheraton Universal Hotel, 333 Universal Terrace Parkway,
Universal City, California 91608. All stockholders of record as of May 5, 1997
are entitled to vote at the Annual Meeting.
The Annual Meeting will be held to: (a) elect one Class I director to
serve until the 2000 annual meeting of stockholders and until his successor is
elected and has qualified; (b) ratify the appointment of independent public
accountants for the fiscal year ending December 31, 1997; and (c) transact such
other business as may properly be brought before the Annual Meeting or any
adjournments thereof.
We appreciate your continued confidence in the Company and hope you will
attend the Annual Meeting in person.
Whether or not you expect to attend the Annual Meeting, please complete,
sign, date and return the enclosed proxy card promptly to ensure that your
shares will be represented at the Annual Meeting. If you attend the Annual
Meeting, you may vote in person even if you have sent in your proxy card.
Sincerely,
/s/ Phil Roman
Phil Roman
President and Chief Executive Officer
<PAGE>
FILM ROMAN, INC.
12020 CHANDLER BOULEVARD
NORTH HOLLYWOOD, CA 91607
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 19, 1997
The Annual Meeting of Stockholders of Film Roman, Inc. (the "Company") will
be held at the Sheraton Universal Hotel, 333 Universal Terrace Parkway,
Universal City, California, 91608 on Thursday, June 19, 1997, at 10:30 a.m.,
PDT, for the following purposes:
1. To elect one Class I director to serve until the 2000 annual meeting
of stockholders and until his successor is elected and has qualified; and
2. To ratify the appointment of Ernst & Young LLP as the Company's
independent public accountants for the fiscal year ending December 31, 1997; and
3. To transact such other business as may properly be brought before the
Annual Meeting or any adjournments thereof.
Stockholders of record at the close of business on May 5, 1997 are entitled
to notice of, and to vote at, the Annual Meeting. The list of stockholders will
be available for examination for the ten days prior to the Annual Meeting at
Film Roman, Inc., 12020 Chandler Boulevard, Suite 200, North Hollywood,
California 91607.
All stockholders are cordially invited to attend the Annual Meeting.
PLEASE COMPLETE THE ACCOMPANYING PROXY AND RETURN IT IN THE ENCLOSED
ADDRESSED ENVELOPE.
By Order of the Board of Directors
/s/ Phil Roman
Phil Roman
President and Chief Executive Officer
North Hollywood, California
May 7, 1997
<PAGE>
FILM ROMAN, INC.
____________________
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
JUNE 19, 1997
This Proxy Statement is furnished to stockholders of Film Roman, Inc.
("Film Roman" or the "Company") in connection with the solicitation of proxies
in the form enclosed herewith for use at the Annual Meeting of Stockholders to
be held on June 19, 1997 (the "Annual Meeting") at 10:30 a.m., PDT, for the
purposes of: (1) electing one Class I director to serve until the 2000 annual
meeting of stockholders and until his successor is elected and has qualified;
(2) ratifying the appointment of Ernst & Young LLP as the Company's independent
public accountants for the fiscal year ending December 31, 1997; and (3)
transacting such other business as may properly be brought before the Annual
Meeting or any adjournments thereof. A copy of the Company's 1996 Annual Report
to Stockholders and this Proxy Statement and accompanying proxy card will be
first mailed to stockholders on or about May 7, 1997.
This solicitation is made on behalf of the Board of Directors of the
Company. Costs of solicitation will be borne by the Company. Directors,
officers and employees of the Company may also solicit proxies by telephone,
telegraph, fax or personal interview. The Company will reimburse banks,
brokerage firms and other custodians, nominees and fiduciaries for reasonable
expenses incurred by them in sending proxy material to stockholders. The
Company has retained American Stock Transfer & Trust Company to assist in the
solicitation of proxies with respect to shares of Common Stock held of record by
brokers, nominees and institutions. The estimated cost of the services of
American Stock Transfer & Trust Company, is $3,000, plus expenses.
The Company's principal executive offices are located at 12020 Chandler
Boulevard, Suite 200, North Hollywood, California 91607.
Shares Entitled to Vote and Required Vote
The outstanding Common Stock, $.01 par value, of the Company ("Common
Stock") constitutes the only class of securities of the Company entitled to vote
at the Annual Meeting. Stockholders of record of the Common Stock at the close
of business on May 5, 1997 are entitled to notice of, and to vote at, the Annual
Meeting. At that date, 8,454,690 shares of Common Stock were outstanding. The
presence at the Annual Meeting, in person or by proxy, of a majority of the
shares of the Common Stock issued and outstanding on May 5, 1997, will
constitute a quorum. Each share of Common Stock is entitled to one vote.
Voting Procedures
A proxy card is enclosed for your use. You are solicited on behalf of the
Board of Directors to sign, date and return the proxy card in the accompanying
envelope, which is postage prepaid if mailed in the United States.
1
<PAGE>
You have choices on each of the matters to be voted upon at the Annual
Meeting. Concerning the election of the Class I director, by checking the
appropriate box on your proxy card you may: (a) vote for such director nominee;
or (b) withhold authority to vote for such director nominee. Concerning the
ratification of the selection of Ernst & Young LLP as the Company's independent
public accountants you may: (a) vote for such ratification; (b) vote against
such ratification; or (c) abstain from such ratification.
Unless contrary instructions are indicated on the proxy, all shares
represented by valid proxies received pursuant to this solicitation (and not
revoked before they are voted) will be voted at the Annual Meeting FOR (i) the
election of the Class I director nominee to the Board listed herein and (ii)
ratification of the selection of Ernst & Young LLP as the Company's independent
public accountants. With respect to any other business which may properly come
before the Annual Meeting and be submitted to a vote of stockholders, proxies
received by the Board of Directors will be voted in accordance with the best
judgment of the designated proxy holders.
Shares represented by proxies that reflect abstentions or "broker non-
votes" (i.e., shares held by a broker or nominee which are represented at the
Annual Meeting, but with respect to which such broker or nominee is not
empowered to vote on a particular proposal) will be counted as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum. The Class I director nominee shall be elected by a plurality of the
votes of the shares present or represented by proxy at the Annual Meeting and
entitled to vote on the election of a director.
Stockholders may vote by either completing and returning the enclosed proxy
card prior to the Annual Meeting, voting in person at the Annual Meeting, or
submitting a signed proxy card at the Annual Meeting.
Your vote is important. Accordingly, you are urged to sign and return the
accompanying proxy card whether or not you plan to attend the meeting.
You may revoke your proxy at any time before it is actually voted at the
Annual Meeting by delivering written notice of revocation to the Secretary of
the Company at 12020 Chandler Boulevard, Suite 200, North Hollywood, California
91607, by submitting a later dated proxy, or by attending the Annual Meeting and
voting in person. Attendance at the Annual Meeting will not, by itself,
constitute revocation of the proxy. You may also be represented by another
person present at the Annual Meeting by executing a form of proxy designating
such person to act on your behalf.
