SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
|_| Preliminary proxy statement
|X| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Henry A. Singer, Esq., Morrison Cohen Singer Weinstein, LLP
750 Lexington Avenue, New York, New York 10022
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
|X| $0.00 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(l), or 14a-6(j)(2).
|_| $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions 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:
<PAGE>
- --------------------------------------------------------------------------------
|_| 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:
- --------------------------------------------------------------------------------
<PAGE>
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
ANNUAL MEETING OF SHAREHOLDERS OF TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
The undersigned acknowledges receipt of a Notice of Annual Meeting and of
an accompanying Proxy Statement, and hereby appoints Deborah J. Schrader and
Martin S. Fawer, and either of them, proxies with several powers of
substitution, to vote on behalf of the undersigned at the Annual Meeting of
Shareholders of TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC. (the "Company"),
to be held on January 11, 1999 or at any adjournment thereof, as indicated upon
the following matters as described in the Notice of Meeting and accompanying
Proxy Statement:
1. For election of four nominees for director listed below (unless
authority to vote is withheld as to all nominees by crossing out this Item, or
as to any individual nominee by crossing out his/her name below) to serve in the
two existing classes of the Board of Directors for staggered terms as described
in the accompanying Proxy Statement.
Class I Class II
------- --------
Robert E. Schrader David Lerner
Deborah J. Schrader Martin S. Fawer
2. To approve the appointment of Ernst & Young LLP as the independent
public accountants for the Company.
[___] FOR [___] AGAINST [___] ABSTAIN
3. Upon any other business that may properly come before the meeting or
any adjournment thereof, including the election of directors not named as
nominees if any of such nominees shall be unable to serve as a director by
reason of death, incapacity or for any other reason or for good cause will not
serve, according to the number of votes and as fully as the undersigned would be
entitled to vote if personally present, hereby revoking any prior proxy or
proxies. If more than one of the above-named proxies shall be present in person
or by substitute, both of the proxies so present and voting shall have and
either may exercise all the powers hereby granted.
<PAGE>
Continued from other side
Said proxies will withhold the vote on the election of directors if so
instructed under Item 1.
IF NO INSTRUCTION IS INDICATED, SAID PROXIES WILL VOTE IN FAVOR OF THE NOMINEES
LISTED IN PROPOSAL 1 AND IN FAVOR OF PROPOSAL 2 AND WILL USE THEIR DISCRETION
WITH RESPECT TO ANY MATTERS REFERRED TO IN ITEM 3.
Dated: ______________________, 199_
Please Date
Signature(s):
-------------------------------------
(Please sign under name exactly as it
appears on stock certificate)
___ Check here if you plan
to attend the meeting
<PAGE>
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
22681-22687 Old Canal Road
Yorba Linda, California 92687
(714) 974-7676
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
January 11, 1999
The Annual Meeting of Shareholders of Transition Analysis Component
Technology, Inc. (the "Company") will be held at Westchester Marriott Hotel, 670
White Plains Road, Tarrytown, New York 10591, on January 11, 1999 at 10:00 A.M.,
for the following purposes:
1. To elect to the Board of Directors two members to serve in a
class the term of which will expire at the next succeeding Annual Meeting
of Shareholders and to elect to the Board of Directors two members in a
class the term of which will expire at the Annual Meeting of Shareholders
following the next succeeding Annual Meeting of Shareholders, and, in each
case, until their successors shall be elected and shall qualify.
2. To approve the appointment of Ernst & Young LLP as the
independent public accountants for the Company.
3. To act upon any other business that may properly come before
the meeting.
The shareholders of record at the close of business on November 30, 1998
will be entitled to notice of and to vote at the Annual Meeting. The transfer
books of the Company will not be closed. Your attention is directed to the Proxy
Statement attached to this Notice for a discussion of the proposals to be acted
upon at the meeting.
Whether or not you plan to attend the meeting, kindly fill in, date and
sign the enclosed Proxy exactly as your name appears on your stock certificate,
and mail it promptly in the enclosed return envelope in order that your vote can
be recorded. The giving of this Proxy will not affect your right to vote in
person in the event you find it convenient to attend the meeting.
