PACIFIC MULTIMEDIA INC, SB-2, 1997-04-30

PACIFIC MULTIMEDIA INC
SB-2, 1997-04-30

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------

FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------

PACIFIC MULTIMEDIA, INC.

(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
WASHINGTON 5065 33-0477912
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
</TABLE>

2477 E. ORANGETHORPE AVENUE, FULLERTON, CALIFORNIA 92831
(714) 441-0782

(Address, including zip code and telephone number, including
area code, of registrant's principal executive offices)

JAMES E. CAMPBELL, III
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PACIFIC MULTIMEDIA, INC.
2477 E. ORANGETHORPE AVENUE, FULLERTON, CALIFORNIA 92831
(714) 441-0782

(Name, address, including zip code and telephone number, including area code, of
agent for service)
--------------------------

COPIES TO:

GARY J. KOCHER, ESQ.
Preston Gates & Ellis LLP
5000 Columbia Center
701 Fifth Avenue
Seattle, Washington 98104
(206) 623-7580
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock............................... 1,250,000 shares $5.00 $6,250,000 $1,894
</TABLE>

(1) Estimated pursuant to Rule 457 solely for the purpose of calculating the
registration fee.

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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<PAGE>
PACIFIC MULTIMEDIA, INC.
CROSS REFERENCE SHEET
SHOWING LOCATION IN PROSPECTUS OF PART 1 ITEMS OF FORM SB-2

<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN
FORM SB-2 REGISTRATION STATEMENT LOCATION IN PROSPECTUS
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<C> <S> <C>

1. Front of Registration Statement and Outside Front
Cover Page of Prospectus........................... Outside Front Cover Page; Front of Registration Statement

2. Inside Front and Outside Back Cover Pages of
Prospectus......................................... Inside Front and Outside Back Cover Pages

3. Summary Information and Risk Factors................. Prospectus Summary; Risk Factors; The Reorganization; The
Company

4. Use of Proceeds...................................... Prospectus Summary; Risk Factors; Use of Proceeds;
Management's Discussion and Analysis of Financial Condition
and Results of Operations

5. Determination of Offering Price...................... Outside Front Cover Page; Risk Factors; Underwriting

6. Dilution............................................. Risk Factors; Dilution

7. Selling Security Holders............................. Not Applicable

8. Plan of Distribution................................. Outside Front Cover Page; Underwriting

9. Legal Proceedings.................................... Business

10. Directors, Executive Officers, Promoters and Control
Persons............................................ Management

11. Security Ownership of Certain Beneficial Owners and
Management......................................... Principal Shareholders

12. Description of Securities............................ Description of Capital Stock

13. Interests of Named Experts and Counsel............... Legal Matters

14. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities..................... Management

15. Organization Within Last Five Years.................. Not Applicable

16. Description of Business.............................. Prospectus Summary; Risk Factors; Management's Discussion
and Analysis of Financial Condition and Results of
Operations; Business

17. Management's Discussion and Analysis or Plan of
Operation.......................................... Management's Discussion and Analysis of Financial Condition
and Results of Operations

18. Description of Property.............................. Business

19. Certain Relationships and Related
Transactions....................................... The Reorganization; Certain Transactions; Principal
Shareholders

20. Market for Common Equity and Related Shareholder
Matters............................................ Outside Front Cover Page; Prospectus Summary; Risk Factors;
The Reorganization; Dividend Policy; Description of Capital
Stock; Shares Eligible for Future Sale

21. Executive Compensation............................... Management

22. Financial Statements................................. Financial Statements

23. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ Not Applicable
</TABLE>
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED APRIL 30, 1997

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
1,250,000 SHARES

[LOGO]

COMMON STOCK

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All of the shares of Common Stock (the "Common Stock") of Pacific
MultiMedia, Inc. ("Pacific MultiMedia" or the "Company") offered hereby (the
"Offering") are being sold by Pacific MultiMedia. Prior to this Offering, there
has been no public market for the Common Stock. It is currently estimated that
the initial public offering price of the Common Stock will be $5.00 per share.
For information relating to the factors considered in determining the initial
offering price to the public, see "Underwriting." Application has been made to
list the Common Stock on the Nasdaq Small Cap Market under the symbol "PMMI."

------------------------

THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE 3.

---------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share................................. $ $ $
Total (3)................................. $ $ $
</TABLE>

(1) See "Underwriting " for indemnification arrangement with the Underwriter.

(2) Before deduction of expenses payable by the Company, estimated at $250,000.

------------------------

The shares of Common Stock are offered through the Underwriter acting on a
best efforts basis, when, as and if issued by the Company, and subject to the
Company's right to reject orders in whole or in part. It is expected that the
shares will be ready for delivery on or about June 30, 1997, against payment in
immediately available funds.

TRADEWAY SECURITIES GROUP, INC.
UNDERWRITER

THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE IN
THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERM "COMPANY" OR
"PACIFIC MULTIMEDIA" WHEN USED IN THIS PROSPECTUS REFERS TO PACIFIC MULTIMEDIA,
INC., A WASHINGTON CORPORATION WHICH IS THE SUCCESSOR TO PACIFIC AUDIO
RECORDING, INC., A CALIFORNIA CORPORATION, PURSUANT TO A REINCORPORATION MERGER
THAT WILL BE EFFECTED PRIOR TO THE CLOSING OF THE OFFERING. SEE "THE
REORGANIZATION." THE FOLLOWING SUMMARY AND CERTAIN PORTIONS OF THIS PROSPECTUS
INCLUDE FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS PREDICTED BY
SUCH FORWARD-LOOKING STATEMENTS DUE TO VARIOUS FACTORS, INCLUDING BUT NOT
LIMITED TO THOSE DISCUSSED IN "RISK FACTORS."

THE COMPANY

Pacific MultiMedia, Inc. ("Pacific MultiMedia" or the "Company") is a full
service audio and video production company that provides a wide array of
services, including recording, mastering and duplicating of audio and video
cassette tapes, primarily consisting of spoken-word (non-musical) content.
Pacific MultiMedia provides high quality recordings and immediate duplication
services at on-site (client-selected) locations, as well as at its own facility
in Fullerton, California. In addition to housing the Company's duplication
equipment and recording studio, the Company provides packaging, shipping,
storage and other fulfillment services from its Fullerton facility. Upon closing
of this Offering, the Company intends to relocate its corporate offices and open
a second production and fulfillment facility in the Seattle, Washington area.

Pacific MultiMedia's customer base encompasses a wide variety of industries.
However, materials recorded and duplicated by the Company can generally be
categorized as business related, religious, musical/artistic or health oriented.
The overwhelming majority of these materials are spoken-word recordings that
present information regarding personal or professional improvement.

Audio recordings have been found to be a powerful method of delivering self
improvement messages. Producers of such tapes use various sound effects,
background music and speaking tones to enhance the effectiveness of the message
being conveyed. Many business promoters have also realized that cassette tapes
are as effective or more effective marketing materials than brochures and other
print literature because business professionals perceive that they do not
possess enough time to read printed materials. However, these busy professionals
can easily listen to an audio tape while they are driving, working or performing
other tasks.

The Company's goal is to become a leading provider of remote and on-site
audio and video tape recording and duplication services. The Company has
historically focused on providing a high level of customer service to a limited
number of small accounts. Management believes that significant opportunities
exist to expand the Company's core business activities to service more and
larger accounts as well as to expand selectively the Company's operations into
related service areas. Through the application of the net proceeds raised in
this Offering, the Company intends to implement a strategy designed to capture
these perceived market opportunities, primarily focusing on expansion of audio
and video tape duplication activities through investment in new equipment and
the opening of a Seattle, Washington production and fulfillment facility,
increased emphasis on marketing of "message on hold" and other studio services
and the addition of several sales and marketing and other key management
personnel. In addition, the Company intends to expand the range of its services
to include video production capabilities and the compilation and marketing of an
audio library comprised of on-site, spoken word content recorded by the Company.
The Company believes each of these expanded services is a natural fit with the
Company's existing business and/or customer base.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ SMALLCAP STOCK MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

1
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THE OFFERING

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<CAPTION>
Common Stock Offered.............................. 1,250,000 shares
<S> <C>
Common Stock Outstanding after the Offering....... 5,000,000 shares (1)
Use of Proceeds................................... To purchase equipment, to finance increased
marketing activities, to satisfy cash payment
obligations in connection with the Pearl Share
Exchange, to finance opening the Seattle,
Washington facility, to make the S Distribution
and certain other payments to officers of the
Company and for working capital and general
corporate purposes. See "The Reorganization," "Use
of Proceeds," and "S Corporation Matters."
Proposed Nasdaq Small Cap Market Symbol........... PMMI
</TABLE>

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(1) Excludes 750,000 shares of Common Stock reserved for issuance under the
Company's 1997 Stock Option Plan (the "Option Plan") and includes the
issuance of 3,350,000 shares of Common Stock as Exchange Consideration in
connection with the Pearl Share Exchange. See "The Reorganization,"
"Capitalization," "Management-- Executive Compensation" and "Certain
Transactions."

SUMMARY FINANCIAL DATA (1)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1996 1995
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<S> <C> <C>
STATEMENT OF INCOME DATA:
Net sales............................................................... $ 773,590 $ 352,611
Cost of sales........................................................... 478,817 212,672
Gross profit............................................................ 294,773 139,939
Selling, general and administrative..................................... 255,345 140,729
Operating income (loss)................................................. 39,428 (790)
Other income (expense), net............................................. 420 2,241
Income before tax....................................................... 39,848 1,451
Net income (2).......................................................... 30,748 651
Net income per share (2)................................................ $ 0.31 $ 0.00
Shares used in per share computations................................... 100,000 100,000
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1996
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ACTUAL AS ADJUSTED(3)
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(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash............................................................... $ 35,390 $ 4,585,390
Working capital.................................................... 14,768 4,564,768
Total assets....................................................... 205,224 4,755,224
Long-term liabilities.............................................. 28,021 28,021
Total shareholders' equity......................................... 52,448 4,602,448
</TABLE>

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(1) See the Company's audited financial statements and accompanying notes
thereto included elsewhere in this Prospectus.

(2) Reflects a pro forma adjustment for the payment of income taxes assuming the
Company's election to be treated as an S Corporation had not been in effect
for such periods. See Note 1(h) of Notes to Financial Statements.

(3) Adjusted to reflect the (i) sale of the 1,250,000 shares of Common Stock
offered hereby at an assumed initial public offering price of $5.00 per
share after deducting underwriting discounts and estimated offering expenses
and (ii) the issuance of 3,350,000 shares of Common Stock and the payment of
the maximum cash consideration of $1.0 million by the Company as the
Exchange Consideration in connection with the Pearl Share Exchange. See "The
Reorganization," "Use of Proceeds" and "Capitalization."

2
<PAGE>
RISK FACTORS

AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. SHARES SHOULD NOT BE PURCHASED BY A PERSON WHO CAN NOT AFFORD
THE LOSS OF HIS OR HER ENTIRE INVESTMENT. PROSPECTIVE INVESTORS SHOULD CONSIDER
CAREFULLY THE FOLLOWING PRINCIPAL RISK FACTORS IN ADDITION TO THE OTHER
INFORMATION IN THIS PROSPECTUS. THIS PROSPECTUS INCLUDES FORWARD-LOOKING
STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS
MAY DIFFER MATERIALLY FROM THE RESULTS PREDICTED BY SUCH FORWARD-LOOKING
STATEMENTS DUE TO VARIOUS FACTORS, INCLUDING BUT NOT LIMITED TO THOSE WHICH ARE
DISCUSSED BELOW.

DETERMINATION OF OFFERING PRICE

The offering price for the shares of Common Stock offered hereby has been
determined by the Company based on the Company's prospects for future growth and
bears no relationship to assets, earnings, net worth or any other traditional
objective criteria of value. See "Underwriting."

ABILITY TO ACHIEVE AND MANAGE GROWTH

The Company's growth plans are subject to numerous and substantial risks.
The Company's ability to achieve such growth and profitability will depend upon
a number of factors, including the ability of the Company to attract and retain
sufficient qualified managerial and sales and marketing personnel, successful
offerings of new services, existing and emerging competition, collection of
accounts receivable and the availability of working capital to support
anticipated growth. Pacific MultiMedia must adapt its management structure and
internal control systems as the Company expands. There can be no assurances that
the Company will successfully realize its growth objectives. Any inability to
achieve and manage the Company's growth plans would have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Strategy."

DEPENDENCE ON KEY PERSONNEL; ABILITY TO ATTRACT ADDITIONAL MANAGEMENT

The Company is highly dependent upon James E. Campbell, III, its President
and Chief Executive Officer. Mr. Campbell has historically performed a wide
variety of functions for the Company and the loss of the services of Mr.
Campbell would have material and adverse affect on the Company. The Company's
future success will depend upon its ability to retain Mr. Campbell. In order to
realize the Company's growth plans, the Company will also be required to locate
and hire several key management personnel including a Chief Financial Officer
and a Vice President-Sales and Marketing as well as several key marketing and
sales personnel. The competition for such employees is intense and the Company
must compete with other companies with greater resources and name recognition in
order to attract and retain highly qualified personnel. The failure to attract
and retain qualified personnel for such positions will severely restrict the
Company's ability to achieve its growth objectives. See "Business--Strategy" and
"Management."

INTENSE COMPETITION

The audio and video production, duplication and fulfillment industry is
highly competitive and many of the Company's competitors have substantially
greater name recognition, customer bases, and financial, marketing and
management resources than the Company. In the audio and video tape duplication
markets, the Company competes with Cassette Productions Unlimited, Inc., Fosdick
Corporation and others which are larger, nationally-known companies which have
financial and personnel resources substantially in excess of those of the
Company's. In the on-site convention recording market, the Company competes with
a number of smaller, regional companies such as Convention Cassettes Unlimited
and Infomedix, both located in Southern California. Furthermore, the audio and
video production, duplication and fulfillment business has relatively few
barriers to entry. The Company attempts to compete

3
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based on offering quality service at a reasonable price. There can be no
assurance, however, that the Company will be successful in improving or
maintaining its competitive position against its existing competitors or that
new competitors will not enter into the market. Any such failure to improve the
Company's competitive position VIS-A-VIS existing competitors and/or the entry
of significant new competitors into the Company's existing markets and targeted
areas for expansion will have a material and adverse effect on the Company's
ability to achieve its growth objectives See "Business--Strategy" and
"--Competition."

VARIABILITY OF OPERATING RESULTS

The Company's annual and quarterly operating results are affected by a
number of factors including the level and timing of customer orders. The level
and timing of orders may vary widely due to customer needs, general economic
conditions and competition. One or more large orders may affect the Company's
performance in any quarter and the delay of one or more orders expected in a
particular quarter could severely and adversely impact the Company's financial
performance for such quarter. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

CUSTOMER CONCENTRATION: DEPENDENCE ON SIGNIFICANT CUSTOMERS

The Company is dependent upon a limited number of customers for a
substantial portion of its net sales. Sales to the Company's five largest
customers accounted for 72% and 62% of the Company's gross sales in the years
ended December 31, 1996 and 1995, respectively. During the same periods, sales
to the Company's largest customer accounted for 20% and 26%, respectively. In
addition, as part of the Company's strategy, it intends to aggressively target
larger run accounts which could have the effect of increasing customer
concentration in future periods. The Company has not entered into long-term
contracts with any of its customers. The loss of, or any material reduction in,
orders from the Company's significant customers for any reason could have a
material adverse effect on the Company's results of operations and financial
condition and the price of the Company's Common Stock. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business--Strategy."

ACCOUNTS RECEIVABLE

As the Company expands its capacity to undertake larger run orders, the
Company's revenues and receivables with respect to their customers can be
expected to increase and such receivables could account for a significant
portion of the Company's revenues and/or profits in any quarterly or annual
period. See "Risk Factors--Customer Concentration: Dependence on Significant
Customers." The failure of the Company to collect any such accounts receivable
or to experience higher than normal bad debt expense on its traditional accounts
would have a material adverse effect on the Company's results of operations,
financial condition and the price of the Company's Common Stock. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Strategy."

TECHNOLOGICAL CHANGE; NEW PRODUCT INTRODUCTIONS

The Company's primary line of business involves the duplication of analog
audio cassettes and VHS videocassettes. Both of these technologies have been in
existence for a number of years. Recent audio and video industry developments
have included the introduction of a number of newer technologies such as the
compact disc, digital video disc, laser disc and digital audio tape. Many of
these newer technologies offer performance characteristics and other features
which are superior to analog audio and VHS video. The Company believes, however,
that the market for spoken-word recording does not demand the use of such newer,
improved technologies. If this assumption proves incorrect or if new
technologies are developed which become accepted among the Company's targeted
customers, the Company's existing equipment could become obsolete and the
Company will be required to invest significant amounts of capital to upgrade to
such newer technologies. Moreover, there can be no assurance that new
technologies, new

4
<PAGE>
products or new services developed or offered by others will not reduce the
demand for the Company's products and services and have a material adverse
effect on the Company's business, operating results and financial condition. See
"Business--Strategy."

SEATTLE EXPANSION; DUAL FACILITIES

Upon completion of the Offering, the Company intends to open a second
production and fulfillment facility in the Seattle, Washington area. The Seattle
facility will also house the executive offices of the Company. The operation of
two facilities will require additional management time to coordinate activities
between the two operations and suitable managers will need to be retained to run
both operations. While the Company believes that suitable space in the Seattle
area will be available, the Company has not entered into any commitment
therefor. The lease for the Company's Fullerton facility is on a month-to-month
basis. If necessary, the Company believes that suitable space for the Company's
California operations can be located in the event the Company's lease is
terminated. However, there can be no assurance that suitable facilities in
either Seattle or California will be located and available at commercially
reasonable rates. Any move of the California operations could cause disruption
to the Company's business and which could adversely impact the Company's results
of operations. See "Risk Factors--Dependence on Key Personnel; Ability to
Attract Additional Management" and "Business--Strategy" and
"--Properties."

CONTROL BY CERTAIN SHAREHOLDERS

Upon completion of the Offering and the Reorganization, Mr. Jerome
Schneider, a director of the Company, will beneficially own 54.7% of the
outstanding shares of Common Stock. In addition, pursuant to voting agreements
entered into between Mr. Schneider and James E. Campbell and certain of the
former shareholders of Pearl Financial, Mr. Schneider will have the right to
vote additional shares of Common Stock, giving Mr. Schneider voting control with
respect to approximately 75.0% of the outstanding shares of Common Stock after
this Offering. Accordingly, Mr. Schneider will have majority control of the
Company, with the potential ability to elect the Board of Directors and to
approve or prevent certain fundamental corporate transactions (including
mergers, consolidations and sales of all or substantially all of the Company's
assets). See "The Reorganization," "Certain Transactions," "Principal
Shareholders" and "Description of Capital Stock."

PAST DISCIPLINARY ACTION AND INSOLVENCY PROCEEDINGS OF AMERINATIONAL

In January 1996, Mr. Schneider entered into an Offer of Settlement (the
"Settlement") with the National Association of Securities Dealers, Inc. (the
"NASD"). The Settlement resolved a complaint filed in April 1995 against
AmeriNational Financial Services, Inc. ("AmeriNational") and certain Registered
Principals of AmeriNational, including Mr. Schneider. Without admitting or
denying the allegations, Mr. Schneider consented to the entry of findings of
violations relating to a failure to supervise private securities transactions
and a failure to establish, maintain and enforce adequate supervisory procedures
relating to certain activities conducted by AmeriNational. Pursuant to the
Settlement, Mr. Schneider was censured and fined $8,000. AmeriNational, which
formerly was a wholly-owned subsidiary of Pearl Financial, is currently involved
in insolvency proceedings in Federal District Court for the Central District of
California (Western Division) (Docket No. 2:96cv03942). Mr. Schneider owns a
majority of the outstanding stock of Pearl Financial and is an officer and a
director of Pearl Financial. Prior to the acquisition of AmeriNational by Pearl
Financial, Mr. Schneider was Chairman of the Board of AmeriNational and owned a
majority of the outstanding stock of AmeriNational. Pearl Financial will become
a subsidiary of the Company upon completion of the Reorganization. See "The
Reorganization" and "Management."

5
<PAGE>
THE REORGANIZATION

In connection with the Pearl Share Exchange, the shareholders of Pearl
Financial will exchange substantially all of the outstanding equity securities
of Pearl Financial for shares of Common Stock of the Company and Pearl Financial
will become a subsidiary of the Company. Pearl Financial has no significant
assets and had no significant income, operations or prospects in the year ended
December 31, 1996. In connection with the Pearl Share Exchange, Mr. Schneider
has agreed to serve on the Company's Board of Directors and to cause Pearl
Financial to advance certain costs and expenses of the Company in connection
with the Offering and the Reorganization. Other than the foregoing, the Company
will not derive any significant benefit from the Pearl Share Exchange. See "The
Reorganization," "Certain Transactions" and "Underwriting."

RELATED PARTY TRANSACTIONS

The Company provides fulfillment services to Wilshire Publishing. In 1995
and 1996, Wilshire Publishing accounted for 13% and 8%, respectively, of the
Company's total revenues. Wilshire Publishing is controlled by Jerome Schneider,
a director and majority shareholder of the Company. Transactions between the
Company and Wilshire Publishing have historically been based on arm's length
negotiations. All future transactions between the Company and its affiliates
will be on terms no more favorable to the affiliates than those available to
unaffiliated third parties and must be approved by a majority of the
disinterested directors of the Company. See "Certain Transactions."

CONSENT TO USE RECORDED MATERIALS

A component of the Company's growth strategy is to compile and market a
library of recorded materials. Historically, the Company has not received a
license or other right to duplicate or otherwise sell or use the recorded
materials (beyond that authorized in the initial engagement). Therefore, the
Company's ability to market such materials as part of a tape library will
require that the Company secure the originating party's consent to such use and
may require payment of advance royalties with respect thereto. Furthermore,
because much of the Company's business and self-improvement materials have a
limited life, the failure to receive such rights on a timely basis will severely
restrict the Company's ability to successfully market such materials. As a
matter of course, the Company will seek to secure such rights with respect to
future client engagements. However, there can be no assurance that the Company
will secure the necessary rights to use such materials in a timely manner or on
terms which are commercially reasonable or favorable to the Company. See
"Business--Strategy."

RISK OF LIABILITY CLAIMS

The Company has historically operated with minimum levels of insurance
coverage. The Company currently maintains commercial general liability
insurance, with limits of $0.5 million per occurrence and in the aggregate per
year. There can be no assurance that the Company's insurance will be adequate to
cover future liability claims, or that the Company will be successful in
maintaining adequate liability insurance at acceptable rates. Any losses that
the Company may suffer from any liability claims, and the effect that any
litigation may have upon the reputation and marketability of the Company's
products, may divert management's attention from other matters and may have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business."

SUBSTANTIAL AND IMMEDIATE DILUTION; ABSENCE OF DIVIDENDS

Purchasers of the Shares offered hereby will incur immediate dilution of
approximately $4.08 per share in net tangible book value (assuming an initial
public offering price of $5.00). The exercise of outstanding options or options
granted in the future by the Company may also have a dilutive effect on the

6
<PAGE>
interests of the investors in this Offering. See "Dilution." The Company has not
paid any dividends on its Common Stock since its inception and does not
contemplate or anticipate paying any dividends upon its Common Stock in the
foreseeable future. It is currently anticipated that earnings, if any, will be
used to finance the development and expansion of the Company's business. See
"Dividend Policy" and "Dilution."

NO PRIOR TRADING MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to this Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will develop
or, if one does develop, that it will be maintained. The initial public offering
price has been established by the Company and may not be indicative of prices
that will prevail in the trading market. See "Underwriting" for information
relating to the method of determining the initial public offering price. The
market price of shares of Common Stock is likely to be volatile. Announcements
of technological innovations and new commercial products and changes in the
general conditions in the convention and audio/video production industries may
have a significant effect on the Company's business and on the market price of
the Company's Common Stock. In addition, the stock market has from time to time
experienced significant price and volume fluctuations that are unrelated to the
operating performance of particular companies. The securities of small and
emerging companies have experienced extreme price and volume fluctuations, which
have often been unrelated to the companies' operating performance. Sales of a
substantial number of shares of Common Stock by existing security holders could
also have an adverse effect on the market price of the Company's securities. See
"Shares Eligible for Future Sale."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of shares of Common Stock in the public market
following the Offering could have an adverse impact on the market price of the
Common Stock. In addition, since only a limited number of shares will be
available for sale in the public market after this Offering because of certain
contractual and legal restrictions on resale (as described below), sales of
substantial amounts of Common Stock of the Company in the public market after
the restrictions lapse could adversely affect the prevailing market price and
the ability of the Company to raise equity in the future.

Upon completion of this Offering, the Company will have outstanding an
aggregate of 5,000,000 shares of Common Stock. The 1,250,000 shares sold in this
Offering will be freely tradable without restriction or further registration
under the Securities Act, unless purchased by an "affiliate" of the Company, as
that term is defined in Rule 144 under the Securities Act (an "Affiliate"). The
remaining 3,750,000 shares of Common Stock existing are "restricted securities"
as that term is defined in Rule 144 under the Act ("Restricted Shares").
Restricted Shares may be sold in the public market only if registered or if they
qualify for an exemption from registration under the Securities Act, including,
but not limited to Rules 144 and 701 under the Securities Act which are
summarized in "Shares Eligible for Future Sale" below.

The Company, all of its executive officers and directors who own Common
Stock and certain beneficial owners of the Common Stock have agreed, subject to
certain exceptions, not to offer to sell, contract to sell, or otherwise sell,
dispose of, loan, pledge or grant any rights with respect to any shares of
Common Stock, any options or warrants to purchase any shares of Common Stock or
any securities convertible into or exchangeable for shares of Common Stock, now
or hereafter acquired, for a period of up to 180 days after the date of this
Prospectus without the prior written consent of the Underwriter. Together, such
shareholders own an aggregate of 3,750,000 shares of Common Stock. See "Shares
Eligible for Future Sale" and "Underwriting."

The Company has reserved 750,000 shares of Common Stock for grants under its
Stock Option Plan. The Company intends to file a registration statement under
the Securities Act, covering the shares of Common Stock issuable under the Stock
Option Plan. Upon effectiveness of such registration, shares

7
<PAGE>
issued upon the exercise of options covered thereby generally will be freely
tradable in the open market (subject to Rule 144 limitations applicable to
Affiliates). No prediction can be made as to the effect, if any, that future
sales of Common Stock or the availability of Common Stock for sale will have on
the market price prevailing from time to time. See "Management--Stock Option
Plan" and "Shares Eligible for Future Sale."

THE REORGANIZATION

Prior to the closing of the Offering, Pacific Audio Recording, Inc., a
California corporation ("Pacific Audio California"), will merge with and into a
newly-formed, wholly-owned subsidiary of Pacific Audio California, Pacific
MultiMedia, Inc., a Washington corporation ("Pacific MultiMedia Washington"),
with Pacific MultiMedia Washington being the surviving corporation (referred to
herein as the "Reincorporation"). In addition, after effectiveness of the
Reincorporation and immediately prior to the closing of the Offering, the
holders of all or substantially all of the outstanding shares of capital stock
of Pearl Financial Services, Inc., a Washington corporation ("Pearl Financial"),
will exchange such shares for shares of Common Stock of Pacific MultiMedia
Washington on the terms outlined below (the "Pearl Share Exchange"). Upon
consummation of the Pearl Share Exchange, Pearl Financial will become a
subsidiary of the Company. The Reincorporation and the Pearl Share Exchange are
referred to herein collectively as the "Reorganization."

Pursuant to the terms of the Exchange Agreement between Pacific MultiMedia
Washington and Pearl Financial, holders of common stock of Pearl Financial will
be entitled to receive either (i) one share of Common Stock of Pacific
MultiMedia Washington for every 3.407 shares of common stock of Pearl Financial
so exchanged, or (ii) $1.00 in cash for each share of common stock of Pearl
Financial so exchanged up to a maximum aggregate cash payment by Pacific
MultiMedia Washington of $1.0 million, or (iii) a combination of cash and shares
of Common Stock of Pacific MultiMedia Washington based on the foregoing exchange
rates (collectively referred to herein as the "Exchange Consideration"). Based
on the number of shares of common stock of Pearl Financial currently outstanding
and assuming holders of such stock elect to receive the maximum cash
consideration in connection with the Pearl Share Exchange, the Company will
issue 3,350,000 shares of its Common Stock as Exchange Consideration (in
addition to $1.0 million cash consideration). In the event that holders of more
than 1.0 million shares of Pearl Financial elect to receive cash rather than
shares of Common Stock of the Company, such holders will receive a PRO RATA
allocation of the maximum $1.0 million cash proceeds based on their relative
ownership interest in Pearl Financial. Jerome Schneider and Robert McMichael,
directors of the Company, own 9,310,000 and 446,644 shares of common stock of
Pearl Financial, respectively, and will receive 2,732,609 and 131,095 shares of
Common Stock of the Company, respectively, and no cash proceeds as Exchange
Consideration in the Pearl Share Exchange. See "Certain Transactions."

Pacific Audio California was incorporated under the laws of the State of
California in June 1991 and Pacific MultiMedia Washington was incorporated under
the laws of the State of Washington in April 1997. As used in this Prospectus,
references to "Company" and "Pacific MultiMedia" refer to Pacific MultiMedia,
Inc., after giving effect to the Reorganization and to its predecessor entities
to the extent appropriate. The principal executive offices of the Company are
currently located at 2477 E. Orangethorpe Avenue, Fullerton, California 92631,
and the Company's telephone number is (714) 441-0782. Following the closing of
the Offering, the Company intends to relocate its principal offices to the
Seattle, Washington area. See "Risk Factors--Seattle Expansion; Dual Facilities"
and "Business--Properties."

8
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,250,000 shares of
Common Stock in this Offering at an assumed initial public offering price of
$5.00 per share, after deducting the underwriter discount and estimated offering
expenses payable by the Company, are estimated to be approximately $5,500,000.

The Company intends to use the net proceeds of this Offering for the
following purposes: approximately $1.8 million to purchase additional audio and
video production, recording and duplication equipment; approximately $1.0
million to increase sales and marketing activities, including salaries to hire
new marketing personnel, advertising and other promotions; up to $1.0 million to
satisfy cash payment obligations in connection with the Pearl Share Exchange;
approximately $0.5 million for relocation expenses and tenant improvements for
the new Seattle, Washington facility; $0.1 million will be distributed to
officers and existing shareholders of the Company to pay certain deferred
bonuses, redeem outstanding stock and to make the S Distribution; and the
remainder for working capital and general corporate purposes. The Company may
use a portion of the proceeds to make strategic acquisitions. However, the
Company is not currently involved in discussions for any such acquisition. See
"The Reorganization," "S Corporation Matters," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business" and
"Certain Transactions." Pending such uses, the Company intends to invest the net
proceeds of the Offering in short-term, interest bearing, investment-grade
securities.

DIVIDEND POLICY

Except as described under "S Corporation Matters" above, the Company has not
paid any cash dividends on the shares of its Common Stock and currently intends
to retain future earnings, if any, to fund the development and growth of its
business.

S CORPORATION MATTERS

In 1991, the Company elected to be treated as a corporation subject to
taxation under Subchapter S of the internal Revenue Code of 1986, as amended (an
"S Corporation"). As a result, substantially all taxable income and losses since
such time have flowed though the Company to its shareholders for federal and
state income tax purposes. The Company's status as an S Corporation will
terminate effective as of the closing of this Offering and the Company
thereafter will become subject to tax at the corporate level.

