<PAGE>
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
[_] Preliminary Information Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14c-5(d)(2))
[X] Definitive Information Statement
CYPRESS FINANCIAL SERVICES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant As Specified In Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required.
[_] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
--------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
--------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
CYPRESS FINANCIAL SERVICES, INC.
5400 Orange Avenue, Suite 200
Cypress, California 90630
To our Stockholders:
On January 20, 1999, certain stockholders (the "Consenting Stockholders")
of CYPRESS FINANCIAL SERVICES, INC. ("CYPRESS" or the "Company") executed
written consents approving the following actions by the Company:
1. Election of six (6) Directors to serve until the next annual meeting
of stockholders and until their respective successors are duly elected
and qualified; and
2. An amendment to the 1995 Stock Option Plan increasing the number of
authorized shares of common stock reserved under the Plan from 450,000
to 950,000 shares.
The Board of Directors approved the above actions and fixed the close of
business on November 30, 1998 as the record date for the determination of
stockholders entitled to vote with respect to the above actions. The Consenting
Stockholders, consisting of the Directors and certain other stockholders, whose
shares represent approximately 70.1% of the Company's outstanding voting
securities entitled to vote, have consented to the above actions. Therefore no
annual meeting of stockholders will be held. Management is not soliciting
proxies in connection with this Information Statement and stockholders are
requested not to send proxies to the Company. A copy of the Company's Annual
Report on Form 10-KSB for the year ended September 30, 1998, which includes
certified financial statements of the Company, will be mailed with this
Information Statement to all stockholders of record as of the record date.
Your attention is directed to the enclosed Information Statement.
By Order of the Board of Directors
Farrest Hayden
Chairman of the Board
Cypress, California
January 30, 1999
<PAGE>
CYPRESS FINANCIAL SERVICES, INC.
5400 Orange Avenue, Suite 200
Cypress, California 90630
____________________________________________
INFORMATION STATEMENT
____________________________________________
INTRODUCTION
This Information Statement is furnished by the Board of Directors of
CYPRESS FINANCIAL SERVICES, INC. (the "Company") in connection with (i) the
election of directors and (ii) amendment of the Company's 1995 Stock Option Plan
(the "Plan") pursuant to the written consent of the holders of a majority of the
Company's outstanding voting securities. This Information Statement and
enclosed materials are first being sent on or before the close of business on
January 30, 1999, to stockholders of record as of November 30, 1998 (the "Record
Date"). On January 20, 1999, the holders of a majority of the outstanding
voting securities of the Company on the Record Date (the "Consenting
Stockholders") executed written consents approving the above action. The
Company will cause the election of directors and the amendment to the Plan to
become effective 20 days after this Information Statement is first sent to the
stockholders.
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
The information included herein should be reviewed in conjunction with the
financial statements, notes to financial statements, auditor's report and other
information included in the Company's 1998 Annual Report on Form 10-KSB that is
being mailed with this Information Statement to all stockholders of record as of
the Record Date.
Outstanding Securities and Voting Rights
As of the Record Date, there were issued and outstanding 6,527,571 shares
of the Company's Common Stock, $.001 par value (the "Common Stock") and 345,000
shares of the Company's $.001 par value Preferred Stock (the "Preferred Stock")
(collectively the "Voting Securities"), for the purpose of determining
stockholders entitled to receive this Information Statement. The Consenting
Stockholders, consisting of the Directors and certain other stockholders, held
approximately 4,579,457 shares of Common Stock and 238,148 shares of Preferred
Stock or approximately (70.1%) of the Company's issued and outstanding Voting
Securities.