By Order of the Board of Directors
Deborah J. Schrader
Secretary
Dated: December 11, 1998
<PAGE>
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
22681-22687 Old Canal Road
Yorba Linda, California 92687
(714) 974-7676
PROXY STATEMENT
---------------
Solicitation and Use of Proxy
- -----------------------------
The enclosed Proxy is solicited by the Board of Directors of Transition
Analysis Component Technology, Inc. (the "Company" or "TACTech") for use at the
Annual Meeting of Shareholders of the Company to be held on January 11, 1999 or
at any adjournments thereof, for the purposes set forth in the attached Notice
of Meeting. This Proxy Statement and the Annual Report of the Company for the
fiscal year ended June 30, 1998 are being mailed to shareholders on or about
December 11, 1998. The Company previously mailed to shareholders the Quarterly
Report on Form 10-QSB for the nine-month period ended March 31, 1998.
The shares of common stock represented by each duly executed proxy
received by the Board of Directors before the Annual Meeting will be voted at
the Annual Meeting as specified in the proxy. A stockholder may withhold
authority to vote for all of the nominees by striking a line through such
nominees' names in the appropriate space on the accompanying proxy card or
withhold authority to vote for any individual nominee by striking a line through
such nominee's name in the appropriate space on the accompanying proxy card.
UNLESS INSTRUCTIONS TO THE CONTRARY ARE GIVEN, EACH PROPERLY EXECUTED PROXY WILL
BE VOTED FOR (i) THE ELECTION OF DIRECTORS NAMED IN THIS PROXY STATEMENT AND THE
FORM OF PROXY AND (ii) THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
AS THE COMPANY'S INDEPENDENT AUDITORS.
Any shareholder giving a Proxy may nevertheless revoke it at any time
prior to its use at the Meeting by filing with the Secretary of the Company an
instrument revoking it or by a duly executed proxy bearing a later date. In
addition, if the person executing the proxy is present at the meeting, he or she
may vote his or her shares in person. Proxies, if duly signed and received in
time for voting, and not so revoked, will be voted at the meeting. Where choices
are specified by a shareholder by means of the ballot provided on the Proxy for
that purpose, the Proxy will be voted in accordance with such specifications. In
the absence of such specifications, the Proxy will be voted for the election of
the four directors nominated by management to the classes described herein and
the appointment of auditors selected by the Board of Directors as set forth in
this Proxy Statement.
Under Delaware State law and the Charter and By-Laws of the Company for
purposes of determining whether a quorum is present, abstentions will be counted
and broker non-votes will not be counted. For purposes of determining whether
the vote required for the election of directors and for the appointment of
auditors selected by the Board of Directors, as set forth in this Proxy
Statement has been achieved, abstentions and broker non-votes will not be
counted.
The cost of soliciting proxies will be borne by the Company. In addition
to solicitation by the use of the mails, certain officers and regular employees
of the Company may solicit proxies personally and by telephone. The Company may
request banks, brokerage houses and custodians, nominees and fiduciaries to
forward soliciting material to their principals and will reimburse them for
their out-of-pocket expenses. The Company has also retained the firm of Regan &
Associates, Inc. to assist in solicitations for a fee of $1,000 plus
out-of-pocket disbursements.
<PAGE>
Outstanding Shares and Voting Rights
- ------------------------------------
As of November 30, 1998, the record date fixed for the determination of
shareholders entitled to vote at the Annual Meeting, there were outstanding
598,734 shares of common stock, par value $.01 per share, which constitute the
only outstanding securities of the Company having voting rights. Each
outstanding share of common stock is entitled to one vote on each matter to be
voted upon. One-third of the shares of common stock represented in person or by
proxy will constitute a quorum for the transaction of business.