Since 1991, the Company has made distributions of accumulated earnings and
profits to shareholders to enable them to satisfy their income tax liabilities
with respect to such earnings and profits. The Company intends to distribute
(the "S Distribution") to the current shareholders of the Company an amount
equal to the Company's estimated taxable income from January 1, 1996 to the date
of closing of this Offering. The S Distribution will be made shortly after the
closing of this offering and is currently estimated to be approximately $30,000
to $50,000. Purchasers of shares of Common Stock in this Offering will not
receive the S Distributions. See "Certain Transactions."

9
<PAGE>
DILUTION

The pro forma net tangible book value of the Company's Common Stock at
December 31, 1996 (assuming consummation of the Reorganization but excluding the
S Distribution at such date) was $52,448, or $0.01 per share. "Pro forma net
tangible book value per share" represents the amount of the Company's total
tangible assets less total liabilities divided by the number of shares of Common
Stock outstanding after giving effect to the Reorganization. Without taking into
account any other changes in net tangible book value after December 31, 1996,
other than to give effect to the sale by the Company of the 1,250,000 shares
offered hereby at an assumed initial public offering price of $5.00 per share
and after deduction of underwriting discounts and commissions and estimated
offering expenses, pro forma net tangible book value of the Company at December
31, 1996 would have been approximately $4,602,448, or $0.92 per share of Common
Stock. This represents an immediate increase in the net tangible book value of
$0.91 per share of Common Stock to existing shareholders and an immediate
dilution of $4.08 per share to new investors, as illustrated by the following
table:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............... $ 5.00
Pro forma net tangible book value per share before this
Offering.................................................. $ 0.01
Increase per share attributable to new investors............ 0.91
---------
Net tangible book value per share after this Offering......... 0.92
---------
Dilution per share to new investors......................... $ 4.08
---------
---------
</TABLE>

The following table summarizes, on a pro forma basis assuming consummation
of the Reorganization as of December 31, 1996, the difference between the number
of shares of Common Stock purchased from the Company, the total cash
consideration paid and the average cash price per share paid by the existing
shareholders and by the investors purchasing shares of Common Stock in this
Offering:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------------- ------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ----------- ------------ ----------- ---------------
<S> <C> <C> <C> <C> <C>
Existing Shareholders............................ 3,750,000 75.0% $ 1,000 0.0% $ 0.00
New Investors.................................... 1,250,000 25.0 $ 6,250,000 100.0 5.00
---------- ----------- ------------ ----- -----
Total........................................ 5,000,000 100 % $ 6,251,000 100.0% $ 1.25
</TABLE>

- ------------------------

(1) Before deducting estimated underwriting discounts and estimated expenses of
the Offering payable by the Company.

(2) Excludes 750,000 shares of Common Stock reserved for issuance under the
Option Plan. See "Management--Stock Option Plan." To the extent that options
granted under the Option Plan are exercised, there may be further dilution
to new investors.

10
<PAGE>
CAPITALIZATION

The following table sets forth as of December 31, 1996 (i) the actual
capitalization of the Company, and (ii) the pro forma capitalization of the
Company assuming consummation of the Reorganization and as adjusted to give
effect to the Reorganization and the sale of the 1,250,000 shares of Common
Stock offered by the Company hereby (at an assumed initial public offering price
of $5.00 per share, after deduction of underwriting discounts and commissions
and estimated offering expenses). See "The Reorganization" and "Use of
Proceeds."

<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------
PRO FORMA
ACTUAL AS ADJUSTED(1)
---------- --------------
<S> <C> <C>
Long-term liabilities, net of current portion..................... $ 28,021 $ 28,021
Shareholders' equity:
Common Stock, no par value, 25,000,000 shares authorized 100,000
shares outstanding; 3,750,000 shares outstanding pro forma;
5,000,000 shares outstanding, as adjusted (2)................. 1,000 4,551,000
Retained earnings............................................... 51,448 51,448
Total shareholders' equity.................................... 52,448 4,602,448
Total capitalization........................................ $ 205,224 $ 4,755,224
</TABLE>

- ------------------------

(1) Pro Forma information assumes the issuance of 3,350,000 shares of Common
Stock as Exchange Consideration in connection with the Pearl Share Exchange.
See "The Reorganization."

(2) Excludes shares of Common Stock issuable upon exercise of options which may
be granted under the Option Plan. See "Management--1997 Stock Plan."

11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This "Management's Discussion and Analysis of Financial Condition and
Results of Operations" (i) should be read in conjunction with the Company's
annual audited financial statements, the notes thereto and the other financial
data included elsewhere in this Prospectus and (ii) includes forward-looking
statements which involve risks and uncertainties. The Company's actual results
may differ materially from the results predicted by such forward-looking
statements due to various factors, including but not limited to those which are
discussed below and elsewhere in this Prospectus, including "Risk Factors."

OVERVIEW

Pacific Audio is a full service audio and video production company that
provides high quality recording services to a wide variety of industries. The
Company was incorporated in 1991, after current management purchased certain
assets from Tape Data Media, a subsidiary of Mc-Graw Hill. The Company's
original market focus was on audio production and duplication. In 1993, the
Company became involved in video production and duplication.

Pacific Audio's net sales are generated in five main areas: audio and video
tape duplication services; on-site convention recording and sales; studio
operations; fulfillment services and message recording and other related
services. For the year ended December 31, 1996, net sales increased 119% over
1995 net sales in the same period. For the 1996 period, duplication services
accounted for approximately 38% of net sales, fulfillment operations represented
approximately 26% of net sales, on-site convention recording and sales
represented approximately 23% of net sales, studio operations accounted for
approximately 1% of net sales, and other miscellaneous services represented
approximately 12% of net sales.

The Company's cost of sales includes all direct material, labor, overhead
and production expenses related to net sales. Cost of sales for the year ended
December 31, 1996 marginally increased as a percentage of net sales, compared to
the same period for 1995. The Company currently expects that its cost of sales,
as a percentage of revenues, will decline as sales volumes increase.

Pacific Audio is not currently required to pay federal income tax as a
result of the Company's Subchapter S election. The Company's status as a
Subchapter S corporation will terminate upon the closing of the Offering and
thereafter the Company will be subject to federal income tax on its net income.
The Company pays state income taxes at an effective rate of 1.5%, with a minimum
tax of $800.

12
<PAGE>
RESULTS OF OPERATION

The following table summarizes certain components of net income as a
percentage of net sales for the periods indicated.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
DECEMBER 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
Net Sales................................................................ 100.0% 100.0%
Cost of Sales............................................................ 61.9 60.3
----- -----
Gross Profit........................................................... 38.1 39.7
Selling, general and administrative expenses............................. 33.0 39.9
----- -----
Income (loss) from Operations............................................ 5.1 (0.2)
Other income............................................................. -- 0.6
----- -----
Income before income taxes............................................... 5.1 0.4
Provision for income taxes............................................... 0.1 0.2
----- -----
Net income............................................................. 5.0% 0.2%
----- -----
----- -----
</TABLE>

COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1996

NET SALES

For the twelve months ended December 31, 1996, net sales increased by
$420,979 or 119%, to $773,590, compared with the net sales of $352,611 for 1995.
The increase was attributable primarily to growth in video services and new
audio services customers and to a lesser extent increased fulfillment services.

COST OF SALES

For the twelve months ended December 31, 1996, cost of sales totaled
$478,817, up $266,145 from the $212,672 reported for the year ended December 31,
1995. As a percentage of net sales, costs of sales for 1996 increased to 61.9%,
compared to 60.3% for the same period of 1995.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative ("SG&A") expenses, were up $114,616, and
totaled $255,345 in the year ended December 31, 1996, compared to $140,729 for
1995. The increase was attributable primarily to the addition of an office
manager, increased audit and legal expenses attributable to this Offering and
additional marketing expenses. The Company's SG&A expenses as a percentage of
net sales dropped 33% in 1996, from 39.9% in 1995. The percentage decrease in
these expenses was attributable to revenue growth which outpaced the growth in
SG&A expenses.

PROVISION FOR INCOME TAXES

The provision for state income taxes for the year ended December 31, 1996
totaled $800 (the minimum annual California franchise fee), and was unchanged
from 1995. Taxes for future periods will be higher as a result of termination of
the Company's S election for federal income tax purposes.

LIQUIDITY AND CAPITAL RESOURCES

To date, Pacific Audio has funded its operations through cash flow from
operations, capital equipment leases, bank borrowing and loans from the
Company's officers. As of December 31, 1996, the Company had no outstanding
balances on bank credit facilities and no outstanding loans to officers. The
balance on

13
<PAGE>
the Company's capital leases at December 31, 1996 was $40,368, up from $24,950
at December 31, 1995 due primarily to additional leases for video duplication
equipment.

Capital expenditures were approximately $30,000 and $1,200 for the twelve
months ended December 31, 1996, and 1995; respectively. The Company intends to
significantly increase capital expenditures in 1997. See "Use of Proceeds."

The Company believes that the proceeds from the sale of the Common Stock
offered hereby, together with cash anticipated to be generated by operations,
will satisfy the Company's projected working capital and capital expenditures
requirements for the foreseeable future. However, the Company may be required to
finance its future cash flow requirements through additional equity or debt
financings or credit facilities. There can be no assurance that such additional
financings or credit facilities will be available, or if available, that they
will be on satisfactory terms.

From time to time, the Company may consider certain strategic acquisitions
and business alliances. The Company is not currently involved in discussions for
any such acquisition or alliance. To the extent that the Company undertakes a
material acquisition, it may require additional capital to finance such
transaction.

14
<PAGE>
BUSINESS

OVERVIEW

Pacific MultiMedia, Inc. is a full service audio and video production
company that provides a wide array of services, including recording, mastering,
duplicating and distributing audio and video cassette tapes. The Company offers
authors and creators of spoken-word audio recordings the necessary facilities,
services and resources to prepare audio recordings for sale to end users.

The Company also provides on-site recording services, which involve the use
of portable recording equipment at client-selected locations to record materials
in a non-studio environment. The most common non-studio locations recorded by
the Company are conventions, conferences, seminars, religious revivals and other
public gatherings. The Company records, duplicates and sells audio and video
tapes of the speeches and presentations made at these events.

The Company also maintains and operates a warehouse and fulfillment center
that stores client-owned materials, such as books, tapes, manuals and marketing
materials. Upon receipt of an order, Pacific MultiMedia packages and ships these
materials in accordance with customer specifications. Pacific MultiMedia also
drop ships materials in bulk to the location of a client's speaking engagement,
when that client wants to have materials on hand to sell directly. Pacific
MultiMedia also maintains a recording studio in Fullerton, California and
performs a variety of audio recording services for its clients, including
digital tape mastering, development of message-on-hold systems and various other
services.

The Company's operations are segmented into five distinct categories. The
revenue breakdown by category for 1995 and 1996 is shown below:

<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Duplication Services...................................................... 28.0% 38.4%
Fulfillment Services...................................................... 16.2 25.9
On-Site Convention Recording & Sales...................................... 36.8 23.0
Studio Operations......................................................... 10.0 1.0
Message Recording and Other Services...................................... 9.0 11.7
----- ---
Total................................................................. 100.0% 100%
----- ---
----- ---
</TABLE>

STRATEGY

The Company intends to devote a significant portion of the proceeds of this
Offering to the purchase of new audio and video duplication equipment, the
opening of a Seattle, Washington production and fulfillment facility and for the
addition of marketing personnel. The addition of the Company's Seattle facility
and new audio and video duplication equipment will significantly expand the
Company's audio and video production capacity. This will enable the Company to
compete for larger run orders (5,000 to 50,000 pieces) which it is currently not
able to effectively undertake. Participants in this market include the direct
response television industry (such as infomercials and other paid commercial
television advertisements) and distributors of movies and home videos. The
Company also intends to begin marketing to professional organizations that
maintain significant continuing education requirements (such as the American
Medical Association, the American Bar Association and the American Institute of
Certified Public Accountants),

15
<PAGE>
and corporate and industrial accounts which require instructional and product
promotion materials on a routine and regular basis.

In addition, the Company intends to expand the range of services it offers
to include video production capabilities. Currently, the Company offers only
video duplication which requires Company clients to contract with a third party
for video production (or possess such capabilities in-house). The Company
intends to purchase digital video editing equipment which the Company intends to
offer on a rental basis and to also offer trained technical operators if
requested by the client. The addition of video production services will allow
the Company to provide a more comprehensive service package to its clients

Finally, the Company intends to leverage its position in the spoken-word
recording market to compile and market a library of recorded materials.
Historically, the Company has not received a license or other rights to
duplicate or otherwise use the recorded materials (beyond that authorized in the
initial engagement). Therefore, the Company's ability to market such materials
as part of a tape library will require that the Company secure the originating
party's consent to such use. As a matter of course, the Company will seek to
secure such rights with respect to future client engagements. However, there can
be no assurance that the Company will secure the necessary rights to use such
materials in a timely manner or on terms which are commercially reasonable or
favorable to the Company. The Company believes that through its role as a
provider of on-site recordings, the Company can efficiently obtain mailing lists
of conference attendees and use such lists to implement highly focused marketing
for such materials to a base of "pre-screened" consumers. See "Risk
Factors--Consent to Use Recorded Materials."

DUPLICATION SERVICES

The Company's primary line of business involves the duplication of audio and
video tapes. The duplication process begins with a prerecorded tape known as a
"master." Pacific MultiMedia uses its duplicating equipment to reproduce
multiple copies of the master, as specified by the client. The Company also
handles all of the tasks and details necessary to produce a complete and
attractive cassette package. Such services include designing and printing custom
labels that are applied to each tape and packaging the final product in
accordance with customer specifications.

The Company currently operates three audio duplication systems and one video
duplication system. Pacific MultiMedia's current duplication capacity is
approximately 40,000 audio tapes per week and approximately 700 video tapes per
week. The Company intends to expand capacity to up to 100,000 audio tapes and
12,500 video tapes per week through the addition of new equipment from the
proceeds of the Offering. The Company duplicated approximately 700,000 audio
tapes and 22,500 video tapes in 1996.

The Company's duplication business specializes in relatively short
production runs involving 1,000 to 10,000 units. This segment of the market is
highly dependent on customer service. As a result, Pacific MultiMedia is well
known in the industry as a service-oriented company willing to get intimately
involved in the details associated with such small orders. Pacific MultiMedia's
customers have responded with a high incidence of repeat business.

Typical customers of the Company's duplication services include motivational
speakers, investment advisors, spiritual leaders, musicians, medical
professionals and experts in various other fields. These individuals produce
audio and video tapes for a variety of purposes with the most common uses being
resale and profit generation; training and professional development; promotion
of businesses, products and services; and spiritual guidance. Other customers
produce audio and video tapes as "value added" complements to other product
offerings. Most customers sell their tapes through catalog, mail order and
direct marketing channels. Other customers, such as multi-level marketing
organizations, use the cassettes as a "give away" item in order to promote their
businesses.

The Company's audio and video duplicating pricing is largely a function of
the component cost of the materials needed to produce the required quantity of
tapes. The principal components of a duplication

16
<PAGE>
project include raw tape stock, cassette shells, labels, and non-essential items
such as the packing box, pre-printed materials, shrink wrapping and other
optional items. The Company presently purchases fixed length tape stock and uses
subcontractors to load tapes. Management believes that the purchase of a tape
loading machine and other planned equipment purchases will significantly reduce
component costs and increase the gross profits of the duplication business.

ON-SITE (CONVENTION) RECORDING AND SALES

The Company provides high quality, on-site duplication services for
conventions and other public forums, such as conferences, seminars, religious
revivals and other public events. Under contract with the event organizers, the
Company records and duplicates audio and video tapes of the presentations made
by featured speakers at the event. Prior to the end of the day, and usually
within 20 minutes of the completion of the presentations, the event attendees
are provided an opportunity to purchase an assortment package of audio
recordings containing the presentations. Video tape recordings are duplicated
and made available to the attendees within three to four hours of the completion
of the presentations.

At most large conventions and conferences, the attendees are permitted to
select a fixed number of cassettes from the total number of recordings
available. Audio cassette tapes sold by the Company generally range from $6.00
and $10.00 per tape and video tapes generally range from $15.00 to $30.00 per
tape, depending on the quantity of tapes purchased. Most convention tape
customers choose to purchase multiple tape packages which retail for
approximately $50.00 to $80.00 for audio tapes and from $50.00 to $200.00 for
video tapes.

SHIPPING & FULFILLMENT

The Company maintains and operates a warehouse and fulfillment center that
stores client-owned materials, including books, tapes, manuals, marketing
materials and other media. Upon receipt of an order, Pacific MultiMedia packages
and ships these materials in accordance with customer specifications. Pacific
MultiMedia also drop ships materials in bulk to client-specified locations,
usually the site of a client's speaking engagement, when such client wants to
have materials on hand to sell directly.

STUDIO OPERATIONS

The Company operates a multi-track recording facility within its Fullerton
location. The studio is available for use on an hourly rental basis. Pacific
MultiMedia's studio has been used to record and edit a wide variety of
materials, including books on tape, home study courses, foreign language
studies, sales motivation techniques, management techniques and
self-improvement, and multi-level marketing organization promotions. In
addition, the Company provides support and services beyond the initial recording
session including editing, mastering and preparing tapes for duplication.

OTHER SERVICES

The Company produces professional quality message on-hold systems (recorded
messages that telephone callers hear when they are on-hold) to businesses and
consumers. Message-On-Hold ("MOH") tape recordings are standard audio tape
recordings developed in accordance with exact customer specifications. Most MOH
recordings are produced in Pacific MultiMedia's recording studio with voice
talent provided by Company personnel. These tapes are used with conventional
hardware that plug into standard business telephone systems. Most MOH recordings
are updated annually, thus creating recurring revenue opportunities for the
Company.

SALES AND MARKETING

The Company currently uses a variety of sales and marketing techniques to
promote each segment of the business. However, much of the success of the
Company's sales and marketing efforts results from its

17
<PAGE>
relationships with key personnel and organizations that have been maintained
over the years. The Company intends to hire additional sales and marketing
personnel which will be responsible for specific areas of the Company's
business. The implementation of a focused marketing effort should enhance the
Company's ability to capture market share in its targeted markets.

The Company's management directly approaches speakers at conventions,
conferences and trade shows in order to solicit duplication services and other
applicable business. The Company's presence as a subcontractor of the conference
organizer provides Pacific MultiMedia with credibility to most speakers. Many of
these speakers are members of groups and organizations being promoted by the
conference organizers. Members of these "affinity" groups often are inclined to
do business with other members of the group.

Pacific MultiMedia's success in marketing on-site recording services is
largely a result of its long-term relationships with conference organizers.
Pacific MultiMedia believes it has earned a reputation for dependability,
quality, integrity and honesty. Accordingly, the Company has experienced a high
degree of repeat business with several conference organizers. The Company also
maintains relationships with audio visual equipment rental companies. Such
companies are usually contacted by conference organizers to reserve equipment in
advance of events. Key personnel at the equipment rental companies notify
Pacific MultiMedia of many on-site recording, duplication and sales
opportunities.

The in-house studio is used by many potential duplication customers that
management has solicited at conferences, conventions and trade shows. The
Company also uses yellow page and trade advertisements to attract business
promoters, local music groups, sales and marketing organizations,
choreographers, and other potential users of its in-house studio.

EQUIPMENT

Pacific MultiMedia currently operates three audio duplication systems and
one video duplication system. Audio recordings can be duplicated in a shorter
period of time than the length of the recording. However, the quality of the
recording is largely a function of the duplication time. Ultra high quality
recordings can be obtained on the Company's Telex 6120 XLP duplicator. The Telex
6120 can make 11 reproductions from each master in 1/8th the time of the
original recording. For mass production projects which require less than ultra
high quality, the Company utilizes a portable duplication system that can
simultaneously reproduce 39 duplicate recordings from each master in 1/16th the
time of the actual recording. The Company also utilizes a Sony audio duplication
system that can simultaneously reproduce 51 recordings from each master at
1/16th the time of the actual recording.

Video duplication is performed on a Sony video duplication system capable of
simultaneously producing 20 videocassette copies from each master. Video
duplication occurs in a real-time environment. Accordingly, videocassettes are
duplicated in accordance with the length of the video. Pacific MultiMedia's
video duplication system is portable, and it is frequently used in on-site
duplication assignments. The Company knows of few, if any, companies providing
on-site video duplication throughout the country.

COMPETITION

The audio and video production, duplication and fulfillment industry is
highly competitive and many of the Company's competitors have substantially
greater name recognition, customer bases, and financial, marketing and
management resources than the Company. In the audio and video tape duplication
markets, the Company competes with Cassette Productions Unlimited, Inc., Fosdick
Corporation and Audio Video Color Corporation which are larger, nationally-known
companies which have financial and personnel resources substantially in excess
of those of the Company's. In the on-site convention recording market, the
Company competes with a number of smaller, regional companies such as Convention
Cassettes Unlimited and Infomedix, both located in Southern California.
Furthermore, the audio and video production, duplication and fulfillment
business has relatively few barriers to entry. The Company

18
<PAGE>
attempts to compete based on offering quality service at a reasonable price.
There can be no assurance, however, that the Company will be successful in
improving or maintaining its competitive position against its existing
competitors or that new competitors will not enter into the market. Any such
failure to improve the Company's competitive position VIS-A-VIS existing
competitors and/or the entry of significant new competitors into the Company's
existing markets and targeted areas for expansion will have a material and
adverse effect on the Company's ability to achieve its growth objectives. See
"Risk Factors--Intense Competition."

FACILITIES

The Company leases a 2,500 square foot two-story facility in Fullerton,
California which it has possessed since the Company commenced operations in
1991. The facility contains a recording studio, editing/control room,
duplication area, warehouse and administrative offices. The Company's most
recent 3 year lease on the premises expired in December of 1996. At that time
the Company elected not to enter into an additional long-term lease due to
uncertainty over the Company's future needs and the planned opening of a
Seattle, Washington facility. The Company currently operates on a month to month
basis and pays approximately $1650 per month in rent. The Company's tenancy is
terminable by either party on 90 days prior written notice. The Company believes
its relations with the property owners are excellent and a long term lease is
available to the Company.

After the closing of this Offering, the Company intends to open a second
production and fulfillment facility in the Seattle, Washington area. This
facility will also house the Company's executive offices. The Company believes
the Seattle market possesses demographics and characteristics which should be
very favorable for the Company's business. While the Company has not identified
specific space for its operations, it believes that suitable facilities are
available at commercially reasonable rates. See "Risk Factors--Seattle
Expansion; Dual Facilities."

EMPLOYEES

The Company currently employs 7 persons, one in productions, two in assembly
and fulfillment, two in accounting and office operations and two in marketing.
None of the Company's employees are represented by labor unions or have a
collective bargaining agreement. The Company believes its relationship with its
employees is good.

LEGAL PROCEEDINGS

The Company may from time to time become a party to various legal
proceedings arising in the normal course of its business. The Company is not
currently subject to any material legal proceedings.

19
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers key employees and directors of the Company are as
follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------- --- ------------------------------------------------------------------

<S> <C> <C>
James E. Campbell....................... 45 President, Chief Executive Officer, Chief Financial Officer and
Director

Craig Patterson......................... 46 Vice President--California Operations

Jerome Schneider........................ 46 Director

Robert W. McMichael..................... 69 Director
</TABLE>

JAMES E. CAMPBELL, III has served as the Company's President, Chief
Executive Officer and Chief Financial Officer since April 1997 and has been a
director since the Company's organization in 1991. Along with Craig Patterson,
Mr. Campbell founded the Company and he has served in a variety of management
positions since such date and has been responsible for all management, financial
and marketing operations of the Company. Prior to founding the Company, Mr.
Campbell was employed by Tape Data Media, a division of McGraw-Hill and
predecessor to the Company. At Tape Data Media, Mr. Campbell held a variety of
technical responsibilities, including Chief Engineer responsible for managing
all aspects of the engineering and recording operations.

CRAIG D. PATTERSON has served as the Company's Vice President--California
Operations since April 1997. Along with Mr. Campbell, he founded the Company in
1991 and has served in a variety of management positions including President and
has been a member of the Board of Directors. Mr. Patterson has over 20 years of
experience in the sound engineering and recording industry. Prior to founding
the Company, Mr. Patterson was a recording engineer at Tape Data Media where he
handled production work on commercials.

JEROME SCHNEIDER became a member of the Company's Board of Directors in
April 1997. From 1976 to 1993, Mr. Schneider held the position of President and
Chief Executive Officer of WFI Corporation, an international financial
consulting firm in Beverly Hills, California, which wound up the active conduct
of its business in 1993. From November 1993 to June 1995, Mr. Schneider was the
Chief Executive Officer and a director of AmeriNational. In addition, during
such period he acted as a freelance financial writer and author and an
independent financial planning consultant. Since June 1995 to present, Mr.
Schneider has served as a Senior Financial Consultant with Premier Corporate
Services Ltd. of Vancouver, British Columbia. Mr. Schneider also founded Pearl
Financial in June 1995 and has served as its President and director since such
date.

ROBERT W. MCMICHAEL has been a member of the Company's Board of Directors
since April 1997. In 1950, he joined General Electric Company ("GE") where he
spent 15 years in various financial management positions. From 1963 to 1976, Mr.
McMichael held various financial and management positions with large
manufacturing and food processing companies including Allis-Chalmers in
Milwaukee, Wisconsin, International Multifoods in Minneapolis, Minnesota,
Jeffery-Galion, Inc. in Columbus, Ohio and White Motor Corporation in Cleveland,
Ohio. In 1976, Mr. McMichael purchased majority control of Trundle Consultants,
Inc., a general management consulting firm in Cleveland, Ohio and served as a
director and Chairman and Chief Executive Officer. At the same time he also
became a director and Chairman and Chief Executive Officer of Computer
Management, Inc., an affiliate of Trundle. In 1981, Mr. McMichael, with two
other partners, founded and developed Bentley Village, Inc., a $50 million
continuing-care retirement community in Naples, Florida. He served as a director
and President, Chief Executive Officer and Chief Financial Officer of Bentley
Village until 1986 and sold his interest therein in 1989. Since that time Mr.
McMichael has been retired and living in Bonita Springs, Florida.

20
<PAGE>
ELECTION OF DIRECTORS AND OFFICERS

All members of the Company's Board of Directors hold office until the next
annual meeting of shareholders or until their successors are elected and
qualified. Officers serve at the discretion of the Board of Directors and are
elected annually. There are no family relationships among the directors or
officers of the Company.

BOARD COMMITTEES AND COMPENSATION

The Company's Board of Directors has two committees--an Audit Committee and
a Compensation Committee.

The Audit Committee consists of Messrs. McMichael and Schneider. The Audit
Committee makes recommendations to the Board of Directors regarding the
selection of independent auditors, reviews the results and scope of the audit
and other services provided by the Company's independent auditors, and reviews
and evaluates the Company's internal control functions.

The Compensation Committee consists of Messrs. Schneider and McMichael. The
Compensation Committee administers the Company's Stock Option Plan and makes
recommendations to the Board of Directors concerning compensation for executive
officers and consultants of the Company.

The Company's directors currently do not receive cash compensation for
attendance at Board of Directors or committee meetings. However, in the future,
non-employee directors who are not significant shareholders or representatives
of significant shareholders may receive compensation for attendance and may be
reimbursed for certain expenses in connection with attendance at board and
committee meetings.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During the fiscal year ended December 31, 1996, decisions regarding
compensation of executive officers were made by the entire Board of Directors.
Certain members of the Board of Directors have been party to transactions with
the Company since January 1, 1994. See "Certain Transactions."

EXECUTIVE COMPENSATION

The following table sets forth compensation earned during the fiscal year
ended December 31, 1996 by the Company's Chief Executive Officer and by all
directors and executive officers of the Company as a group. No executive officer
received total salary and bonus during such year in excess of $100,000.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ---------------
-------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION OPTIONS(#) COMPENSATION
- ------------------------------------------- --------- ------------ ------------- --------------- ---------------

<S> <C> <C> <C> <C> <C>
James E. Campbell III
Chief Executive Officer.................. $ 21,637 $ 30,000(1) $ 17,034(2) -- --
--------- -------------

All directors and executive officers
(2 persons).............................. $ 44,979 $ 30,000 $ 28,068
--------- ------------ -------------
--------- ------------ -------------
</TABLE>

- ------------------------

(1) Payable at or after the closing of this Offering.

(2) Includes $11,033.52 attributable to equipment rental payments pursuant to
equipment leases between the Company and Mr. Campbell and $6,000 of certain
child care benefits paid by the Company.

21
<PAGE>
STOCK OPTION PLAN

In April 1997, the Board of Directors adopted the 1997 Stock Option Plan
(the "Option Plan") and reserved 750,000 shares of Common Stock for issuance
upon exercise of options granted thereunder. The Option Plan is administered by
the Compensation Committee of the Board of Directors. The Option Plan permits
the Compensation Committee to select eligible persons to receive grants and to
determine certain terms and conditions of such grants, including the vesting
schedule and exercise price of each award, and whether such award will
accelerate upon the occurrence of a change of control of the Company. Options
may be granted with an option exercise price that is less than the then current
market value of such stock. The Option Plan may be amended, suspended or
terminated at any time as provided therein. However, the maximum number of
shares that may be sold or issued under the Option Plan may not be increased
without the approval of the Company's shareholders.

BONUS PLAN

In April 1997, the Board of Directors adopted the 1997 Performance Bonus
Plan (the "Bonus Plan") which is administered by the Compensation Committee of
the Board of Directors. The Compensation Committee will select each year the
executive officers of the Company who will be eligible to receive awards under
the Bonus Plan. Upon achievement by the Company of certain targeted operating
results or other performance goals, such as operating income, pre-tax income or
net income, the Company will pay performance bonuses, the aggregate amounts of
which will be determined annually based upon an objective formula. The actual
amount of such bonuses may be proportionality greater or less than the target
bonus established for each participant, to the same extent to which the
Company's actual performance exceeds or falls short of the targeted goals.

EMPLOYMENT AGREEMENTS

Prior to closing of the Offering, the Company intends to enter into an
employment agreement with James E. Campbell, providing for a base salary of
$65,000 per year, which will remain in effect for two years from the effective
date of the agreement, unless terminated by either the Company or Mr. Campbell
at any time and for any reason, with or without cause, upon 30 days notice to
the other party. The agreement contains non-compete and confidentiality clauses
and provides that, in the event Mr. Campbell's employment is terminated by the
Company without cause, Mr. Campbell shall be entitled to receive a severance
payment equal to three months base salary payable over three months. In
addition, the Company intends to enter into an employment agreement with Craig
Patterson, providing for a base salary of $40,000 per year, which will remain in
effect for one year from the effective date of the agreement, unless terminated
by either the Company or Mr. Patterson at any time and for any reason, with or
without cause, upon 30 days notice to the other party. The agreement contains
non-compete and confidentiality clauses and provides that, in the event Mr.
Patterson's employment is terminated by the Company without cause, Mr. Patterson
shall be entitled to receive a severance payment equal to one month base salary.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

Section 23B.08.510 of the Revised Code of Washington authorizes Washington
corporations to indemnify their officers and directors under certain
circumstances against expenses and liabilities incurred in legal proceedings
involving such persons because of their being or having been an officer or
director. The Company's Articles of Incorporation and Bylaws require
indemnification of the Company's officers and directors to the fullest extent
permitted by Washington law. The Company also intends to secure a director's and
officer's liability insurance policy prior to the closing of this Offering.