Votes cast at the Annual Meeting will be tabulated by the persons appointed
by the Company to act as inspectors of election for the Annual Meeting.
2
<PAGE>
PROPOSAL NO. 1:
ELECTION OF NOMINEE TO BOARD OF DIRECTORS
General Information
The Board of Directors of the Company is currently comprised of six members
divided into three classes serving staggered terms of three years each.
Pursuant to the Company's Certificate of Incorporation and Bylaws, the term of
office of one class of directors expires each year and at each annual meeting
the successors of the class whose term is expiring in that year are elected to
hold office for a term of three years and until their successors are elected and
have qualified. The current terms of two Class I directors expire at the Annual
Meeting in 1997, two Class II directors expire at the annual meeting of
stockholders in 1998 and two Class III directors expire at the annual meeting of
stockholders in 1999. Mr. Horton, a Class I director, has informed the Company
that he will not be standing for re-election at the Annual Meeting. At this
time, the Company does not have a candidate to fill the second Class I position.
Pursuant to the Company's Bylaws and the Delaware General Corporation Law
("DGCL"), a vacancy on the Board of Directors may be filled by the remaining
directors, subject to the designation of the BCI Affiliate (as defined herein),
as described below. Any director elected by the remaining directors to fill
the Class I vacancy shall hold office for the designated term of a Class I
director (i.e., until the annual meeting of stockholders in 2000) and until such
time as a successor has been elected and qualified.
In the absence of instructions to the contrary, votes will be cast for the
election of the following individual as a director pursuant to the proxies
solicited hereby. In the event the nominee is unable or declines to serve as a
director at the time of the Annual Meeting, the proxy will be voted for any
substitute nominee selected by the current Board of Directors. However, the
proxy cannot be voted for a greater number of persons than the number of
nominees designated by the Board of Directors. Management has no reason to
believe, at this time, that the person named will be unable or will decline to
serve if elected, and the nominee has informed the Company that he will serve if
elected.
Under the Company's Bylaws and the DGCL, nominations of persons for
election to the Board, other than those made by or at the direction of the
Board, may be made at the Annual Meeting only if pursuant to a timely notice
delivered or mailed to the Secretary of the Company. To be timely, a
stockholder's notice must be delivered to the secretary at the Company's
principal executive offices not less than the close of business on the 120th
calendar day in advance of the date the Company's proxy statement was released
to security holders in connection with the previous year's annual meeting
provided, however, that if no annual meeting was held in the previous year a
proposal shall be received by the Company a reasonable time before the
solicitation is made. A notice of nomination must set forth certain information
as required under the Company's Bylaws and the DGCL.
As a result of a non-cash redemption of certain shares of senior preferred
stock of the Company held by Delaware State Employees' Retirement Fund,
Declaration of Trust for Defined Benefit Plans of ICI American Holding Inc. and
Declaration of Trust for Defined Benefit Plans of Zeneca Holding Inc.
(collectively, the "Pecks Affiliate") and by BCI Growth, III, L.P. (the "BCI
Affiliate" and, together with the Pecks Affiliate, the "Affiliate") in
connection with the Company's initial public offering in September 1996, the
Company and each Affiliate agreed that each Affiliate has the right to designate
one director to the Board of Directors, and the Company has agreed to nominate
such designated director to the Board of Directors and to use all reasonable
efforts to cause the Board of Directors to
3
<PAGE>
recommend to the stockholders that such stockholders vote in favor of such
designated director. See "Certain Transactions--Reorganization". If the Pecks
Affiliate transfers in excess of 264,011 shares of Common Stock or if the BCI
Affiliate transfers in excess of 264,009 shares of Common Stock, then the
Company and such Affiliate have agreed that: (i) in the event the annual
meeting of stockholders at which such Affiliate's designated director is to be
placed on the ballot for election has not yet been held, such Affiliate will not
have the right to designate a director (and the Company shall not be required to
nominate such director); and (ii) in the event such annual meeting of
stockholders has been held, the Affiliate will, if requested by the Company, use
all reasonable efforts to cause such director to resign from the Board of
Directors. Mr. Cresci, a Class I director, is the director designated by the
Pecks Affiliate and has been recommended by the Board of Directors as a nominee
in this year's Annual Meeting as set forth below. Mr. Horton, a Class I
director, is the director designated by the BCI Affiliate. Mr. Horton has
informed the Company that he will not be standing for re-election at the Annual
Meeting. Neither the BCI Affiliate nor the Company presently has an alternate
candidate for nomination as a Class I director to replace Mr. Horton.
NOMINEE FOR ELECTION AS A DIRECTOR
<TABLE>
<CAPTION>
NOMINEE FOR DIRECTOR AGE PRESENT POSITION HELD DIRECTOR
- ----------------------------------- --- WITH THE COMPANY SINCE
--------------------- --------
<S> <C> <C> <C>
Robert Cresci /(1)/................ 53 Class I Director 1995
- ---------------------------
</TABLE>
/(1)/ Member of Audit Committee.
Robert Cresci: Mr. Cresci has been a Director of Film Roman since August
1995 and has been a Managing Director of Pecks Management Partners Ltd., an
investment management firm, since September 1990. Mr. Cresci currently serves on
the board of directors of Bridgeport Machines, Inc., Serv-Tech, Inc., EIS
International, Inc., Sepracor, Inc., Vestro Natural Foods, Inc., Olympic
Financial, Ltd., GeoWaste, Inc., Hitox, Inc., Natures Elements, Inc., Garnet
Resources Corporation, HarCor Energy, Inc., Meris Laboratories, Inc. and
Educational Medical, Inc.
<TABLE>
<CAPTION>
DIRECTORS CONTINUING IN OFFICE
DIRECTOR PRESENT POSITION TERM
NAME SINCE AGE WITH THE COMPANY EXPIRES
- ---- -------- --- ------------------ -------
<S> <C> <C> <C> <C>
Phil Roman....................... 1984 66 Class III Director 1999
Dixon Q. Dern /(1)/.............. 1995 68 Class III Director 1999
Dennis W. Draper /(1)/........... 1995 48 Class II Director 1998
Peter Mainstain /(2)/............ 1995 49 Class II Director 1998
- ---------------------------
</TABLE>
/(1)/ Member of Compensation Committee.
/(2)/ Member of Audit Committee.
4
<PAGE>
Phil Roman: Mr. Roman has been the Company's Chief Executive Officer since
the Company was founded in 1984. Phil Roman began his animation career in 1955
at The Walt Disney Company as an assistant animator on Sleeping Beauty. Over the
next 30 years, Mr. Roman worked at many of the major studios, including MGM
Animation and Warner Bros. Cartoons, and was an animator on such productions as
The Cat in the Hat, How the Grinch Stole Christmas, George of the Jungle,
Popeye, Snoopy Come Home and Lord of the Rings. Mr. Roman also directed 13 Emmy-
nominated Charlie Brown specials.
Dixon Q. Dern: Mr. Dern has been a Director of Film Roman since August
1995. Mr. Dern has practiced entertainment law for over 40 years and currently
owns and operates his own private practice which specializes in entertainment,
copyright and communications law.