SECURITY OWNERSHIP
------------------
Principal Security Holders
- --------------------------
The following table sets forth, as of November 30, 1998, information
concerning the beneficial ownership of voting securities of the Company by each
person who is known by management to own beneficially more than 5% of any class
of such securities:
<TABLE>
<CAPTION>
Name and Address Amount Beneficially Percent of
Title of Class of Beneficial Owner Owned Class
- -------------- ------------------- ----- -----
<S> <C> <C> <C>
Common Stacy J. Schrader 109,169 18.23%
666 Greenwich Street
New York, NY 10014
Common Robert M. Schrader 109,168 18.23%
24 Carhart Avenue
White Plains, NY 10602
Common Malcolm Baca 55,383 9.25%
2985 Zell Drive
Laguna Beach, CA 92651
</TABLE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation and By-Laws provide for a Board
of Directors consisting of not fewer than three nor more than ten members,
classified into three classes if there shall be nine or more directors, or two
classes if there shall be fewer than nine and more than three directors, in
either case with each class being as nearly as possible equal in size to the
others and with at least two directors in each class. The Board of Directors is
comprised of the following members in the following classes:
CLASS I CLASS II
(To Serve Until the (To Serve Until the
Annual Meeting of Annual Meeting of
Shareholders Following Shareholders Following
the end of Fiscal Year 2000) the end of Fiscal Year 1999)
---------------------------- ----------------------------
Robert E. Schrader Martin S. Fawer
Deborah J. Schrader David Lerner
2
<PAGE>
Under Proposal Number 1, therefore, shareholders will be asked to vote for
two nominees to Class I to serve until the next succeeding meeting of the
shareholders to be held following the 1999 fiscal year of the Company and two
nominees to Class II to serve until the meeting of shareholders to be held
following the 2000 fiscal year of the Company. The Class I nominees are Robert
E. Schrader and Deborah J. Schrader; and the Class II nominees are David Lerner
and Martin S. Fawer. This proposal requires the affirmative vote of a plurality
of those authorized to vote who are present in person or by proxy.
At each annual meeting, the class of directors whose term expires at such
meeting is to stand for election for a staggered two-year term ending the second
annual meeting following class election. The following table sets forth certain
information concerning the nominees for directors and the Company's executive
officers.
Name, Age, Position with the Company, Director of
Experience, Other Directorships TACTech Since
------------------------------------ -------------
ROBERT E. SCHRADER, 54, has been President, Chief Executive
Officer and Chairman of the Board of Directors of the 1987
Company since its incorporation in 1987. He is the husband
of Deborah J. Schrader. He is the founder of Zing
Technologies, Inc. ("Zing"), and has been its President,
Chief Executive Officer and Chairman of the Board of
Directors since its incorporation in 1969. He expects to
devote approximately 25% of his business time to the affairs
and operations of the Company.
MARTIN S. FAWER, 64, has been the Chief Financial Officer
and Treasurer of the Company since March 1995; and from June
1, 1987 to March 1995 he was Vice President and Assistant 1987
Treasurer of the Company. He is also the Chief Financial
Officer, Treasurer and a director of Zing. For more than
five years, Mr. Fawer has been a principal of The Fawer
Group, P.C., and its predecessors, certified public
accountants. He expects to devote approximately 10% of his
business time to the affairs and operations of the Company.
DEBORAH J. SCHRADER, 51, has been Secretary of the Company
since its incorporation in 1987. She has also been the
Secretary and a director of Zing since its incorporation in 1987
1969. She is the wife of Robert E. Schrader.
MALCOLM BACA, 56, has been Vice President and Treasurer from
1987 to March 1995; and Executive Vice President and Chief
Operating Officer since March 1995. ____
JEFF HANSER, 40, has been Senior Vice President of the
Company since September 1997. He has also served as
Executive Vice President and Chief Financial Officer of ____
Research Analysis Corporation ("RAC"), a recently acquired
wholly owned subsidiary of the Company, from 1992 to 1994
and has been its President and Chief Executive Officer since
1994 up to the time of the RAC acquisition by the Company.
Mr. Hanser has over 15 years of experience in the design and
implementation of major Configuration and Systems Management
for the United States Navy and Air Force.
BRUCE L. BLACKFORD, 50, has been Senior Vice President of
the Company since September 1997. He has also served as
President and Chief Executive Officer of RAC from 1992 to ____
1994, and has been its Executive Vice President and Chief
Financial Officer since 1994 up to the time of the RAC
acquisition by the Company. Mr. Blackford has been a
director of RAC since its inception in 1983.
DAVID LERNER, 43, has been a partner of the law firm of
Morrison Cohen Singer & Weinstein, LLP for the last five
years. Morrison Cohen Singer & Weinstein, LLP serves as ____
general counsel to the Company.