The Company's Bylaws and Articles of Incorporation provide that the Company
shall, to the full extent permitted by the Business Corporation Act of the State
of Washington, as amended from time to

22
<PAGE>
time, indemnify all directors and officers of the Company. In addition, the
Company's Articles of Incorporation contains a provision eliminating the
personal liability of directors to the Company or its shareholders for monetary
damages arising out of a breach of fiduciary duty. Under Washington law, this
provision eliminates the liability of a director for breach of fiduciary duty
but does not eliminate the personal liability of any director for (i) acts or
omissions of a director that involve intentional misconduct or a knowing
violation of law, (ii) conduct in violation of Section 23B.08.310 of the Revised
Code of Washington (which section relates to unlawful distributions) or (iii)
any transaction from which a director personally received a benefit in money,
property or services to which the director was not legally entitled.

The Company intends to enter into separate indemnification agreements with
each of its directors and officers prior to Closing of the Offering. These
agreements require the Company, among other things, to indemnify such
individuals against certain liabilities that may arise by reason of their status
or service as directors or officers (other than liabilities arising from actions
not taken in good faith or in a manner the indemnitee believed to be opposed to
the best interests of the Company) to advance their expenses incurred as a
result of any proceeding against them as to which they could be indemnified and
to obtain directors' insurance if available on reasonable terms. Insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Securities Act"), may be permitted to directors, officers or
persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable. The Company believes that its
Articles of Incorporation and Bylaw provisions and indemnification agreements
are necessary to attract and retain qualified persons as directors and officers.

PAST DISCIPLINARY ACTIONS AND INSOLVENCY PROCEEDINGS OF AMERINATIONAL

In January 1996, Jerome Schneider entered into an Offer of Settlement (the
"Settlement") with the National Association of Securities Dealers, Inc. (the
"NASD"). The Settlement resolved a complaint filed in April 1995 against
AmeriNational and certain Registered Principals of AmeriNational, including Mr.
Schneider. Without admitting or denying the allegations, Mr. Schneider consented
to the entry of findings of violations relating to a failure to supervise
private securities transactions and a failure to establish, maintain and enforce
adequate supervisory procedures relating to certain activities conducted by
AmeriNational. Pursuant to the Settlement, Mr. Schneider was censured and fined
$8,000. AmeriNational, which formerly was a wholly-owned subsidiary of Pearl
Financial, is currently involved in insolvency proceedings in Federal District
Court for the Central District of California (Western Division) (Docket No.
2:96cv03942). Mr. Schneider owns a majority of the outstanding stock of Pearl
Financial and is an officer and a director of Pearl Financial. Prior to the
acquisition of AmeriNational by Pearl Financial, Mr. Schneider was Chairman of
the Board of AmeriNational and owned a majority of the outstanding stock of
AmeriNational. Pearl Financial will become a subsidiary of the Company upon
completion of the Reorganization. See "Risk Factors--Past Disciplinary Actions
and Insolvency Proceedings of Amerinational."

CERTAIN TRANSACTIONS

From time to time, the Company has made salary advances to James Campbell
and Craig Patterson which are due on demand. Officer receivables for the years
ended December 31, 1996 and 1995 amounted to $20,730 and $18,957, respectively.

In 1996 and 1995, the Company leased certain equipment from Messrs. Campbell
and Patterson under terms of a noncancelable operating lease. Rental expense to
these officers amounted to $22,072 in each of the years ended December 31, 1996
and 1995. These leases have been terminated upon closing of the Offering and the
leased assets will be contributed to the Capital of the Company.

23
<PAGE>
Approximately 13% and 8% of the Company's revenues in 1995 and 1996,
respectively, were derived from sales to Wilshire Publishing. Jerome Schneider
controls Wilshire Publishing but in 1995 and 1996 he was not affiliated with the
Company. In connection with the Pearl Share Exchange, Mr. Schneider agreed (i)
to serve as a director of the Company effective April 1997 and (ii) to cause
Pearl Financial to advance costs and expenses of this Offering and the Pearl
Share Exchange. The Company has agreed to reimburse Pearl Financial for such
fees and expenses from the proceeds of this Offering. See "Underwriting."

Upon closing of the Offering, the Company intends to distribute the S
Distribution to the current shareholders of the Company. See "S Corporation
Matters." In addition, prior to the closing of this Offering, the Company
intends to enter into the Stock Redemption Agreement with Craig Patterson
pursuant to which the Company will repurchase 40,000 shares of common stock of
Pacific Audio California held by Mr. Patterson in exchange for a cash payment of
$40,000, options to purchase 10,000 shares of Common Stock at an exercise price
of $5.00 per share and the Employment Agreement referred to above. See
"Management--Employment Agreements."

All future transactions with affiliates of the Company will be on terms no
more favorable to the affiliate than those available from unaffiliated third
parties and must be approved by a majority of the disinterested directors of the
Company.

PRINCIPAL SHAREHOLDERS

The following table sets forth the pro forma beneficial ownership of the
Common Stock as of April 30, 1997 (assuming consummation of the Reorganization
at such date), by (i) each person or entity known to the Company to own
beneficially 5% or more of the outstanding shares of Common Stock, (ii) each
director and executive officer of the Company, and (iii) all directors and
executive officers of the Company as a group. The address of each 5% beneficial
owner is 2477 E. Orangethorpe Avenue, Fullerton, California 92631. The following
share information assumes and has been adjusted to reflect the consummation of
the Pearl Share Exchange and assumes the issuance by the Company of 3,350,000
shares of Common Stock as Exchange Consideration. See "The Reorganization." See
"Management" for each individual's position with the Company.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR OWNED
TO THE OFFERING(1) AFTER THE OFFERING(1)
----------------------- -----------------------
NAME NUMBER PERCENT NUMBER PERCENT
- --------------------------------------------------------------------- ---------- ----------- ---------- -----------

<S> <C> <C> <C> <C>
Jerome Schneider..................................................... 2,732,609 72.9% 2,732,609 54.7%

James E. Campbell III................................................ 400,000 10.7 400,000 8.0

Craig Patterson...................................................... 10,000 * 10,000 *

Robert W. McMichael.................................................. 131,095 3.5 131,095 2.6

All executive officers and directors as a group (4 persons).......... 3,263,704 87.0 3,263,704 65.3
</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. Subject to community property
laws where applicable, the persons named in the table have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.

24
<PAGE>
DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 25,000,000 shares of
Common Stock, no par value per share and 5,000,000 shares of Preferred Stock.

COMMON STOCK

As of April 30, 1997, there were 100,000 shares of Common Stock outstanding
held by two shareholders of record and there were no shares of Preferred Stock
outstanding. Assuming consummation of the Reorganization as of April 30, 1997,
there were 3,750,000 shares of Common Stock outstanding held by approximately 35
shareholders of record. There will be 5,000,000 shares of Common Stock
outstanding after giving effect to the sale of 1,250,000 shares of Common Stock
offered hereby and after giving effect to the Reorganization.

The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the shareholders, including the election of
directors, and do not have cumulative voting rights. The holders of Common Stock
are entitled to receive ratably such dividends, if any, as may be declared from
time to time by the Board of Directors out of funds legally available therefor.
See "Dividend Policy." In the event of liquidation, dissolution or winding up of
the Company, the holders of shares of Common Stock shall be entitled to receive
pro rata all of the assets of the Company available for distribution to its
shareholders. The Common Stock has no preemptive or conversion rights or other
subscription rights. There are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of Common Stock are fully
paid and nonassessable, and shares of Common Stock to be issued pursuant to this
Offering shall be fully paid and nonassessable.

PREFERRED STOCK

Pursuant to its Articles of Incorporation, the Company is authorized to
issue 5,000,000 shares of preferred stock (the "Preferred Stock"), which may be
issued from time to time in one or more classes or series or both upon
authorization by the Company's Board of Directors. The Board of Directors,
without further approval of the shareholders, is authorized to fix the dividend
rights and terms, conversion rights, voting rights, redemption rights and terms,
liquidation preferences, and any other rights, preferences, privileges and
restrictions applicable to each class or series of Preferred Stock. The issuance
of Preferred Stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could, among other things, adversely
affect the voting power of the holders of Common Stock and, under certain
circumstances, make it more difficult for a third party to gain control of the
Company, discourage bids for the Company's Common Stock at a premium, or
otherwise adversely affect the market price of the Common Stock. The Company has
no current plans to issue any Preferred Stock.

CERTAIN ARTICLES OF INCORPORATION, BYLAWS, AND STATUTORY PROVISIONS AFFECTING
SHAREHOLDERS

SPECIAL MEETINGS OF SHAREHOLDERS; SHAREHOLDER ACTION BY WRITTEN
CONSENT. The Company's Articles of Incorporation require that any action
required or permitted to be taken by the Company's shareholders may be effected
at a duly called annual or special meeting of shareholders or by consent in
writing. Additionally, the Articles of Incorporation and Bylaws require that
special meetings of the shareholders of the Company may be called by a majority
of the Board of Directors or an authorized committee thereof or one or more
shareholders holding 20% or more of the outstanding shares of Common Stock.

ADVANCE NOTICE REQUIREMENTS FOR SHAREHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. The Company's Bylaws provide that shareholders seeking to bring
business before or to nominate directors at any meeting of shareholders must
provide timely notice thereof in writing. To be timely, a shareholder's notice
must be delivered to or mailed and received at the principal executive offices
of the Company not less than (i) with respect to an annual meeting, 120 calendar
days in advance of the date that the Company's proxy statement was released to
shareholders in connection with the previous year's annual meeting, except that

25
<PAGE>
if no annual meeting was held in the previous year or if the date of the annual
meeting has been changed by more than 30 calendar days from the date
contemplated at the time of the previous year's proxy statement, such notice
must be received by the Company a reasonable time before the Company's proxy
statement is to be released and (ii) with respect to a special meeting of
shareholders, a reasonable time before the Company's proxy statement is to be
released. The Bylaws also specify certain requirements for a shareholder's
notice to be in proper written form. These provisions may preclude some
shareholders from bringing matters before the shareholders or from making
nominations for directors.

DIRECTOR AND OFFICER INDEMNIFICATION. The Washington Business Act provides
that a Washington corporation may include provisions in its articles of
incorporation relieving each of its directors of monetary liability arising out
of his or her conduct as a director for breach of his or her fiduciary duty
except liability for (i) acts or omissions of a director that involve
intentional misconduct or a knowing violation of law, (ii) conduct violating
Section 23B.08.310 of the Washington Business Act (which section relates to
unlawful distributions) or (iii) any transaction from which a director will
personally receive a benefit in money, property or services to which the
director was not legally entitled. The Company's Articles of Incorporation
include such provisions.

The Company's Articles of Incorporation and Bylaws provide that the Company
shall, to the fullest extent permitted by the Washington Business Act, as
amended from time to time, indemnify and advance expenses to each of its
currently acting and former directors and officers, and may so indemnify and
advance expenses to each of its current and former employees and agents. The
Company believes the foregoing provisions are necessary to attract and retain
qualified persons as directors and officers. Prior to the consummation of the
Offerings, the Company intends to enter into separate indemnification agreements
with each of its directors and executive officers in order to effectuate such
provisions.

RESTRICTIONS ON CHANGE OF CONTROL. Washington law contains certain
provisions that may have the effect of delaying, deterring or preventing a
change in control of the Company. Chapter 23B.19 of the Revised Code of
Washington ("RCW"), prohibits a "target corporation," with certain exceptions,
from engaging in certain "significant business transactions," with an "acquiring
person" who acquired more than 10% of the voting securities of the target
corporation for a period of five years after such acquisition, unless the
transaction is approved by a majority of the members of the target corporation's
board of directors prior to the date of the transaction or unless the aggregate
amount of the cash and market value of non-cash consideration received by the
holders of outstanding shares of any class or series of stock of the target
corporation is equal to certain minimum amounts. Such transactions include,
among others, a merger with, dispositions of assets to, or issuance or
redemption of stock to or from, the acquiring person, or otherwise allowing the
acquiring person to receive any disproportionate benefit as a shareholder. Such
prohibitions do not apply to any shareholders who beneficially owned ten percent
or more of the Company's outstanding voting securities prior to the time the
Common Stock was registered with the Securities and Exchange Commission pursuant
to Section 12 or 15 of the Securities Exchange Act of 1934, as amended. For
purposes of Chapter 23B.19, upon consummation of the Offering the Company will
be a "target corporation." The Company may not exempt itself from coverage of
Chapter 23B.19.

STOCK TRANSFER AGENT AND REGISTRAR

The stock transfer agent and registrar for the Company's Common Stock is
U.S. Stock Transfer Corporation, Seattle, Washington.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this Offering, there has been no market for the Common Stock of the
Company. Therefore, future sales of substantial amounts of Common Stock in the
public market could adversely affect market prices prevailing from time to time.
Furthermore, since only a limited number of shares will be available for sale
shortly after this Offering because of certain contractual and legal
restrictions on resale (as

26
<PAGE>
described below), sales of substantial amounts of Common Stock of the Company in
the public market after the restrictions lapse could adversely affect the
prevailing market price and the ability of the Company to raise equity in the
future.

Certain holders of Common Stock have agreed, pursuant to certain "lock-up"
agreements, that they will not offer, sell, contract to sell or grant any option
to purchase or otherwise dispose of the shares of Common Stock owned by them or
that could be purchased by them through the exercise of options to purchase
Common Stock of the Company for certain designated periods. All shares owned by
holders signing such lock-ups will be restricted from sale for a minimum of 180
days following the Effective Date of this Offering, unless such holder receives
the prior written consent of the Underwriter to sell such shares. As a result of
these contractual restrictions, notwithstanding possible earlier eligibility for
sale under the provisions of Rules 144 and 701, shares subject to lock-up
agreements will not be salable until the agreements expire.

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned Restricted Shares for at least one year (including
the holding period of any prior owner except an Affiliate) would be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of: (i) one percent of the number of shares of Common Stock then
outstanding; or (ii) the average weekly trading volume of the Common Stock
during the four calendar weeks preceding the filing of a Form 144 with respect
to such sale. Sales under Rule 144 are also subject to certain manner of sale
provisions and notice requirements and to the availability of current public
information about the Company. Under Rule 144(k), a person who is not deemed to
have been an Affiliate of the Company at any time during the 90 days preceding a
sale, and who has beneficially owned the shares proposed to be sold for at least
two years (including the holding period of any prior owner except an Affiliate),
is entitled to sell such shares without complying with the manner of sale,
public information volume limitation or notice provisions of Rule 144;
therefore, unless otherwise restricted, "144(k) shares" may be sold immediately
upon the completion of this Offering.

In addition, any employee, officer or director of or consultant to the
Company who purchased his or her shares pursuant to a written compensatory plan
or contract may be entitled to rely on the resale provisions of Rule 701. Rule
701 permits an Affiliate to sell their Rule 701 shares under Rule 144 without
complying with the holding period requirements of Rule 144. Rule 701 further
provides that non-affiliates may sell such shares in reliance on Rule 144
without having to comply with the public information, volume limitation or
notice provisions of Rule 144. In both cases, a holder of Rule 701 shares is
required to wait until 90 days after the date of this Prospectus before selling
such shares.

The Company has reserved 750,000 shares of Common Stock for issuance under
the Option Plan. The Company intends to file one or more registration statements
on Form S-8 under the Securities Act to register all of the shares of Common
Stock issuable pursuant to the Option Plan. Accordingly, as such shares are
registered under such registration statements they will be, subject to Rule 144
volume limitations applicable to Affiliates, available for sale in the open
market, except to the extent that such shares are subject to vesting
restrictions with the Company or other contractual restrictions. See
"Management--Stock Option Plan."

27
<PAGE>
UNDERWRITING

The Common Stock will be offered for sale through Tradeway Securities Group,
Inc. as Underwriter on a best efforts basis without any underwriting commitment
for an Offering Period ending June 30, 1997, subject to extension for up to an
additional 90 days in the discretion of the Company, at $5.00 per share.

As compensation in connection with the Offering, the Company will pay to the
Underwriter cash compensation in the amount of $0.40 per share sold (assuming a
public offering price of $5.00 per share) and warrants to purchase 100,000
shares of Common Stock at an exercise price equal to the initial public offering
price (the "Underwriter Warrants"). The Underwriter Warrants expire five years
from the date of issuance.

Pearl Financial, which will become an affiliate of the Company upon
completion of the Reorganization, has advanced all expenses relating to the
Reorganization and the Offering. Pearl Financial will be reimbursed for such
expenses from the gross proceeds of the Offering, all which amount will be used
by Pearl to pay down debt incurred by Pearl in funding the Offering expenses.
See "The Reorganization" and "Certain Transactions."

The offering price for the shares of Common Stock offered hereby has been
determined by the Company based on the Company's prospects for future growth and
bears little relationship to assets, earnings, net worth or any other
traditional objective criteria of value. See "Risk Factors--Determination of
Offering Price."

In order to purchase Common Stock, an investor must complete and execute a
copy of the Subscription Agreement attached hereto as Exhibit A and deliver or
mail such completed Subscription Agreement along with a check or wire transfer
for the full subscription amount in accordance with the instructions set forth
in the Subscription Agreement. Checks should be made payable to "First Trust
N.A., as Escrow Agent for Pacific MultiMedia, Inc." All subscriptions will be
forwarded to the Escrow Agent by noon of the next business day following their
receipt. The Company shall determine, in its sole discretion, whether to accept
or reject any tendered subscription, in whole or in part.

Each subscriber will be paid the interest actually earned on his
subscription funds while such funds are held in escrow; provided that, in the
case of accepted subscriptions, interest earned on a subscription while held in
escrow will be paid to the Company when the shares of Common Stock are sold.
When interest in respect of subscription funds while held in escrow and
subscriptions themselves (if a subscription is rejected or the offering is
terminated without any Common Stock being sold) are returned to subscribers,
such payments will be effected by check. Subscription funds will be invested, to
the extent practicable, in money market instruments or comparable instruments
while held in escrow pending investment in the Common Stock and, accordingly,
will earn interest at the prevailing rates on such investments. No fees will be
charged on any subscriptions while held in escrow.

If this Offering is terminated without any Common Stock being sold, or a
subscriber's subscription is rejected, all funds remitted by the subscriber,
plus all interest actually earned thereon while held in escrow, will be returned
as soon thereafter as practicable (but in no event more than thirty calendar
days after such termination or rejection). Subscribers will be notified prior to
the return of their subscriptions, and the amounts returned to them shall in no
event be reduced by any deductions for fees or expenses.

28
<PAGE>
The shares of Common Stock are offered when, as and if subscriptions
therefor are accepted by the Company, subject to the satisfaction of certain
conditions set forth in the Selling Agreement and to approval by counsel of
certain legal matters.

Each prospective investor who desires to purchase any Common Stock must
complete, date, execute and deliver to the Underwriter one copy of the
detachable Subscription Agreement and Form W-9 (if applicable) attached hereto.

Other than as set forth above, no commissions or other fees will be paid,
directly or indirectly, by the Company, any affiliate of the foregoing or any
shareholder or officer of any of the foregoing, to any person in connection with
the solicitation of purchasers for the Common Stock.

Although acting solely on a best efforts basis, the Underwriter will
constitute an "underwriter" of the Common Stock for purposes of the Securities
Act of 1933. In the Underwriting Agreement, the Company has agreed to indemnify
the Underwriter against certain liabilities that the Underwriter may incur in
connection with the offering and sale of the Common Stock, including liabilities
under the Securities Act.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Preston Gates & Ellis LLP, Seattle, Washington. Certain legal matters
in connection with this offering will be passed upon for the Underwriter by Eric
J. Witmayer, Esq., Los Angeles, California.

EXPERTS

The financial statements of Pacific MultiMedia, Inc., as of December 31,
1995 and 1996 have been audited by Moore Stephens Frazer & Torbet, LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein and in the Registration Statement. Such financial statements have been
included herein in reliance on their report given on their authority as experts
in accounting and auditing.

ADDITIONAL INFORMATION

The Company intends to furnish to its shareholders annual reports containing
audited financial statements, with an opinion thereon expressed by an
independent certified public accounting firm, and quarterly reports containing
unaudited financial information for the first three quarters of each fiscal
year.

The Company has filed with the Commission a Registration Statement
(including any amendments thereto) on Form SB-2 under the Securities Act with
respect to the Common Stock offered hereby. This Prospectus, which constitutes a
part of the Registration Statement, omits certain of the information contained
in the Registration Statement and the exhibits and schedules thereto on file
with the Commission pursuant to the Securities Act and the rules and regulations
of the Commission thereunder. The Registration Statement, including exhibits and
schedules thereto, may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials may be obtained at prescribed
rates from the Public Reference Section of the Commission, Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and its public reference
facilities in New York, New York and Chicago, Illinois. Statements contained in
this Prospectus as to the contents of any contract or other document referred to
are not necessarily complete and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such reference
to the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference. The
Commission maintains a Web site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission.

29
<PAGE>
PACIFIC MULTIMEDIA, INC.
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
<S> <C>
Audit Report of Independent Auditors........................................................................ F-2

Balance Sheets at December 31, 1995 and 1996................................................................ F-3

Statements of Income and Retained Earnings for the years ended December 31, 1995 and 1996................... F-4

Statements of Cash Flows at December 31, 1995 and 1996...................................................... F-5

Notes to Audited Financial Statements....................................................................... F-6
</TABLE>

F-1
<PAGE>
AUDIT REPORT OF INDEPENDENT AUDITORS

The Shareholders

Pacific MultiMedia, Inc.

Fullerton, California

We have audited the accompanying balance sheets of Pacific MultiMedia, Inc.
as of December 31, 1995 and 1996, and the related statements of income and
retained earnings and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Pacific MultiMedia, Inc. as
of December 31, 1995 and 1996, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.

/s/ MOORE STEPHENS FRAZER AND TORBET, LLP
Certified Public Accountants

March 11, 1997

F-2
<PAGE>
PACIFIC MULTIMEDIA, INC.

BALANCE SHEETS

AT DECEMBER 31, 1995 AND 1996

ASSETS

<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash.................................................................................... $ 4,536 $ 35,390
Accounts receivable, net of allowance for doubtful accounts of $250..................... 30,888 42,740
Inventories............................................................................. 9,874 12,555
Receivables from Pearl Financial Services, Inc.......................................... 28,108
Receivables from officers............................................................... 18,957 20,730
---------- ----------
Total current assets.................................................................. $ 64,255 $ 139,523
---------- ----------
PROPERTY AND EQUIPMENT, at cost:
Leasehold improvements.................................................................. $ 1,894 $ 1,894
Machinery and equipment................................................................. 54,004 82,435
Furniture and Fixtures.................................................................. 7,474 7,724
---------- ----------
Totals................................................................................ $ 63,372 $ 92,053
Less accumulated depreciation........................................................... 22,614 30,204
---------- ----------
Property and equipment, net........................................................... $ 40,758 $ 61,849
---------- ----------
OTHER ASSETS:
Deposits................................................................................ $ 3,184 $ 3,852
Organization costs, net................................................................. 46
---------- ----------
Total other assets.................................................................... $ 3,230 $ 3,852
---------- ----------
Total assets........................................................................ $ 108,243 $ 205,224
---------- ----------
---------- ----------

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable, trade................................................................. $ 39,482 $ 99,142
Accrued liabilities..................................................................... 29,558 13,266
Current portion of capital lease liability.............................................. 6,894 12,347
Income taxes payable.................................................................... 853
---------- ----------
Total current liabilities............................................................. $ 76,787 $ 124,755
---------- ----------
LONG-TERM LIABILITIES:
Capital lease liability................................................................. $ 18,056 $ 28,021
---------- ----------
SHAREHOLDERS' EQUITY:
Capital stock, $.01 par value, 1,000,000 shares authorized, 100,000 issued and
outstanding........................................................................... $ 1,000 $ 1,000
Retained earnings, Exhibit B............................................................ 12,400 51,448
---------- ----------
Total shareholders' equity............................................................ $ 13,400 $ 52,448
---------- ----------
Total liabilities and shareholders' equity.......................................... $ 108,243 $ 205,224
---------- ----------
---------- ----------
</TABLE>

The accompanying notes are an integral part of this financial statement.

F-3
<PAGE>
PACIFIC MULTIMEDIA, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996

<TABLE>
<CAPTION>
1995 1996
------------------------ -----------------------
AMOUNT PERCENT AMOUNT PERCENT
---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
SALES, NET..................................................... $ 352,611 100.0 % $ 773,590 100.0%
COST OF SALES.................................................. 212,672 60.3 478,817 61.9
---------- ----- ---------- -----
GROSS PROFIT ON SALES.......................................... 139,939 39.7 294,773 38.1
---------- ----- ---------- -----
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................... 140,729 39.9 255,345 33.0
---------- ----- ---------- -----
OPERATING (LOSS) INCOME........................................ (790) (.2) 39,428 5.1
OTHER INCOME, NET OF OTHER EXPENSES............................ 2,241 .6 420
---------- ----- ---------- -----
INCOME BEFORE STATE INCOME TAXES............................... 1,451 .4 39,848 5.1
PROVISION FOR STATE INCOME TAXES............................... 800 .2 800 .1
---------- ----- ---------- -----
NET INCOME..................................................... 651 .2 % 39,048 5.0%
---------- ----- ---------- -----
----- -----
RETAINED EARNINGS, beginning of year........................... 11,749 12,400
---------- ----------
RETAINED EARNINGS, end of year................................. $ 12,400 $ 51,448
---------- ----------
---------- ----------
PRO FORMA ADJUSTMENTS:
HISTORICAL INCOME BEFORE INCOME TAXES.......................... $ 1,451 .4 % 39,848 5.1%
PRO FORMA PROVISIONS FOR INCOME TAXES.......................... 800 .2 9,100 1.1
---------- ----- ---------- -----
PRO FORMA NET INCOME........................................... 651 .2 30,748 4.0
----- -----
----- -----
PRO FORMA EARNINGS PER SHARE................................... $ .00 $ .31
---------- ----------
---------- ----------
</TABLE>

The accompanying notes are an integral part of this financial statement.

F-4
<PAGE>
PACIFIC MULTIMEDIA, INC.

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996

<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................................................. $ 651 $ 39,048
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization......................................................... 6,343 7,836
Gain on retirement of assets.......................................................... (650) (416)
Increase in accounts receivable....................................................... (10,267) (11,852)
Increase in receivables from officers................................................. (3,089) (1,773)
Decrease (increase) in inventories.................................................... 4,611 (2,681)
Increase in receivable from Pearl Financial Services, Inc............................. (28,108)
Increase in deposits.................................................................. (668)
Increase in accounts payable and accrued liabilities.................................. 17,004 43,368
Decrease in income taxes payable...................................................... (853)
---------- ----------
Net cash provided by operating activities............................................. $ 14,603 $ 43,901
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to plant and equipment........................................................ $ (1,178) $ (4,404)
Proceeds from sale of property and equipment............................................ 650 500
---------- ----------
Net cash used in investing activities................................................. $ (528) $ (3,904)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in bank overdraft.............................................................. $ (1,535) $
Repayment of note payable............................................................... (2,561)
Principal repayment of capital lease.................................................... (5,636) (9,143)
---------- ----------
Net cash used in financing activities................................................. $ (9,732) $ (9,143)
---------- ----------
NET INCREASE IN CASH...................................................................... $ 4,343 $ 30,854
CASH, beginning of year................................................................... 193 4,536
---------- ----------
CASH, end of year......................................................................... $ 4,536 $ 35,390
---------- ----------
---------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND NON-CASH FLOW INFORMATION:
Interest paid........................................................................... $ 7,139 $ 7,818
---------- ----------
---------- ----------
Income taxes paid....................................................................... $ 800 $ 800
---------- ----------
---------- ----------
Assets acquired under capital lease..................................................... $ $ 24,561
---------- ----------
---------- ----------
</TABLE>

The accompanying notes are an integral part of this financial statement.

F-5
<PAGE>
PACIFIC MULTIMEDIA, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. NATURE OF BUSINESS

Pacific MultiMedia, Inc. (the "Company") was incorporated in California in
1991. The Company provides duplication services to producers of audio and video
recordings.

b. INVENTORIES

Inventories are stated at lower of cost or market on a first-in, first-out
basis.

c. PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation, which includes
amortization of assets under capital leases, is based on the straight-line
method over the estimated useful lives of the assets.

The net gain or loss on equipment and vehicles disposed of is removed from
the accounts and the resultant gain or loss is included in earnings. Maintenance
and repairs are expensed currently. Major renewals and betterments are
capitalized.

Depreciation expense for the years ended December 31, 1995 and 1996 amounted
to $6,233 and $7,791, respectively.

d. INCOME TAXES

The Company, with the consent of its shareholders, has elected to be taxed
under section 1362(a) of the Internal Revenue Code (S Corporation) which
provides that, in lieu of corporation income taxes, the shareholders are taxed
on their proportionate share of the Corporation's taxable income. The Company
has also elected to be taxed as an S Corporation under provisions of the
California Tax Code which require that the income or loss of the corporation be
partially passed through to the shareholders, while income is taxed at a reduced
rate at the corporate level. The Company accounts for income taxes using the
liability method as prescribed by Statement of Financial Accounting Standards
No. 109.

SFAS 109 uses the asset and liability method which requires the recognition
of deferred tax liabilities and assets for the expected future tax consequences
of temporary differences between tax bases and financial reporting bases of
assets and liabilities. There were no material deferred tax items at December
31, 1995 and 1996 and, accordingly, no provision has been made for such items.

e. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Management believes that the estimates utilized in preparing
its financial statements are reasonable and prudent. Actual results could differ
from those estimates.

f. CONCENTRATION OF CREDIT RISK

The Company sells its products primarily to customers located throughout the
United States. Credit is extended based on an evaluation of the customer's
financial condition. The Company estimates its potential losses on trade
receivables on an ongoing basis and provides for anticipated losses in the
period in which the revenues are recognized. Actual losses may differ from the
Company's estimates.

F-6
<PAGE>
PACIFIC MULTIMEDIA, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
For the years ended December 31, 1995 and 1996, the Company's five largest
customers accounted for approximately 62% and 72% of the Company's sales,
respectively.

Financial instruments potentially subject to concentration of credit risk
consist of trade receivables. At December 31, 1995 and 1996, five of the
Company's customers accounted for 74% and 93% of the total receivables,
respectively.

g. REVENUE RECOGNITION

Revenue is recognized at the date of shipment.

h. EARNINGS PER SHARE

Earnings per share is based on the weighted average number of common shares
outstanding in each period.

As stated in Note 1 item d, the Company has elected to be taxed under
section 1362(a) of the Internal Revenue Code (S Corporation) which provides
that, in lieu of corporation income taxes, the shareholders are taxed on their
proportionate share of the Corporation's taxable income. A pro forma provision
for income taxes has been calculated for the years ended December 31, 1995 and
1996 to reflect the income taxes which would have applied if the Company had
been taxed at C-corporation rates in effect for those years. The earnings per
share amounts are based on the pro-forma amounts using C-corporation rates.

(2) LEASE OBLIGATIONS

The Company is obligated under operating leases expiring in 1997 for its
office facility and automobiles.

The Company leases equipment under operating leases from related parties
which expire in 1997.