Dennis W. Draper: Mr. Draper has been a Director of Film Roman since
August 1995 and has been an Associate Professor of Finance at the University of
Southern California's School of Business since 1977. Mr. Draper serves as
trustee of the Pacifica Funds.
Peter Mainstain: Mr. Mainstain has been a Director of Film Roman since
August 1995 and has been a partner of Tanner, Mainstain & Hoffer, an accountancy
corporation, since 1976.
Compensation of Directors
Directors receive $6,000 per year as compensation for serving on the Board
of Directors, $500 for attendance at each meeting of the Board of Directors and
$250 for attendance at each meeting of a committee of the Board of Directors.
In January 1996, Film Roman granted to certain non-employee directors,
specifically, Messrs. Dern, Draper and Mainstain, options to purchase 25,000
shares of Common Stock at an exercise price of $8.00 per share. These options
vest in equal installments of 20% over a period of five years commencing
September 1996.
Board of Directors and Committee Meetings
Board of Directors. Since the Company's incorporation in May 1996, the
Board of Directors met three times, and each of the directors attended all of
the meetings of the Board of Directors and of the committees on which the
director served.
Audit Committee. The Audit Committee of the Board of Directors is
presently comprised of Messrs. Cresci and Mainstain. Mr. Cresci chairs the
committee. As directed by the Board of Directors, the functions of the Audit
Committee include reviewing, monitoring and making recommendations to the Board
of Directors with respect to: (a) the policies and procedures of the Company and
management in maintaining the Company's books and records and furnishing
necessary information to the Company's independent public accountants, (b) the
adequacy and implementation of the Company's internal controls, (c) the adequacy
and competency of the accounting related personnel, (d) the audit reports
submitted by the independent public accountants and taking such action in
respect of such reports as the Audit Committee deems appropriate and (e)
annually recommending to the Board of Directors for appointment by the Board of
Directors independent public accountants as auditors of the books, records and
accounts of the Company. During the fiscal year ended December 31, 1996, the
Audit Committee held one meeting.
5
<PAGE>
Compensation Committee. The Compensation Committee of the Board of
Directors is presently comprised of Messrs. Dern, Draper and Horton. Mr. Draper
chairs the Compensation Committee. Mr. Horton's participation in the
Compensation Committee will terminate as of his resignation from the Board of
Directors effective as of the date of the Annual Meeting. As directed by the
Board of Directors, the functions of the Compensation Committee include ensuring
that the officers and management personnel of the Company are compensated in
terms of salaries, supplemental compensation and benefits which are internally
equitable and externally competitive, and administering the Company Stock Option
Plan. During the fiscal year ended December 31, 1996, the Compensation Committee
held one meeting.
COMPLIANCE WITH SECTION 16(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership (Forms 3, 4
and 5) with the Securities and Exchange Commission. Officers, directors and
greater-than-ten-percent holders are required to furnish the Company with copies
of all such forms which they file.
To the Company's knowledge, based solely on the Company's review of such
reports or written representations from certain reporting persons, the Company
believes that during the fiscal year ended December 31, 1996 all filing
requirements applicable to its officers, directors, greater-than-ten-percent
beneficial owners and other persons subject to Section 16(a) of the Exchange Act
were complied with.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR THE DIRECTOR
NOMINATED IN PROPOSAL NO. 1.
6
<PAGE>
PROPOSAL NO. 2:
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of the Audit Committee, has
appointed Ernst & Young LLP as the Company's independent public accountants for
the fiscal year ending December 31, 1997. Ernst & Young LLP has been the
Company's independent public accountants since 1994. A representative of Ernst
& Young LLP will be present at the Annual Meeting and will be given an
opportunity to make a statement and answer questions. This appointment is being
submitted for ratification at the Annual Meeting. If the appointment is not
ratified, the appointment will be reconsidered by the Board of Directors,
although the Board of Directors will not be required to appoint different
independent public accountants for the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF ERNST &
YOUNG LLP AS THE COMPANY'S INDEPENDENT
PUBLIC ACCOUNTANTS FOR THE FISCAL
YEAR ENDING DECEMBER 31, 1997 AS
SET FORTH IN PROPOSAL NO. 2.
7
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Set forth in the following table is the beneficial ownership of the
Company's Common Stock as of April 30, 1997, for (1) each person known by the
Company to own beneficially 5% or more of the Company's Common Stock, (2) each
person who is currently a director of the Company, including the nominee for
election as a director of the Company, (3) each of the Named Executive Officers
(as defined on page 11), and (4) all current directors and executive officers of
the Company, as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP (1)
-----------------------------------
NUMBER OF
NAME SHARES PERCENT
- -------------------------------------------- ------------------------ --------
<S> <C> <C>
BCI Growth III, L.P. (2).................... 1,033,969 12.2%
Pecks Management Partners Ltd.(3)........... 1,033,971 12.2
Phil Roman (4) (5).......................... 3,104,050 36.6
William Schultz (5) (6)..................... 80,000 *
Jon F. Vein (5) (7)......................... 13,000 *
Jacqueline Blum (5) (8)..................... 8,750 *
Gregory Arsenault (5) (9)................... 9,750 *
Robert J. Cresci (10)....................... 1,033,971 12.2
Dixon Q. Dern (11).......................... 5,100 *
Dennis W. Draper (12)....................... 5,000 *
Theodore T. Horton, Jr. (13)................ 1,033,969 12.2
Peter Mainstain (14)........................ 7,500 *
All directors and executive officers as a
Group (10 persons) (10)(13).............. 5,301,090 61.6%
- ----------------------------------------------------------------------------------
</TABLE>
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to options which are currently exercisable, or will become exercisable within
60 days of April 30, 1997, are deemed outstanding for computing the
percentage of the person or entity holding such securities but are not
outstanding for computing the percentage of any other person or entity.
Except as indicated by footnote, and subject to the community property laws
where applicable, the persons named in the table above have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
(2) Based on Schedule 13G filed by Teaneck Associates L.P., Teaneck Associates
L.P., is the sole general partner of BCI Growth III, L.P. BCI Advisors, Inc.,
the investment advisor to BCI Growth III, L.P., has sole investment and
voting power with respect to the shares beneficially owned by BCI Growth III,
L.P. Mr. Horton, a director of the Company, is a general partner of Teaneck
Associates L.P., and a Managing Director of BCI Advisors, Inc. The mailing
address for BCI Growth III, L.P. is c/o BCI Advisors, Inc., Glenpointe Centre
West, Teaneck, New Jersey, 07666. Teaneck Associates L.P. and BCI Advisors,
Inc. disclaim beneficial ownership of such shares.