3
<PAGE>
Board Committees and Meetings
- -----------------------------
The Company does not currently maintain separate standing audit, executive
and compensation committees of the Board of Directors. The Company maintains a
stock option committee, whose members during the 1998 Fiscal Year were the
members of the full Board of Directors. This committee was created on June 30,
1997. The stock option committee met once during the 1998 Fiscal Year. The
stock option committee has responsibility to designate optionees under the
Company's 1997 Stock Option Plan, the exercise price of the options, the date of
grant and period of the options, and other terms and conditions. The Board of
Directors met four times during the 1998 Fiscal Year. All of the directors
attended at least 75% of the Board's meetings.
Security Ownership of Management
- --------------------------------
The following table sets forth, as of November 30, 1998, information
concerning the beneficial ownership of voting securities of the Company by all
current directors individually, by the Chief Executive Officer and the executive
officers of the Company whose total annual salary and bonus exceeded $100,000 in
the 1998 Fiscal Year, and by all directors and officers as a group:
- --------------------------------------------------------------------------------
Amount of
Common Stock Percent
Beneficially Owned of Class
------------------ --------
- --------------------------------------------------------------------------------
Malcolm Baca 55,383 9.25%
- --------------------------------------------------------------------------------
Bruce L. Blackford 22,452 3.75%
- --------------------------------------------------------------------------------
Jeff Hanser 22,452 3.75%
- --------------------------------------------------------------------------------
Martin S. Fawer 5,968 1.00%
- --------------------------------------------------------------------------------
Robert E. Schrader(1) 17,794 2.97%
- --------------------------------------------------------------------------------
Deborah J. Schrader(1) 17,794 2.97%
- --------------------------------------------------------------------------------
David Lerner - 0 - 0%
- --------------------------------------------------------------------------------
All Officers and Directors
as a Group (7 persons,
including one such person
who owns no shares) 124,049 20.72%
- --------------------------------------------------------------------------------
(1) Mr. and Mrs. Schrader disclaim beneficial ownership of the shares of
Company stock owned by Robert M. Schrader and Stacy J. Schrader. Mrs.
Schrader owns no shares directly.
Martin S. Fawer, Robert E. Schrader and Deborah J. Schrader are directors
of Zing Technologies, Inc. As of October 19, 1998, except for the foregoing, no
director is a director of any company with a class of securities registered
pursuant to Section 12 of the Act or of any company registered as an Investment
Company under the Investment Company Act of 1940. Other than Robert E. Schrader
and Deborah J. Schrader, who are married to each other, there is no family
relationship among any of the members of the Board of Directors or the officers
of the Company.
4
<PAGE>
Compensation of Directors and Executive Officers
- ------------------------------------------------
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth a summary for the last three (3) fiscal
years of the cash compensation paid by the Company and its subsidiaries as well
as certain other compensation paid or accrued for those years, to the Chief
Executive Officer and the executive officers of the Company whose total annual
salary and bonus exceeded $100,000 in the 1998 Fiscal Year (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
Name and ---------------------- All Other
Principal Position Year Salary Bonus Compensation(1)
- ------------------ ---- ------ ----- ---------------
<S> <C> <C> <C> <C>
Robert E. Schrader (2) 1998 $80,000 ___ ___
President, Chief Executive Officer 1997 $80,000 ___ ___
and Chairman of the Board 1996 ___ ___ ___
Malcolm A. Baca 1998 $216,560 ___ $1,374
Executive Vice President and Chief 1997 $188,713 ___ $1,374
Operating Officer 1996 $178,269 ___ $1,374
Bruce L. Blackford 1998 $160,423 ___ ___
Senior Vice President
Jeff Hanser 1998 $160,423 ___ ___
Senior Vice President
</TABLE>
- ----------
(1) Other compensation represents annual life insurance premiums paid on
behalf of the officer listed.
(2) Although no compensation was directly paid by the Company to Mr.
Schrader during the fiscal year ending June 30, 1996, (1) effective July 1, 1996
Robert E. Schrader became entitled to and received an annual salary of $80,000
pursuant to an employment agreement discussed below under "Employment Contracts,
Termination of Employment and Change-In-Control Arrangements" and (2) prior to
June 30, 1997, Mr. Schrader was compensated by Zing which was receiving
management fees from the Company for services rendered by Mr. Schrader to the
Company. Management fees in the amount of $75,000 were paid by the Company to
Zing in the fiscal years ended June 30, 1996 and June 30, 1997.