The Company leases equipment under capital leases which are included in
machinery and equipment in the accompanying balance sheet. The amount of
machinery and equipment under such arrangements included in these financial
statements consisted of the following as of December 31:

<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Machinery and equipment................................................. $ 36,055 $ 60,616
Less accumulated depreciation........................................... 7,425 12,236
--------- ---------
Total............................................................... $ 28,630 $ 48,380
--------- ---------
--------- ---------
</TABLE>

F-7
<PAGE>
PACIFIC MULTIMEDIA, INC.

NOTES TO AUDITED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996

(2) LEASE OBLIGATIONS (CONTINUED)
Minimum lease commitments on all noncancelable leases for office facility,
equipment and vehicles as of December 31, 1996 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING OPERATING CAPITAL
DECEMBER 31, LEASES LEASES
- ------------------------------------------------------------------------ ----------- ---------
<S> <C> <C>
1997.................................................................... $ 16,554 $ 19,377
1998.................................................................... 18,682
1999.................................................................... 7,469
2000.................................................................... 6,690
2001.................................................................... 2,791
----------- ---------
Totals................................................................ $ 16,554 $ 55,009
----------- ---------
----------- ---------
Less amount representing interest................................... 14,641
---------
Present value of minimum lease payments............................. $ 40,368
---------
---------
</TABLE>

Total rental expense, including related party rental expense of $22,072 in
each of the years ended December 31, 1995 and 1996, amounted to $44,211 and
$38,777, respectively.

(4) RELATED PARTY TRANSACTIONS

Receivables from officers consist of salary advances to officers which are
due on demand. Officer receivables for the years ended December 31, 1995 and
1996 amounted to $18,957 and $20,730, respectively,

The Company leases certain equipment from officers under terms of a
noncancelable operating lease. Rental expense to related parties amounted to
$22,072 in each of the years ended December 31, 1995 and 1996.

At December 31, 1996, the Company had a receivable in the amount of $28,108
from Pearl Financial Services, Inc., a company currently negotiating with the
Company in connection with a proposed share exchange. The receivable relates to
the reimbursement of expenses incurred by the Company in connection with a
contemplated public offering of its Common Stock.

F-8
<PAGE>
[LOGO]

SUBSCRIPTION AGREEMENT

INSTRUCTIONS

In order to subscribe for shares of Common Stock of Pacific MultiMedia, Inc.
(the "Company"), please fully complete and sign the attached Subscription
Agreement. In addition, all U.S. residents (including entities formed under the
laws of any state or other jurisdiction of the United States) must complete and
sign the Form W-9 attached hereto. Please return your completed Subscription
Agreement and Form W-9, if applicable, together with a check for the full
subscription amount to either the Company or the Underwriter at the address set
forth below:

<TABLE>
<S> <C>
If to the Company: If to the Underwriter:

Pacific MultiMedia, Inc. Tradeway Securities Group, Inc.
2477 E. Orangethorpe Avenue 18401 Von Karman Avenue
Fullerton, CA 92631 Suite 400
Attention: James E. Campbell Irvine, CA 92715
Attention: Mark Riviello
</TABLE>

Checks should be made payable to "First Trust NA, as Escrow Agent for
Pacific MultiMedia, Inc." All subscriptions will be forwarded to the escrow
agent by noon of the next business day following their receipt.

Alternatively, investors may return their completed Subscription Agreement
and Form W-9, if applicable, to the Company or the Underwriter at the address
set forth above and wire transfer the full subscription amount directly to the
Escrow Agent in accordance with the following instructions:

First Bank N.A.
ABA #091000022
Beneficiary: First Trust
Credit Account #180121167365
For further Credit to Account 47300029
Re: Pacific Multimedia, Inc.
[insert name of subscriber]
Attn: Seattle Office/(Shirley Young 461-4126)

(Detach and remove along perforation)

S-1
<PAGE>
PACIFIC MULTIMEDIA, INC.
SUBSCRIPTION AGREEMENT

1. The undersigned (the "Subscriber") hereby offers to purchase shares of
common stock (the "Shares") of Pacific MultiMedia, Inc., a Washington
corporation (the "Company"), under the terms of this agreement (the
"Subscription"). The Subscriber understands that the Shares are offered subject
to prior sales and to withdrawal, cancellation or modification of the offer and
subject to the right of the Company to reject this Subscription in whole or in
part.

2. NUMBER OF SHARES. The Subscriber hereby offers to purchase
_______________ Shares at a cash price of $5.00 per share, or $_______________
in the aggregate, which shall be payable by check, bank draft or money order to
the order of "First Trust NA, as Escrow Agent for Pacific MultiMedia, Inc" or by
wire transfer to the account set forth on the previous page.

3. SUBSCRIPTION IRREVOCABLE. This Subscription shall be irrevocable after
acceptance by the Company, shall survive the death or disability of the
Subscriber, and is subject to all the terms and provisions contained in the
Prospectus of the Company relating to the offering of the Shares (the
"Prospectus"). This Subscription may be accepted on behalf of the Company by one
of its officers executing this Subscription in the space provided below. In the
event the Subscription is not accepted by the Company, the Subscription funds
shall be returned and this Subscription shall be null and void.

4. REPRESENTATION BY SUBSCRIBER. The Subscriber hereby represents to the
Company that:

a) Subscriber, individually, is a ________________________ [PRINT STATE
OR TERRITORY] resident or if a partnership, limited liability
company, corporation or trust, is domiciled in
________________________ [PRINT STATE OR TERRITORY].

b) Subscriber is aware that the market for the Shares may be illiquid.

c) Subscriber recognizes that an investment in the Shares involves
significant risks, including those set forth under the caption "Risk
Factors" in the Prospectus, and he or she understands such risks;

d) Subscriber has been furnished and has thoroughly read and understands
the Prospectus;

e) Subscriber has not relied upon any oral or written representation
statement, except those contained in the Prospectus;

f) Subscriber and his or her advisors, if any, have had an opportunity
to ask questions of and to request additional information from the
Company, and they have received any answers and additional
information requested;

g) Subscriber acknowledges that no oral or written statement or
inducement which is contrary to the information set forth in the
Prospectus has been made by or on behalf of the Company to the
Subscriber or his or her advisors, if any;

h) Subscriber has, or he or she and his or her advisors, if any,
together have, such knowledge and experience in business and
financial matters as to be capable of evaluating the Company and the
proposed activities thereof and the risks and merits of an investment
in the Shares and of making an informed investment decision thereof;

i) Subscriber (i) has adequate means of providing for his or her current
needs and possible personal contingencies, (ii) has no need for
liquidity in this investment, (iii) believes that the nature and
amount of such investment is suitable for him or her and consistent
with his or her overall investment program and financial position,
(iv) believes that his or her overall commitment to investments which
are not readily marketable is not disproportionate to his or her net
worth and the investment in the Shares will not cause such overall
investment to

S-2
<PAGE>
become excessive, (v) is under no present or contemplated future need
to dispose of any of the Shares to satisfy any existing or
contemplated undertaking, need or indebtedness, (vi) is able to bear
the economic risks of his or her investment in the Shares, and (vii)
at the present time, can afford a complete loss of such investment.

j) Subscriber has not distributed the Prospectus to anyone, nor has
anyone other than his or her advisors, if any, had access to the
Prospectus and he or she has not made any copies of the Prospectus.

5. ADDITIONAL REPRESENTATIONS.

a) If the Subscriber is an individual, the Subscriber hereby represents
to the Company that (i) he or she is at least 21 years old, (ii) he
or she has the legal capacity to execute, deliver and perform this
Subscription and (iii) his or her principal residence is located
within ___________________ [PRINT STATE AND COUNTRY OF RESIDENCE].

b) If the Subscriber is a corporation, partnership, trust or other form
of legal entity, the Subscriber hereby represents to the Company that
(i) the Subscriber is duly organized and validly existing under the
laws of its jurisdiction of formation, (ii) it is authorized and
otherwise duly empowered to acquire and own the Shares subscribed
hereby and to execute this Subscription, (iii) it was not formed for
the specific purpose of acquiring an investment in the Company, (iv)
this Subscription is a valid and binding obligation of Subscriber,
enforceable against it in accordance with its terms, and (v) its
principal place of business is located in ________________________
[PRINT STATE AND COUNTRY].

6. INDEMNIFICATION. The Subscriber agrees to indemnify and hold harmless
the Company, its officers, directors, employees, shareholders and affiliates,
and any person acting on behalf of the Company, from and against any and all
damage, loss, liability, cost and expense (including attorney's fees) which any
of them may incur by reason of the failure by the Subscriber to fulfill any of
the terms or conditions of this Subscription, or by reason of any breach of the
representations and warranties made by the Subscriber herein, or in any other
document provided by the Subscriber to the Company. All representations,
warranties and covenants contained in this Subscription and the indemnification
contained in this Section 6, shall survive the acceptance of this Subscription.

7. VERIFICATION. The Subscriber hereby authorizes the Company to verify any
of the information set forth in this Subscription. The Subscriber understands
that he or she may be required to furnish additional information.

8. APPLICABLE LAW. This Subscription shall be construed in accordance with
and governed by the laws of the State of Washington.

9. BINDING EFFECT. This Subscription shall be binding upon and inure to the
benefit of the parties hereto and their heirs, legal representatives,
successors, and permitted assigns.

10. ENTIRE AGREEMENT; MODIFICATION. This Subscription constitutes the entire
agreement among the parties pertaining to the purchase of the Shares, as set
forth herein, and supersedes any prior understanding, and neither this
Subscription or any provisions hereof shall be waived, modified or terminated
except by an instrument in writing signed by the party against whom any waiver,
modification or termination is sought.

11. ASSIGNABILITY. The Subscriber agrees not to transfer or assign this
Subscription or any of the Subscriber's interests herein.

12. TYPE OF OWNERSHIP. The Subscriber wishes to own his or her Shares as
follows (initial one):

[ ] Individually

S-3
<PAGE>
[ ] Trust (include name of trust, name(s) of trustee, and include a
copy of the trust instrument);

[ ] Limited liability company (include copy of limited liability
company or operating agreement);

[ ] Partnership (include a copy of the partnership agreement and
written consent of all general partners authorizing signature);

[ ] Corporation (include a copy of articles of incorporation and
certified corporate resolution authorizing subscription); or

[ ] Other (indicate):

The name(s) in which the Shares are to be held is:

- --------------------------------------------------------------------------------

The undersigned hereby represents that he or she has read this Subscription
Agreement in its entirety and has duly executed and delivered this Subscription
Agreement as of the date set forth below.

<TABLE>
<S> <C>
Dated: , 1997.

- ------------------------------------------ ------------------------------------------
Signature ** Signature **

- ------------------------------------------ ------------------------------------------
Print or Type Name Print or Type Name

- ------------------------------------------ ------------------------------------------
Social Security or Tax ID No. Social Security or Tax ID No.

- ------------------------------------------ ------------------------------------------
Street Address Street Address

- ------------------------------------------ ------------------------------------------
City State Zip City State Zip

- ------------------------------------------ ------------------------------------------
Telephone Number Telephone Number
</TABLE>

** If a partnership, limited liability company, corporation or other entity, the
signature should be in the name of the entity followed by the authorized
signature and title of the signature.

S-4
<PAGE>
ACCEPTANCE OF SUBSCRIPTION

This Subscription Agreement is hereby accepted by and on behalf of the
Company as of the date set forth below.

Dated: ________________________, 1997

PACIFIC MULTIMEDIA, INC.

By: _________________________________

James E. Campbell, III
President and Chief Executive Officer

S-5
<PAGE>

Form W-9 REQUEST FOR TAXPAYER Give form to the
Rev. December 1995) IDENTIFICATION NUMBER requester. DO NOt
Department of the AND CERTIFICATION send to the IRS.
Treasury
Internal Revenue
Service
- --------------------------------------------------------------------------------
Name (if a joint account or you changed your name, see Specific Instructions on
page 2).

- --------------------------------------------------------------------------------
Business name, if different from above.(See Specific Instructions on page 2.)

- --------------------------------------------------------------------------------
Check appropriate box: / / Individual/Sole proprietor / / Corporation
/ / Partnership / / Other > ...............
- --------------------------------------------------------------------------------
Address (number, street, and apt. or suite no.) Requester's name
and address
(optional)
- ----------------------------------------------
City, state, and ZIP code

- --------------------------------------------------------------------------------
PART I. TAXPAYER IDENTIFICATION NUMBER (TIN) List account
- ---------------------------------------------- number(s)
Enter your TIN in the appropriate box. For here
individuals, this is your social security (optional)
number (SSN). However, if you are a resident
alien OR a sole proprietor, see the -----------------------
instructions on page 2. For other entities, Social security number
it is your employer identification number - -
(EIN). If you do not have a number, see -----------------------
How to Get a TIN on page 2. OR
-----------------------
Employee identification
number
-
-----------------------
Note: If the account is in more than one PART II. FOR PAYEES EXEMPT FROM
name, see the chart on page 2 for BACKUP WITHHOLDING (see
guidelines on whose number to enter the instructions on
page 2.)
----------------------------------
>
- --------------------------------------------------------------------------------
PART III. CERTIFICATION
- --------------------------------------------------------------------------------
Under penalties of perjury, I certify that:

1. The number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me), and

2. I am not subject to backup withholding because (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue
Service (IRS) that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the IRS has notified me
that I am no longer subject to backup withholding.

CERTIFICATION INSTRUCTIONS.--You must cross out item 2 above if you have been
notified by the IRS that you are currently subject to backup withholding
because you have failed to report all interest and dividends on your tax
return. For real estate transactions, item 2 does not apply. For mortgage
interest paid, acquisition or abandonment of secured property, cancellation
of debt, contributions to an individual retirement arrangement (IRA), and
generally, payments other than interest and dividends, you are not required
to sign the Certification, but you must provide your correct TIN. (See the
instructions on page 2.)
- --------------------------------------------------------------------------------
SIGN
HERE SIGNATURE > DATE >
- --------------------------------------------------------------------------------

FOR053.DOC Cat. No. 10231X Form W-9 (Rev. 12-96)

<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 1
Risk Factors................................... 4
The Reorganization............................. 9
Use of Proceeds................................ 9
Dividend Policy................................ 10
S Corporation Matters.......................... 10
Dilution....................................... 10
Capitalization................................. 12
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 13
Business....................................... 16
Management..................................... 21
Certain Transactions........................... 24
Principal Shareholders......................... 25
Description of Capital Stock................... 26
Shares Eligible for Future Sale................ 27
Underwriting................................... 29
Legal Matters.................................. 30
Experts........................................ 30
Additional Information......................... 30
Index to Financial Statements.................. F-1
Subscription Agreement......................... S-1
</TABLE>

------------------------

UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

1,250,000 SHARES

[LOGO]

COMMON STOCK
(NO PAR VALUE)

---------------------

PROSPECTUS
---------------------

TRADEWAY SECURITIES
GROUP, INC.

, 1997

- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

23B.08.510 of the Revised Code of Washington authorizes Washington
corporations to indemnify their officers and directors under certain
circumstances against expenses and liabilities incurred in legal proceedings
involving such persons because of their being or having been an officer or
director. The Company's Articles of Incorporation and Bylaws require
indemnification of the Company's officers and directors to the fullest extent
permitted by Washington law. The Company also maintains director's and officer's
liability insurance.

Company's Bylaws and Articles of Incorporation provide that the Company
shall, to the full extent permitted by the Business Corporation Act of the State
of Washington, as amended from time to time, indemnify all directors and
officers of the Company. In addition, the Company's Articles of Incorporation
contains a provision eliminating the personal liability of directors to the
Company or its shareholders for monetary damages arising out of a breach of
fiduciary duty. Under Washington law, this provision eliminates the liability of
a director for breach of fiduciary duty but does not eliminate the personal
liability of any director for (i) acts or omissions of a director that involve
intentional misconduct or a knowing violation of law, (ii) conduct in violation
of Section 23B.08.310 of the Revised Code of Washington (which section relates
to unlawful distributions) or (iii) any transaction from which a director
personally received a benefit in money, property or services to which the
director was not legally entitled.

Company's Articles of Incorporation also gives the Company the ability to
enter into indemnification agreements with each of its directors and officers.
The Company has entered into indemnification agreements with each of its
directors and officers (Exhibit 10.3 hereto), which provide for the
indemnification of directors an officers of the Company against any an all
expenses, judgments, fines, penalties and amounts paid in settlement, to the
fullest extent permitted by law.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth all costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of the Common Stock being registered hereunder. All of the amounts
shown are estimates except for the SEC registration fee, the NASD filing fee and
the Nasdaq Small Cap Market application fee.

<TABLE>
<CAPTION>
TO BE PAID
BY THE
COMPANY
------------
<S> <C>
SEC registration fee...................................................................... $ 1,894
NASD filing fee........................................................................... 1,125
Nasdaq Small Cap Market entry fee......................................................... 10,000
Printing expenses......................................................................... 40,000
Legal fees and expenses................................................................... 85,000
Accounting fees and expenses.............................................................. 20,000
Blue sky fees and expenses................................................................ 15,000
Transfer agent and escrow fees............................................................ 3,000
Director and officer liability insurance.................................................. 50,000
Miscellaneous............................................................................. 23,981
------------
Total................................................................................. $ 250,000
------------
------------
</TABLE>

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

The Company has not issued any shares of its capital stock during the three
years preceding the date of filing of this Registration Statement.

II-1
<PAGE>
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Underwriting Agreement

2.1 Agreement and Plan of Merger between the Company and Pacific MultiMedia, Inc., a California corporation

*2.2 Form of Share Exchange Agreement between the Company and certain shareholders of Pearl Financial

3.1 Articles of Incorporation of the Company

3.2 Bylaws of the Company

*4.1 Specimen certificate representing the Common Stock

5.1 Opinion of Preston Gates & Ellis LLP

10.1 Employment Agreement between the Company and James E. Campbell, III

10.2 Employment Agreement between the Company and Craig D. Patterson

10.3 Form of Indemnification Agreement between the Company and its officers and directors

10.4 Form of Convention Recording Contract

10.5 Escrow Agreement between the Company and First Trust N.A.

*10.6 Redemption Agreement between the Company and Craig D. Patterson

23.1 Consent of Preston Gates & Ellis LLP (contained in Exhibit 5.1)

23.2 Consent of Moore Stephens Frazer & Torbet, LLP, Independent Auditors

24.1 Power of Attorney (see signature page)
</TABLE>

- ------------------------

* To be filed by amendment.

All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.

ITEM 28. UNDERTAKINGS

The Company hereby undertakes to provide to the Underwriter at the closing
specified in the Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriter to permit prompt
delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities
(other than the payment by the Company of expenses incurred or paid by a
director, officer or controlling person of the Company in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

II-2
<PAGE>
The Company hereby undertakes that:

(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of a
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of the Registration
Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form SB-2 and authorized this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized in the
City of Fullerton, State of California, on the 30th day of April, 1997.

PACIFIC MULTIMEDIA, INC.

By: /s/ JAMES E. CAMPBELL
------------------------------------------
James E. Campbell
PRESIDENT AND CHIEF EXECUTIVE OFFICER

POWER OF ATTORNEY

We, the undersigned directors and officers of Pacific MultiMedia, Inc., do
hereby constitute and appoint each of James E. Campbell, III and Jerome
Schneider, with full power of substitution, our true and lawful attorney and
agent, to do any and all acts and things in our name and behalf in our
capacities as directors and officers and to execute any and all instruments for
us and in our names in the capacities indicated below, which said attorneys and
agents, or either of them, may deem necessary or advisable to enable said
corporation to comply with the Securities Act of 1933, as amended, and any
rules, regulations and requirements of the Securities and Exchange Commission in
connection with this Registration Statement, including specifically, but without
limitation, power and authority to sign for us or any of us in our names and in
the capacities indicated below, any and all amendments (including post-effective
amendments) hereto or any related registration statement that is to be effective
upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as
amended; and we do hereby ratify and confirm all that the said attorneys and
agents, or either of them, shall do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities indicated below on April 30, 1997.

SIGNATURE TITLE
- ------------------------------ --------------------------

President, Chief Financial
Officer and Director
/s/ JAMES E. CAMPBELL (Principal Executive,
- ------------------------------ Financial and Accounting
Officer)

/s/ JEROME SCHNEIDER Director
- ------------------------------

/s/ ROBERT W. MCMICHAEL Director
- ------------------------------

II-4
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Underwriting Agreement

2.1 Agreement and Plan of Merger between the Company and Pacific MultiMedia, Inc., a California corporation

*2.2 Form of Share Exchange Agreement between the Company and certain shareholders of Pearl Financial

3.1 Articles of Incorporation of the Company

3.2 Bylaws of the Company

*4.1 Specimen certificate representing the Common Stock

5.1 Opinion of Preston Gates & Ellis LLP

10.1 Employment Agreement between the Company and James E. Campbell, III

10.2 Employment Agreement between the Company and Craig D. Patterson

10.3 Form of Indemnification Agreement between the Company and its officers and directors

10.4 Form of Convention Recording Contract

10.5 Escrow Agreement between the Company and First Trust N.A.

*10.6 Redemption Agreement between the Company and Craig D. Patterson

23.1 Consent of Preston Gates & Ellis LLP (contained in Exhibit 5.1)

23.2 Consent of Moore Stephens Frazer & Torbet, LLP, Independent Auditors

24.1 Power of Attorney (see signature page)
</TABLE>

- ------------------------

* To be filed by amendment.

II-5

<PAGE>

UNDERWRITING AGREEMENT

BETWEEN

PACIFIC MULTIMEDIA, INC.

AND

TRADEWAY SECURITIES GROUP, INC.

DATED

APRIL 30, 1997

<PAGE>

UNDERWRITING AGREEMENT

TABLE OF CONTENTS
Page
----

Section 1. Representations and Warranties
of the Company . . . . . . . . . . . . . . . . . . . . . 1

Section 2. Offering and Sale of Shares . . . . . . . . . . . . . . . . . . 4

Section 3. Compliance with Conduct Rules. . . . . . . . . . . . . . . . . . 5

Section 4. Blue Sky Survey. . . . . . . . . . . . . . . . . . . . . . . . . 6

Section 5. Covenants of the Company . . . . . . . . . . . . . . . . . . . . 6

Section 6. Payment of Expenses and Fees . . . . . . . . . . . . . . . . . . 7

Section 7. Conditions of Closing. . . . . . . . . . . . . . . . . . . . . . 8

Section 8. Prospectus Terms and Descriptions
Controlling . . . . . . . . . . . . . . . . . . . . . . .10

Section 9. Indemnification and Exculpation. . . . . . . . . . . . . . . . .10

Section 10. Status of Parties . . . . . . . . . . . . . . . . . . . . . . .11

Section 11. Termination . . . . . . . . . . . . . . . . . . . . . . . . . .11

Section 12. Notices and Authority to Act. . . . . . . . . . . . . . . . . .12

Section 13. Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

Section 14. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . .12

Section 15. Requirements of Law . . . . . . . . . . . . . . . . . . . . . .12

Section 16. Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . .12

<PAGE>

Pacific MultiMedia, Inc.
(A Washington Corporation)

1,250,000 Shares of Common Stock
$5.00 per Share

UNDERWRITING AGREEMENT

April 30, 1997
Tradeway Securities Group, Inc.
630 Alta Vista Drive, Suite 201
Vista, CA 92084,
as Underwriter

Dear Sirs:

This Underwriting Agreement is made by and between Pacific MultiMedia,
Inc., a Washington corporation (the "Company"), and Tradeway Securities Group,
Inc., a California corporation (the "Underwriter"), as of the date set forth
above.

The Company proposes to issue and sell 1,250,000 shares of its
authorized and unissued Common Stock as contemplated by the Prospectus (as
defined below). The 1,250,000 shares of Common Stock to be sold by the Company
are hereafter referred to as the "Shares." All shares of the Common Stock of
the Company, including the Shares, are hereinafter referred to as the "Common
Stock."

Section 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to the Underwriter as follows:

(a) A registration statement on Form SB-2 (File No. 333-_____) with
respect to the Shares, including a preliminary form of prospectus, has been
prepared by the Company in conformity with the Securities Act of 1933, as
amended (the "Securities Act"), and the applicable rules and regulations ("SEC
Regulations") of the Securities and Exchange Commission (the "SEC") under the
Securities Act and has been filed with the SEC; such amendments to such
registration statement and such amended preliminary prospectuses as may have
been required prior to the date hereof have been similarly prepared and filed
with the SEC; and the Company will file such additional amendments to such
registration statement and such amended prospectuses as may hereafter be
required. Copies of such registration statement and amendments and of each
related preliminary prospectus (the "Preliminary Prospectuses") have been
delivered to the Underwriter. If the registration statement has been declared
effective under the Securities Act by the SEC, the Company has prepared and will
promptly file with the SEC the

<PAGE>

information omitted from the registration statement pursuant to Rule 430(A) of
the SEC Regulations as part of an amendment or supplement to the prospectus
pursuant to subparagraph (1) or (4) of Rule 424(b) of the SEC Regulations or as
part of a post-effective amendment to the registration statement (including an
amended prospectus); otherwise the Company has prepared and will promptly file
an amendment to the registration statement (including an amended prospectus).
The term "Registration Statement" as used in this Agreement shall mean such
registration statement, including financial statements, schedules and exhibits
in the form in which it became or becomes, as the case may be, effective
(including, if the Company omitted information from the registration statement
pursuant to Rule 430A(a) of the SEC Regulations, the information deemed to be a
part of the registration statement at the time it became effective pursuant to
Rule 430A(b) of the SEC Regulations) and, in the event of any amendment thereto
after the effective date of such registration statement, shall also mean (from
and after the effectiveness of such amendment) such registration statement as so
amended. The term "Prospectus" as used in this Agreement shall mean the
prospectus relating to the Shares as included in such registration statement at
the time it becomes effective, except that if any revised prospectus shall
thereafter be provided to the Underwriters by the Company for use in connection
with the offering of the Shares that differs from the Prospectus on file with
the SEC at the time the registration statement became or becomes, as the case
may be, effective (whether or not such revised prospectus is required to be
filed with the SEC pursuant to Rule 424(b)(3) of the SEC Regulations), the term
"Prospectus" shall refer to such revised prospectus from and after the time it
is first provided to the Underwriters for such use.

(b) The SEC has not issued any order preventing or suspending the use
of any Preliminary Prospectus and each such Preliminary Prospectus, at the time
of filing thereof, has conformed in all material respects to the requirements of
the Securities Act and the SEC Regulations; when the Registration Statement
became or becomes, as the case may be, effective (the "Effective Date") and when
the Prospectus is first filed (if required) in accordance with Rule 424(b) and
at all times subsequent thereto up to and at the Closing Time (as hereinafter
defined ) and any later date on which Option Shares are to be purchased, as the
case may be, (i) the Registration Statement and the Prospectus, and any
amendments or supplements thereto, will in all material respects conform to the
requirements of the Securities Act and the SEC Regulations, on the Effective
Date, the Registration Statement did not or will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances under which they were made not misleading; provided, however, that
none of the representations and warranties contained in this subparagraph shall
apply to information contained in or omitted from the Registration Statement or
the Prospectus or any such amendment or supplement in reliance upon, and in
conformity with, written information furnished to the Company by the Underwriter
specifically for inclusion therein.

(c) The Company is a corporation duly organized pursuant to the
Washington Act and is validly existing under the laws of the State of Washington
with full power and authority to engage in the business to be conducted by it,
as described in the Prospectus. The Company is in good standing and qualified
to do business in each jurisdiction in which such qualification is necessary in
which the nature or conduct of its business as described in the Registration
Statement

<PAGE>

requires such qualification and the failure to be so qualified would materially
adversely affect the Company.

(d) The Company has full corporate power and authority, under
applicable law to perform its obligations under this Agreement, and to act as
described in the Registration Statement and Prospectus.

(e) All outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and nonassessable; the
capital stock of the Company conforms in all material respects to the statements
relating thereto contained in the Registration Statement and the Prospectus (and
such statements correctly state the substance of the instruments defining the
capitalization of the Company); the Shares to be purchased from the Company
hereunder have been duly authorized for issuance and sale as contemplated by the
Prospectus and, when issued and delivered by the Company against payment
therefor in accordance with the terms of the Prospectus, will be duly and
validly issued and fully paid and nonassessable; and no preemptive right,
co-sale right, registration right, right of first refusal or other similar right
of shareholders exists with respect to any of the Shares or the issue and sale
thereof other than those that have been expressly waived prior to the date
hereof or those that will automatically expire upon the consummation of the
transactions contemplated on the Closing Date. No further approval or
authorization of any shareholder, the Board of Directors or others is required
for the issuance and sale or transfer of the Shares except as may be required
under the Securities Act or under state or other securities or "Blue Sky" laws.

(f) The accountants who certified the financial statements filed with
the SEC as part of the Registration Statement are, with respect to the Company,
independent public accountants as required by the Securities Act and the SEC
Regulations.

(g) The financial statements filed as part of the Registration
Statement and those included in the Prospectus present fairly the financial
position of the Company as of the dates indicated and said financial statements
have been prepared in conformity with generally accepted accounting principles
(as described therein), or, in the case of unaudited financial statements, in
substantial conformity with generally accepted accounting principles, applied on
a basis which is consistent in all material respects for each balance sheet date
presented.

(h) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as may otherwise be stated
in or contemplated by the Registration Statement and the Prospectus, there has
not been any material adverse change in the condition (financial or otherwise),
business or prospects of the Company, whether or not arising in the ordinary
course of business.

(i) This Agreement has been duly and validly authorized, executed and
delivered by the Company, and constitutes a valid, binding and enforceable
agreement of the Company, in accordance with its terms.

<PAGE>

(j) The execution and delivery of this Agreement, the incurrence of
the obligations as set forth herein and the consummation of the transactions
contemplated herein and in the Prospectus will not constitute a breach of, or
default under, any instrument or agreement by which the Company is bound, or any
order, rule or regulation applicable to the Company of any court or any
governmental body or administrative agency having jurisdiction over the Company.

(k) Except as otherwise disclosed in the Registration Statement or
the Prospectus, there is not pending or, to the best of the Company's knowledge,
threatened any action, suit or proceeding before or by any court or other
governmental body to which the Company is a party, or to which any of the assets
of the Company are subject, which might reasonably be expected to result in any
material adverse change in the condition (financial or otherwise), business or
prospects of the Company or is required to be disclosed in the Prospectus
pursuant to the Securities Act and the SEC Regulations.

Section 2. OFFERING AND SALE OF SHARES.

(a) The Underwriter is hereby appointed the exclusive Underwriter of
the Company during the offering period specified in the Prospectus (the
"Offering Period") for the purpose of finding acceptable subscribers for up to
the number of Shares set forth on page 1 hereof through a public offering.
Subject to the performance by the Company of its obligations to be performed
hereunder and to the completeness and accuracy in all material respects of all
the representations and warranties of the Company contained herein, the
Underwriter hereby accepts such agency and agrees on the terms and conditions
herein set forth to use its best efforts during the Offering Period to find
acceptable subscribers for the Shares at a public offering price of $5.00 per
Share. It is understood that the Underwriter's agreement to use its best
efforts to find acceptable subscribers for the Shares shall not prevent it from
acting as a Underwriter or underwriter for the securities of other issuers which
may be offered or sold during the Offering Period. The agency of the
Underwriter hereunder shall continue until the close of business on the later of
the Offering Termination Date (as defined below) and the Closing Date, or such
later date as the Underwriter and the Company shall agree upon (the date on
which the Offering Period terminates being hereinafter referred to as the
"Offering Termination Date"), including such additional period as may be
required to effect the closing of the sale of the Shares.