(3) Based on Schedule 13G filed by Pecks Management Partners, Ltd. 698,039,
197,546 and 138,386 of such shares are beneficially owned by Delaware State
Employees' Retirement Fund, Declaration of Trust for Defined Benefit Plans of
ICI American Holding Inc. and Declaration of Trust for Defined Benefit Plans
of Zeneca Holding Inc., respectively. Pecks Management Partners Ltd., as
investment manager for these beneficial owners, has sole investment and
voting power with respect to such shares. Mr. Cresci, a director of the
Company, is a managing partner of Pecks Management Partners Ltd. The mailing
address for Pecks Management Partners Ltd. is One Rockefeller Plaza, New
York, New York 10020. Pecks Management Partners Ltd. disclaims beneficial
ownership of such shares.
8
<PAGE>
(4) Includes: (i) 25,000 shares of Common Stock which may be acquired upon
exercise of employee stock options which will become exercisable within 60
days of April 30, 1997; and (ii) 300 shares of Common Stock held by Mr.
Roman's spouse for which Mr. Roman disclaims beneficial ownership.
(5) The mailing address for such person is: c/o Film Roman, Inc., 12020 Chandler
Boulevard, Suite 200, North Hollywood, California 91607.
(6) Includes 79,500 shares of Common Stock which may be acquired upon exercise
of employee stock options which are currently exercisable.
(7) Includes 12,500 shares of Common Stock which may be acquired upon exercise
of employee stock options which are currently exercisable.
(8) Represents 8,750 shares of Common Stock which may be acquired upon exercise
of employee stock options which are currently exercisable.
(9) Includes 8,750 shares of Common Stock which may be acquired upon exercise of
employee stock options which are currently exercisable.
(10) Represents 1,033,971 shares held by pension trusts and a pension fund which
are managed by Pecks Management Partners Ltd. and for which Mr. Cresci
disclaims any beneficial ownership. The mailing address for Mr. Cresci is c/o
Pecks Management Partners Ltd., One Rockefeller Plaza, New York, New York
10020.
(11) Includes 5,000 shares of Common Stock which may be acquired upon exercise
of stock options which are currently exercisable. The mailing address for
Mr. Dern is 1901 Avenue of the Stars, Suite 400, Los Angeles, California
90067.
(12) Represents 5,000 shares of Common Stock which may be acquired upon exercise
of stock options which are currently exercisable. The mailing address for
Mr. Draper is c/o The University of Southern California Business School,
University Park, Los Angeles, California.
(13) Represents 1,033,969 shares held by BCI Growth III, L.P. which is managed
by BCI Advisors, Inc. and for which Mr. Horton disclaims any beneficial
ownership. The mailing address for Mr. Horton is c/o BCI Advisors, Inc.,
Glenpointe Centre West, Teaneck, New Jersey 07666. Mr. Horton has informed
the Company that he will not be standing for re-election at the Annual
Meeting.
(14) Includes 5,000 shares of Common Stock which may be acquired upon exercise
of stock options which are currently exercisable. The mailing address for
Mr. Mainstain is c/o Tanner, Mainstain & Hoffer, 10866 Wilshire Boulevard,
10th Floor, Los Angeles, California 90024.
9
<PAGE>
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------- --- -------------------------------------
<S> <C> <C>
Phil Roman.......... 66 President and Chief Executive Officer
William Schultz..... 36 Executive Vice President
Jon F. Vein......... 33 Senior Vice President
Jacqueline Blum..... 35 Senior Vice President--Worldwide
Licensing and Marketing
Gregory Arsenault... 39 Senior Vice President--Finance and
Administration
</TABLE>
In addition to Mr. Roman whose biography appears on page 5, the following
persons are executive officers of the Company.
William Schultz. In 1989, Mr. Schultz joined the Company as a Vice
President and in 1993 was promoted to Executive Vice President. Mr. Schultz
currently oversees production and development, as well as the Company's
international division, and coordinates new business opportunities. Prior to
joining the Company, Mr. Schultz was employed by New World Entertainment, where
he served in a variety of positions including Production Controller and Director
of Development at the animation studio Marvel Productions, a subsidiary of New
World Entertainment. Mr. Schultz received his Bachelor of Science degree from
the University of Illinois at Champaign--Urbana in 1982.
Jon F. Vein. In February 1995, Mr. Vein joined Film Roman as a Senior Vice
President where he oversees business and legal affairs for the Company. Mr.
Vein also established and oversees the Company's feature film and interactive
divisions. Prior to joining the Company, Mr. Vein practiced entertainment law
at Dern & Donaldson from 1990 to 1993 and at Dern & Vein from 1993 to 1995. Mr.
Vein received his Bachelor of Science degree in electrical engineering-computer
science and material sciences engineering from University of California at
Berkeley in 1986 and his Juris Doctor degree from The Harvard Law School in
1989.
Jacqueline Blum. Ms. Blum joined the Company in 1993 as a Vice President
to establish and oversee the Company's licensing and merchandising division. In
1996, she was promoted to Senior Vice President. Ms. Blum also oversees the
Company's publicity and creative services departments. Prior to joining the
Company, Ms. Blum co-founded Imagination Factory, a licensing and merchandising
agency, in 1991. Previously, Ms. Blum was a principal of Brentwood Licensing
Properties, handling television packaging and merchandising of the multi-million
dollar property Kliban's Cat.
Gregory Arsenault. Mr. Arsenault joined the Company in 1991 as Accounting
Manager, served as Controller for two years, served as Vice President of Finance
for two years and was promoted to Senior Vice President--Finance and
Administration in 1996. Mr. Arsenault oversees the Company's accounting
department. Prior to joining Film Roman, Mr. Arsenault served as an accounting
systems consultant for LIVE Entertainment. Mr. Arsenault received his Bachelor
of Science degree in accounting from the University of Southern California in
1980.
10
<PAGE>
EXECUTIVE COMPENSATION
The following table provides for the periods shown certain summary
information concerning compensation paid or accrued by the Company to or on
behalf of the Company's Chief Executive Officer and each of the four highest
paid executive officers of the Company (collectively, the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- -----------------
NAME AND OTHER ANNUAL (SHARES
PRINCIPAL POSITION FISCAL COMPENSATION UNDERLYING
- ---------------------------------- YEAR SALARY ($) BONUS ($) ($)(1) OPTIONS (#)(2)
------ --------- --------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Phil Roman........................ 1996 $331,250 ___ $57,851 125,000
President and Chief Executive 1995 306,500 ___ 41,974 ___
Officer 1994 247,500 ___ 36,413 ___
William Schultz................... 1996 $250,000 $40,000 ___ 155,000
Executive Vice President 1995 221,912 71,839 ___ 75,000
1994 188,827 47,185 ___ ___
Jon F. Vein....................... 1996 $158,424 ___ ___ 62,500
Senior Vice President 1995 128,800(3) ___ ___ ___
Jacqueline Blum................... 1996 $149,519 $10,000(4) ___ 43,750
Senior Vice President ---- 1995 123,962 ___ ___ ___
Worldwide Licensing 1994 109,346 ___ ___ ___
and Marketing
Gregory Arsenault................. 1996 $159,110 ___ ___ 43,750
Senior Vice President ---- 1995 144,160 ___ ___ ___
Finance and Administration 1994 103,680 ___ ___ ___
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Each individual in the table, other than Mr. Roman, received annually (i) a
contribution pursuant to the Company's 401(k) profit sharing plan amounting
to less than $2,100 and (ii) perquisites and other personal benefits,
securities or property aggregating less than $50,000 or 10% of the total
annual salary and bonus reported for such individual. On behalf of Mr.