The above amounts do not include certain personal benefits, which do not
exceed, as to any executive officer identified above, 10% of his total Annual
Compensation.
GRANTS OF OPTIONS
An aggregate of 26,200 options have been granted at an exercise price of
$4.00 per share pursuant to the Company's 1997 Option Plan, as amended November
3, 1997. None of the options were granted to Named Executive Officers or to
directors. Additionally, options to purchase 44,904 shares of Company Common
Stock in the aggregate were issued in the Company's September 1, 1997
acquisition of Research Analysis Corporation to Messrs. Hanser and Blackford.
5
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
During the 1998 Fiscal Year, no warrants, options or stock appreciation
rights in the Company were exercised by any Named Executive Officer.
COMPENSATION OF DIRECTORS
The Company does not pay directors for their services as directors. The
Company may, in the future, pay directors who are not officers or employees for
their services as directors plus a fee for committee meetings attended. The law
firm of which Mr. Lerner is a partner is paid its customary legal fees for Mr.
Lerner's attendance and participation at Board meetings.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS
Mr. Robert E. Schrader has an employment agreement with the Company, the
term of which expires on June 30, 2000. Mr. Schrader's agreement entitles him to
a salary of $80,000 per annum. Mr. Schrader has no contractual entitlement to
any bonus. Pursuant to the employment agreement, Mr. Schrader has agreed to
serve as the Company's Chief Executive Officer, President and Chairman of the
Board of Directors on a part-time basis. In the event that a Change in Control
(as defined in the employment agreement) of the Company occurs, Mr. Schrader may
terminate his employment. In such event, Mr. Schrader is required to extend the
duration of the non-competition agreements set forth in the employment agreement
to the third anniversary of such Change of Control. In consideration for the
extension of his agreement not to compete with the Company after such Change of
Control which results in the termination of the term of his employment
agreement, Mr. Schrader will be entitled to receive a lump sum payment equal to
the amount of the remaining base salary he would be entitled to under his
employment agreement had it not been so terminated, plus $250,000. Pursuant to
such employment agreement, Mr. Schrader is required only to provide part time
services to the Company, but not less than 10 business hours per week.
Mr. Malcolm A. Baca has an employment agreement with the Company under
which he will devote full-time efforts on behalf of the Company. The term of Mr.
Baca's employment expires April 30, 1999. Mr. Baca's agreement entitles him to a
base salary of $120,000 per annum, plus five percent (5%) of the Company's
collected revenues, except that on revenues attributable to another commissioned
member of the Company's management, Mr. Baca's commission is two and one half
percent (2 1/2%). In all events, Mr. Baca's compensation cannot exceed $350,000
per annum subject to increase based upon the National Consumer Price Index. All
commissions to Mr. Baca are subject to his required contribution of one-half of
one percent (1/2%) of the Company's collected revenues to a bonus pool fund for
the benefit of non-commissioned members of management, which contribution is
matched by the Company. In the event Mr. Baca is terminated without good cause,
the Company is obligated to continue to pay compensation to Mr. Baca through
April 30, 1999. Mr. Baca's agreement also prohibits Mr. Baca from selling any of
his shares of Common Stock during the one year period after June 30,1997. After
the expiration of such one year period, Mr. Baca is not permitted to sell in
excess of 25% of his shares of Company Stock until the expiration of two years
after June 30, 1997.
The Company has engaged Mr. Martin S. Fawer on a part-time basis to
perform supervisory financial and strategic analysis services.
Each of Mr. Blackford and Mr. Hanser have entered into an employment
agreement on identical terms and conditions with the Company for a term of three
years. Under their respective employment agreements, each has agreed to serve as
a Senior Vice President of the Company. Pursuant to the agreements, each of Mr.
Blackford and Mr. Hanser is
6
<PAGE>
entitled to a salary of $193,000 per annum, and is eligible to receive an
incentive bonus of up to $100,000 annually. The annual bonus is based on the
Company achieving certain targeted sales goals.
Each of Messrs. Blackford's and Hanser's employment agreement provides
that if his employment is terminated without cause (or, as a result of death or
disability), he will be entitled to receive base salary up to the date of such
termination (and, subject to the Company's option, salary for up to one year
following termination without cause in exchange for which the term of the
non-competition agreement in his employment agreement shall continue for such
one year period), and a pro rata portion of his annual bonus (if any) based on
the number of days of employment in the then current contract year.