The Company will pay the Underwriter at Closing Time compensation in
an amount equal to eight percent (8%) of the gross sales price of each Share
sold. In addition, in the event the Minimum Shares are sold, the Company will
pay to the Underwriter at Closing Time a Common Stock Purchase Warrant, in the
form attached hereto as Annex A (the "Warrant"), for the purchase of 100,000
shares of Common Stock at a purchase price of $5.00 per share. The Warrant
shall be exercisable for a period of 5 years from the date of issuance.

(b) In the event the offering is commenced and acceptable
subscriptions for at least 1,250,000 Shares (the "Minimum Shares") shall not
have been received prior to the end of the Offering Period (unless extended by
the Company as contemplated by the Prospectus), all funds received from
subscribers shall be returned in full, with any interest payable thereon (except
as otherwise described in the Prospectus) and without deduction for any escrow
or other fee or

<PAGE>

expense; and thereupon the Underwriter's duties as agent and this Agreement
shall terminate without further obligation hereunder on the part of the
Underwriter or the Company.

(c) On the Offering Termination Date or at such earlier time as
(i) subscriptions for the Shares shall have been received, or (ii) as the
Company may determine to terminate the offering, or at such later date should
the Company extend the offering as contemplated by the Prospectus, the Company
shall notify the Underwriter of the aggregate number of Shares for which the
Company has received acceptable subscriptions and, if at least the Minimum
Shares shall have been so subscribed for, then payment of the purchase price for
the Shares shall be made at the office of Preston Gates & Ellis LLP, 5000
Columbia Center, 701 Fifth Avenue, Seattle, WA 98104, or at such other place as
shall be agreed upon between the Underwriter and the Company, at 10:00 A.M.,
Pacific Standard Time ("PST"), on such day (the "Closing Date") and time (the
"Closing Time") as shall be agreed upon between the Underwriter and the Company
(not later than three (3) business days after the end of the Offering Period).

(d) Except as set forth herein, the Company shall not be in any
respect responsible for any commissions.

Section 3. COMPLIANCE WITH CONDUCT RULES.

(a) The Underwriter will use its best efforts to find eligible
persons to purchase the Shares on the terms stated herein and in the
Registration Statement and Prospectus. It is understood that the Underwriter
has no commitment with regard to the sale of the Shares other than to use its
best efforts. In connection with the offer and sale of the Shares, the
Underwriter represents that it will comply fully with all applicable laws, and
the rules of the NASD, the SEC, state securities administrators and any other
regulatory body. In particular, and not by way of limitation, the Underwriter
represents and warrants that it is aware of the Conduct Rules of the NASD Rules
and that it will comply fully with all the terms thereof in connection with the
offering and sale of the Shares. The Underwriter shall not execute any sales of
Shares from a discretionary account over which it has control without prior
written approval of the customer in whose name such discretionary account is
maintained.

(b) The Underwriter agrees not to recommend the purchase of Shares to
any subscriber unless the Underwriter shall have reasonable grounds to believe,
on the basis of information obtained from the subscriber concerning, among other
things, the subscriber's investment objectives, other investments, financial
situation and needs; the subscriber has a fair market net worth sufficient to
sustain the risks inherent in participating in the Company, including loss of
investment and lack of liquidity (which, as described in the Prospectus, may be
significant); and the Shares are otherwise a suitable investment for the
subscriber. The Underwriter agrees to maintain files of information disclosing
the basis upon which the Underwriter determined that the suitability
requirements of Section 2310 of the Conduct Rules of the NASD Rules of Fair
Practice were met as to each subscriber (the basis for determining suitability
shall be the Subscription Agreements and other certificates submitted by
subscribers). The Underwriter represents and

<PAGE>

warrants that it has reasonable grounds to believe, based on information in the
Prospectus, that all material facts relating to an investment in the Shares are
adequately and accurately disclosed in the Prospectus.

In connection with making the representations and warranties set forth in
this paragraph, the Underwriter has not relied on inquiries made by or on behalf
of any other parties.

(c) None of the Underwriter or the Company shall, directly or
indirectly, pay or award any finder's fees, commissions or other compensation to
any person engaged by a potential investor for investment advice as an
inducement to such advisor to advise the purchase of Shares; PROVIDED, HOWEVER,
the normal sales commissions payable to a registered broker-dealer or other
properly licensed person for selling Shares shall not be prohibited hereby.

(d) All payments for subscriptions shall be made by subscriber check
payable to First Trust NA, as Escrow Agent for Pacific MultiMedia maintained at
First National NA, Seattle, Washington (the "Escrow Agent"), and submitted to
the Underwriter. Such payments will be transmitted to the Escrow Agent by Noon,
PST, on the business day following receipt thereof by the Underwriter in
accordance with the procedures set forth in the Prospectus and the Subscription
Agreement attached thereto.

Section 4. BLUE SKY SURVEY. The Company has caused counsel to
prepare and deliver to the Underwriter a Blue Sky Survey which sets forth, for
the guidance of such persons or entities, the United States jurisdictions in
which the Shares may be offered and sold. It is understood and agreed that the
Underwriter may rely, in connection with the offering and sale of Shares in any
United States jurisdiction, on advice given by such counsel as to the legality
of the offer or sale of the Shares in such jurisdiction; PROVIDED, HOWEVER, that
the Underwriter shall be responsible for compliance with all applicable laws,
rules and regulations with respect to the actions of its employees, acting as
such, in connection with the sales of Shares in any jurisdiction.

Section 5. COVENANTS OF THE COMPANY.

(a) The Company will notify the Underwriter immediately and confirm
such notification in writing (i) when any amendment to the Registration
Statement shall have become effective, (ii) of the receipt of any further
comments from the SEC or any other Federal or state regulatory or
self-regulatory body with respect to the Registration Statement, (iii) of any
request by the SEC or any other Federal or state regulatory or self-regulatory
body for any further amendment to the Registration Statement or any amendment or
further supplement to the Prospectus or for additional information relating
thereto, (iv) of any material criminal, civil or administrative proceedings
against or involving the Company, and (v) of the issuance by the SEC or any
other Federal or state regulatory or self-regulatory body of any order
suspending the effectiveness of the Registration Statement under the Securities
Act, or the registration of Shares under the "Blue Sky" or securities laws of
any state or other jurisdiction or any order or decree enjoining the offering or
the use of the then current Prospectus or of the institution, or notice of the
intended institution, of any action or proceeding for that purpose.

<PAGE>

(b) The Company will deliver to the Underwriter one signed copy of
the Registration Statement as originally filed and of each amendment thereto and
one set of exhibits thereto, and will also deliver to the Underwriter such
number of conformed copies of the Registration Statement as originally filed and
of each amendment thereto (without exhibits) as the Underwriter shall reasonably
require.

(c) The Company will deliver to the Underwriter as promptly as
practicable from time to time during the period when the Prospectus is required
to be delivered under the Securities Act, such number of copies of the
Prospectus (as amended or supplemented) as the Underwriter may reasonably
request for the purposes contemplated by the Securities Act or the SEC
Regulations.

(d) During the period when the Prospectus is required to be delivered
pursuant to the Securities Act, the Company will comply with all requirements
imposed upon it by the Securities Act as now and hereafter amended, and by any
SEC Regulations, as from time to time in force, so far as necessary to permit
the continuance of sales of the Shares during such period in accordance with the
provisions hereof and as set forth in the Prospectus.

(e) If any event relating to or affecting the Company shall occur as
a result of which it is necessary, in the reasonable opinion of the Company, to
amend or supplement the Prospectus in order to make the Prospectus not
materially misleading in the light of the circumstances existing at the time it
is delivered to a subscriber, the Company shall forthwith prepare and furnish to
the Underwriter, at the expense of the Company, a reasonable number of copies of
an amendment or amendments of, or a supplement or supplements to, the Prospectus
which will amend or supplement the Prospectus so that as amended or supplemented
it will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances existing at the time the Prospectus is delivered to a
subscriber, not misleading. No such amendment or supplement shall be filed
without the approval of the Underwriter which approval will not be unreasonably
withheld.

Section 6. PAYMENT OF EXPENSES AND FEES. The Company will pay all
expenses incident to the performance of the obligations of the Company
hereunder, including: (i) the printing and delivery to the Underwriter in
quantities as hereinabove stated of copies of the Registration Statement and all
amendments thereto, of the Prospectus and any supplements or amendments thereto,
and of any supplemental sales materials; (ii) the printing and filing of the
Registration Statement and the Prospectus (and, in certain cases, the exhibits
thereto) with the SEC; (iii) the qualification of the Shares under the
securities or "Blue Sky" laws in the various jurisdictions, including filing
fees and the fees and disbursements of the Company's counsel incurred in
connection therewith; and (iv) the services of counsel and accountants for the
Company. Other than as set forth above, each party hereto shall bear its own
expenses relating hereto and to the offering of the Shares, except as may
otherwise be agreed upon in writing.

The Company and the Underwriter are each aware of the limitations
imposed by Appendix F of the NASD Rules of Fair Practice on the aggregate
compensation which may be

<PAGE>

received by the Underwriter in connection with the offering and sale of the
Shares. The Company will in no event make any payments to the Underwriter
which, when added to the selling commissions which the Underwriter will receive,
would exceed 10% of the gross proceeds of the Shares sold to the public.

Section 7. CONDITIONS OF CLOSING. The obligations of each of the
parties hereunder are subject to the accuracy of the representations and
warranties of the other parties hereto, to the performance by such other parties
of their respective obligations hereunder and to the following further
conditions:

(a) The Registration Statement shall have become effective and at
Closing Time no order suspending the effectiveness thereof shall have been
issued under the Securities Act or proceeding therefor initiated or threatened
by the SEC.

(b) At Closing Time, Preston Gates & Ellis LLP, counsel to the
Company and the Company, shall deliver its opinion, in form and substance
reasonably satisfactory to the parties hereto, to the effect that:

(i) The Company is duly organized and validly existing as a
corporation under the laws of the State of Washington and is in good standing
and qualified to do business in each other jurisdiction in which the failure to
so qualify might reasonably be expected to result in material adverse
consequences to the Company. The Company has full corporate power and authority
to perform its obligations as described in the Registration Statement, the
Prospectus and herein.

(ii) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Prospectus under the caption "Capitalization"
as of the dates stated therein; the issued and outstanding shares of Common
Stock of the Company have been duly and validly authorized and issued, are fully
paid and nonassessable.

(iii) The Shares to be issued and sold by the Company as
contemplated by the Prospectus will be, upon issuance and delivery against
payment therefor in accordance with the terms hereof, duly authorized and
validly issued and fully paid and nonassessable.

(iv) This Agreement has been duly authorized, executed and
delivered by or on behalf of the Company, and assuming that this Agreement is
binding on the Underwriter, this Agreement constitutes a valid, binding and
enforceable agreement of the Company in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium or similar laws at the time
in effect affecting the enforceability generally of rights of creditors and
except as enforceability of indemnification provisions may be limited by
applicable law and the enforcement of any specific terms or remedies may be
unavailable.

(v) The execution and delivery of this Agreement and the
incurrence of the obligations herein set forth and the consummation of the
transactions contemplated herein and in the Prospectus will not be in
contravention of any of the provisions of the Company's Articles

<PAGE>

of Incorporation or Bylaws and, to their knowledge, will not constitute a breach
of, or default under, any instrument by which the Company is bound or any order,
rule or regulation applicable to the Company of any court or any governmental
body or administrative agency having jurisdiction over the Company.

(vi) To their knowledge, there are no actions, claims or
proceedings pending or threatened in any court or before or by any governmental
or administrative agency or body to which the Company is a party, or to which
any of its assets is subject, which are required to be, but are not, disclosed
in the Registration Statement or Prospectus.

(vii) No authorization, approval or consent of any
governmental authority or agency is necessary in connection with the
subscription for and sale of the Shares, except such as may be required under
the Securities Act, NASD rules or applicable securities or "Blue Sky" laws.

(viii) The Registration Statement is effective under the
Securities Act and no proceedings for a stop order are pending or, to their
knowledge, threatened under Section 8(d) or Section 8(e) of the Securities Act
or any applicable state "Blue Sky" laws.

(ix) At the time the Registration Statement initially became
effective and at the time any post-effective amendment thereto became effective,
the Registration Statement, and at the time the Prospectus and any amendments or
supplements thereto were first issued, the Prospectus, complied as to form in
all material respects with the requirements of the Securities Act and SEC
Regulations.

Counsel rendering the foregoing opinion may rely as to questions of fact
upon representations or certificates of officers of the Company and of
governmental officials, in which case their opinion is to state that they are so
relying.

(c) At Closing Time, Eric J. Witmayer, Esq., counsel to the
Underwriter, shall deliver its opinion in form and substance satisfactory to the
parties hereto.

(d) At Closing Time, the Company shall deliver a certificate to the
effect that: (i) no order suspending the effectiveness of the Registration
Statement has been issued and no proceedings therefor have been instituted or to
the best of their knowledge threatened by the SEC or other regulatory or
self-regulatory body; (ii) the representations and warranties of the Company
contained herein are true and correct with the same effect as though expressly
made at Closing Time and in respect of the Registration Statement as in effect
at Closing Time; and (iii) the Company has performed all covenants and
agreements herein contained which are required to be performed on their part at
or prior to Closing Time.

(e) Executed copies of this Agreement shall be delivered to all
parties.

(f) The parties hereto shall have been furnished with such additional
information, opinions and documents, including supporting documents relating to
parties

<PAGE>

described in the Prospectus and certificates signed by such parties with regard
to information relating to them and included in the Prospectus as they may
reasonably require for the purpose of enabling them to pass upon the sale of the
Shares as herein contemplated and related proceedings, in order to evidence the
accuracy or completeness of any of the representations or warranties or the
fulfillment of any of the conditions herein contained; and all actions taken by
the parties hereto in connection with the sale of the Shares as herein
contemplated shall be reasonably satisfactory in form and substance to Preston
Gates & Ellis LLP.

If the conditions specified in this Section 7 shall not have been
fulfilled in all material respects when and as required by this Agreement to be
fulfilled, this Agreement and all obligations hereunder may be cancelled by any
party hereto by notifying the other parties hereto of such cancellation in
writing or by telegram at any time at or prior to Closing Time, and any such
cancellation or termination shall be without liability of any party to any other
party except as otherwise provided in Section 9 of this Agreement.

Section 8. PROSPECTUS TERMS AND DESCRIPTIONS CONTROLLING. All
parties hereto expressly agree that the description of this Agreement contained
in the Registration Statement and Prospectus shall control against the terms and
conditions contained herein.

Section 9. INDEMNIFICATION AND EXCULPATION.

(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify
and hold harmless the Underwriter, its officers, directors, and each person, if
any, who controls the Underwriter within the meaning of Section 15 of the
Securities Act against any and all loss, liability, claim, damage and expense
whatsoever arising from any (i) breach by the Company of this Agreement or (ii)
untrue statement of a material fact or alleged untrue statement of a material
fact contained in the Registration Statement (or any amendment thereto) or any
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary in order to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a material
fact contained in the Prospectus or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, except
for any untrue statement or omission or alleged untrue statement or omission
made in reliance upon and in conformity with information relating to the
Underwriter and furnished by the Underwriter for use in the Prospectus.

In no case shall the Company be liable under this indemnity agreement with
respect to any claim made against any indemnified party unless the Company shall
be notified in writing of the nature of the claim within a reasonable time after
the assertion thereof, but failure to so notify the Company shall not relieve
the Company from any liability which it may have otherwise than on account of
this indemnity agreement. The Company shall be entitled to participate at its
own expense in the defense or, if either so elects within a reasonable time
after receipt of such notice, to assume the defense of any suit so brought,
which defense shall be conducted by counsel chosen by it and satisfactory to the
indemnified party or parties, defendant or defendants therein.

<PAGE>

The Company agrees to notify the Underwriter within a reasonable time of
the assertion of any claim in connection with the sale of the Shares against it
or any of its officers or directors or any person who controls the Company
within the meaning of Section 15 of the Securities Act.

(b) INDEMNIFICATION BY THE UNDERWRITER. The Underwriter agrees to
indemnify and hold harmless the Company, its officers, directors, and each
person, if any, who controls the Company within the meaning of Section 15 of
the Securities Act against any and all loss, liability, claim, damage and
expense whatsoever arising from any (i) breach by the Underwriter of this
Agreement or (ii) untrue statement of a material fact or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment thereto) or any omission or alleged omission therefrom of a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Prospectus or the omission or
alleged omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that any such untrue statement or omission or
alleged untrue statement or omission was made in reliance upon and in conformity
with information relating to the Underwriter and furnished by the Underwriter
for use in the Prospectus.

In no case shall the Underwriter be liable under this indemnity agreement
with respect to any claim made against any indemnified party unless the
Underwriter shall be notified in writing of the nature of the claim within a
reasonable time after the assertion thereof, but failure to so notify the
Underwriter shall not relieve the Underwriter from any liability which it may
have otherwise than on account of this indemnity agreement. The Underwriter
shall be entitled to participate at its own expense in the defense or, if either
so elects within a reasonable time after receipt of such notice, to assume the
defense of any suit so brought, which defense shall be conducted by counsel
chosen by it and satisfactory to the indemnified party or parties, defendant or
defendants therein.

The Underwriter agrees to notify the Company within a reasonable time of
the assertion of any claim in connection with the sale of the Shares against it
or any of its officers or directors or any person who controls the Underwriter
within the meaning of Section 15 of the Securities Act.

Section 10. STATUS OF PARTIES. In selling the Shares for the
Company, the Underwriter is acting solely as agent for the Company, and not as
principal. The Underwriter will use its best efforts to assist the Company in
obtaining performance by each purchaser whose offer to purchase Shares from the
Company has been accepted on behalf of the Company, but the Underwriter shall
not have any liability to the Company in the event that Subscription Agreements
are improperly completed or any such purchase is not consummated for any reason.
Except as specifically provided herein, the Underwriter shall in no respect be
deemed to be an agent of the Company.

Section 11. TERMINATION. The Company shall have the right to
terminate this Agreement at any time prior to Closing Time by giving written
notice of such termination to the Underwriter.

<PAGE>

Section 12. NOTICES AND AUTHORITY TO ACT. All communications
hereunder shall be in writing and, if sent to the Company, shall be mailed,
delivered or telecopied and confirmed to the Company at: 2477 East Orangethorpe
Avenue, Fullerton, CA 92631, Attention: James E. Campbell, III, with a copy to
Preston Gates & Ellis LLP, 5000 Columbia Center, 701 Fifth Avenue, Seattle, WA
98104, Attention: Gary Kocher. If sent to Tradeway Securities Group, Inc.,
shall be mailed, delivered or telecopied and confirmed to it at: 630 Alta Vista
Drive, Suite 201, Vista, CA 92084, Attention: Mark Riviello. Notices shall be
effective when actually received.

Section 13. PARTIES. This Agreement shall inure to the benefit of
and be binding upon the Underwriter, the Company and such parties' respective
successors to the extent provided herein. This Agreement and the conditions and
provisions hereof are intended to be and are for the sole and exclusive benefit
of the parties hereto and their respective successors, assigns and controlling
persons and parties indemnified hereunder, and for the benefit of no other
person, firm or corporation. No purchaser of a Share shall be considered to be
a successor or an assignee solely on the basis of such purchase.

Section 14. GOVERNING LAW. This Agreement and the rights and
obligations of the parties created hereby shall be governed by the laws of the
State of Washington.

Section 15. REQUIREMENTS OF LAW. Whenever in this Agreement it is
stated that a party will take or refrain from taking a particular action, such
party may nevertheless refrain from taking or take such action if advised by
counsel that doing so is required by law or advisable to ensure compliance with
law, and shall not be subject to any liability hereunder for doing so, although
such action shall permit termination of the Agreement by the other parties
hereto.

Section 16. CONSENT TO JURISDICTION. The parties hereto agree that
any action or proceeding arising directly, indirectly, or otherwise in
connection with, out of, related to, or from this Agreement, any breach hereof,
or any transaction covered hereby, shall be resolved, whether by arbitration or
otherwise, within the County of King, City of Seattle, and State of Washington.
Accordingly, the parties hereto consent and submit to the jurisdiction of the
federal and state courts and applicable arbitral body located within the County
of King, City of Seattle, and State of Washington. The parties further agree
that any such action or proceeding brought by any party to enforce any right,
assert any claim, or obtain any relief whatsoever in connection with this
Agreement shall be brought by such party exclusively in the federal or state
courts, or if appropriate, before any applicable arbitral body, located within
the County of King, City of Seattle, and State of Washington.

[remainder of page intentionally blank]

<PAGE>

If the foregoing is in accordance with each party's understanding of
their agreement, each party is requested to sign and return to the Company a
counterpart hereof, whereupon this instrument along with all counterparts will
become a binding agreement among them in accordance with its terms.

Very truly yours,

PACIFIC MULTIMEDIA, INC.

By:___________________________
James E. Campbell, III
President and Chief Executive Officer

Confirmed and accepted as of
the date first above written:

TRADEWAY SECURITIES GROUP, INC.

By:___________________________
Name: Mark Riviello
Title:

<PAGE>

ANNEX A

FORM OF WARRANT

<PAGE>

No. 1

THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.

PACIFIC MULTIMEDIA, INC.
COMMON STOCK WARRANT

Issue Date: ___________, 1997 100,000 Shares of Common Stock

For good and valuable consideration, Tradeway Securities Group, Inc. (the
"Holder") is entitled to subscribe for and purchase from Pacific MultiMedia,
Inc. (the "Company"), 100,000 shares of the Company's Common Stock, having no
par value (the "Warrant Shares"). The Exercise Price per Warrant Share shall be
$5.00 per Warrant Share.

1. EXERCISE OF WARRANT.

1.1 EXERCISE OF WARRANT. Subject to the provisions of Sections 1.2 and
1.3 hereof, the Holder may exercise this Warrant in whole, or in part, at any
time prior to the fifth (5th) anniversary of the date of this Warrant, at which
time this Warrant shall expire.

1.2 METHOD OF EXERCISE.

(a) Subject to Section 1.1, the Holder shall exercise this Warrant by
surrendering it at the offices of the Company at the address designated for
notice purposes under Section 4.2 below, together with (i) a duly executed
subscription in substantially the form of the Subscription Notice appearing at
the end of this Warrant, and (ii) cash or a certified check payable to the
Company in the amount equal to the aggregate Exercise Price for the number of
Warrant Shares being purchased.

(b) Within three (3) business days after the Warrant has been
exercised, the Company at its expense shall issue and deliver, in such name or
names as Holder may direct, a certificate or certificates for the number of
Warrant Shares for which Holder subscribed and is entitled. A surrendered
Warrant shall be canceled by or on behalf of the Company, except that if the
Warrant is exercised in part, the Company shall execute and deliver a new
Warrant evidencing the right of Holder to purchase the balance of the Warrant
Shares. The Holder shall for all purposes be deemed to become the holder of
Warrant Shares on the date this Warrant is duly exercised for such Warrant
Shares.

<PAGE>

1.3 NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional share to which the Holder would otherwise be
entitled, the Company shall round up the number of shares to the nearest whole
share.

1.4 REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and substance to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver in lieu of this Warrant, a
Warrant of like tenor and amount.

1.5 RIGHTS OF HOLDER. The Holder shall not be entitled to vote or receive
dividends or be deemed the holder of Common Stock or any other securities of the
Company that may at any time be issuable on the exercise hereof for any purpose,
nor shall anything contained herein be construed to confer upon the Holder, as
such, any of the rights of a shareholder of the Company until the Warrant shall
have been exercised as provided herein.

2. TRANSFER OF THE WARRANT.

This Warrant may not be transferred without the prior written consent of
the Company, in its sole and absolute discretion. With the prior written
consent of the Company, this Warrant may be transferred, in whole or in part, to
any person by presentation of the Warrant to the Company with written
instructions for transfer; provided, however, that Holder agrees to comply with
Section 3.2 below.

3. PROVISIONS FOR PROTECTION OF THE HOLDER.

3.1 RESERVATION OF SHARES. The Company shall at all times reserve such
number of shares of its authorized but unissued Common Stock as necessary to
permit the exercise of the Warrant for of all of the Warrant Shares. If at any
time an insufficient number of shares is authorized for such purpose, the
Company will take such action as, in the opinion of its counsel, may be
necessary to increase its authorized but unissued Common Stock to such number of
shares as shall be sufficient for such purpose.

3.2 COMPLIANCE WITH SECURITIES LAWS. Neither this Warrant nor the Warrant
Shares have been registered under the Securities Act of 1933, as amended (the
"Securities Act") or any state securities laws. This Warrant has been acquired
for investment purposes and not with a view to distribution or resale and may
not be pledged, hypothecated, sold or otherwise transferred without an effective
registration statement for such Warrant under the Securities Act or any
applicable state securities laws or an opinion of counsel or other evidence
reasonably satisfactory to the Company that registration is not required
thereunder. Certificates representing the Warrant Shares shall bear a legend
substantially in the following form:

<PAGE>

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO
THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

3.3 ADJUSTMENT FOR DIVIDENDS, STOCK SPLITS, OR RECLASSIFICATION. In case
the Company shall:

(a) declare a dividend of Common Stock (or other securities of the
Company) on its Common Stock (or any other class of securities issuable upon
exercise of this Warrant),

(b) subdivide outstanding Common Stock (or any other class of
securities issuable upon exercise of this Warrant) into a larger number of
shares of Common Stock (or such other securities) by reclassification or
otherwise, or

(c) combine outstanding Common Stock (or any other class of
securities issuable upon exercise of this Warrant) into a smaller number of
shares of Common Stock (or such other securities) by reclassification or
otherwise,

the number of shares of Common Stock (or other securities) issuable upon
exercise of this Warrant immediately prior to any such event shall be adjusted
proportionately, and the Exercise Price shall be equitably adjusted, so that
thereafter the Holder shall be entitled to receive upon exercise of this Warrant
the number of shares of Common Stock (or other securities) which such Holder
would have owned after the happening of any of the events described above had
this Warrant been exercised immediately prior to the happening of such event.
An adjustment made pursuant to this paragraph shall become effective immediately
after the record date in the case of a dividend and shall become effective
immediately after the effective date in the case of a subdivision or
combination. The determination of an adjustment that is made by the Board of
Directors in good faith and absent error shall be final, conclusive and binding.

3.4 ADJUSTMENTS FOR MERGERS AND REORGANIZATIONS. If, prior to exercise of
this Warrant, the Company shall at any time consolidate or merge with another
corporation (other than a merger or consolidation in which the Company is the
surviving corporation), the Holder hereof will thereafter be entitled to
receive, upon the exercise hereof, the securities or property to which a holder
of the number of shares of Common Stock (or other securities) then deliverable
upon the exercise hereof would have been entitled upon such consolidation or
merger, and the Company shall take such steps in connection with such
consolidation or merger as may be necessary to assure that the provisions hereof
shall thereafter be applicable, as nearly as reasonably may be, in relation to
any securities or property thereafter deliverable upon the exercise of this
Warrant.

<PAGE>

3.5 NOTICE OF ADJUSTMENT. The Company shall provide the Holder notice
within three (3) business days after any adjustment under Sections 3.3 or 3.4,
together with reasonable details of the manner and effect of the adjustment.

4. MISCELLANEOUS PROVISIONS.

4.1 APPLICABLE LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of Washington.

4.2 NOTICES. Any notice or other document required or permitted to be
given in connection with this Warrant shall be sufficiently given if sent by
first class mail, postage prepaid, addressed to the Company at its executive
offices and to the Holder at the last address shown on the books of the Company
or its transfer agent maintained for the registry and transfer of Warrants.

4.3 SUCCESSORS. All covenants and provisions of this Warrant by or for
the benefit of the Company shall bind and inure to the benefit of its respective
successors and assigns.

4.4 BENEFITS OF THIS WARRANT. Nothing in this Warrant shall be construed
to give to any person or corporation other than the Company and the Holder any
legal or equitable right, remedy or claim under this Warrant. This Warrant
shall be for the sole and exclusive benefit of the Company and the Holder.

PACIFIC MULTIMEDIA, INC.

___________________________________________
James E. Campbell, III, President

<PAGE>

(FORM OF SUBSCRIPTION NOTICE TO BE EXECUTED
UPON EXERCISE OF WARRANT)

SUBSCRIPTION NOTICE

The undersigned, the registered holder of Warrant __ (the "Warrant"),
issued by Pacific MultiMedia, Inc. hereby (i) irrevocably subscribes for
_________ shares of Common Stock which the undersigned is entitled to purchase
under the terms and conditions of the Warrant, (ii) makes payment of
$___________ in full [in cash/by certified check] therefor as called for by the
Warrant, and (iii) directs that the certificates for such shares of Common Stock
issuable upon exercise of the Warrant be issued in the name of and delivered to
________________ whose address is _______________________________.

__________________________________
(Name)

__________________________________
(Address)

SIGNATURE: __________________________________

Dated: _________________, 199___

________________________________________________________________

NOTICE: The signature on this Subscription Notice must correspond with the
name as written upon the face of the Warrant, or upon an assignment form
attached hereto.

<PAGE>

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") dated as of ________, 1997
(the "EFFECTIVE DATE") by and between Pacific MultiMedia, Inc., a Washington
corporation ("MULTIMEDIA") and Pacific Audio Recordings, Inc., a California
corporation ("P.A.R.").

RECITALS

WHEREAS, MultiMedia and P.A.R. desire to merge; and

WHEREAS, the boards of directors of MultiMedia and P.A.R. have duly
approved the merger of P.A.R. with and into MultiMedia and the consummation of
the transactions contemplated hereby, upon the terms and subject to the
conditions set forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, the parties hereto, intending to be
legally bound hereby, agree as follows:

ARTICLE I

THE MERGER

SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as hereinafter defined), in accordance
with the Washington Business Corporation Act, as amended (the "WBCA") and the
California Corporations Code, as amended (the "CCC"), P.A.R. shall be merged
with and into MultiMedia and the separate existence of P.A.R. shall thereupon
cease (the "MERGER"). MultiMedia shall be the surviving corporation in the
Merger (hereinafter referred to as the "SURVIVING CORPORATION" or "MULTIMEDIA").

SECTION 1.2 EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective pursuant to Section 23B.01.230 of the WBCA as of the close of business
on the date on which the requisite Articles of Merger pursuant to
Section 23B.11.050 of the WBCA and any other documents necessary to effect the
Merger in accordance with the WBCA are filed with the Washington Secretary of
the State (the "EFFECTIVE TIME"). Upon filing of an Officer's Certificate with
the California Secretary of State in accordance with the provisions of Section
1108 of the CCC, the merger shall be effective in California as of the Effective
Time.

SECTION 1.3 EFFECTS OF MERGER. The Merger shall have the effects set
forth in Section 23B.11.060 of the WBCA.

<PAGE>

ARTICLE II

THE SURVIVING CORPORATION

SECTION 2.1 ARTICLES OF INCORPORATION. At the Effective Time, the
Articles of Incorporation of MultiMedia, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation until duly amended.

SECTION 2.2 BYLAWS. At the Effective Time, the Bylaws of MultiMedia, as
in effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until duly amended.