Each holder of Voting Securities would normally be entitled to one vote in
person or by proxy for each share of Voting Securities in his name on the books
of the Company, as of the Record Date, on any matter submitted to the vote of
the stockholders. However, under Nevada law, any action which may be taken at
any stockholders' meeting may be taken by consent of the requisite number of
stockholders required to take such action. The election of directors and the
approval of the amendment to the Plan require the affirmative vote or written
consent of a majority of the Company's outstanding Voting Securities. On
November 30, 1998 the Consenting Stockholders, who hold in excess of 70% of the
Company's outstanding Voting Securities, consented to the election of directors
and approval of the amendment to the Plan as set forth herein. Therefore, the
Company is not soliciting proxies and will not hold a meeting on these matters.
1
<PAGE>
ELECTION OF DIRECTORS
Information Concerning Nominees
The Bylaws of the Company authorize the Board of Directors to fix the
number of directors up to a maximum of nine (9). The Board of Directors has
currently fixed the number of directors at six (6), and nominated the incumbent
directors for re-election to the Board. The seventh through ninth positions on
the Board are vacant and are expected to be filled by vote of the Board of
Directors when suitable candidates for the independent director positions are
selected. Each director will be elected to hold office until the next annual
meeting of stockholders and until his successor has been duly elected and
qualified.
All of the six (6) nominees for election to the Board of Directors are
members of the current Board of Directors. Each of the nominees has consented
to be named in this Information Statement and has consented to serve as a
director. However, should any nominee named herein for the office of director
become unable or unwilling to accept nomination or election, the Board of
Directors may recommend and nominate another person in the place and stead of
such person. The Board of Directors has no reason to believe that any
substitute nominee will be required.
Farrest Hayden, 53, founded the Company as the Chief Executive Officer and
Chairman of the Board in 1995 and currently serves as Chairman and President.
Mr. Hayden is the founder, Chief Executive Officer and Director of Medical
Control Services, Inc. ("MCSI") the Company's predecessor, which was founded in
1977.
Otto J. Lacayo, 63, joined the Company as the Chief Financial Officer,
Secretary and Director in 1995 and currently serves as Executive Vice President
and Director. Mr. Lacayo is a co-founder, Executive Vice President and Director
of MCSI, the Company's predecessor, since 1977.
Manuel Occiano, 47, joined the Company as Chief Executive Officer and a
Director in September 1998. He served as Executive Vice President and Chief
Operating Officer of West Capital Financial Services, Corp., a division of
SunAmerica Life from July 1996 to September 1998. He spent 13 years with Arthur
Andersen LLP as senior manager directing financial services and business
consulting practices for the San Diego office.
Graham E. Gill, 68, was elected to serve as a Director in 1995. He has
been the President of The Belgravia Fund (London) Ltd., a London-based mutual
fund since 1990. He has also served as President of Euro-American Productions,
Ltd. since 1989.
Richard H. Keyes, 45, was elected as a Director in February 1998 and Vice
Chairman on September 1, 1998. Mr. Keyes is a principal of Keyes Capital Corp.,
an investment banking firm, founded in 1993.
Diane W. Dales, 42, was elected to serve as Director in 1998. She has
served as Assistant Vice President at Pacific Life Insurance Company since
January 1988 and is currently Director, Private Placements, at Pacific Life.
She is responsible for the origination and monitoring of private placement
securities and credit analysis of investment grade public securities.
Additional Executive Officers and Key Employees
Messrs. Hayden, Occiano, Hindman and Lacayo currently serve as the
executive officers of the Company along with Mr. Richard A. Keyes. See
Information Concerning Nominees and the information below for biographical
description of these individuals.
2
<PAGE>
John C. Hindman, 27, joined the Company on September 4, 1998 as Chief
Financial Officer. Mr. Hindman served as Vice President of Finance for West
Capital Financial Services from June 1996 until September 1998. From September
1993 to June 1996, he was employed by Arthur Andersen LLP in public accounting.
Daniel R. Eder, 42, became Chief Operating Officer of the Company in July
1998. He has served as the General Manager of MCSI, the Company's predecessor,
since 1987.