Roman, the Company contributed (i) $2,375, $2,310 and $2,310 to the
Company's 401(k) profit sharing plan in 1996, 1995 and 1994, respectively;
(ii) $10,088, $28,358 and $27,374 in automobile insurance, service and lease
payments in 1996, 1995 and 1994, respectively, (iii) $26,500 in life
insurance premiums for 1996, and (iv) payments for personal travel and
accounting services which accounted for the remainder of Mr. Roman's other
annual compensation.
(2) The securities underlying the options are shares of Common Stock. For a
description of the terms pertaining to such options and other information
relating thereto, see "--Stock Option Plan" and "--Employment Agreements."
(3) Mr. Vein began employment with the Company in February 1995 and his annual
base salary for his first year of employment was $145,600.
(4) Ms. Blum received a $10,000 signing bonuses in 1996 following the
negotiation of her new employment agreement in December 1995.
11
<PAGE>
During the periods indicated above, none of the individuals listed above
received any awards under any long-term incentive plan, and the Company does not
have a pension plan.
401(k) Profit Sharing Plan
The Company has a defined contribution 401(k) Profit Sharing Plan which covers
substantially all of its employees. The plan became effective on January 1, 1991
and was amended effective January 1, 1992. Under the terms of the plan,
employees can elect to defer up to 15% of their wages, subject to certain
Internal Revenue Service limitations, by making voluntary contributions to the
plan. Additionally, the Company, at the discretion of management, can elect to
match up to 100% of the voluntary contributions made by its employees. For the
years ended December 31, 1994, 1995 and 1996, the Company contributed $73,103,
$93,081, and $104,923, respectively, to the plan on behalf of its employees.
Stock Option Plan
The Company has adopted the Stock Option Plan (the "Plan") under which awards
may be granted including incentive or non-qualified stock options. The Company
reserved 1,227,695 shares of Common Stock for issuance thereunder. The Plan is
administered by the Board of Directors and/or the Compensation Committee which
sets the terms and provisions of the awards granted under the Restated Plan.
Incentive stock options may only be awarded to officers and other full-time
employees of the Company to promote long-term performance of the Company and
specifically, to retain and motivate senior management in achieving a sustained
increase in shareholder value. Non-qualified options may be awarded to
directors, officers, other employees, consultants and other key persons who
provide services to the Company. Currently, the Plan has no pre-set formula or
criteria for determining the number of options that may be granted. The
Compensation Committee reviews and evaluates the overall compensation package of
the executive officers and determines the awards based on the overall
performance of the Company and the individual performance of the executive
officers.
As of December 31, 1996, 856,375 shares of Common Stock were reserved for
future issuance under the Plan.
Set forth below is a table describing the options granted by the Company to
each of the Named Executive Officers during the year ended December 31, 1996.
12
<PAGE>
The following table sets forth certain information regarding grants of stock
options made to the Named Executive Officers during the fiscal year ended
December 31, 1996, including information as to the potential realizable value of
such options at assumed annual rates of stock price appreciation for the 10 year
option terms.
<TABLE>
<CAPTION>
OPTION GRANTS DURING FISCAL YEAR ENDED DECEMBER 31, 1996
Potential Realizable
INDIVIDUAL Value at Assume
OPTION GRANT Annual Rates of
Stock Price Appreciation
Individual Option Grant For Option Term (1)
---------------------------------------------------------------------- ------------------------
PERCENT OF
NUMBER OF TOTAL
SHARES OPTIONS MARKET
UNDERLYING GRANTED TO EXERCISE PRICE AT
NAME AND OPTIONS EMPLOYEES PRICE GRANT EXPIRATION
PRINCIPAL POSITION GRANTED(2) IN PERIOD PER SHARE DATE DATE 5% 10%
- ----------------------------- ------------- ------------ --------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Phil Roman
President and Chief
Executive Officer.......... 125,000 15.9% $8.52 $8.52 2006 $669,773 $1,697,333
William Schultz
Executive Vice
President.................. 155,000 19.8% $8.00 $8.00 2006 $779,824 $1,976,238
Jon F. Vein
Senior Vice President...... 62,500 8.0% $8.00 $8.00 2006 $314,445 $ 796,870
Jacqueline Blum
Senior Vice President...... 43,750 5.6% $8.00 $8.00 2006 $220,112 $ 557,809
Gregory Arsenault
Senior Vice President...... 43,750 5.6% $8.00 $8.00 2006 $220,112 $ 557,809
- -------------------------------
</TABLE>
(1) The potential realizable value assumes a rate of annual compound stock price
appreciation of 5% and 10% from the date the option was granted over the
full option term. These assumed annual compound rates of stock price
appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of
future Common Stock prices.
(2) The securities underlying the options are shares of Common Stock. For a
description of the terms pertaining to such options and other information
relating thereto, see "--Stock Option Plan" and "--Employment Agreements."
13
<PAGE>
Employment Agreements
The Company has entered into the following employment agreements with the
Named Executive Officers:
Mr. Roman. On August 7, 1995, Mr. Roman and the Company entered into an
employment agreement that expires on August 7, 2000. Pursuant to the terms of
the agreement, Mr. Roman shall serve as the Company's President and Chief
Executive Officer, and the Company will pay Mr. Roman a base salary equal to
$325,000 per year. In the event the Company attains certain earnings goals, Mr.
Roman is entitled to receive an additional $25,000 as base salary during the
fourth year of employment and an additional $50,000 per year as base salary
during the fifth year of employment.
Mr. Roman is also entitled to an incentive bonus for each calendar year
based on the relationship of earnings to earnings goals for such calendar year.
In the event the Board of Directors and/or the Compensation Committee adopts a
management bonus plan, Mr. Roman's employment agreement is expected to be
amended to remove such incentive bonus provisions and Mr. Roman will become
eligible to receive a bonus under the Company's management bonus plan. The
Company is entitled to terminate Mr. Roman's agreement upon his death or
disability or "for cause" (e.g., commission of a felony, gross negligence or
material breach of his employment agreement).
Mr. Schultz. On August 7, 1995, Mr. Schultz and the Company entered into
an employment agreement that expires on August 7, 1998, and may be extended, at
the Company's option, for up to two additional one-year periods. Pursuant to the
terms of the agreement, Mr. Schultz shall serve as the Company's Executive Vice
President, and the Company will pay Mr. Schultz a base salary equal to (i)
$250,000 per year for each of the first three years of employment, (ii) $275,000
during the fourth year of employment, if his contract is extended to a fourth
year and, (iii) $300,000 during the fifth year of employment, if his contract is
extended to a fifth year. In the event the Company meets or exceeds certain
earnings goals, Mr. Schultz is entitled to receive an additional $25,000 per
year as base salary during each of the fourth and fifth years of employment. Mr.