SECTION 2.3 DIRECTORS AND OFFICERS. At and after the Effective Time,
the directors and officers of MultiMedia immediately prior to the Effective Time
shall be the directors and officers of the Surviving Corporation, in each case
until their respective successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Restated Articles of Incorporation and Bylaws.

ARTICLE III

CONVERSION OF P.A.R. COMMON SHARES

SECTION 3.1 CONVERSION OF SHARES. At the Effective Time, by virtue of
the Merger and without any action on the part of any holder of any capital stock
of MultiMedia or P.A.R., each of the issued and outstanding shares of P.A.R.
common stock (the "P.A.R. COMMON STOCK") shall be converted into, and MultiMedia
shall thereupon issue to each of the shareholders of P.A.R., 6.66667 shares of
MultiMedia common stock (the "MULTIMEDIA COMMON STOCK") for every share of
P.A.R. Common Stock held by each shareholder. On the Effective Date, the
shareholders shall surrender their certificate(s) representing a total of 60,000
shares of P.A.R. Common Stock to MultiMedia or a designated exchange agent
together with such duly executed documentation as may be reasonably required by
MultiMedia or the exchange agent to effect a transfer of such shares, and upon
such surrender MultiMedia shall issue a total of 400,000 shares of MultiMedia
Common Stock represented by certificates in the name of each respective
shareholder. The shares of MultiMedia Common Stock into which the shares of
P.A.R. Common Stock shall be converted in the Merger shall be deemed to have
been issued at the Effective Time.

SECTION 3.2 CLOSING OF TRANSFER BOOKS. From and after the Effective
Time, the stock transfer books of P.A.R. (but not of MultiMedia) shall be closed
and no transfer of shares of P.A.R. Common Stock shall thereafter be made except
in accordance with this Article III.

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<PAGE>

ARTICLE IV

MISCELLANEOUS

SECTION 4.1 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.

SECTION 4.2 NOTICES. Any notices or other communications required or
permitted hereunder shall be in writing and shall be deemed duly given upon
(a) transmitter's confirmation of a receipt of a facsimile transmission,
(b) confirmed delivery by a standard overnight carrier or by hand delivery or
(c) the expiration of five (5) business days after the day when mailed by
certified or registered mail, postage prepaid, addressed at the addresses if by
each party.

SECTION 4.3 CHOICE OF LAW This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of Washington (without giving effect to the provisions thereof relating to
conflicts of law).

SECTION 4.4 INTERPRETATION. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."

SECTION 4.5 INTEGRATION. This Agreement (including the documents and
instruments referred to herein): (i) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof;
and (ii) shall not be assigned by operation of law or otherwise without the
prior written consent of the other parties hereto.

SECTION 4.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.

SECTION 4.7 PARTIES IN INTEREST. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the parties hereto and their
respective permitted successors and assigns, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.

SECTION 4.8 SEVERABILITY. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.

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<PAGE>

IN WITNESS WHEREOF, MultiMedia and P.A.R. have each caused this Agreement
to be signed, where applicable by their respective officers thereunto duly
authorized, as of the date first set forth above.

PACIFIC AUDIO RECORDINGS, INC. PACIFIC MULTIMEDIA, INC.

By _______________________________ By _______________________________

Its ______________________________ Its_______________________________

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<PAGE>

ARTICLES OF INCORPORATION

PACIFIC MULTIMEDIA, INC.

ARTICLE I

The name of the corporation is Pacific MultiMedia, Inc.

ARTICLE II

1. The total number of shares of capital stock which the corporation
shall have authority to issue is thirty million (30,000,000), which shall
consist of twenty five million (25,000,000) shares of Common Stock, without par
value (the "Common Stock"), and five million (5,000,000) shares of Preferred
Stock, without par value (the "Preferred Stock").

The Board of Directors shall have the full authority permitted by law to
divide the authorized and unissued shares of Preferred Stock into classes or
series, or both, and to provide for the issuance of such shares in an aggregate
amount not exceeding in the aggregate the number of shares of Preferred Stock
authorized by these Articles of Incorporation, as amended from time to time; and
to determine with respect to each such class and/or series the voting powers, if
any (which voting powers, if granted, may be full or limited), designations,
preferences and relative, participating, optional or other special rights, and
the qualifications, limitations or restrictions relating thereto, including
without limiting the generality of the foregoing, the voting rights relating to
shares of Preferred Stock of any class and/or series (which may be one or more
votes per share or a fraction of a vote per share, which may vary over time and
which may be applicable generally or only upon the happening and continuance of
stated events or conditions), the rate of dividend to which holders of Preferred
Stock of any class and/or series may be entitled (which may be cumulative or
noncumulative), the rights of holders of Preferred Stock of any class and/or
series in the event of liquidation, dissolution or winding up of the affairs of
the corporation, the rights, if any, of holders of Preferred Stock of any class
and/or series to convert or exchange such shares of Preferred Stock of such
class and/or series for shares of any other class or series of capital stock or
for any other securities, property or assets of the corporation or any
Subsidiary (including the determination of the price or prices or the rate or
rates applicable to such rights to convert or exchange and the adjustment
thereof, the time or times during which the right to convert or exchange shall
be applicable and the time or times during which a particular price or rate
shall be applicable), whether or not the shares of that class and/or series
shall be redeemable, and if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be redeemable, and
the amount per share payable in case of redemption, which amount may vary under
different conditions and at different redemption

<PAGE>

dates, and whether any shares of that class and/or series shall be redeemed
pursuant to a retirement or sinking fund or otherwise and the terms and
conditions of such obligation.

Before the corporation shall issue any shares of Preferred Stock of any
class and/or series, articles of amendment in a form meeting the requirements of
the Washington Business Corporation Act, as amended from time to time (the
"Act"), setting forth the terms of the class and/or series and fixing the voting
powers, designations, preferences, the relative, participating, optional or
other special rights, if any, and the qualifications, limitations and
restrictions, if any, relating to the shares of Preferred Stock of such class
and/or series, and the number of shares of Preferred Stock of such class and/or
series authorized by the Board of Directors to be issued shall be filed with the
Secretary of State of the State of Washington in the manner prescribed by the
Act, and shall become effective without any shareholder action. The Board of
Directors is further authorized to increase or decrease (but not below the
number of such shares of such series then outstanding) the number of shares of
any class or series subsequent to the issuance of shares of that class or
series.

2. The shares of capital stock of this corporation may be issued by this
corporation from time to time for such consideration as from time to time may be
fixed by the Board of Directors of this corporation; and all issued shares of
the capital stock of this corporation shall be deemed fully paid and
non-assessable.

ARTICLE III

The street address of the registered office of the corporation in the State
of Washington is 5000 Columbia Seafirst Center, 701 Fifth Avenue, Seattle,
Washington 98104-7078 and the name of the registered agent of the corporation at
such address is PTSGE Corp.

ARTICLE IV

A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for conduct as a director,
except for:

a. Acts or omissions involving intentional misconduct by the
director or a knowing violation of law by the director;

b. Conduct violating Section 23B.08.310 of the Act (which involves
certain distributions by the corporation);

c. Any transaction from which the director will personally receive a
benefit in money, property, or services to which the director is not
legally entitled.

If the Act is amended to authorize corporate action further eliminating or
limiting the personal liability of directors or officers, then the liability of
a director or officer of the

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<PAGE>

corporation shall be eliminated or limited to the fullest extent permitted by
the Act, as so amended. The provisions of this Article IV shall be deemed to be
a contract with each director and officer of the corporation who serves as such
at any time while such provisions are in effect, and each director and officer
entitled to the benefits hereof shall be deemed to be serving as such in
reliance on the provisions of this Article IV. Any repeal or modification of
this Article IV by the shareholders of the corporation shall not adversely
affect any right or protection of a director or officer of the corporation with
respect to any acts or omissions of such director or officer occurring prior to
such repeal or modification.

ARTICLE V

1. The corporation shall indemnify its directors and officers to the full
extent permitted by applicable law. The corporation shall advance expenses for
such persons pursuant to the terms set forth in the Bylaws, or in a separate
directors' resolution or contract.

2. The Board of Directors may take such action as is necessary to carry
out these indemnification and expense advancement provisions. The Board of
Directors is expressly empowered to adopt, approve, and amend from time to time
such Bylaws, resolutions, contracts, or further indemnification and expense
advancement arrangements implementing these provisions as may be permitted by
law, including the purchase and maintenance of insurance. Such Bylaws,
resolutions, contracts, or further arrangements shall include but not be limited
to implementing the manner in which determinations as to any indemnity or
advancement of expenses shall be made.

3. No amendment or repeal of this Article V shall apply to or have any
effect on any right to indemnification provided hereunder with respect to acts
or omissions occurring prior to such amendment or repeal.

ARTICLE VI

Shareholders of this corporation shall not have preemptive rights to
acquire additional shares issued by the corporation.

ARTICLE VII

Shareholders of the corporation shall not have cumulative voting rights.

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<PAGE>

ARTICLE VIII

1. The number of directors comprising the Board of Directors of the
corporation shall be specified in the Bylaws, and such number may from time to
time be increased or decreased in such manner as may be prescribed in the
Bylaws. The initial directors of the Company shall be James E. Campbell, III,
Jerome Schneider and Robert W. McMichael who shall hold such office for such
term as may be prescribed in the Bylaws.

2. Any director, any class of directors, or the entire Board of Directors
may be removed from office at any time, at a duly called meeting of
shareholders, by the affirmative vote of holders of not less than a majority of
the Voting Shares (as defined in Article IX, Section 3 below) of the
Corporation.

3. Vacancies in the Board of Directors, including vacancies resulting
from an increase in the number of directors, shall be filled by a majority of
the directors then in office, though less than a quorum, by the sole remaining
director or by action of the shareholders. All directors elected to fill
vacancies shall hold office for a term expiring at the annual meeting of
shareholders at which the term of the class to which they have been elected
expires and until his or her successor shall have been elected and qualified.
No decrease in the number of directors constituting the Board of Directors shall
shorten or eliminate the term of any incumbent director.

ARTICLE IX

1. Unless otherwise provided herein, the provisions of these Articles of
Incorporation may be repealed or amended upon the affirmative vote of the
holders of not less than a majority of the outstanding Voting Shares of the
corporation. The provisions set forth in Article VI, Article VII and this
sentence of Section 1 of Article IX herein may not be repealed or amended in any
respect, unless such action is approved by the affirmative vote of the holders
of not less than 66-2/3% of the outstanding Voting Shares of the corporation.

2. In furtherance and not in limitation of the powers conferred by the
Act, the Board of Directors is expressly authorized to make, adopt, repeal,
alter, amend, and rescind the Bylaws of the corporation by a resolution adopted
by a majority of the directors. The shareholders shall also have the power to
adopt, amend or repeal the Bylaws of the corporation as set forth therein.

3. For purposes of these Articles, the following capitalized terms shall
have the meanings set forth below. "Subsidiary" means any corporation or other
entity of which a majority of the voting power of the capital shares entitled to
vote generally in the election of Directors is owned, directly or indirectly, by
the Corporation. "Voting Shares" shall mean all Common Stock and any other
shares entitled to vote for the election of directors as of the date on which a
determination of the number of outstanding Voting Shares is being made under
these Articles of Incorporation.

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<PAGE>

ARTICLE X

The incorporator of the Corporation is James E. Campbell, III having an
address at 5000 Columbia Center, 701 Fifth Avenue, Seattle, WA 98104-7078,
Attention: PSTGE Corp.

IN WITNESS WHEREOF, the foregoing represent a true and complete copy of the
Articles of Incorporation duly adopted on behalf of Pacific MultiMedia, Inc.

PACIFIC MULTIMEDIA, INC.

By: /s/ James E. Campbell, III
------------------------------------------
James E. Campbell, III
President and Chief Executive Officer

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<PAGE>

B Y L A W S

PACIFIC MULTIMEDIA , INC.

ARTICLE I

SHAREHOLDERS

Section 1. ANNUAL MEETING. An annual meeting of the shareholders for
the election of directors and for the transaction of such other business as may
properly come before the meeting shall be held each year on the date and at the
time determined by the Board of Directors. The failure to hold an annual
meeting at the time stated in these Bylaws does not affect the validity of any
corporate action.

Section 2. SPECIAL MEETINGS. Except as otherwise provided by law,
special meetings of shareholders of this Corporation shall be held whenever
called by (i) the Board of Directors or an authorized committee of the Board of
Directors or (ii) one or more shareholders holding 20% or more of the
outstanding shares entitled to vote on matters presented at such meeting, in
accordance with the provisions of these Bylaws.

Section 3. PLACE OF MEETINGS. Meetings of shareholders shall be held
at such place in or out of the State of Washington as determined by the Board of
Directors, pursuant to proper notice.

Section 4. NOTICE. Written notice of each shareholders' meeting
stating the date, time, and place and, in case of a special meeting, the
purpose(s) for which such meeting is called, shall be given by the Corporation
not less than ten (10) (unless a greater period of notice is required by law in
a particular case) nor more than sixty (60) days prior to the date of the
meeting, to each shareholder of record entitled to vote at such meeting unless
required by law to send notice to all shareholders regardless of whether or not
such shareholders are entitled to vote, to the shareholder's address as it
appears on the current record of shareholders of this Corporation.

Section 5. WAIVER OF NOTICE. A shareholder may waive any notice
required to be given by these Bylaws, the Articles of Incorporation of this
Corporation, as amended and restated from time to time (the "Articles of
Incorporation"), or the Washington Business Corporation Act, as amended from
time to time (the "Act"), before or after the meeting that is the subject of
such notice. A valid waiver is created by any of the following three methods:
(a) in writing, signed by the shareholder entitled to the notice and delivered
to the Corporation for inclusion in its

<PAGE>

corporate records; (b) attendance at the meeting, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting; or (c) as to the consideration of a particular matter that is
not within the purpose or purposes described in the meeting notice, the
shareholders' failure to object at the time of presentation of such matter for
consideration.

Section 6. QUORUM OF SHAREHOLDERS. At any meeting of the shareholders,
holders of a majority of the votes of all the shares entitled to vote on a
matter, represented by shareholders of record in person or by proxy, shall
constitute a quorum.

Once a share is represented at a meeting, other than to object to holding
the meeting or transacting business, it is deemed to be present for quorum
purposes for the remainder of the meeting and for any adjournment of that
meeting unless a new record date is or must be set for the adjourned meeting.
At such reconvened meeting, any business may be transacted that might have been
transacted at the meeting as originally noticed.

If a quorum exists, action on a matter is approved if the votes cast
favoring the action exceed the votes cast opposing the action, unless the
question is one upon which by express provision of law or of the Articles of
Incorporation a different vote is required.

Section 7. PROXIES. Shareholders of record may vote at any meeting
either in person or by proxy executed in writing. A proxy is effective when
received by the Secretary of the Corporation or another officer or agent of the
Corporation authorized to tabulate votes for the Corporation. A proxy is valid
for eleven (11) months unless a longer period is expressly provided in the
proxy.

Section 8. VOTING. Subject to the provisions of the laws of the State
of Washington, and unless otherwise provided in the Articles of Incorporation,
each outstanding share is entitled to one (1) vote on each matter voted on at a
shareholders' meeting, with all shares voting together as a single class.

Section 9. ADJOURNMENT. A majority of the shares represented at the
meeting, even if less than a quorum, may adjourn any meeting of the shareholders
from time to time. At a reconvened meeting at which a quorum is present, any
business may be transacted at the meeting as originally noticed. If a meeting
is adjourned to a different date, time, or place, notice need not be given of
the new date, time, or place if a new date, time, or place is announced at the
meeting before adjournment; however, if a new record date for the adjourned
meeting is or must be fixed in accordance with the corporate laws of the State
of Washington, notice of the adjourned meeting must be given to persons who are
shareholders as of the new record date.

Section 10. ADVANCE NOTICE REQUIREMENTS FOR SHAREHOLDER PROPOSALS AND
DIRECTOR NOMINATIONS. Any shareholder seeking to bring business before or to
nominate a director or directors at any meeting of shareholders, must provide
written notice thereof in accordance with this Section 10. The notice must be
delivered to, or mailed and received at, the principal executive offices of the
Corporation not less than (i) with respect to an annual meeting of

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<PAGE>

shareholders, 120 calendar days in advance of the date that the Corporation's
proxy statement was released to shareholders in connection with the previous
year's annual meeting, except that if no annual meeting of shareholders was held
in the previous year or if the date of the annual meeting has been changed by
more than 30 calendar days from the date contemplated at the time of the
previous year's proxy statement, such notice must be received by the Corporation
a reasonable time before the Corporation's proxy statement is to be released,
and (ii) with respect to a special meeting of shareholders, a reasonable time
before the Corporation's proxy statement is to be released.

ARTICLE II

BOARD OF DIRECTORS

Section 1. POWERS OF DIRECTORS. All corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
Corporation shall be managed under the direction of, the Board of Directors,
except as otherwise provided by the Articles of Incorporation.

Section 2. NUMBER AND QUALIFICATIONS. The number of directors which
shall constitute the whole Board shall be not less than one (1) director nor
more than nine (9) directors. The number of directors may at any time be
increased or decreased within such range by the shareholders or by the Board of
Directors at any regular or special meeting. Directors must have reached the
age of majority. The Board of Directors shall initially consist of three (3)
directors.

Section 3. ELECTION - TERM OF OFFICE. Except as otherwise provided in
these Bylaws, the Board of Directors shall be elected to serve for a term of
office to expire at the next succeeding Annual Meeting of Shareholders. Each
director shall hold office for the term for which elected and until his or her
successor shall have been elected and qualified. If, for any reason, the
directors shall not have been elected at the annual meeting, they may be elected
at a special meeting of shareholders called for that purpose in the manner
provided by these Bylaws.

Section 4. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held immediately following each annual meeting of
shareholders and at such other times and at such places as the Board may
determine, and no notice thereof need be given.

Section 5. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be held at any time, whenever called by the Chairman of the Board,
President, Chief Executive Officer, or any director, notice thereof being given
to each director by the officer calling or directed to call the meeting.

Section 6. NOTICE. No notice is required for regular meetings of the
Board of Directors. Notice of special meetings of the Board of Directors,
stating the date, time, and place thereof, shall be given at least two (2) days
prior to the date of the meeting. The purpose of the meeting need not be given
in the notice. Such notice shall be given in the manner provided by Section 3
of Article III of these Bylaws.

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<PAGE>

Section 7. WAIVER OF NOTICE. A director may waive notice of a special
meeting of the Board either before or after the meeting, and such waiver shall
be deemed to be the equivalent of giving notice. Attendance of a director at a
meeting shall constitute waiver of notice of that meeting unless said director,
at the beginning of the meeting, or promptly upon such director's arrival,
objects to holding the meeting or transacting business at the meeting and does
not thereafter vote for or assent to action taken at the meeting. Any waiver by
a non-attending director must be in writing, signed by the director entitled to
the notice and delivered to the Corporation for inclusion in its corporate
records.

Section 8. QUORUM OF DIRECTORS. A majority of the members of the Board
of Directors shall constitute a quorum for the transaction of business. When a
quorum is present at any meeting, a majority of the members present thereat
shall decide any question brought before such meeting, except as otherwise
provided by the Articles of Incorporation or by these Bylaws.

Section 9. ADJOURNMENT. A majority of the directors present, even if
less than a quorum, may adjourn a meeting and continue it to a later time.
Notice of the adjourned meeting or of the business to be transacted thereat,
other than by announcement, shall not be necessary. At any adjourned meeting at
which a quorum is present, any business may be transacted which could have been
transacted at the meeting as originally called.

Section 10. RESIGNATION AND REMOVAL. Any director of this Corporation
may resign at any time by giving written notice to the Board of Directors, its
Chairman, or the President or Secretary of this Corporation. Any such
resignation is effective when the notice is delivered, unless the notice
specifies a later effective date. A director, any class of directors, or the
entire Board of Directors may be removed as prescribed in the Articles of
Incorporation.

Section 11. VACANCIES. Unless otherwise provided by law, vacancies in
the Board of Directors shall be filled by a majority of the directors then in
office, though less than a quorum, by the sole remaining director or by action
of the shareholders.

Section 12. COMPENSATION. By resolution of the Board of Directors, each
director may be paid expenses, if any, of attendance at each meeting of the
Board of Directors (and each meeting of any committees thereof), and may be paid
a stated salary as director, or a fixed sum for attendance at each meeting of
the Board of Directors (and each meetings of any committee thereof), or both.
No such payment shall preclude any director from serving this Corporation in any
other capacity and receiving compensation therefor.

Section 13. PRESUMPTION OF ASSENT. A director of this Corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action taken
unless:

a. The director objects at the beginning of the meeting, or promptly
upon the director's arrival, to holding it or transacting business at the
meeting;

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b. The director's dissent or abstention from the action taken is
entered in the minutes of the meeting; or

c. The director delivers written notice of dissent or abstention to
the presiding officer of the meeting before its adjournment or to the
Corporation within a reasonable time after adjournment.

The right of dissent or abstention is not available to a director who votes in
favor of the action taken.

Section 14. COMMITTEES OF THE BOARD OF DIRECTORS. The Board of
Directors is expressly authorized to create one or more committees of directors
in accordance with the provisions of Section 23B.08.250 of the Act. Each
committee must have two or more members, who serve at the pleasure of the Board
of Directors. The creation of a committee and appointment of members to it must
be approved by a majority of all the directors in office when such action is
taken or such other number of directors as may be required by Section
23B.08.250(2) of the Act. To the extent specified by the Board of Directors or
in the Articles of Incorporation or these Bylaws, each committee may exercise
the authority of the Board of Directors under Section 23B.08.010 of the Act;
provided, however, a committee may not: (a) authorize or approve a distribution
except according to a general formula or method prescribed by the Board of
Directors, (b) approve or propose to shareholders action that is required by the
Act to be approved by shareholders; (c) fill vacancies on the Board of Directors
or on any of its committees, (d) amend the Articles of Incorporation pursuant to
Section 23B.10.020 of the Act, (e) adopt, amend or repeal these Bylaws, (f)
approve a plan of merger not requiring shareholder approval, or (g) authorize or
approve the issuance or sale or contract for sale of shares, or determine the
designation and relative rights, preferences, and limitations of a class or
series of shares, except that, in the case of this clause (g), the Board of
Directors may authorize a committee, or a senior executive officer of the
corporation, to do so within limits specifically prescribed by the Board of
Directors.

ARTICLE III

SPECIAL MEASURES APPLYING TO
SHAREHOLDER AND/OR DIRECTOR ACTIONS

Section 1. ACTION BY WRITTEN CONSENT. Any action required or permitted
to be taken at a meeting of the shareholders or the Board of Directors may be
accomplished without a meeting if the action is taken by all the shareholders
entitled to vote thereon, or all the members of the Board, as the case may be.
The action must be evidenced by one or more written consents describing the
action taken, signed by all the shareholders entitled to vote thereon, or by all
directors, as the case may be, either before or after the action is taken, and
delivered to the Corporation for inclusion in the minutes or filing with the
Corporation's records.

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Action taken by unanimous written consent of the shareholders is effective
when all consents are in the possession of the Corporation, unless the consent
specifies a later effective date. Action taken by unanimous written consent of
the Board of Directors is effective when the last director signs the consent,
unless the consent specifies a later effective date.

Section 2. CONFERENCE TELEPHONE. Meetings of the shareholders and
Board of Directors may be effectuated by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other during the meeting. Participation by such means
shall constitute presence in person at such meeting.

Section 3. ORAL AND WRITTEN NOTICE. Oral notice of a meeting of the
Board of Directors may be communicated in person or by telephone, wire or
wireless equipment that does not transmit a facsimile of the notice. Oral
notice is effective when communicated.

Written notice may be transmitted by mail, reputable overnight or express
delivery service, or personal delivery; telegraph or teletype; or telephone,
wire, or wireless equipment that transmits a facsimile of the notice. Written
notice is effective at the earliest of the following:

(a) when dispatched by telegraph, teletype or facsimile equipment, if
such notice is sent to the person's address, telephone number or other number
appearing on the records of the Corporation;

(b) when received;

(d) the day of delivery as shown on the delivery receipt or
acknowledgment if delivered by reputable overnight or express delivery service;
or

(e) on the date shown on the return receipt, if sent by registered or
certified mail, return receipt requested, and the receipt is signed by or on
behalf of the addressee.

ARTICLE IV

OFFICERS

Section 1. POSITIONS. The officers of this Corporation shall be a
Chairman of the Board of Directors, President, Chief Executive Officer, one or
more Vice Presidents, a Chief Financial Officer, a Secretary, one or more
Assistant Secretaries, a Controller and a Treasurer, as appointed by the Board.

In addition, the Board of Directors may choose such other officers and
assistant officers to perform such duties as from time to time may be assigned
to them by the Board of Directors. The Board of Directors may delegate to any
other officer of the Corporation the power to choose

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such other officers and assistant officers and to prescribe their respective
duties and powers. No officer need be a shareholder or a director of this
Corporation. Any two or more offices may be held by the same person.

Section 2. APPOINTMENT AND TERM OF OFFICE. The officers of this
Corporation shall be appointed annually by the Board of Directors at the first
meeting of the Board of Directors held after each annual meeting of the
shareholders. If officers are not appointed at such meeting, such appointment
shall occur as soon as possible thereafter. Each officer shall hold office
until a successor shall have been appointed and qualified or until said
officer's earlier death, resignation, or removal.

Section 3. POWERS AND DUTIES. If the Board of Directors appoints
persons to fill the following officer positions, such officer shall have the
powers and duties set forth below:

a. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board of
Directors shall preside at all meetings of the shareholders and of the Board of
Directors. The Chairman of the Board of Directors shall possess the same power
as the President to sign all bonds, deeds, mortgages and any other agreements,
and such signature shall be sufficient to bind this Corporation. During the
absence or disability of the President, the Chairman of the Board of Directors
shall exercise all the powers and discharge all the duties of the President.
The Chairman of the Board of Directors shall also perform such other duties as
the Board of Directors shall designate.

b. PRESIDENT. The President shall, subject to the direction and
control of the Board of Directors, have general supervision of the business of
this Corporation. Unless the Chairman of the Board of Directors has been
appointed and is present, the President shall preside at meetings of the
shareholders and of the Board of Directors.

The President, or such other persons as are specifically authorized by
resolution of the Board of Directors, shall possess the power to sign all bonds,
deeds, mortgages, and any other agreements, and such signatures shall be
sufficient to bind this Corporation. The President shall perform such other
duties as the Board of Directors shall designate.

c. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall,
together with the President, and subject to the direction and control of the
Board of Directors, have general supervision of the business of the Corporation.
The Chief Executive Officer shall, in the absence of the Chairman of the Board
of Directors and the President, preside at all meetings of shareholders and of
the Board of Directors.

The Chief Executive Officer may sign all bonds, deeds, mortgages, and any
other agreements, and such signature shall be sufficient to bind this
Corporation. The Chief Executive Officer shall perform such other duties as the
Board of Directors shall designate.

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<PAGE>

d. VICE PRESIDENTS. Each Vice President shall have such powers and
discharge such duties as may be assigned from time to time to such Vice
President by the Board of Directors, the Chairman of the Board of Directors, the
President or the Chief Executive Officer. The Board of Directors may select a
specific title for a Vice President of this Corporation, which such title shall
include the words "Vice President" together with such other term or terms which
may generally indicate such Vice President's rank and/or duties. During the
absence or disability of the Chairman of the Board of Directors (if one has been
elected), the President, and the Chief Executive Officer, the Vice President (or
in the event that there be more than one Vice President, the Vice Presidents in
the order designated by the Board of Directors) shall exercise all functions of
the Chairman of the Board of Directors, the President and the Chief Executive
Officer, except as limited by resolution of the Board of Directors.

e. SECRETARY. The Secretary shall:

(1) Prepare minutes of the directors' and shareholders' meetings
and keep them in one or more books provided for that purpose;

(2) Authenticate records of the Corporation;

(3) See that all notices are duly given in accordance with the
provisions of these Bylaws or as required by law;

(4) Be custodian of the corporate records and of the seal of the
Corporation (if any), and affix the seal of the Corporation to all documents as
may be required;

(5) Keep a register of the post office address of each
shareholder which shall be furnished to the Secretary by such shareholder;

(6) Sign with the Chairman of the Board of Directors, the
President, the Chief Executive Officer or a Vice President, certificates for
shares of the Corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors;

(7) Have general charge of the stock transfer books of the
Corporation; and

(8) In general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him or
her by the Board of Directors, the Chairman of the Board of Directors, the
President or the Chief Executive Officer. In the Secretary's absence, an
Assistant Secretary shall perform the Secretary's duties.

f. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall have
custody of the funds and securities of the Corporation, shall keep full and
accurate accounts of receipts and disbursements of the Corporation in books
belonging to the Corporation and shall deposit all moneys and other valuable
effects of the Corporation in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors. The Chief

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<PAGE>

Financial Officer shall disburse the funds of the Corporation as may be ordered
by the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the Chairman of the Board, the President, the Chief Executive
Officer and the Board of Directors, at its regular meetings, or when the
Chairman of the Board, the President, the Chief Executive Officer or the Board
of Directors so requires, an account of all of his or her transactions as Chief
Financial Officer and of the financial condition of the Corporation If required
by the Board of Directors, the Chief Financial Officer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his or her office and for the restoration to the Corporation, in case
of his or her death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in his or her
possession or under his or her control belonging to the Corporation.

g. CONTROLLER. The Controller shall perform such duties and have
such powers as from time to time may be assigned to him or her by the Board of
Directors, the Chairman of the Board, the President, the Chief Executive
Officer, any Vice President, or the Chief Financial Officer, and in the absence
of the Chief Financial Officer or in the event of the Chief Financial Officer's
disability or refusal to act, shall perform the duties of the Chief Financial
Officer, and when so acting, shall have all the powers of and be subject to all
the restrictions upon the Chief Financial Officer. If required by the Board of
Directors, the Controller shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his or her office and for the
restoration to the Corporation, in the case of his or her death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his or her possession or under his or her
control belonging to the Corporation.

h. TREASURER. The Treasurer shall perform such duties and have
such responsibilities as from time to time may be assigned by the Board of
Directors.

Section 4. SALARIES AND CONTRACT RIGHTS. The salaries, if any, of the
officers shall be fixed from time to time by the Board of Directors. The
appointment of an officer shall not of itself create contract rights.

Section 5. RESIGNATION OR REMOVAL. Any officer of this Corporation may
resign at any time by giving written notice to the Board of Directors. Any such
resignation is effective when the notice is delivered, unless the notice
specifies a later date, and shall be without prejudice to the contract rights,
if any, of such officer.

The Board of Directors, by majority vote, may remove any officer or agent
appointed by it, with or without cause. The removal shall be without prejudice
to the contract rights, if any, of the person so removed.

Section 6. VACANCIES. If any office becomes vacant by any reason, the
directors may appoint a successor or successors who shall hold office for the
unexpired term.

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ARTICLE V

CERTIFICATES OF SHARES AND THEIR TRANSFER;
UNCERTIFICATED SHARES

Section 1. ISSUANCE OF SHARES. No shares of this Corporation shall be
issued unless authorized by the Board of Directors. Such authorization shall
include the maximum number of shares to be issued an the consideration to be
received. A good faith determination by the Board that the consideration
received or to be received for the shares to be issued is adequate is conclusive
insofar as the adequacy of consideration relates to whether the shares are
validly issued, fully paid and nonassessable.