Board of Directors and Committees
The Board of Directors meets during its fiscal year to review significant
developments affecting the Company and to act on matters requiring board
approval. The Board of Directors met six (6) times and acted by unanimous
written consent eight (8) times during the 1998 fiscal year. During such
period, all members of the Board participated in at least 75% of all Board and
applicable committee meetings.
The Board of Directors has established audit, executive, stock option and
nominating committees to devote attention to specific subjects and to assist in
the discharge of its responsibilities. The functions of those committees, their
members and the number of meetings held during the 1998 fiscal year are
described below:
Audit Committee. The Audit Committee was established to recommend to the
Board of Directors the appointment of the firm selected to be the independent
public accountants for the Company and monitor the performance of such firm; to
review and approve the scope of the annual audit and quarterly reviews and
evaluate with the independent public accountants the Company's annual audit and
annual financial statements; to review with management the status of the
internal accounting controls; to evaluate any problem areas having a potential
financial impact on the Company which may be brought to its attention by
management, the independent public accountants or the Board of Directors; and to
evaluate all public financial reporting documents of the Company. Mr. Gill and
Ms. Dales are presently the members of the Audit Committee. The Audit Committee
met on January 20, 1999 with Arthur Andersen LLP, the Company's accountants, in
connection with their audit for the fiscal year ended September 30, 1998, and
found no material deficiencies.
Executive Committee. The Executive Committee is empowered to act in lieu
of the Board of Directors on any matter except that for which the Board of
Directors has specifically reserved authority to itself and except for those
matters specifically reserved to the full Board of Directors by law. Messrs.
Hayden, Occiano and Keyes are members of the Executive Committee. The Executive
Committee met twice during the fiscal year.
Stock Option Committee. The Stock Option Committee develops and
administers incentive plans, including the Company's 1995 Stock Option Plan.
Messrs. Hayden, Lacayo, and Gill are members of the Stock Option Committee,
which held one meeting during the fiscal year.
Nominating and Compensation Committee. The Nominating and Compensation
Committee was established to recommend and nominate qualified persons to serve
as independent directors of the Company and to determine the compensation of
executive officers and key employees of the Company. Mr. Gill and Ms. Dales are
presently the members of the Committee. The Committee has not adopted
procedures for the consideration of nominees recommended by security holders.
The Committee met three times during the fiscal year to recommend the election
of three Directors.
The Company compensates independent directors at the rate of $4,000 per
year for service on the Board of Directors, plus $500 per Board meeting. The
Board agreed to consider adopting an appropriate stock option formula for
independent directors at a future meeting. The Company did not grant any stock
options to any of the Company's independent directors during the fiscal year.
3
<PAGE>
The Consenting Stockholders
Stockholders of the Company, including all of the Directors of the Company,
representing voting rights equal to at least 70.1 % of the shares entitled to
vote on Company matters, have delivered written consent to the election of the
above nominees as directors of the Company to serve until the next annual
meeting of stockholders and until their successors are duly elected and
qualified as set forth in this Information Statement.
The names of such stockholders and the number of shares of Common Stock and
Preferred Stock such persons are entitled to vote on matters such as those
proposed in this Information Statement are as follows:
<TABLE>
<CAPTION>
Number of Common Percentage of
Shares Entitled to Vote Common Stock
Name As of Record Date As of Record Date
- ---- ----------------- -----------------
<S> <C> <C>
Pacific Life Insurance Company (1) 2,000,000 30.6%
Farrest Hayden 879,109 13.5%
Lacayo Family Trust (2) 707,048 10.8%
Keyes Family Trust (3) 511,000 7.8%
Euro-American Production, Ltd (4) 342,900 5.3%
The Belgravia Fund, Ltd. (4) 73,400 1.1%
Manuel Occiano 66,000 1.0%
--------- ----
Total: 4,579,457 70.1%
</TABLE>
<TABLE>
<CAPTION>
Number of Preferred Percentage of
Shares Entitled to Vote Preferred Stock
Name As of Record Date As of Record Date
- ---- ----------------- -----------------
<S> <C> <C>
Farrest Hayden 121,088 35.1%
Otto Lacayo 117,060 33.9%
------- -----
Total: 238,148 69.0%
</TABLE>
(1) Ms. Dales, a director of the Company, is a director of Pacific Life
Insurance Company ("Pacific Life"). Pacific Life is holder of the stock
and Ms. Dales has voting power over these shares.