Additionally, the vesting of options granted to each of Messrs. Blackford and
Hanser by the Company in connection with the RAC transaction will accelerate
under certain circumstances including, without limitation, if his employment is
terminated without cause or, if his employment is terminated as a result of
death or disability, and if a change of control (as described in such option
agreements) occurs.
INTEREST IN CERTAIN TRANSACTIONS OF DIRECTORS,
OFFICERS AND PRINCIPAL HOLDERS OF VOTING SECURITIES
As of November 30, 1998, Mr. Schrader owned 1,152,711 shares of Zing
Common Stock constituting approximately 47.92% of the issued and outstanding
shares of Zing Common Stock. Mr. Schrader, Deborah J. Schrader (Mr. Schrader's
wife) and Martin Fawer are directors of the Company and thus have an indirect
interest in the various agreements and arrangements between Zing and the Company
including the Zing guaranty of the Company's credit facility, the
Indemnification Agreement with Zing and the management services to be provided
to the Company by certain employees of Zing.
Zing guaranteed repayment by the Company of its obligations under the
Company's $1.5 million credit facility with a commercial bank. Pursuant to the
Indemnification Agreement, among other things, the Company and Zing have entered
into certain agreements with respect to the indemnification of certain
liabilities arising from the operation of their respective businesses. The
Company will engage certain Zing employees (with the permission of Zing) who
will provide management services to the Company. Management of the Company
anticipates that the aggregate cost of such services will not exceed $100,000
per year.
On December 17, 1996, Zing advanced $100,000 to Mr. Baca for personal uses
unrelated to the Company in exchange for Mr. Baca's secured promissory note. The
promissory note, which matured on June 29, 1997, was secured by a first priority
security interest in all of his shares of Company Stock. $46,000 was repaid on
such note in 1997, $43,000 in Fiscal Year 1998, and the remaining principal
balance of $11,000 was paid on July 2, 1998.
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's executive officers and directors, and
persons who own more than 10% of a registered class of the Company's equity
securities (the "10% Stockholders"), to file reports of ownership on Form 3 and
reports of changes in ownership on Form 4 or Form 5 with the Securities Exchange
Commission. Executive officers, directors and the 10% Stockholders are required
to furnish the Company with copies of such reports. Based solely on its review
of the copies of such forms received by the Company, or written representations
that no other reports are required, the Company believes that during the 1998
Fiscal Year, the Company's executive officers, directors and 10% stockholders
complied with the applicable Section 16(a) filing requirements, except that
Malcolm A. Baca did not timely file his initial Form 3.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR ALL THREE NOMINEES
FOR DIRECTOR.
7
<PAGE>
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Messrs. Ernst & Young LLP have been the Company's independent public
accountants since 1997, and were selected by the Board of Directors to serve in
such capacity for the 1998 Fiscal Year as well. Accordingly, the Board of
Directors recommends that the shareholders now ratify the appointment of Ernst &
Young LLP as the Company's auditors. Representatives of Ernst & Young LLP will
attend the Annual Meeting, will have an opportunity to make a statement and will
be available to answer appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THIS PROPOSAL.
Shareholder Proposals at the Company's Next Annual Meeting of Shareholders
- --------------------------------------------------------------------------
Shareholders of the Company who intend to submit proposals to the
Company's shareholders at the Company's next annual meeting of shareholders must
submit such proposals to the Company no later than August 30, 1999, 120 days
before the anticipated date of mailing of the Proxy Statement for such meeting.
Shareholder proposals should be submitted to Deborah J. Schrader, Corporate
Secretary, 22681-22687 Old Canal Road, Yorba Linda, CA 92687.
Incorporation by Reference
- --------------------------
The Company hereby incorporates by reference its Annual Report on Form
10-KSB for the fiscal year ended June 30, 1998.
Other Matters
- -------------
Management knows of no other matters to be presented at the Meeting. If
any other matter does properly come before the Meeting, the appointees named in
the Proxy will vote the Proxy in accordance with their best judgment.
By Order of the Board of Directors
Deborah J. Schrader
Secretary
Dated: Yorba Linda, California
December 11, 1998
8