Section 2. ISSUANCE OF CERTIFICATED SHARES. Unless the Board of
Directors determines that the Corporation's shares are to be uncertificated,
certificates for shares of the Corporation shall be in such form as is
consistent with the provisions of the Act. The certificate shall be signed by
original or facsimile signature of two officers of the Corporation, and the seal
of the Corporation may be affixed thereto.

Section 3. TRANSFER OF CERTIFICATED STOCK. Certificated shares of
stock may be transferred by delivery of the certificate accompanied by either an
assignment in writing on the back of the certificate or by a written power of
attorney to assign and transfer the same on the books of the Corporation, signed
by the record holder of the certificate. Shares shall be transferable on the
books of this Corporation upon surrender thereof so assigned or endorsed.

Section 4. LOSS OR DESTRUCTION OF CERTIFICATES. In case of the loss,
mutilation, or destruction of a certificate of stock, a duplicate certificate
may be issued upon such terms as the Board of Directors shall prescribe.

Section 5. ISSUANCE OF UNCERTIFICATED SHARES. The Board of Directors
may authorize the issue of some or all of the shares of any or all of the
Corporation's classes or series of stock without certificates, provided,
however, that such authorization shall not affect shares already represented by
certificates until they are surrendered to the Corporation. Within a reasonable
time after the issue or transfer of shares without certificates, the Corporation
shall send the shareholders a written statement of the information required on
certificates by the Act. Said statement shall be informational to the
shareholder, and not incontrovertible evidence of stock ownership.

The statement shall be signed by original or facsimile signature of two
officers of the Corporation, and the seal of the Corporation may be affixed
thereto.

Section 6. TRANSFER OF UNCERTIFICATED STOCK. Transfer of
uncertificated shares of stock may be accomplished by delivery of an assignment
in writing or by a written power of attorney to assign and transfer the same on
the books of the Corporation, signed by the record holder of the shares.
Surrender of the written statement shall not be a requirement for transfer of
the shares so represented.

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Section 7. RECORD DATE AND TRANSFER BOOKS. For the purpose of
determining shareholders who are entitled to notice of or to vote at any meeting
of shareholders or any adjournment thereof, or entitled to receive payment of
any dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may fix in advance a record date for any
such determination of shareholders, such date in any case to be not more than
seventy (70) days and, in case of a meeting of shareholders, not less than ten
(10) days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken.

If no record date is fixed for such purposes, the date on which notice of
the meeting is mailed or the date on which the resolution of the Board of
Directors declaring such dividend is adopted, as the case may be, shall be the
record date for such determination of shareholders.

When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof, unless the Board of Directors fixes a new
record date, which it must do if the meeting is adjourned more than one hundred
twenty (120) days after the date fixed for the original meeting.

Section 8. VOTING RECORD. The officer or agent having charge of the
stock transfer books for shares of this Corporation shall make at least ten (10)
days before each meeting of shareholders a complete record of the shareholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each.
Such record shall be produced and kept open at the time and place of the meeting
and shall be subject to the inspection of any shareholder during the whole time
of the meeting for the purposes thereof.

ARTICLE VI

BOOKS AND RECORDS

Section 1. BOOKS OF ACCOUNTS, MINUTES, AND SHARE REGISTER. The
Corporation:

a. Shall keep as permanent records minutes of all meetings of its
shareholders and Board of Directors, a record of all actions taken by the
shareholders or Board of Directors without a meeting, and a record of all
actions taken by a committee of the Board of Directors exercising the authority
of the Board of Directors on behalf of the Corporation;

b. Shall maintain appropriate accounting records;

c. Or its agent shall maintain a record of its shareholders, in a
form that permits preparation of a list of the names and addresses of all
shareholders, in alphabetical order by class of shares showing the number and
class of shares held by each; and

d. Shall keep a copy of the following records at its principal
office:

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(1) The Articles of Incorporation;

(2) The Bylaws or Restated Bylaws and all amendments to them
currently in effect;

(3) The minutes of all shareholders' meetings, and records of
all actions taken by shareholders without a meeting, for the past three (3)
years;

(4) Its financial statements for the past three (3) years,
including balance sheets showing in reasonable detail the financial condition of
the Corporation as of the close of each fiscal year, and an income statement
showing the results of its operations during each fiscal year;

(5) All written communications to shareholders generally within
the past three (3) years;

(6) A list of the names and business addresses of its current
directors and officers; and

(7) Its most recent annual report delivered to the Secretary of
State of Washington.

Section 2. COPIES OF RESOLUTIONS. Any person dealing with the
Corporation may rely upon a copy of any of the records of the proceedings,
resolutions, or votes of the Board of Directors or shareholders, when certified
by the President or Secretary.

ARTICLE VII

INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS

Section 1. INDEMNIFICATION RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS. The Corporation shall indemnify its directors and officers and may
indemnify its employees and agents (each an "Indemnified Party") to the full
extent permitted by the Act or other applicable law, as then in effect, and the
Articles of Incorporation, against liability arising out of a proceeding to
which each such Indemnified Party was made a party because the Indemnified Party
is or was a director, officer, employee or agent of the Corporation. The
Corporation shall advance expenses incurred by each such Indemnified Party who
is a party to a proceeding in advance of final disposition of the proceeding, as
provided by applicable law, the Articles of Incorporation, or by written
agreement, which written agreement may allow any required determinations to be
made by any appropriate person or body consisting of a member or members of the
Board of Directors, or any other person or body appointed by the Board of
Directors, who is not a party to the particular claim for which an Indemnified
Party is seeking indemnification, or independent legal counsel.

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<PAGE>

The Corporation is not obligated to indemnify an Indemnified Party for any
amounts paid in settlement of any proceeding without the Corporation's prior
written consent to such settlement and payment. The Corporation shall not
settle any proceeding in any manner which would impose any penalty or limitation
on an Indemnified Party without such Indemnified Party's prior written consent.
Neither the Corporation nor an Indemnified Party may unreasonably withhold its
consent to a proposed settlement.

Section 2. CONTRACT AND RELATED RIGHTS.

a. CONTRACT RIGHTS. The right of an Indemnified Party to
indemnification and advancement of expenses is a contract right upon which the
Indemnified Party shall be presumed to have relied in determining to serve or to
continue to serve in his or her capacity with the Corporation. Such right shall
continue as long as the Indemnified Party shall be subject to any possible
proceeding. Any amendment to or repeal of this Article shall not adversely
affect any right or protection of an Indemnified Party with respect to any acts
or omissions of such Indemnified Party occurring prior to such amendment or
repeal.

b. OPTIONAL INSURANCE, CONTRACTS, AND FUNDING. The Corporation may:

(1) Maintain insurance, at its expense, to protect itself and
any Indemnified Party against any liability, whether or not the Corporation
would have power to indemnify the Indemnified Party against the same liability
under Sections 23B.08.510 or .520 of the Act, or a successor section or statute;

(2) Enter into contracts with any Indemnified Party in
furtherance of this Article and consistent with the Act; and

(3) Create a trust fund, grant a security interest, or use other
means (including without limitation a letter of credit) to ensure the payment of
such amounts as may be necessary to effect indemnification as provided in this
Article.

Section 3. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Corporation shall not be obligated pursuant to the terms of
these Bylaws to indemnify or advance expenses to an Indemnified Party with
respect to any proceeding:

a. initiated or brought voluntarily by an Indemnified Party and not
by way of defense, except with respect to proceedings brought to establish or
enforce a right to indemnification under these Bylaws, the Articles of
Incorporation or any statute or law; but such indemnification or advancement of
expenses may be provided by the Corporation in specific cases if the Board of
Directors finds it to be appropriate;

b. instituted by an Indemnified Party to enforce or interpret the
provisions hereof or the Articles of Incorporation, if a court of competent
jurisdiction determines that each

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of the material assertions made by such Indemnified Party in such proceeding was
not made in good faith or was frivolous;

c. to the extent such Indemnified Party has otherwise actually
received payment (under any insurance policy or otherwise) of the amounts
otherwise indemnifiable hereunder; or

d. if the Corporation is prohibited by the Articles of
Incorporation, the Act or other applicable law as then in effect from paying
such indemnification and/or advancement of expenses.

ARTICLE VIII

AMENDMENT OF BYLAWS

Section 1. BY THE SHAREHOLDERS. These Bylaws may be amended or
repealed by a resolution duly adopted by not less than a majority of the shares
entitled to vote thereon.

Section 2. BY THE BOARD OF DIRECTORS. These Bylaws may be amended or
repealed by a resolution duly adopted by a majority of the whole Board of
Directors. However, the directors may not modify the Bylaws relating to filling
Board of Directors vacancies resulting from a removal by action of the
shareholders as specified herein or in the Articles of Incorporation.

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CERTIFICATE OF ADOPTION

The undersigned Secretary of Pacific MultiMedia, Inc. does hereby certify
that the above and foregoing Bylaws of said Corporation were adopted by the
directors as the Bylaws of said Corporation and that the same do now constitute
the Bylaws of this Corporation.

DATED this 30th day of April, 1997.

/s/ JAMES E. CAMPBELL
--------------------------------
James E. Campbell
Secretary

<PAGE>

EXHIBIT 5.1
April 30, 1997

Pacific MultiMedia, Inc.
2477 E. Orangethorpe Avenue
Fullerton, CA 92831

Re: Registration Statement on Form SB-2

Ladies and Gentlemen:

We have acted as counsel to Pacific MultiMedia, Inc. (the "Company") in
connection with the filing of the above-referenced Registration Statement (the
"Registration Statement") relating to the registration of shares of common
stock, without par value per share (the "Shares"), of the Company. In
connection therewith, we have reviewed the Company's Articles of Incorporation,
Bylaws, resolutions of the Board of Directors, and such other matters we deemed
appropriate.

Based on this review, it is our opinion that:

1. The Company is duly incorporated and validly existing under the laws
of the State of Washington.

2. The Shares will be fully paid and non-assessable under the Washington
Business Corporation Act when certificates representing the Shares shall have
been duly executed, countersigned and registered and duly delivered to the
purchasers thereof against payment of the agreed consideration therefor.

We do not find it necessary for the purposes of this opinion to cover, and
accordingly we express no opinion as to, the application of the securities or
blue sky laws of the various states to the sale of the Shares.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to all references to our firm included in or made a
part of the Registration Statement.

Very truly yours,
PRESTON GATES & ELLIS LLP

By /s/ Gary J. Kocher

<PAGE>

EMPLOYMENT AGREEMENT

This Employment Agreement (the "Agreement") is entered into between Pacific
MultiMedia, Inc., a Washington corporation (the "Company"), and James E.
Campbell III ("Employee"). The effective date of this Agreement is January 1,
1997 ("Effective Date"). In consideration for the mutual promises in this
Agreement, the parties agree as follows:

1. EMPLOYMENT

The Company hereby employs Employee and Employee hereby accepts employment
with the Company on the terms and conditions set forth below. Employee
represents and warrants that he is under no disability that prevents him from
entering into this Agreement and from complying with all of its provisions to
the fullest extent. If Employee is enjoined or otherwise prevented by judicial
or administrative determination from complying with the terms of this Agreement,
then the Company may terminate this Agreement immediately without incurring any
liability.

2. TERM

The term of Employee's employment shall be for two (2) years commencing on
the Effective Date unless earlier terminated in accordance with the provisions
of this Agreement.

3. DUTIES

Employee is hereby hired by the Company and agrees to serve as its
President, Chief Executive Officer and Chief Financial Officer, or in such other
positions as determined by the Company from time to time, and to perform the
duties as from time to time may be assigned to Employee by the Company's Board
of Directors. Employee shall devote his full time, energies, and best efforts
to the performance of his duties under this Agreement, to the exclusion of all
other business activities. Employee shall not engage in any other professional
work within the area of his expertise, whether compensated or gratuitous,
without the express prior written consent of the Company.

4. COMPENSATION AND BENEFITS

As compensation for services rendered under this Agreement, Employee shall
be paid a base salary of $65,000 per year, which shall be paid in regular
intervals in accordance with the Company's payroll schedule and will be subject
to the usual withholding taxes and deductions. In addition, Employee shall be
eligible for annual performance bonuses as determined by Company's Board of
Directors.

During his employment under this Agreement, Employee will be entitled to
fifteen (15) days vacation, to be scheduled so as to avoid any undue disruption
to the business of the Company, and other fringe benefits, including the right
to participate in any insurance plans for

<PAGE>

which he is eligible, in accordance with the Company's policies for similarly
situated employees of comparable tenure and position.

5. TERMINATION

(a) Employee's employment with the Company shall be terminated upon
the occurrence of any one or more of the following events, in accordance with
the following:

(i) Immediately, upon Employee's death;

(ii) At the election of the Company, upon three (3) day's notice
to Employee, if Employee is prevented by sickness, disability, or other causes
beyond his control from fully and adequately performing the duties required of
him for a continuous period of ninety (90) days;

(iii) At the election of the Company, upon three (3) day's
notice to Employee, for cause. For purposes of this Agreement, "for cause"
shall mean termination resulting from a good faith determination by a majority
of the Company's Directors that:

a. Employee has failed or refused to attend to the duties or
obligations of his position or has failed or refused to abide by the Company's
rules, policies, or procedures after a written demand for performance is
delivered to Employee that specifically identifies the manner in which Employee
has not performed his duties and provided that the Company allows Employee a
reasonable opportunity to cure such deficiencies; or

b. There has been an act or action by Employee involving
gross malfeasance, flagrant disloyalty to the Company, dishonesty, fraud,
deceit, habitual use of drugs or alcohol, or similar act of misconduct.

In the event that Employee is terminated under this provision, Employee
will not be entitled to any salary or other compensation after the date of
termination; provided, however, that Employee will be entitled to any employee
benefits that have accrued and vested as of the date of termination.

(iv) At the election of the Company, upon three (3) day's
notice, without cause. In the event that Employee is terminated under this
provision, the Company will provide him with his base salary for a period of
three (3) months, payable at the same intervals as if Employee were still
employed by the Company. Employee will also be entitled to any employee
benefits that have accrued and vested as of the date of separation from
employment.

(b) Upon termination, all of the liabilities and rights of the
parties to this Agreement shall cease as of the effective date of termination,
except (i) Employee's noncompetition and nonsolicitation agreements under
Sections 6 and 7 herein; (ii) Employee's agreement not to disclose or utilize
confidential information and to return the same to the Company under Sections 6
and 9 herein; (iii) Employee's agreements under Section 8 herein with

<PAGE>

respect to property rights; (iv) the duty of Employee not to violate any common
law or statutory obligations, including but not limited to noncompetition and
nondisclosure of information, and (v) the obligation of either party to make
payments for amounts accrued prior to the date of separation.

6. NONCOMPETITION AND NONDISCLOSURE

The parties agree that due to the nature of Employee's position with the
Company, Employee will have access to, will acquire, and will assist in
developing confidential and proprietary information relating to the business and
operations of the Company. Employee acknowledges that such information is and
will continue to be of central importance to the business of the Company and
that disclosure of such confidential and proprietary information would cause
substantial loss and harm, to the Company. Employee accordingly agrees as
follows:

(a) Employee agrees, during the course of his employment with the
Company and for twelve (12) months following his separation from employment with
the Company, regardless of the reason or cause for separation, that he will not
directly or indirectly engage in any activity or business located in the United
States, as employee, owner, or participant, that is the same as or substantially
similar to the business that the Company is engaged in.

(b) Employee accordingly agrees that during and after his employment
with the Company he will not disclose or use any confidential information or
proprietary information that he obtains in the course of his employment with the
Company unless he has express written authorization from the Company.
"Proprietary information" means all information, data, materials, designs,
programs, reports and processes relating to any business or other activity of
the Company or used by the Company in its business or other activity, either now
or in the future, including, without limitation, information about the Company's
processes, research, data, customers, marketing plans and expertise.

7. NONSOLICITATION

Employee agrees that upon separation from employment for whatever reason,
and for a period of twenty four (24) months after the date of termination of
Employee's employment that Employee will not offer, directly or indirectly, or
through any third parties, partnerships, firms, corporations, associations or
other entities, employment to any past or present employee of the Company, or
solicit any employee or agent of the Company to terminate any contract or
working arrangements with the Company, or offer to enter into any type of
contract or other arrangement with any employee to the Company which would
require or result in such employee terminating employment with the Company,
ceasing to work full-time for the Company or would otherwise interfere with, or
constitute a breach of such employee's obligation and/or responsibilities to the
Company.

<PAGE>

8. PROPERTY RIGHTS

(a) Company owns all Intellectual Property (as defined below) Employee
makes, conceives, develops, discovers, reduces to practice or fixes in a
tangible medium of expression, alone or with others, either (i) during
Employee's employment by Company (whether or not during work hours), or
(ii) within one year after Employee's employment ends if the Intellectual
Property results from any use of Company's facilities, materials, personnel or
confidential information. Company owns all Intellectual Property of Employee
that Employee brings to Company that is used in the course of Company's business
or that is incorporated into any Intellectual Property that belongs to Company.

(b) Employee will promptly disclose to Company, will hold in trust for
Company's sole benefit, will assign to Company and hereby does assign to Company
all Intellectual Property described herein, including but not limited to, all
copyrights, patent rights, trade or service mark rights, and trade secret
rights, vested and contingent (including any renewal rights). Employee will
waive and hereby does waive any moral rights Employee has or may have in the
Intellectual Property described herein. Employee agrees that all Intellectual
Property Employee produced within the scope of Employee's employment (which
shall include all Intellectual Property Employee produces related to Company's
business, whether or not done during regular working hours) shall be considered
"works made for hire" so that Company will be considered the author or owner of
the Intellectual Property under the federal copyright, trademark, patent and
other similar laws. At Company's direction and sole expense Employee will
execute all documents and take all actions necessary or convenient for Company
to document, obtain, maintain or assigns its rights to the Intellectual
Property. Company shall have full control over all applications for patents,
copyrights, trademarks, or other legal protection of the Intellectual Property.

(c) "Intellectual Property" includes but is not limited to, discoveries,
developments, concepts, marks, ideas, improvements to existing processes,
procedures, products, formulas and techniques, and all other matters ordinarily
intended by the words "intellectual property," whether or not patentable or
copyrightable, or otherwise able to be registered.

(d) Employee understands that this Section 8 does not apply to any
invention or work for which no equipment, supplies, facilities or trade secret
information of Company was used and which was developed entirely on Employee's
own time, unless (i) the invention or work relates to Company's business or
actual or demonstrably anticipated research or development, or (ii) the
invention, work or idea results from any work Employee performed for Company.
Employee shall have the burden to prove beyond a reasonable doubt that an
invention is not subject to assignment under this Section 8.

9. RETURN OF COMPANY DOCUMENTS AND PROPERTY.

<PAGE>

property, or reproductions of any aforementioned items developed by me pursuant
to employment with Company or otherwise belonging to Company, its successors or
assigns.

10. ARBITRATION

In the event any parties to this Agreement cannot resolve between or among
themselves any dispute with respect to the interpretation or performance of this
Agreement, any of such parties shall have the right to submit the controversy to
final and binding arbitration in Seattle, Washington or other principal city
closest to the then principal place of business of the Company. Arbitration
shall be conducted by a single arbitrator pursuant to the Commercial Arbitration
Rules ("Rules") of the American Arbitration Association ("AAA"), with an
arbitrator chosen by mutual agreement of the parties within thirty (30) days of
demand for arbitration by either party. In the event the parties agree on an
arbitrator within said thirty (30) day period, such arbitrator shall proceed
without use of the auspices of the AAA, although he or she shall use its Rules.
In the event that agreement on an arbitrator is not achieved within thirty (30)
days of the date that either party provides the other written notice requesting
binding arbitration, then either party may request an arbitrator be assigned by
the AAA, and both parties shall be bound to accept this arbitrator. Both
parties shall request that the arbitrator hear and decide the matter within
thirty (30) days from the date which the arbitrator agrees to arbitrate the
dispute. The award of the arbitrator shall be enforceable in any court of
competent jurisdiction.

11. MISCELLANEOUS.

(a) NOTICES. Any notice that may be permitted or required to be
served under the terms of this Agreement shall be in writing and shall be served
by personal service or, in the case of any notice given to the Company, by
leaving a copy of such notice addressed to the Company at its corporate
headquarters, to the attention of the Chairman of the Board of Directors
whereupon service shall be deemed complete, or by mailing a copy, postage
prepaid with return receipt requested by certified or registered mail. In the
case of service by mail, service shall be deemed complete at the expiration of
forty-eight (48) hours after the date of mailing. Service upon Employee shall
be at the address last reflected for Employee in the Company's books and
records.

(b) SEVERABILITY. In the event any provision of this Agreement, or
any portion thereof, or the application thereof to any person or circumstance,
shall to any extent be held invalid, inoperative or unenforceable, the remainder
of this Agreement, or the application of such provision, or portion thereof, to
any other person or circumstance, shall not be affected thereby; the remainder
of this Agreement shall be given effect as if such invalid or inoperative
portion had not been included. It shall be deemed that any invalid provision
does not effect the consideration for this Agreement. Each provision of this
Agreement shall be valid and enforceable to the fullest extent permitted by law.

(c) AGREEMENT TO PERFORM NECESSARY ACTS. Each party hereto, the
personal representatives of Employee and any other person bound by the terms of
this Agreement shall

<PAGE>

perform any acts and execute and deliver any documents and produce any court
orders which may be reasonably necessary to carry out the provisions of this
Agreement.

(d) SPECIFIC PERFORMANCE. Employee hereto acknowledges that he has
bargained for the performance of the specific duties and obligations of each of
the parties contained in this Agreement, and that, in the event of a default by
any party hereunder, money damages would not adequately compensate the injured
parties. Accordingly, Employee hereto on behalf of himself and his successor in
interest, if any, consents to be bound hereunder by the valid injunction, award
or order of an arbitrator under this Agreement, or by the valid injunction
judgment or decree of a court of competent jurisdiction, in the event of his
failure to perform such duties and obligations in accordance with their terms.

(e) ENFORCEMENT: ATTORNEYS' FEES. In the event any arbitration or
other legal action is required to enforce the provisions of this Agreement, the
prevailing party in such action shall be paid by the other party hereto all
reasonable fees and costs, including attorneys' fees, incurred by the prevailing
party in connection with such legal action.

(f) WAIVER. The failure of the Company to insist upon strict
adherence to any one or more of the covenants and restrictions in this Agreement
shall not be construed as a waiver, nor deprive the Company of the right to
require strict compliance thereafter with the same.

(g) ASSIGNMENT. Employee's obligations under this Agreement are
personal in nature and may not be assigned or transferred. In the event that
the Company shall transfer or assign this Agreement, such transferee or assignee
shall be entitled to enforce this Agreement in full, including without
limitation the noncompetition and nondisclosure provisions.

(h) GOVERNING LAW. This Agreement will be governed by the laws of
the State of Washington, and Employee further consents to jurisdiction by the
state or federal courts sitting in King County, Washington. Process may be
served on either party by U.S. Mail, postage prepaid, certified or registered,
return receipt requested, or by such other method as is authorized by law.

(i) ENTIRE AGREEMENT. This Agreement contains the entire agreement
of the parties and it may not be changed or modified without written agreement
signed by both parties.

12. EMPLOYEE ACKNOWLEDGMENT.

Employee acknowledges that he has read and understood all of the terms of
this Agreement, that he has had an opportunity to have this Agreement reviewed
by an attorney of his choice, and that he signs this Agreement voluntarily.

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.

PACIFIC MULTIMEDIA, INC.

By:___________________________
Name:
Title:

______________________________
James E. Campbell, III

<PAGE>

EMPLOYMENT AGREEMENT
--------------------

This Employment Agreement (the "Agreement") is entered into between Pacific
MultiMedia, Inc., a Washington corporation (the "Company"), and Craig D.
Patterson ("Employee"). The effective date of this Agreement is _______, 1997
("Effective Date"). In consideration for the mutual promises in this Agreement,
the parties agree as follows:

1. EMPLOYMENT

2. TERM

The term of Employee's employment shall be for one (1) year commencing on
the Effective Date unless earlier terminated in accordance with the provisions
of this Agreement.

3. DUTIES

Employee is hereby hired by the Company and agrees to serve as its Vice
President for California Operations, or in such other positions as determined by
the Company from time to time, and to perform the duties as from time to time
may be assigned to Employee by the Company's Board of Directors. Employee shall
devote his full time, energies, and best efforts to the performance of his
duties under this Agreement, to the exclusion of all other business activities.
Employee shall not engage in any other professional work within the area of his
expertise, whether compensated or gratuitous, without the express prior written
consent of the Company.

4. COMPENSATION AND BENEFITS

As compensation for services rendered under this Agreement, Employee shall
be paid a base salary of $40,000 per year, which shall be paid in regular
intervals in accordance with the Company's payroll schedule and will be subject
to the usual withholding taxes and deductions. In addition, Employee shall be
eligible for annual performance bonuses as determined by and in the sole
discretion of the Company's Board of Directors.

During his employment under this Agreement, Employee will be entitled to
fifteen (15) days vacation, to be scheduled in consultation with the Company's
President and so as to avoid any undue disruption to the business of the
Company, and other fringe benefits, including the right

<PAGE>

to participate in any insurance plans for which he is eligible, in accordance
with the Company's policies for similarly situated employees of comparable
tenure and position.

5. TERMINATION

(a) Employee's employment with the Company shall be terminated upon
the occurrence of any one or more of the following events, in accordance with
the following:

(i) Immediately, upon Employee's death;

In the event that Employee is terminated under this provision,
Employee will not be entitled to any salary or other compensation after the date
of termination; provided, however, that Employee will be entitled to any
employee benefits that have accrued and vested as of the date of termination.

(iv) At the election of the Company, upon three (3) day's
notice, without cause. In the event that Employee is terminated under this
provision, the Company will provide him with his base salary for a period of one
(1) month. Employee will also be entitled to any employee benefits that have
accrued and vested as of the date of separation from employment.

<PAGE>

obligations, including but not limited to noncompetition and nondisclosure of
information, and (v) the obligation of either party to make payments for amounts
accrued prior to the date of separation.

6. NONCOMPETITION AND NONDISCLOSURE

7. NONSOLICITATION

8. PROPERTY RIGHTS

(a) Company owns all Intellectual Property (as defined below) Employee
makes, conceives, develops, discovers, reduces to practice or fixes in a
tangible medium of expression,

<PAGE>

alone or with others, either (i) during Employee's employment by Company
(whether or not during work hours), or (ii) within one year after Employee's
employment ends if the Intellectual Property results from any use of Company's
facilities, materials, personnel or confidential information. Company owns all
Intellectual Property of Employee that Employee brings to Company that is used
in the course of Company's business or that is incorporated into any
Intellectual Property that belongs to Company.

9. RETURN OF COMPANY DOCUMENTS AND PROPERTY.

Employee agrees that, at the time Employee leaves the employ of Company,
Employee will deliver to Company (and will not keep in possession, recreate or
deliver to anyone else) any and all devices, records, data, notes, reports,
proposals, lists, correspondence, specifications, drawings, blueprints,
sketches, materials, prototypes, models, equipment, other documents or property,
or reproductions of any aforementioned items developed by me pursuant to
employment with Company or otherwise belonging to Company, its successors or
assigns.

<PAGE>

10. ARBITRATION

11. MISCELLANEOUS.

(a) NOTICES. Any notice that may be permitted or required to be
served under the terms of this Agreement shall be in writing and shall be served
by personal service or, in the case of any notice given to the Company, by
leaving a copy of such notice addressed to the Company at its corporate
headquarters, to the attention of the President, whereupon service shall be
deemed complete, or by mailing a copy, postage prepaid with return receipt
requested by certified or registered mail. In the case of service by mail,
service shall be deemed complete at the expiration of forty-eight (48) hours
after the date of mailing. Service upon Employee shall be at the address last
reflected for Employee in the Company's books and records.

(c) AGREEMENT TO PERFORM NECESSARY ACTS. Each party hereto, the
personal representatives of Employee and any other person bound by the terms of
this Agreement shall perform any acts and execute and deliver any documents and
produce any court orders which may be reasonably necessary to carry out the
provisions of this Agreement.

(d) SPECIFIC PERFORMANCE. Employee hereto acknowledges that he has
bargained for the performance of the specific duties and obligations of each of
the parties

<PAGE>

contained in this Agreement, and that, in the event of a default by any party
hereunder, money damages would not adequately compensate the injured parties.
Accordingly, Employee hereto on behalf of himself and his successor in interest,
if any, consents to be bound hereunder by the valid injunction, award or order
of an arbitrator under this Agreement, or by the valid injunction judgment or
decree of a court of competent jurisdiction, in the event of his failure to
perform such duties and obligations in accordance with their terms.

(i) ENTIRE AGREEMENT. This Agreement contains the entire agreement
of the parties and it may not be changed or modified without written agreement
signed by both parties.

12. EMPLOYEE ACKNOWLEDGMENT.

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.

PACIFIC MULTIMEDIA, INC.

By:___________________________
Name:
Title:

_________________________
Craig D. Patterson

<PAGE>

INDEMNIFICATION AGREEMENT

This Indemnification Agreement is made as of this ___ day of ________,
1997, by and between PACIFIC MULTIMEDIA, INC., a Washington corporation (the
"Company"), and ____________ ("Indemnified Party").

WHEREAS, as of the date hereof, the Company has provisions for
indemnification of its directors and officers in Article V of its Articles of
Incorporation (the "Articles of Incorporation") and Article VII of its Bylaws
(the "Bylaws") which provide for indemnification of the Company's directors and
officers to the fullest extent permitted by law;

WHEREAS, the indemnification provisions in the Bylaws provide that the
right of indemnification is a contract right of the covered parties;

WHEREAS, the Bylaws provide that the Company may maintain, at its expense,
insurance to protect itself and any of its directors and officers against
liability asserted against such persons incurred in such capacity whether or not
the Company has the power to indemnify such persons against the same liability
under Section 23B.08.510 or .520 of the Act (as defined below) or a successor
statute;

WHEREAS, the Company and the Indemnified Party recognize that the officers
and directors of publicly owned companies are frequently joined as parties to
Proceedings (as defined below) against their respective companies as a result of
their serving in such capacity; and

WHEREAS, in order to induce Indemnified Party to serve or continue to serve
the Company, the Company wishes to confirm the contract indemnification rights
provided in the Bylaws and agrees to provide Indemnified Party with the benefits
contemplated by this Agreement and to supplement the provisions of this
Agreement with directors' and officers' liability insurance maintained by the
Company.

NOW, THEREFORE, in consideration of the promises, conditions,
representations and warranties set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and Indemnified Party hereby agree as follows:

1. DEFINITIONS. The following terms, as used herein, shall have the
following respective meanings; other capitalized terms used and not specifically
defined in this Section 1 shall have the meanings provided elsewhere in the
Agreement and in the Bylaws:

(a) "Act" means the Washington Business Corporation Act RCW
Title 23B, as amended from time to time.

(b) "Adjudication" shall refer to a final, non-appealable decision by
a court of competent jurisdiction. "Adjudged" shall have a correlative meaning.

<PAGE>

(c) "Covered Amount" means any Loss, Fine and Expense, to the extent
such Loss, Fine or Expense, in type or amount, is not insured under the D&O
Insurance maintained by the Company from time to time.

(d) "Covered Act" means any act or omission of the Indemnified Party
in his or her capacity as a director, officer, employee, agent, fiduciary or
consultant of the Company alleged by any claimant or any claim against
Indemnified Party by reason of him or her serving in such a capacity, or by
reason of Indemnified Party serving, at the request of the Company, in such
capacity with another corporation, partnership, employee benefit plan, trust or
other enterprise, in all cases, whether such alleged act or omission occurred
before or after the date of this Agreement.

