<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
DIAMOND ENTERTAINMENT CORPORATION
------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which 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:
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
DIAMOND ENTERTAINMENT CORPORATION
16818 MARQUARDT AVENUE
CERRITOS, CALIFORNIA 90703
JULY 23, 1996
Dear Diamond Entertainment Corporation Shareholder:
You are cordially invited to attend the annual meeting (the 'Annual
Meeting') of the shareholders of Diamond Entertainment Corporation, a New Jersey
corporation (the 'Company') to be held on August 23, 1996 at 3:00 P. M., local
time , at the offices of Diamond Entertainment Corporation, 16818 Marquardt
Avenue, Cerritos, California 90703. At the Annual Meeting, you will be asked to
consider and vote upon (I) the election of the one (1) Class 1 directors and two
(2) Class 2 directors to the Board of Directors of the Company for term of three
years; (II) the ratification of Moore Stephens, P. C. as the independent
certified public accountants of the Company; (III) the increase of the
authorized common stock of the Company from 15,000,000 shares of common stock,
no par value ('Common Stock'), to 100,000,000 shares: and (IV) such other
business as may properly come before the Annual Meeting or any adjournments
thereof. Shareholders may abstain from voting by making the appropriate boxes on
the enclosed Proxy. Abstentions shall be counted separately and shall be used
for purpose of calculating a quorum.
IT IS IMPORTANT THAT YOUR SHARES OF CAPITAL STOCK BE REPRESENTED AT THE
MEETING. WE THEREFORE ASK THAT YOU PROMPTLY SIGN, DATE AND RETURN THE ENCLOSED
PROXY REGARDLESS OF THE NUMBER OF SHARES OF CAPITAL STOCK WHICH YOU OWN.
Time will be set aside during the meeting to discuss each item of business
describe in the Proxy Statement and for other questions relating to the Company.
Representative members of management will be on hand for this purpose, including
a representative from the auditor.
Accompanying the Proxy Materials is the Company's Annual Report filed on
Form 10-K, as amended, for the year ended March 31, 1996. I hope you take the
opportunity to review the enclosed Proxy Materials and Annual Report.
I look forward to seeing you at the Annual Meeting.
Very truly yours,
JAMES LU
Chairman of the Board of Directors
<PAGE>
DIAMOND ENTERTAINMENT CORPORATION
16818 MARQUARDT AVENUE
CERRITOS, CALIFORNIA 90703
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 23, 1996
To the shareholders of Diamond Entertainment Corporation:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders ( the
'Annual Meeting') of Diamond Entertainment Corporation, a New Jersey corporation
(the 'Company'), will be held on August 23, 1996 at 3:00 P. M., local time, at
the offices of Diamond Entertainment Corporation, 16818 Marquardt Avenue,
Anaheim, CA 90703 to consider and vote upon the following proposals and such
business as may properly come before the Annual Meeting:
1. To elect one (1) Class 1 directors and two (2) Class 2 directors to
the Board of the Company for term of three years;
2. To ratify the appointment of Moore Stephens, P. C. As the Company's
independent certified public accountants;
3. To increase the authorized common stock of the Company from
15,000,000 shares of common stocks no par value ('Common Stock'),
to 100,000,000 shares; and
4. To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on June 25, 1996 as
the record date (the 'Record Date') for the determination of shareholders
entitled to notice and vote at the Annual Meeting, or any adjournment or
postponements thereof.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE AND RETURN YOUR PROXY IN THE REPLY
ENVELOPE PROVIDED. YOUR COOPERATION IN PROMPTLY SIGNING AND RETURNING YOUR PROXY
WILL HELP AVOID FURTHER SOLICITATION EXPENSE.
SHAREHOLDERS ARE REQUESTED TO CAREFULLY READ AND REVIEW THE ACCOMPANYING
PROXY STATEMENT BEFORE EXECUTING AND RETURNING THE PROXY TO THE COMPANY OR
VOTING IN PERSON AT THE ANNUAL MEETING.
By Order of the Board of Directors of
DIAMOND ENTERTAINMENT CORPORATION
JAMES LU,
Chairman of the Board/Chief
Executive Officer/President and
Secretary
Dated: July 23, 1996
<PAGE>
PROXY STATEMENT
DIAMOND ENTERTAINMENT CORPORATION
16818 MARQUARDT AVENUE
CERRITOS, CA. 90703
(310) 921-3999
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 23, 1996
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
GENERAL
This Proxy Statement is furnished to shareholders of Diamond Entertainment
Corporation, a New Jersey corporation ('Diamond' or the 'Company' or 'Diamond'),
in connection with the solicitation of proxies by the Board of Directors for the
annual meeting of shareholders to be held at the offices of Diamond
Entertainment Corporation, 16818 Marquardt Ave., Cerritos CA 90703 on August 23,
1996 at 3:00 P.M., local time, and any adjournments or postponements thereof
(the 'Annual Meeting'). This Proxy Statement and the attached Notice of Annual
Meetings are first being mailed to shareholders of the Company on or about
August 23, 1996.