Schultz is also entitled to an incentive bonus for each calendar year based on
the relationship of earnings to earnings goals for such calendar year. In the
event the Board of Directors and/or the Compensation Committee adopts a
management bonus plan, Mr. Schultz's employment agreement is expected to be
amended to remove such incentive bonus provisions and Mr. Schultz will become
eligible to receive a bonus under the Company's management bonus plan. The
Company is entitled to terminate Mr. Schultz's agreement upon his death or
disability, "for cause" (e.g., commission of a felony, gross negligence or
material breach of his employment agreement) or "without cause" (reasons other
than for his death or disability or for cause). Mr. Schultz is entitled to
terminate the agreement if Mr. Roman ceases to be President of the Company and
Mr. Schultz is not selected to replace him or if Mr. Schultz is required to
report to any other person other than Mr. Roman at any time. Pursuant to the
terms of Mr. Schultz's agreement, the Company granted Mr. Schultz options for
the purchase of 75,000 shares of Common Stock at an exercise price of $.01 per
share and options for the purchase of 155,000 shares of Common Stock at an
exercise price of $8.00 per share.
Mr. Vein. On February 14, 1995, Mr. Vein and the Company entered into an
employment agreement that expired on February 12, 1997. The Company is currently
in discussions with Mr. Vein regarding a new employment contract. Pursuant to
the terms of the expired agreement, Mr. Vein served (and continues to serve) as
a Senior Vice President of the Company, and the Company paid Mr. Vein a base
salary equal to $145,600 during the first year of employment and $160,160 during
the second
14
<PAGE>
year of employment. The Company is entitled to terminate Mr. Vein's agreement
upon his death or disability, "for cause" (e.g., commission of a felony, gross
negligence or material breach of his employment agreement) or "without cause"
(reasons other than for his death or disability or for cause). Mr. Vein is
entitled to terminate the agreement if Mr. Roman ceases to be the President of
the Company. Pursuant to the terms of Mr. Vein's agreement, the Company granted
Mr. Vein options for the purchase of 62,500 shares of Common Stock at an
exercise price of $8.00 per share.
Ms. Blum. On December 15, 1995, Ms. Blum and the Company entered into an
employment agreement that expires on January 1, 1998, and may be extended, at
the Company's option, for an additional year. Pursuant to the terms of the
agreement, Ms. Blum shall serve as the Company's Senior Vice President--
Worldwide Licensing and Marketing, and the Company will pay Ms. Blum a base
salary equal to $150,000 during the first year of employment, $157,500 during
the second year of employment, and, if such employment is extended by the
Company, $165,375 during the third year of employment. At the end of each
calendar year, Ms. Blum is eligible to receive a bonus in an amount determined
by the Board of Directors. The Company is entitled to terminate Ms. Blum's
agreement upon her death or disability, "for cause" (e.g., commission of a
felony, gross negligence or material breach of her employment agreement) or
"without cause" (reasons other than for her death or disability or for cause).
Pursuant to the terms of Ms. Blum's agreement, the Company granted Ms. Blum
options for the purchase of 43,750 shares of Common Stock at an exercise price
of $8.00 per share.
Mr. Arsenault. On January 2, 1996, Mr. Arsenault and the Company entered
into an employment agreement that expires on January 2, 1999, and may be
extended at the Company's option for one additional year. Pursuant to the terms
of the agreement, Mr. Arsenault shall serve as the Company's Senior Vice
President--Finance and Administration and the Company will pay Mr. Arsenault a
base salary equal to $160,160 during the first year of employment, $168,168
during the second year of employment and $176,576 during the third year of
employment. If Mr. Arsenault's agreement is extended to include a fourth year
of employment, Mr. Arsenault's base salary during such year will be $194,234.
At the end of each calendar year, Mr. Arsenault is eligible to receive a bonus
in an amount determined by the Board of Directors. The Company is entitled to
terminate Mr. Arsenault's agreement upon his death or disability, "for cause"
(e.g., commission of a felony, gross negligence or material breach of his
employment agreement) or "without cause" (reasons other than for his death or
disability or for cause). Mr. Arsenault is entitled to terminate the agreement
if Mr. Roman ceases to be President of the Company. Pursuant to the terms of
Mr. Arsenault's agreement, the Company granted Mr. Arsenault options for the
purchase of 43,750 shares of Common Stock at an exercise price of $8.00 per
share.
15
<PAGE>
The following table relates to options exercised during fiscal year 1996
and options outstanding at December 31, 1996:
AGGREGATED OPTION EXERCISES IN FISCAL YEAR ENDED
DECEMBER 31, 1996 AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Shares Underlying Unexercised "In-The-Money"
Acquired Value Options as of Options as of
Name On Exercise (#) Realized December 31, 1996(#) December 31, 1996
- -------------------- --------------- -------- ----------------------- --------------------
Exercisable Unexercisable Exercisable Unexercisable
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Phil Roman.......... -- -- -- 125,000 -- --
William Schultz..... 3,000 $19,845 72,000 155,000 $548,640 --
Jon F. Vein......... -- -- -- 62,500 -- --
Jacqueline Blum..... -- -- -- 43,750 -- --
Gregory Arsenault... -- -- -- 43,750 -- --
</TABLE>
(1) Amount represents the difference between the aggregated exercise prices of
unexercised options and the $7.63 closing sale price of the Common Stock on
the Nasdaq National Market on December 31, 1996.
16
<PAGE>
COMPENSATION COMMITTEE REPORT
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors is presently comprised
of Messrs. Dern, Draper and Horton. Mr. Draper chairs the Compensation
Committee. No executive officer of the Company either served in 1996 or now
serves as a member of the Board of Directors or compensation committee of any
entity which has one or more executive officers who serve on the Board or are
members of the Compensation Committee. Mr. Horton, who has informed the Company
that he has declined to run for re-election at the Annual Meeting, is a Managing
Director of BCI Advisors, Inc., which is a major stockholder of the Company.
Mr. Dern provides legal services to the Company on an ongoing basis and Mr.
Draper provides independent financial consulting services to the Company on an
ongoing basis. Each of Mr. Dern and Mr. Draper receive customary fees for such
services. See "Certain Transactions--Related Party Transactions."
Report on Annual Compensation of Executive Officers
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, (the "Securities
Act"), or the Exchange Act, that might incorporate future filings, including
this Proxy Statement, in whole or in part, the following Compensation Committee
Report on Executive Compensation and the Stock Performance Graph on Page 19
shall not be incorporated by reference into any such filings.
* * * * * *
The Compensation Committee of the Board of Directors is an advisory
committee to the Board and is responsible for reviewing the compensation of the
senior management team and for making recommendations regarding compensation.
Compensation Philosophy
The Compensation Committee's philosophy is to provide sufficient
compensation to attract, motivate, and retain skilled management while linking
that compensation to corporate performance and increases in stockholder wealth
where possible.