(e) "D&O Insurance" means the liability insurance which the Company
may purchase on behalf of Indemnified Party against liability asserted against
or incurred by Indemnified Party in connection with claims arising from Covered
Acts, whether or not the Company would have the power to indemnify the
individual against the same liability under Section 23B.08.510 or 23B.08.520 of
the Act. .

(f) "Determination" means a determination, based on the facts known
at the time, made:

(i) by the Board of Directors by majority vote of a quorum
consisting of directors not at the time parties to the Proceeding;

(ii) if a quorum cannot be obtained under clause (i), by majority
vote of a duly designated committee of the Board of Directors, in the manner
provided by Section 23B.08.550(2)(b) of the Act;

(iii) by special legal counsel, selected in the manner provided by
Section 23B.08.550(2)(c) of the Act, in a written opinion; or

(iv) by a majority of the shareholders of the Company, excluding
shares owned or voted under the control of directors who are at the time parties
to the Proceeding.

"Determined" shall have a correlative meaning.

(g) "Excluded Claim" means any payment for Losses or Expenses in
connection with any claim relating to or arising out of:

(i) acts or omissions of the Indemnified Party Adjudged to be
intentional misconduct or a knowing violation of law;

(ii) conduct of the Indemnified Party Adjudged to be in violation
of Section 23B.08.310 of the Act; or

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<PAGE>

(iii) any transaction with respect to which it was Adjudged that
such Indemnified Party personally received a benefit in money, property, or
services to which the Indemnified Party was not legally entitled.

(h) "Expenses" means any reasonable expenses incurred by Indemnified
Party as a result of a claim or claims made against Indemnified Party from
Covered Acts, including, without limitation, reasonable counsel fees and costs
of investigative, judicial or administrative proceedings or appeals.

(i) "Fines" means any fine or penalty including, with respect to an
employee benefit plan, any excise tax assessed with respect thereto.

(j) "Losses" means amounts, as determined by an Adjudication, which
the Indemnified Party is legally obligated to pay as a result of a claim or
claims arising from Covered Acts, including, without limitation, Fines, damages
and judgments and sums paid in settlement of such claim or claims.

(k) "Proceeding" means any threatened, pending or completed action,
suit, proceeding or investigation, whether civil, criminal or administrative
whether formal or informal.

2. MAINTENANCE OF D&O INSURANCE.

(a) The Company hereby covenants and agrees that, so long as
Indemnified Party shall continue to serve as a director or executive officer of
the Company and thereafter, for so long as Indemnified Party shall be subject to
any possible Proceeding arising from any Covered Act, the Company, subject to
Section 2(c), shall maintain in full force and effect D&O Insurance.

(b) In all policies of D&O Insurance, Indemnified Party shall be
named as an insured in such a manner as to provide Indemnified Party the same
rights and benefits, and the same limitations, as are accorded to the Company's
directors or executive officers most favorably insured by such policy.

(c) The Company shall have no obligation to maintain D&O Insurance if
the Company, by majority vote of the Board of Directors, determines in good
faith that such insurance is not reasonably available, the premium costs for
such insurance are disproportionate to the amount of coverage provided, or the
coverage provided by such insurance is limited by exclusions so as to provide an
insufficient benefit; PROVIDED, HOWEVER, that such decision shall not adversely
affect coverage of D&O Insurance for periods prior to such decision without the
unanimous vote of all directors.

3. INDEMNIFICATION. The Company shall indemnify Indemnified Party up to
the Covered Amount and shall advance or reimburse the Expenses incurred by
Indemnified Party in a Proceeding or in connection with any Covered Acts,
subject, in each case, to the further provisions of this Agreement. This
Agreement is made pursuant to and to effectuate the

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<PAGE>

indemnification provisions set forth in Article V of the Articles of
Incorporation and Article VII of the Bylaws. Notwithstanding any other
provision of this Agreement, the Company shall indemnify Indemnified Party to
the extent Indemnified Party is successful, on the merits or otherwise, in the
defense of any Proceeding to which Indemnified Party was a party because of
being a director, officer, employee, agent, fiduciary or consultant of the
Company, against reasonable Expenses incurred by Indemnified Party in connection
with the Proceeding.

4. EXCLUDED COVERAGE. The Company shall have no obligation to indemnify
Indemnified Party for any Losses or Expenses which arise from an Excluded Claim.

5. INDEMNIFICATION PROCEDURES.

(a) Promptly after receipt by Indemnified Party of notice of the
commencement of or the threat of commencement of any Proceeding, Indemnified
Party shall, if indemnification or advancement or reimbursement of Expenses with
respect thereto may be sought from the Company under this Agreement, notify the
Company of the commencement or the threat of commencement thereof.

(b) If, at the time of the receipt of such notice, the Company has
D&O Insurance in effect, the Company shall give prompt notice of the
commencement or the threat of commencement of such Proceeding to the appropriate
insurers in accordance with the procedures set forth in the respective policies
in favor of Indemnified Party. The Company shall thereafter take all necessary
or desirable action to cause such insurers to pay, on behalf of the Indemnified
Party, all amounts (including, without limitation, Losses and Expenses) payable
as a result of such Proceeding in accordance with the terms of such policies.

(c) To the extent the Company does not, at the time of the
commencement of or the threat of commencement of such Proceeding, have
applicable D&O Insurance, or if a Determination is made that any Loss, Fine or
Expense of the Indemnified Party arising out of such Proceeding will not be
payable under the D&O Insurance then in effect, the Company shall be obligated
to pay the Covered Amount with respect to any Proceeding and provide counsel
satisfactory to Indemnified Party, upon the delivery to Indemnified Party of
written notice of the Company's election to do so. After delivery of such
notice, the Company will not be liable to Indemnified Party under this Agreement
for any legal or other Expenses subsequently incurred by the Indemnified Party
in connection with such defense other than the reasonable Expenses of
investigation of Indemnified Party; PROVIDED, that Indemnified Party shall have
the right to employ his or her own counsel in connection with the defense of any
such Proceeding, the fees and expenses of such counsel incurred after delivery
of notice from the Company of its assumption of such defense to be at the
Indemnified Party's sole expense. Notwithstanding the foregoing, if (i) the
employment of counsel by Indemnified Party has been previously authorized by the
Company, (ii) Indemnified Party shall have been advised by counsel that there
may be a conflict of interest between the Company and Indemnified Party in the
conduct of any such defense or (iii) the Company shall not, in fact, have
employed counsel to assume the defense of such Proceeding, in each such case,
the fees and expenses of such counsel retained by Indemnified Party shall be at
the expense of the Company.

-4-

<PAGE>

(d) All payments on account of the Company's indemnification,
advancement and reimbursement obligations under this Agreement shall be made
within sixty (60) days of Indemnified Party's written request therefor unless a
Determination is made that the claims giving rise to Indemnified Party's request
are Excluded Claims or otherwise not payable under this Agreement; PROVIDED,
that all payments on account of the Company's obligations under Paragraph 5(c)
of this Agreement prior to the Adjudication of any Proceeding shall be made
within 20 days of Indemnified Party's written request therefor and such
obligation shall not be subject to any such Determination but shall be subject
to Paragraph 5(e) of this Agreement.

(e) Indemnified Party agrees that he or she will reimburse the
Company for all Losses and Expenses paid by the Company in connection with any
Proceeding against Indemnified Party in the event and only to the extent that it
is Adjudged that the Indemnified Party is not entitled to be indemnified by the
Company for such Losses or Expenses under this Agreement, the Articles of
Incorporation, the Bylaws or the Act.

6. SETTLEMENT. The Company shall have no obligation to indemnify
Indemnified Party under this Agreement for any amounts paid in settlement of any
Proceeding effected without the Company's prior written consent. The Company
shall not settle any claim in any manner which would impose any loss or expense
on Indemnified Party without Indemnified Party's prior written consent, unless
the Company provides a written undertaking to the Indemnified Party to pay for
such loss or expense on behalf of the Indemnified Party. Neither the Company
nor Indemnified Party shall unreasonably withhold their consent to any proposed
settlement.

7. RIGHTS NOT EXCLUSIVE. The rights provided hereunder shall be in
addition to any other rights to which Indemnified Party may be entitled under
the Articles of Incorporation, the Bylaws, the Act, any agreement or vote of
shareholders or directors or otherwise, both as to action in Indemnified Party's
official capacity and as to action in any other capacity, and such rights shall
continue after Indemnified Party ceases to serve the Company as a director or
officer.

8. ENFORCEMENT.

(a) Indemnified Party's rights to indemnification or reimbursement or
advancement of Expenses hereunder shall be enforceable by Indemnified Party
notwithstanding any adverse Determination, other than a Determination which has
been made by Adjudication. In any such action, if a prior adverse Determination
has been made, the burden of proving that indemnification or reimbursement or
advancement of Expenses is required under this Agreement, the Articles of
Incorporation, the Bylaws or the Act shall be on the Indemnified Party. The
Company shall have the burden of proving that indemnification or reimbursement
or advancement of Expenses is not required under this Agreement if no prior
adverse Determination shall have been made.

(b) In the event that any action is instituted by Indemnified Party
under this Agreement, or to enforce or interpret any of the terms of this
Agreement, Indemnified Party shall be entitled to be paid all court costs and
expenses, including reasonable counsel fees, incurred by

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<PAGE>

Indemnified Party with respect to such action, unless the court determines that
each of the material assertions made by Indemnified Party as a basis for such
action were not made in good faith or were frivolous.

9. NO PRESUMPTIONS. For purposes of this Agreement, the termination of
any Proceeding by judgment, order, settlement (whether with or without court
approval) or conviction, or upon a plea of nolo contendre, or its equivalent,
shall not create a presumption that the Indemnified Party did not meet any
particular standard of conduct or have any particular belief or that a court has
determined that indemnification or reimbursement or advancement of Expenses by
the Company is not permitted hereunder or by applicable law. In addition,
neither the absence of a Determination as to whether Indemnified Party has met
any particular standard of conduct or had any particular belief or the existence
of a Determination that Indemnified Party has not met such standard of conduct
or did not have such belief, prior to the commencement of legal proceedings by
Indemnified Party to secure an Adjudication that Indemnified Party should be
indemnified or advanced or reimbursed Expenses hereunder or under applicable
law, shall be a defense to Indemnified Party's claim or create a presumption
that Indemnified Party has not met any particular standard of conduct or did not
have any particular belief.

10. SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnified Party, who shall execute all papers required and
shall do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Company to effectively bring
suit to enforce such rights.

11. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under
this Agreement to make any payment in connection with any Proceeding against
Indemnified Party to the extent Indemnified Party has otherwise actually
received payment (under any D&O Insurance, the Articles of Incorporation, the
Bylaws, the Act or otherwise) of the amounts which may be paid hereunder.

12. SEVERABILITY. In the event that any provision of this Agreement is
determined by a court of competent jurisdiction to require the Company to do or
to fail to do an act which is in violation of the Articles of Incorporation, the
Bylaws or the Act or other applicable law, such provision shall be limited or
modified in its application to the minimum extent necessary to avoid such
violation, and, as so limited or modified, such provision and the remainder of
this Agreement shall be enforceable in accordance with the respective terms.

13. CHOICE OF LAW. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Washington.

14. SUCCESSORS AND ASSIGNS. This Agreement shall be (i) binding upon all
successors and assigns of the Company (including any transferee of all or
substantially all of the Company's assets and any successor by merger or
otherwise by operation of law) and (ii) binding on and inure to the benefit of
the heirs, personal representatives and estate of Indemnified Party.

-6-

<PAGE>

Indemnified Party may not assign this Agreement or any of Indemnified Party's
rights hereunder without the prior written consent of the Company.

15. AMENDMENT. No amendment, modification, termination or cancellation of
this Agreement shall be effective unless made in a writing signed by each of the
parties hereto.

IN WITNESS WHEREOF, the Company and Indemnified Party have executed this
Indemnification Agreement as of the date first above written.

PACIFIC MULTIMEDIA, INC.

By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------

-----------------------------------
, Indemnified Party

-7-

<PAGE>

PROPOSAL FOR RECORDING, DUPLICATION AND SALES OF AUDIO CASSETTE
TAPES

Pacific MultiMedia, Inc. ("Pacific") agrees to:

1. Provide all necessary engineering staff and recording equipment necessary
to professionally record and duplicate on-site all specified speakers and
sessions.
2. Provide all necessary staff and materials for the on site sales and
marketing of audio cassette tapes of the recorded material.
3. Accept all major credit cards for tape purchases and process all credit
card charges.
4. Ship via UPS or U.S.P.S. any order placed (and not delivered on site) and
orders received through the mail within 14 days of receiving orders.
5. Provide printed order forms to be available to all conference attendees to
purchase tapes.
6. Provide all cassette tape purchasers with a limited warranty to replace any
defective or damaged tapes free of charge for a period of one (1) year
after the date of purchase.
7. Provide to the Conference Coordinator one (1) complete set of all recorded
material at no cost.
8. Provide to the conference coordinator a complete accounting for all
merchandise sold on site.
9. Provide all the above services at a cost of $________ per cassette after
$________ in tape sales is reached.
10. Provide shipping and handling services including mailer and postage for the
following amounts:

1 -5 cassettes $________
6 Tape Set $________
12 Tape Set $________
Complete Set $________

11. Ship via UPS collect any orders that were placed during the meeting and not
picked up by

the conclusion of the event.

<PAGE>

If the above terms are accepted, [client] will agree to:

1. Provide an appropriate sales area that includes a minimum of four 8'
skirted banquet tables for the sales, duplication, and assembly of tape
sets, in a convenient, high traffic location.
2. Be responsible for any charges assessed by the hotel for the recording,
sales, and marketing of audio cassettes.
3. Provide/obtain all releases to record and market specified speakers and to
advise Pacific if any sessions or speakers are not to be recorded.
4. Provide written or verbal announcements as to the availability of the
recorded sessions.
5. Provide a printed order form as to the availability of all recorded
sessions in at least one publication after the conference. (Pacific will
provide art work upon release).
6. Guarantee the sale of 125 tapes in any combination of single tapes or sets
or pay the difference not to exceed $__________.

For [client]

- --------------------------- ------------------------
Authorized Signature Date

For Pacific MultiMedia, Inc.

- --------------------------- ------------------------
Authorized Signature Date

<PAGE>

RELEASE FORM
------------

______________________________(speaker's name) agrees to allow the

______________________________________ (association's name) or its designated

agent, ______________________ to record, reproduce, and market audio/video tapes

of the __________________ (date) conference/seminar, to be held in

____________________________________________________________(location).

The _________________________(association) and its designated agent,

__________________ will retain the sole rights to distribute or otherwise make

available through various marketing methods, the audio/video tapes of the above

mentioned conference/seminar.

This release pertains only to the specific presentations given at the
________________________
(association name) annual conference/seminar held in _____________________

(location) on
_________________________ (date).

_______________________________ ______________
Speaker's Signature Date

<PAGE>

ESCROW AGREEMENT
PACIFIC MULTIMEDIA, INC.

This Escrow Agreement (the "Agreement") is made this 30th day of April,
1997, by and between First Trust National Association, with offices at 601 Union
Street, Suite 2120, Seattle, Washington 98101 (the "Escrow Agent") and Pacific
MultiMedia, Inc., a Washington Corporation (the "Company") with a place of
business at 2477 Orangethorpe Avenue, Fullerton, CA 92831.

INTRODUCTION

A. Company desires to have the Escrow Agent act as its escrow agent
pursuant to the terms of this Agreement in connection with a public offering
(the "Offering") of 1,250,000 shares of its Common Stock (the "Shares") at an
anticipated price of $5.00 per Share, as described in the Preliminary Prospectus
of the Company dated April 30, 1997, a copy of which is attached hereto as
EXHIBIT A;

B. Company wishes to assure those who subscribe for such Shares (the
"Subscribers") that the Subscribers' funds will be released to the Company only
if and when not less than Six Million Two Hundred Fifty Thousand Dollars
($6,250,000) (the "Threshold Amount") is received from the sale of Shares and
upon the direction of the Company; and

C. Company desires to provide for the safekeeping of proceeds of the
Offering until such time as subscriptions for Shares totaling the Threshold
Amount (or such greater amount as the Company may direct in writing) have been
received and upon the direction of the Company, or until such time as Escrow
Agent is required to pay and return such proceeds to the Subscribers upon the
terms hereinafter provided.

AGREEMENT

NOW THEREFORE, the Parties hereto hereby agree as follows:

1. DEPOSIT AND DISBURSEMENT.

1.1 Escrow Agent hereby agrees to receive and disburse the proceeds
from the Offering of the Shares and any interest earned thereon in accordance
with the terms of this Agreement.

1.2 The Escrow Agent shall accept such proceeds as deposits from the
Company and/or Tradeway Securities Group, Inc. Deposits may be made by check,
wire transfer or other means, which are designated or instructed to be paid to a
special interest-bearing escrow account in the name of "First Trust, N.A., as
Escrow Agent for Pacific MultiMedia, Inc." (hereinafter the "Escrow Account") at
First Trust National Association, until the Threshold Amount (or such greater
amount as the Company may direct in writing) has been deposited into

<PAGE>

the Escrow Account as good funds. All proceeds are to be deposited in the
Escrow Account immediately upon becoming good funds.

1.3 Escrow Agent shall keep a current list of the persons who have
subscribed for the Shares and deposited money, showing name, date, address and
amount of each subscription, and shall provide the Company with regular reports
of deposits made to the Escrow Account. All funds so deposited shall remain the
property of the Subscribers. Escrow Agent shall promptly forward to the Company
any subscription agreements which it may receive directly from Subscribers.
Company shall cause to be delivered to Escrow Agent a copy of a fully completed
subscription agreement for each Subscriber.

1.4 If the Company rejects any subscriptions for which Escrow Agent
has already collected funds, Escrow Agent shall promptly issue a refund check to
the rejected Subscriber in the amount of the original deposit collected from
such Subscriber, plus interest thereon as calculated by the Company (if any).
If the Company rejects any subscription for which Escrow Agent has not yet
collected funds but has submitted the Subscriber's check for collection, Escrow
Agent shall promptly issue a check in the amount of the rejected Subscriber's
check after Escrow Agent has cleared such funds. If Escrow Agent has not yet
submitted a rejected Subscriber's check for collection, Escrow Agent shall
promptly remit the Subscriber's check directly to the Subscriber.

1.5 In the event that the Threshold Amount is not deposited with
Escrow Agent on or before June 30, 1997, as set forth in the Prospectus (unless
that date is extended in accordance therewith), Escrow Agent shall promptly
return the funds which have been deposited in the Escrow Account to the
Subscribers, in the amount and to the addresses as shown on its records, with
interest earned. If the Offering is terminated due to the failure to fulfill
the Threshold Amount by June 30, 1997, Escrow Agent will inform the Company of
the total amount of interest earned on funds deposited with Escrow Agent, and
the Company will calculate the amount of interest earned by each Subscriber and
inform Escrow Agent how much of the total interest accrued to pay each
Subscriber. For purposes of reporting to tax authorities, Escrow Agent will
report all interest earned by the escrow as paid upon distribution.

1.6 Upon receipt of (i) the Threshold Amount (or such greater amount
as the Company may direct in writing) and (ii) written confirmation from the
Company that funds may be released from escrow, Escrow Agent shall release the
escrow funds to the Company by transferring such funds to the Company's regular
commercial account with a designated major bank in the Seattle, Washington area.
At the Company's option, it may continue to deposit proceeds from the sale of
additional Shares (after receipt and/or distribution of the Threshold Amount or
any greater amount as directed in writing by the Company) and to direct the
disbursement from time to time of funds so deposited after subscriptions for the
Threshold Amount have been received.

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<PAGE>

2. RESPONSIBILITIES AND OBLIGATIONS OF ESCROW AGENT.

2.1 Escrow Agent assumes no responsibilities, obligations, or
liabilities except those expressly provided for in this Agreement and as
follows:

(a) Escrow Agent shall have no responsibility, obligation or
liability to any person with respect to any action taken, suffered or omitted to
be taken by it in good faith under this Agreement and shall in no event be
liable hereunder except for its gross negligence or willful misconduct.

(b) Notwithstanding anything herein to the contrary, no
reference in this Agreement to any other agreement shall be construed or deemed
to enlarge the responsibilities, obligations or liabilities of Escrow Agent set
forth in this Agreement, and Escrow Agent is not charged with knowledge of any
other agreement.

2.2 Escrow Agent shall be protected in relying upon the truth of any
statement contained in any requisition, notice, request, certificate, approval,
consent, or other proper paper, and in acting on any such document, which on its
face and without inquiry as to any other facts, appears to be genuine and to be
signed by the proper party or parties, and is entitled to believe all signatures
are genuine and that any person signing any such paper who claims to be duly
authorized is in fact so authorized.

2.3 Escrow Agent shall be entitled to act on any instruction given to
it in writing and signed by an authorized signatory of the Company and shall be
fully protected in doing so.

2.4 Escrow Agent shall be entitled to act in accordance with any
court order or other final determination by any governmental authority with
jurisdiction of any matter arising hereunder.

2.5 Escrow Agent shall have no responsibility for, and makes no
representation as to the value, validity or genuineness of any article, asset or
document deposited with Escrow Agent in the Escrow Account under this Agreement,
provided that it will give notice to the Company of any check for money not
credited and the reason stated therefore and of any discrepancy with respect to
the value, validity or genuineness of any article, asset or document so
deposited if and when it has actual knowledge thereof.

2.6 Escrow Agent shall have no responsibility to make payments out of
the Escrow Account for any amount in excess of the amount of collected funds
deposited in the Escrow Account, together with any interest earnings thereon, at
the time any payment is to be made.

2.7 Escrow Agent may execute any of its powers or responsibilities
hereunder and exercise any of its rights hereunder either directly or by or
through its agents or attorneys. Nothing in this Agreement shall be deemed to
impose upon Escrow Agent any duty to qualify to

-3-

<PAGE>

do business or to act as a fiduciary or otherwise in any jurisdiction. Escrow
Agent shall not be responsible for and shall not be under a duty to examine or
pass upon the validity, binding effect, execution or sufficiency of this
Agreement or of any agreement amendatory or supplemental hereto or of any other
agreement.

3. AUTHORIZATION TO OPEN THE ESCROW ACCOUNT. This Agreement is to be
executed by the parties hereto in sufficient numbers so that an agreement
bearing each party's original signature can be held by the Escrow Agent. The
parties hereto hereby authorize the Escrow Agent to establish and administer the
Escrow Account upon receipt of a fully executed facsimile, telex or telecopy of
the agreement.

4. INVESTMENT INSTRUCTIONS. The Company will provide written investment
direction to Escrow Agent. Escrow Agent shall have no duty or right to invest
funds on deposit in the Escrow Account unless investment direction is provided.
Interest earned on the Escrow Account will be the property of the Company and
will be maintained in the Escrow Account and distributed to the Company in
accordance with Section 1 hereof, unless the Offering is terminated for failure
to fulfill the Threshold amount by June 30, 1997, in which case interest earned
will be the property of the Subscribers, pro-rata, as provided in Section 1.5
above. Income from all investments shall be taxable to the person to whom such
income is disbursed, and Escrow Agent shall have no responsibility for preparing
or filing any Federal or state tax returns in connection therewith. All
entities entitled to receive interest from the Escrow Account will provide
Escrow Agent with a W-9 or W-8 IRS tax form prior to the disbursement of
interest. A statement of citizenship will be provided if requested by Escrow
Agent.

5. DISBURSEMENT BY WIRE TRANSFER. Parties hereto may elect to request
transfer of funds by Fedwire from time to time, subject to the conditions stated
herein. Parties hereto agree that the wire transfer security procedures
identified on the attached EXHIBIT B to this agreement are commercially
reasonable. Parties hereto further agree that Escrow Agent should use these
procedures to detect unauthorized wire transfer payment requests prior to
executing such requests and further agree that any request acted upon by the
Escrow Agent in compliance with these security procedures, whether or not
authorized, shall be treated as an authorized request. Parties hereto agree
that the Escrow Agent has the right to change the wire transfer security
procedures from time to time and that use of any changed procedures evidences
the acceptance of the commercial reasonability of such change by the parties
hereto.

6. RIGHT TO INTERPLEAD. If any controversy arises between the parties
hereto or with any third person, the Escrow Agent shall not be required to
resolve the same or to take any action to do so but may, at its discretion,
institute such interpleader or other proceedings as it deems proper. Escrow
Agent may rely on any joint written instructions as to the disposition of funds,
assets, documents, or other assets held in escrow.

7. FEES. Escrow Agent shall be paid for services hereunder in accordance
with the fee schedule attached hereto as EXHIBIT C. Payments of all fees shall
be the responsibility of the Company. Nothing in this Agreement shall be
construed as granting the Escrow Agent any right to deduct or offset amounts, to
the extent of unpaid fees and expenses, from any property placed

-4-

<PAGE>

within the Escrow Account with the Escrow Agent. In the event that the Escrow
Agent is made a party to litigation with respect to the property held hereunder,
or brings an action in interpleader or in the event that the conditions of this
escrow are not promptly fulfilled, or Escrow Agent is required to render any
service not provided for in this Agreement and fee schedule, or there is any
assignment of the interest of this escrow or any modification hereof, Escrow
Agent shall be entitled to reasonable compensation for such extraordinary
services and reimbursement from the Company for all fees, costs, liability and
expenses, including attorney fees.

8. RESIGNATION AND TERMINATION.

8.1. This Agreement shall terminate when (i) Escrow Agent or its
successor or assign receives written notification of termination from the
Company including final disposition instructions signed by the Company, and (ii)
there occurs the actual final disposition of the funds held in escrow hereunder
as provided in this Agreement. The rights and obligations of Escrow Agent shall
survive the termination of this Agreement.

8.2. Escrow Agent may, upon providing fifteen (15) days' written
notice, resign its position and terminate its obligations hereunder after the
date of such termination. Similarly, the Company may terminate Escrow Agent and
appoint a successor escrow agent by providing fifteen (15) days' written notice
to Escrow Agent. In the event Escrow Agent is not notified within fifteen (15)
days of the successor Escrow Agent, Escrow Agent may designate its successor by
written notice to the Company so long as any such successor is a bank or trust
company. Upon designation of a successor escrow agent, Escrow Agent shall be
entitled to transfer all funds and assets to such successor Escrow Agent. Upon
delivering such assets, Escrow Agent's obligations and responsibilities shall
cease.

9. INDEMNIFICATION. The Company hereby indemnifies and holds harmless
the Escrow Agent from loss, damage, or any claims made against the Escrow Agent
arising out of or relating to the Escrow Agreement, such indemnification to
include all costs and expense incurred by the Escrow Agent, including, but not
limited to, reasonable attorney fees; provided, that this indemnity and hold
harmless shall not apply to the acts of gross negligence or willful misconduct
of the Escrow Agent. This indemnity shall survive the termination of this
Agreement for any reason, or the resignation or removal of Escrow Agent.

10. CONSENT TO JURISDICTION AND SERVICE. The parties hereby absolutely
and irrevocably consent and submit to the jurisdiction of the courts of the
State of Washington and of any Federal court located in said State in connection
with any actions or proceedings arising out of or relating to this Agreement.
In any such action or proceeding, Company hereby absolutely and irrevocably
waives personal service of any summons, complaint, declaration or other process
and hereby absolutely and irrevocably agrees that the service thereof may be
made by certified or registered first-class mail directed to Company at its
address, in accordance with Section 11 hereof.

-5-

<PAGE>

11. NOTICES. Notices, requests, demands and other communications required
under this agreement shall be in writing considered validly served when
delivered by first-class mail, facsimile, telex or telecopy to address/telephone
number specified below:

ESCROW AGENT:
First Trust of Washington
601 Union Street
Suite 2120
Seattle, Washington 98101
Tel. (206) 461-4132
Fax. (206) 461-4175

COMPANY:
James E. Campbell, III
Pacific MultiMedia, Inc.
2477 East Orangethorpe Avenue
Fullerton, California 92631
Tel. (714)441-0782
Fax. (714)441-1773

with a copy to:

Gary J. Kocher, Esq.
Preston Gates & Ellis LLP
701 Fifth Avenue
Suite 5000
Seattle, Washington 98104-7078

and any party may alter its address by giving written notice of such change.

12. AMENDMENTS. This Agreement may be amended with (and only with) the
written consent of the parties hereto. This Agreement may be terminated at any
time by a written document signed by all parties hereto.

13. DISCLOSURE. The parties hereto hereby agree not to use the name of
Seafirst Bank to imply an association with the transaction other than that of a
legal escrow agent.

14. BINDING AGREEMENT AND ASSIGNMENT. The foregoing provisions shall be
binding upon the assigns, successors, personal representatives and heirs of the
parties hereto, and shall be effective as of the day accepted by the Escrow
Agent. Any corporation into which the Escrow Agent may merge, sell, or transfer
its escrow business and assets, shall automatically be and become the successor
Escrow Agent hereunder and vested with all powers as was its predecessor,
without the execution or filing of any instruments, or any further act, deed or
conveyance on the part of the parties hereto.

-6-

<PAGE>

15. BROKERAGE CONFIRMATIONS. The parties acknowledge that to the extent
regulations of the Comptroller of Currency or other applicable regulatory entity
grant a right to receive brokerage confirmations of security transactions of the
escrow, the parties waive receipt of such confirmations, to the extent permitted
by law. The Escrow Agent shall furnish a statement of security transactions on
its regular monthly reports.

16. SEVERABILITY. If at any time subsequent to the date hereof, any
provision of this Agreement shall be held by a court of competent jurisdiction
to be illegal, void, or unenforceable, such provision shall be of no force or
effect, and shall be limited or expanded in scope so as to carry out the intent
of the parties as expressed herein to the greatest extent possible. The
illegality or unenforceability of any such provision shall have no effect upon
and shall not impair the enforceability of any other provision to this
Agreement.

17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be one and the same instrument.

[Remainder of page intentionally left blank]

-7-

<PAGE>

WHEREFORE, the parties have executed this Escrow Agreement as of the date
first set forth above.

PACIFIC MULTIMEDIA, INC.

By /s/ JAMES E. CAMPBELL, III
-------------------------------------
Its PRESIDENT
------------------------------------

FIRST TRUST NATIONAL ASSOCIATION

By /S/ SHIRLEY YOUNG
-------------------------------------
Its ACCOUNT ADMINISTRATOR
------------------------------------

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<PAGE>

[LETTERHEAD]

EXHIBIT 23.2

CONSENT OF MOORE STEPHENS FRAZER AND TORBET, LLP.
INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated March 11, 1997, in the Registration Statement
(Form SB-2) and the related Prospectus of Pacific MultiMedia, Inc. for the
registration of shares of its Common Stock.

/s/ Moore Stephens Frazer and Torbet, LLP
-----------------------------------------
MOORE STEPHENS FRAZER AND TORBET, LLP

Walnut, California
April 21, 1997
<PAGE>
EXHIBIT 23.2

CONSENT OF MOORE STEPHENS FRAZER & TORBET, LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated March 11, 1997, in the Registration Statement (Form
SB-2) and the related Prospectus of Pacific MultiMedia, Inc. for the
registration of shares of its Common Stock.

/s/ MOORE STEPHENS FRAZER & TORBET, LLP

Walnut, California

April 21, 1997