At the Annual Meeting, shareholders will be asked to approve and consent
to:
1. The election of one (1) Class 1 director to the Board of the Company for
a term of three years. One (1) nominee for the Board is Jeffrey Schillen; The
election of two (2) Class 2 directors to the Board of the Company for terms of
three years. The two (2) nominees for the Board are James Lu and Murray Scott;
2. Ratify the appointment of Moore Stephens, P.C. as the Company's
independent certified public accountants;
3. The increase of the authorized common stock of the Company from
15,000,000 shares of common stock, no par value ('Common Stock'), to 100,000,00
shares; and
4. Transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
VOTING AT THE ANNUAL MEETING
The Board of Directors of the Company has fixed the close of business on
June 25, 1996 as the record date (the 'Record Date') for the determination of
shareholders entitled to notice of and to vote at the Annual Meeting. At the
close of business on the Record Date, there were 13,931,839 shares of the
Company's common stock, no par value (the 'Diamond Common Stock'), issued and
outstanding, each of which is entitled to one vote at the Annual Meeting, and
there were 483,251 shares of Diamond preferred stock, no par value (the 'Diamond
Preferred Stock'), issued and outstanding, each such share entitling the holder
to one and ninety five one hundreds (1.95) votes at the Annual Meeting. As of
the Record Date there were issued and outstanding shares of voting stock of the
Company representing an aggregate of 14,874,178 votes entitled to vote at the
Annual Meeting.
The Company has approximately 1,426 holders of record. The Diamond Common
Stock and the Diamond Preferred Stock vote as one group on all matters.
Under the Certificate of Incorporation of the Company and under the New
Jersey Business Corporation Law, the affirmative vote of a majority of the
combined votes cast by the holders of the issued and outstanding shares of the
capital stock of the Company entitled to vote ('Shareholder Approval') is
necessary to approve and consent to the election of the members of the Board of
the Company, the ratification of the auditors of the Company, and the increase
of the authorized Common Stock of the Company (collectively referred to as the
'Three Shareholder Matters'). The Board of Directors recommends voting FOR the
Three Shareholder matters. Unless otherwise instructed, proxies solicited by the
Board of Directors will be voted FOR the Three Shareholder Matters.
<PAGE>
In order to vote in favor of or against any of the Three Shareholder
Matters at the Annual Meeting, shareholders may attend the Annual Meeting or
deliver executed proxies to the Secretary of the Company at 16818 Marquardt
Avenue, Cerritos, CA 90703 on or before the date of the Annual Meeting.
Shareholders attendant the meeting may abstain form voting by marking the
appropriate boxes designated as Abstain on the Proxy. Abstentions shall be
counted separately and shall be used for purposes of calculating a quorum.
It is not anticipated that any other matters will be brought before the
Annual Meeting.
PROXY SOLICITATION
The expense of preparing, printing and mailing this Proxy Statement,
exhibits and the proxies solicited hereby will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by officers and
directors and regular employees of the Company, without additional remuneration,
by personal interviews, telephone, telegraph or facsimile transmission. The
Company will also request brokerage firms, nominees, custodians and fiduciaries
to forward proxy material to the beneficial owners of shares of capital stock
held of record and will provide reimbursements for the cost of forwarding the
material in accordance with customary charges.
SECURITY OWNERSHIP OF DIRECTORS, OFFICERS AND PRINCIPAL STOCKHOLDERS OF THE
COMPANY.