The Compensation Committee, with the assistance of the Chief Executive
Officer, determines the compensation of the executive officers based on its
evaluation of the Company's overall performance, primarily based on the
Company's operating performance compared with the Company's operating plan, as
well as various qualitative factors such as the extent to which the executive
officer has contributed to forming a strong management team, the growth and
development of proprietary programming and other factors which the Compensation
Committee believes are indicative of the Company's ongoing ability to achieve
its long-term growth and profit objectives. With respect to each executive, the
Compensation Committee focuses on that individual executive's areas of
responsibility and his contribution toward achieving corporate objectives.
Compensation Program
Consistent with achieving the Company's long-term objectives, executive
compensation packages are generally comprised of two components--base
compensation and stock options. The base compensation portion of the
compensation package is determined by considering such factors as breadth of
responsibility, areas of expertise and experience, and comparable compensation
in the industry. As
17
<PAGE>
is the custom in the industry, most of the senior management team is under some
form of employment contract with the Company. The stock option incentive
portion of the compensation package has been implemented through the Company's
Stock Option Plan (the "Plan"). Each member of the senior management team has
been granted options which are intended to provide each individual with a strong
economic interest in the appreciation of the stock price. The Plan permits the
Board of Directors to grant options to other key employees to provide similar
incentives. A number of key employees have been granted such options.
While the Compensation Committee might consider performance bonuses in the
event of exceptional contributions to enhance corporate performance, no such
consideration was made in 1996. Mr. Schultz, the Company's Executive Vice
President, received a pre-determined bonus in 1996 of $40,000 as a result of the
renegotiation and termination of his then existing employment contract.
The 1996 base salaries for Mr. Roman, the Company's Chief Executive Officer
and Mr. Schultz, the Company's Executive Vice President, were $331,250 and
$250,000 respectively. As further consideration, in May 1996, Mr. Roman was
granted options to purchase 125,000 shares of Common Stock at an exercise price
of $8.52 per share, which options vest in 20% installments over a five-year
period commencing May 1997. In January 1996, Mr Schultz was granted options to
purchase 155,000 shares of Common Stock at an exercise price of $8.00 per share,
62,500 shares of which vest in 20% installments over a five-year period
commencing September 1996 and the remainder of which are subject to certain
performance vesting requirements set forth in his option agreement.
To the extent readily determinable and as one of the factors in its
consideration matters, the Compensation Committee considers the anticipated tax
treatment of the Company and to its executives of various payments and benefits.
Some types of compensation payments and their deductibility depend upon the
timing of an executive's vesting or exercise of previously granted rights,
qualification of the Compensation Committee and other reasons. Further,
interpretations of and changes in the tax laws and other factors beyond the
Compensation Committee's control also affect the deductibility of compensation.
For these and other reasons, the Compensation Committee will not necessarily
limit executive compensation to that amount deductible under Section 162(m) of
the Internal Revenue Code of 1986, as amended. The Compensation Committee will
consider various alternatives to preserving the deductibility of compensation
payments and benefits to the extent reasonably practicable and to the extent
consistent with its other compensation objectives.
By the Compensation Committee
/s/ Dennis W. Draper
Dennis W. Draper, Chairman
Dixon Q. Dern
Theodore T. Horton
18
<PAGE>
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the total cumulative return of
the Company's Common Stock since the Common Stock began trading on the Nasdaq
National Market on October 1, 1996 in connection with its initial public
offering through to December 31, 1996 to (a) the Standard & Poor's 500 Composite
Index ("S&P 500 Index"), and (b) the Standard and Poor's Entertainment Index
("S&P Entertainment Index").
COMPARISON OF 3 MONTH CUMULATIVE TOTAL RETURN/1/
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG FILM ROMAN INC., S&P 500 INDEX AND S&P ENTERTAINMENT
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period FILM ROMAN S&P S&P
(Fiscal Year Covered) INC. 500 INDEX ENTERTAINMENT
- --------------------- ---------- --------- -------------
<S> <C> <C> <C>
Measurement Pt- 10/01/96 $100 $100 $100
FYE 10/96 $ 76 $103 $100
FYE 11/96 $ 75 $111 $111
FYE 12/96 $ 76 $108 $104
</TABLE>
/1/ Assumes $100 was invested on October 1, 1996 in stock or on September 30,
1996 in index and assumes dividends are reinvested.
19
<PAGE>
CERTAIN TRANSACTIONS
Reorganization
The Company was incorporated in Delaware in May 1996 in order to hold all
of the outstanding capital stock of Film Roman, Inc., a California corporation
("Film Roman California"). At the time of its incorporation, the Company
conducted no operations. In a reorganization (the "Reorganization") which was
effected immediately prior to the completion of the Company's initial public
offering in October 1996 (the "Offering"), (i) a wholly-owned subsidiary of the
Company was merged with and into Film Roman California; (ii) each outstanding
share of Film Roman California common stock, no par value, of Film Roman
California ("California Common Stock") was converted into 1.25 shares of Common
Stock (including shares of California Common Stock to be issued immediately
prior to such merger upon exercise certain outstanding investor warrants to
purchase California Common Stock (the "Investor Warrants") and upon conversion
of all outstanding shares of Class B convertible preferred stock, $.01 par
value, of Film Roman California ("Convertible Preferred Stock")); (iii) each
outstanding share of Class A redeemable preferred stock, $.01 par value, of Film
Roman California ("California Redeemable Preferred Stock") was converted into
one share of Series A redeemable preferred stock, $.01 par value, of the Company
("Redeemable Preferred Stock"); and (iv) all outstanding employee options and
certain warrants for the purchase of California Common Stock, pursuant to the
anti-dilution provisions thereof, became options and warrants to purchase Common
Stock. As a result of the foregoing, Film Roman California became a wholly-
owned subsidiary of the Company and the stockholders of Film Roman California
became stockholders of the Company. The Reorganization was effected pursuant to
a Plan of Reorganization Agreement dated as of May 15, 1996, as amended, by and
among the Company, Film Roman California, the Affiliates and Phil Roman.
In connection with the Reorganization and the closing of the Offering, the
Company redeemed for cash $7.5 million liquidation preference of Redeemable
Preferred Stock plus accrued and unpaid dividends to the date of redemption
(collectively, the "Cash Redemption"). The remaining shares of Redeemable
Preferred Stock were redeemed for Common Stock (the "Non Cash Redemption") at a
redemption price of 1.3072 shares of Common Stock for each share of Redeemable
Preferred Stock, and accrued and unpaid dividends on such remaining shares of
Redeemable Preferred Stock were paid in cash to the date of redemption.
The Reorganization and the Non-Cash Redemption included the following
transactions: (i) 368,093 shares of California Redeemable Preferred Stock and
Investor Warrants to purchase 592,500 shares of California Common Stock held by
the BCI Affiliate were converted into 1,033,969 shares of Common Stock; (ii)
368,091 shares of California Redeemable Preferred Stock and Investor Warrants to
purchase 592,500 shares of California Common Stock held by the Pecks Affiliate
were converted into 1,033,971 shares of Common Stock; and (iii) 750,000 shares
of Convertible Preferred Stock, Investor Warrants to purchase 185,000 shares of
California Common Stock and 1,713,000 shares of California Common Stock held by
Mr. Roman were converted into 3,078,750 shares of Common Stock. In connection
with the Cash Redemption, each Affiliate received approximately $4.0 million in
cash, and, in connection with the conversion of the Convertible Preferred Stock,
Mr. Roman received approximately $0.7 million in cash, representing accrued and
unpaid dividends to the date of conversion.