(2) Mr. Lacayo, a director of the Company, is a Trustee for the Lacayo Family
Trust, the holder of the stock.
(3) Mr. Keyes, a director of the Company, is a Trustee for The Keyes Family
Trust, the holder of the stock.
(4) Mr. Gill, a director of the Company, is the President of the Belgravia
Fund, Ltd and Euro-American Production, Ltd, the holders of the stock, and
has voting power over these shares.
These shares represent approximately 70.1% of the outstanding Voting
Securities of the Company. Therefore, the proposals have been approved by
written Consent of the Consenting Stockholders and will take effect 20 days
after the Information Statement is sent to stockholders.
4
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the annual and long-term cash and non-cash
compensation paid by the Company for services rendered in all capacities during
the fiscal years ended September 30, 1998, 1997 and 1996 to those persons who
were, as of September 30, 1998, Chief Executive Officer and the other most
highly compensated executive officers of the Company whose total annual salary
and bonus exceeded $100,000 during the fiscal year ended September 30, 1998 (the
"Named Officers"):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Long-Term Compensation
- ---------------------------------------------------------------------------------------------------------------------------
Annual
Compensation
Awards Payout
- ---------------------------------------------------------------------------------------------------------------------------
Restricted All Other
Name and Principal Fiscal Stock Options/ LTIP Compen-
Position Year Salary($) Bonus ($) Other($) Award(s)($) SARs(#) Payout($) sation($)(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Farrest Hayden, 1998 221,000 -0- -0- -0- -0- -0- -0-
Chairman of the Board 1997 221,000 -0- -0- -0- -0- -0- -0-
and President 1996 225,000 -0- -0- -0- -0- -0- -0-
- ---------------------------------------------------------------------------------------------------------------------------
Manuel Occiano, (2) 1998 7,500 -0- -0- -0- 300,000 -0- -0-
Chief Executive 1997 0 -0- -0- -0- -0- -0- -0-
Officer 1996 0 -0- -0- -0- -0- -0- -0-
- ---------------------------------------------------------------------------------------------------------------------------
Daniel R. Eder, 1998 127,023 -0- -0- -0- 50,000 -0- -0-
Chief Operating 1997 126,929 -0- -0- -0- -0- -0- -0-
Officer 1996 108,125 -0- -0- -0- -0- -0- -0-
- ---------------------------------------------------------------------------------------------------------------------------
John C. Hindman, (3) 1998 8,996 -0- -0- -0- 100,000 -0- -0-
Chief Financial 1997 0 -0- -0- -0- -0- -0- -0-
Officer 1996 0 -0- -0- -0- -0- -0- -0-
- ---------------------------------------------------------------------------------------------------------------------------
Otto J. Lacayo, 1998 114,000 -0- -0- -0- -0- -0- -0-
Executive Vice 1997 120,095 -0- -0- -0- -0- -0- -0-
President 1996 113,500 -0- -0- -0- -0- -0- -0-
- ---------------------------------------------------------------------------------------------------------------------------
Richard H. Keyes, (4) 1998 30,000 -0- -0- -0- 250,000 -0- -0-
CEO/Vice Chairman 1997 0 -0- -0- -0- -0- -0- -0-
1996 0 -0- -0- -0- -0- -0- -0-
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The remuneration described in the table does not include the cost to the
Company of benefits furnished to the Named Officers, including premiums for
health insurance and other personal benefits provided to such individuals in
connection with their employment. The value of such benefits cannot be
precisely determined; however, the Named Officers did not receive other
compensation in excess of the lesser of $50,000 or 10% of such officers'
cash compensation.
(2) Mr. Occiano began his employment with the Company on September 16, 1998
under a three-year contract. See "Employment Agreements" below.
(3) Mr. Hindman began his employment with the Company on September 1, 1998 under
a three-year contract. See "Employment Agreements" below.
(4) Mr. Keyes served as Chief Executive Officer from February 18, 1998 to
September 15, 1998 without cash compensation. Effective August 1, 1998 he
was engaged by the Company as a consultant with compensation of $15,000 per
month.
5
<PAGE>
Employment Agreements
Mr. Manuel Occiano serves as Chief Executive Officer under a three-year
employment agreement expiring August 31, 2001. Mr. Occiano receives a base
salary of $180,000 per year. His base salary may be increased up to 20% each
year if he meets certain performance criteria as mutually agreed to with the
Compensation Committee of the Board of Directors. He is eligible to participate
in the management bonus pool to be established by the Board of Directors and is
entitled, during 1999 only, to quarterly advances of $22,500 to be credited
against the management bonus when earned. Mr. Occiano was granted options to
purchase 300,000 shares of the Company's common stock at an exercise price of
$1.3125 per share. None of the options are currently exercisable. 80,000 of
the options are currently vested and the remaining options will vest at the rate
of 20,000 additional per quarter until September 2001. Mr. Occiano also
received a loan of $100,000 to purchase 66,000 shares of common stock on the
open market. The loan is secured by a pledge of the common stock acquired.
Mr. John C. Hindman serves as Chief Financial Officer under a three-year
agreement expiring August 31, 2001. Mr. Hindman receives a base salary of
$125,000 per year. He is eligible to participate in the management bonus pool
to be established by the Board of Directors. Mr. Hindman was granted an option
to purchase 100,000 shares of the Company' common stock at an exercise price of
$1.3125 per share. None of the options are currently exercisable. 17,500 of
the options are currently vested and the remaining options will vest at the
rate of 7,500 per quarter until September 2001. Mr. Hindman also received a
loan of $50,000 to purchase 33,000 shares of common stock on the open market.
The loan is secured by a pledge of the common stock acquired.
Mr. Richard H. Keyes serves as Vice Chairman of the Board of Directors.
Under a Consulting Agreement with the Company, Mr. Keyes served as Chief
Executive Officer from February 18, 1998 until its termination on September 15,
1998. In lieu of salary compensation, he received an option to purchase 250,000
shares of the Company's common stock at an exercise price of $1.00 per share
which is fully vested. Mr. Keyes currently serves as a consultant to the
Company and is compensated at the rate of $15,000 per month, on a month to month
basis.
Stock Option Grants
The Plan is discussed below in relation to action approved by the Board of
Directors and the Consenting Stockholders. The following table sets forth
information concerning stock options granted in the 1998 fiscal year to each
member of the Board of Directors and Executive Officers.
Individual Grants
-----------------
<TABLE>
<CAPTION>
Percent of Total Exercise
Options Granted Price
to or Base
Employees During Price Expiration
Name Grant the Year Per Share Date
- ---- --------- ----------------- --------- -----------
<S> <C> <C> <C> <C>
Richard H. Keyes........ 250,000 36% $1.00 2/18/08
Manuel Occiano.......... 300,000 43% $1.3125 9/16/08
John C. Hindman......... 100,000 14% $1.3125 9/04/08
Daniel R. Eder.......... 50,000 7.0% $1.03 6/01/08
</TABLE>
6
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Certain Beneficial Owners and Management
The following tables set forth information, as of November 30, 1998,
concerning shares of the Company's Voting Securities beneficially owned by (i)
each stockholder known by the Company to be the beneficial owner of more than 5%
of the Company's Outstanding Voting Securities, and (ii) each director of the
Company, and (iii) all officers and directors of the Company as a group. Unless
otherwise indicated, each person listed has sole voting and investment power
over the shares beneficially owned by him.