In connection with the Non-Cash Redemption, each of the BCI Affiliate and
the Pecks Affiliate has the right to designate one director to the Board. See
"Proposal No. 1: Election of Board of Directors--General Information."
20
<PAGE>
1996 Commitment
Due to the Company's increase in production of proprietary programming and
the number of series in process, the Company increased its use of cash in 1996.
In order to supplement cash resources prior to the Offering, in September 1996,
the Company secured a commitment (the "1996 Commitment") from certain of its
existing stockholders to purchase up to $3.0 million of 12% Senior Secured Notes
of Film Roman California due December 20, 1996 ("Senior Notes"). No Senior
Notes have been or will be issued pursuant to the 1996 Commitment. As
consideration for the receipt of the 1996 Commitment, the Company issued
Warrants exercisable for 72,066 shares of Common Stock at an exercise price of
$7.00 per share (the "Warrants"). Such Warrants were issued to Mr. Roman (for
the purchase of 12,014 shares of Common Stock), to the BCI Affiliate (for the
purchase of 30,030 shares of Common Stock) and to the Pecks Affiliate (for the
purchase of 30,022 shares of Common Stock). The Warrants are exercisable
beginning September 1997 and expire in September 2001. The Warrants will be
immediately exercisable upon a merger or consolidation involving the Company
(other than the Reorganization) or in the event of a sale of all or
substantially all of the assets of the Company.
Related Party Transactions
Mr. Dern provides legal services to the Company on a regular basis and
receives customary fees for such services. In 1996, Mr. Dern was paid
approximately $91,000 for such services.
21
<PAGE>
OTHER INFORMATION
Other Matters at the Meeting
The Board of Directors does not know of any matters to be presented at the
Annual Meeting other than those mentioned in this Proxy Statement. If any other
matters are properly brought before the Annual Meeting, it is intended that the
proxies will be voted in accordance with the best judgment of the person or
persons voting such proxies.
Stockholder Proposals for 1998 Annual Meeting
Any stockholder who meets the requirements of the proxy rules under the
Exchange Act may submit to the Board of Directors proposals to be considered for
submission to the stockholders at the 1998 Annual Meeting. Any such proposal
must comply with the requirements of Rule 14a-8 under the Exchange Act and be
submitted in writing by notice delivered or mailed by first-class United States
mail, postage prepaid, to the Corporate Secretary, Film Roman, Inc., 12020
Chandler Boulevard, Suite 200, North Hollywood, California 91607 and must be
received no later than January 7, 1998. Any such notice shall set forth: (a) the
name and address of the stockholder and the text of the proposal to be
introduced; (b) the number of shares of stock held of record, owned beneficially
and represented by proxy by such stockholder as of the date of such notice; and
(c) a representation that the stockholder intends to appear in person or by
proxy at the meeting to introduce the proposal specified in the notice. The
chairman of the meeting may refuse to acknowledge the introduction of any
stockholder proposal not made in compliance with the foregoing procedures. In
addition, the Company's Bylaws provide for notice procedures to recommend a
person for nomination as a director and to propose business to be considered by
stockholders at a meeting.
By Order of the Board of Directors
/s/ Phil Roman
Phil Roman
President and Chief Executive Officer
North Hollywood, California
May 7, 1997
22
<PAGE>
- --------------------------------------------------------------------------------
PROXY CARD
FILM ROMAN, INC.
12020 CHANDLER BOULEVARD, NORTH HOLLYWOOD, CA 91607
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS--JUNE 19, 1997
Phil Roman, Dixon Q. Dern and Dennis W. Draper (the "Proxy Holders"), or any
of them, each with the power of substitution, hereby are authorized to represent
the undersigned, with all powers which the undersigned would possess if
personally present, to vote the shares of Film Roman, Inc. Common Stock of the
undersigned at the Annual Meeting of Stockholders of Film Roman, Inc., (the
"Company") to be held at the Sheraton Universal Hotel, 333 Universal Terrace
Parkway, Universal City, California 91608, at 10:30 A.M., PDT, on Thursday, June
19, 1997, and at any adjournments of that meeting upon and in respect of the
following matters and in accordance with the following instructions, with
discretionary authority as to any and all other business that may properly come
before the meeting.
You are encouraged to specify your choices by marking the appropriate boxes,
SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. PLEASE MARK, SIGN AND
DATE THE REVERSE SIDE AND MAIL PROMPTLY IN THE ENCLOSED ENVELOPE.
Change of Address:
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
(If you have written in the above space, please
mark the corresponding box on the reverse side of
this card.)
[SEE REVERSE SIDE]
PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY USING THE ENCLOSED ENVELOPE.
<PAGE>
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
1. To elect one director to hold office until the Annual Meeting of
Stockholders in the year 2000.
WITHHOLD
FOR AUTHORITY NOMINEE: Robert Cresci
[_] [_]
[_] Please indicate if a change of address was given on the reverse side.
2. To ratify the selection of Ernst & Young LLP as independent public
accountants of the Company for the year ending December 31, 1997.
FOR AGAINST ABSTAIN
[_] [_] [_]
In their discretion, the Proxy Holders are authorized to vote upon such other
matters as may properly come before the Annual Meeting of Stockholders and at
any adjournments thereof. The Board of Directors at present knows of no other
business to be presented by or on behalf of the Company or the Board of
Directors at the Annual Meeting of Stockholders.
This Proxy Card will be voted as specified or, if no choice is specified, will
be voted FOR the election of the named nominee for director and FOR
ratification of the selection of Ernst & Young LLP as the independent public
accountants of the Company for the year ending December 31, 1997. The Board of
Directors recommends a vote FOR election of the nominee for director and FOR
proposal 2.
As of the date hereof, the undersigned hereby acknowledges receipt of the
Notice of Annual Meeting of Stockholders to be held June 19, 1997, the
accompanying Proxy Statement and the accompanying Annual Report of the Company
for the year ended December 31, 1996.
Signature(s): ________ Date: ___________ Signature(s): ________ Date: __________
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREON. IF THE STOCK IS
REGISTERED IN THE NAMES OF TWO OR MORE PERSONS, EACH SHOULD SIGN.
EXECUTORS, ADMINISTRATORS, TRUSTEES, GUARDIANS AND ATTORNEYS-IN-FACT
SHOULD ADD THEIR TITLES. IF SIGNER IS A CORPORATION, PLEASE GIVE FULL
CORPORATE NAME AND HAVE A DULY AUTHORIZED OFFICER SIGN, STATING TITLE.
IF SIGNER IS A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