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owner Beneficial Ownership(1) of Class
- -------------- ------------------- -------------------- --------
Common Stock Pacific Life Insurance Company (2) 2,000,000 30.6%
700 Newport Center Drive
Newport Beach, CA 92660
Common Stock Farrest Hayden (3) 879,109 13.5%
Preferred Stock 5400 Orange Ave., Suite 200 121,088 35.1%
Cypress, CA 92026
Common Stock Lacayo Family Trust (4) 707,048 10.8%
Preferred Stock 5400 Orange Ave., Suite 200 117,060 33.9%
Cypress, CA 92026
Common Stock Tom J. Ziegler Family Trust (5) 628,828 9.6%
Preferred Stock 5400 Orange Ave., Suite 200 106,852 31.0%
Cypress, CA 92026
Common Stock The Keyes Family Trust (6) 761,000(6) 7.8%
Common Stock Euro-American Productions, Ltd. (7) 342,900 5.3%
The Belgravia Fund, Ltd (7) 73,400 1.1%
Common Stock Manuel Occiano (8) 66,000 1.0%
Common Stock John C. Hindman (9) 33,000 *
All Directors and officers Common Stock 4,612,457 70.6%
as a Group (7 persons) Preferred Stock 238,148 69.0%
</TABLE>
- --------------------------
* Represents less than 1% of the class of shares
(1) Beneficial ownership is determined in accordance with the applicable rules
under the Exchange Act. In computing the number of shares beneficially
owned by a person and the percentage ownership of that person, shares of
Common stock subject to options held by that person that are currently
exercisable, or become exercisable within 60 days from the date hereof, are
deemed outstanding. However, such shares are not deemed outstanding for
purposes of computing the percentage ownership deemed outstanding of any
other person. Percentage of ownership is based on 6,527,571 shares of
Common Stock.
(2) Ms. Diane W. Dales, a director of the Company, is a director of Pacific Life
Insurance Company.
(3) Mr. Farrest Hayden is Chairman of the Board.
(4) Mr. Otto J. Lacayo, a director of the Company, is a Trustee for the Lacayo
Family Trust.
(5) Mr. Tom J. Ziegler is a Trustee for the Tom J. Ziegler Family Trust.
(6) Mr. Richard H. Keyes, a director of the Company, is a Trustee for The Keyes
Family Trust. Includes options to purchase 250,000 shares of Common Stock
at $1.00 per share granted under the 1995 Stock Option Plan, which are
immediately exercisable.
(7) Mr. Graham E. Gill, a director of the Company, is the President of Euro-
American Production, Ltd and the Belgravia Fund, Ltd.
(8) Mr. Manuel Occiano is a director of the Company and Chief Executive Officer.
(9) Mr. John C. Hindman is Chief Financial Officer.
7
<PAGE>
Amendment to 1995 Stock Option Plan
The Company's 1995 Stock Option Plan (the "Plan") was amended on August 20,
1998 by the Board of Directors to reserve an additional 500,000 shares of common
stock under the Plan, increasing the number of shares for option grants under
the Plan from 450,000 shares to 950,000 shares.
Background of the Plan
The Plan, was originally adopted by the Board of Directors and approved by
the Company's stockholders on October 30, 1995. The Plan originally reserved
450,000 shares of the Company's Common Stock for issuance under the Plan. The
Board of Directors may amend the Plan, subject in certain cases to stockholder
approval within 12 months after adoption. The Plan is administered by the stock
option committee (the "Committee") appointed by the Board of Directors. Subject
to the limitations set forth in the Plan, the Committee has the authority to
determine to whom options will be granted; the size of each grant; the exercise
price; the term during which an option may be exercised; the rate at which the
options will vest; whether the options will qualify as "incentive" or
"nonqualified" options; and all other terms and conditions of each grant.
The Plan provides for granting of options to Directors, employees,
consultants and advisors of the Company. The exact number of options to be
granted to any single individual or class of individuals is within the
discretion of the Committee and is not determinable. Such options may be either
"incentive stock options" ("Incentive Options") as defined by Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or options that do not
so qualify ("Nonqualified Options"). Only employees are eligible for the grant
of Incentive Stock Options.
All options are nontransferable. The maximum term of an option is ten
years, but the option generally expires earlier if the optionee's service
terminates. The exercise price of each stock option will not be less than 100
percent of fair market value of the underlying shares on the date of the grant.
No options are exercisable until at least six months after the date of the
option grant.
Unless terminated earlier by the Board of Directors, the Plan will
terminate on October 30, 2005. No additional options may be granted after the
termination date, but options granted before the termination date will remain
outstanding. The Board of Directors may amend the Plan at any time. Plan
amendments are subject to stockholder approval only to the extent required by
law.
Amendment of the Plan
On August 20, 1998, the Board of Directors approved an amendment of the
Plan, subject to stockholder approval, to increase the number of shares subject
to the Plan from 450,000 shares to 950,000 shares. The number of shares subject
to the Plan is being increased to provide for option grants in future years
under the formula described above. As of September 30, 1998, options for
797,400 shares have been granted under the Plan leaving only 152,600 shares
available for future option grants. If options to purchase the 950,000 shares
authorized under the Plan were all granted and exercised, such shares would
constitute approximately 14.6% of the Common Stock outstanding as of September
30, 1998.
Board Recommendation
The Board of Directors believes that it is in the best interests of the
Company and its stockholders to adopt the amendment to the 1995 Stock Options
Plan to add an additional 500,000 shares for stock option grants under the Plan
so that stock options will continue to be available to the Company as a means of
attracting and adequately rewarding officers, directors and key employees of the
Company and to provide them with an additional means of incentive compensation
that reflects the Company's successful performance and increase in its
stockholder value.
8
<PAGE>
ANNUAL REPORT
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, INCLUDING FINANCIAL STATEMENTS AND NOTES
THERETO, IS BEING MAILED TO EACH STOCKHOLDER TOGETHER WITH THIS INFORMATION
STATEMENT. ADDITIONAL COPIES OF THE ANNUAL REPORT MAY BE OBTAINED BY
STOCKHOLDERS WITHOUT CHARGE BY WRITING TO THE COMPANY AT THE ADDRESS OF THE
COMPANY SET FORTH ON THE COVER OF THIS INFORMATION STATEMENT.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and certain of its officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Officers, directors and greater than 10% stockholders are required
by SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Form 5's were
required for those persons, the Company believes that during the year ended
September 30, 1998, all filing requirements applicable to its officers,
directors and greater than 10% beneficial owners were complied with during the
fiscal year.
OTHER BUSINESS
No further business will be transacted by Written Consent to corporate
action in lieu of meeting of stockholders to which this Information Statement
pertains.
COSTS OF INFORMATION STATEMENT
This Information Statement has been prepared by the Company and its Board of
Directors, and the Company will bear the costs of distributing this Information
Statement to stockholders, including the expense of preparing, assembling,
printing, and mailing the Information Statement and attached materials.
Although there is no formal agreement to do so, the Company may reimburse banks,
brokerage houses, and other custodians, nominees and fiduciaries for their
reasonable expenses in forwarding this Information Statement and related
materials to stockholders. The Company may pay for and use the services of
other individuals or companies not regularly employed by the Company in
connection with the distribution of this Information Statement if the Board of
Directors of the Company determines that this is advisable.
By the order of the Board of Directors,
Farrest Hayden,
Chairman of the Board
Cypress, California
January 30, 1999
9