The following table sets forth as of July 10,1996 (the record date),
certain information with respect to the beneficial ownership of Diamond
Preferred Stock and Diamond Common Stock by each person or entity known by the
Company to be the beneficial owner of 5% or more of such shares, each director
of the company, and all officers and directors of the Company as a group:
<TABLE>
<CAPTION>
PERCENTAGE
SHARES OF
COMMON STOCK (%) OF
SHARES PERCENTAGE ASSUMING COMMON STOCK
OF (%) OF SHARES CONVERSION ASSUMING
COMMON TOTAL OF OF CONVERSION
STOCK COMMON PREFERRED PREFERRED OF PREFERRED
NAME OWNED STOCK STOCK(4) STOCK STOCK(4)
- --------------------------------------------- --------- ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
James K.T. Lu(1) ............................ 4,412,785 34.22% 209,287 408,110 3.16%
c/o Diamond Entertainment Corporation
16818 Marquardt Avenue
Cerritos CA 90703
Jeffrey I. Schillen(2) ...................... 3,020,750 28.43% 36,282 70,750 9.55%
c/o Diamond Entertainment Corporation
4400 Route 9 South
Freehold, NJ 07728
Murray Scott(5) ............................. 800,000 6.20% 75,796 147,802 1.15%
c/o Diamond Entertainment Corporation
16818 Marquardt Avenue
Cerritos, CA 90703
Pacesetter Int'l Co. ....................... 2,538,446 19.68% 0 0 0
Hong Kong
All directors and officers as a group (3
persons) .................................. 8,233,535 63.85% 321,365 626,662 4.86%
</TABLE>
- ------------------
(1) Mr. Lu is the Chief Executive Officer; Secretary and Director of the
Company.
(2) Mr. Schillen may be deemed a 'parent' or 'promoter' of the Company as such
terms are defined in the Securities Act of 1933, as amended, by virtue of
being a founder and a Senior Executive Vice President of the Company.
(3) Includes 8,710 shares of Common Stock issued pursuant to the Restricted
Stock Plan which shares are to be returned in accordance with the terms of
the Restricted Stock Plan.
(Footnotes continued on next page)
2
<PAGE>
(Footnotes continued from previous page)
(4) The Preferred Stock entitles the holder to 1.95 votes for each share owned
and each share may be converted into 1.95 shares of Common Stock.
(5) Mr. Scott is a Director of the Company.
1. ELECTIONS OF DIRECTORS
Under the certificate of incorporation of the Company ('Certificate of
Incorporation'), the Board of Directors of the Company is divided into three (3)
classes, with each class to be elected by the shareholders every three years.
The Company's Board presently consists of five (5) directors with three (3)
Class 1 directors whose terms expire in 1995, two (2) Class 2 directors whose
terms expire in 1994, who continue to serve until their successors have been
nominated and elected. Officers are elected annually by and serve at the
discretion of the Board of Directors.
The Board has nominated one (1) candidate to serve as Class 1 directors
(Jeff Schillen who is currently a Class 1 directors and whose term has now
expired) and two (2) candidates to serve as Class 2 Directors (James Lu and
Murray Scott, who are currently Class 2 Directors and whose terms have now
expired). The names and biographical summaries of the three (3) persons who have
been nominated by the Board of Directors to stand for election at the Annual
Meeting have been provided below for your information. The Board of Directors
has proposed that these persons be elected at the Annual Meeting to serve until
their Class next stands for election. The Proxies will be voted for the election
of the three (3) nominees listed below as directors of the Company unless
otherwise specified on the form provided. The vote of a majority of the capital
stock, present and constituting a quorum at the Annual Meeting, will be
necessary to elect the directors listed below. If, for any reasons, any of the
nominees shall be unable or unwilling to serve, the proxies will be voted for a
substitute nominee who will be designated by the Board of Directors at the
Annual meeting. Shareholders may abstain from voting by marking the appropriate
boxes on the enclosed Proxy. Abstentions shall be counted separately and shall
be used for purposes of calculating quorum.
BIOGRAPHICAL SUMMARIES
Class a Nominees (terms expires 1998)
Jeffrey I. Schillen (Class 1 Director) Mr. Schillen is Executive Vice
President of Sales and Marketing of the Company and has been a Director of the
Company since inception in April of 1986. Prior to the Acquisition, Mr. Schillen
was the President and Treasurer of the company since April 1986. From May 1984
to April 1986, Mr. Schillen was President and Chief Operating Officer of the
Music Corner Inc., a retail record, tape and video chain which he co-founded.
From 1974 to April 1984, Mr. Schillen founded and served as Vice President in
charge of purchasing, store openings and acquisitions of Platter Puss Records,
Inc., a retail record, tape and video chain. See 'EMPLOYMENT AGREEMENT.'
Class 2 Nominees (terms expires 1998)
James Lu (Class 2 Director) Mr. Lu has been a director of the Company and
Chairman of the Board of Directors since February 28, 1989. Mr. Lu was elected
as Chairman of the Board, Chief Executive Officer and Secretary of the Company
as of March 1, 1990. In July 1991, Mr. Lu was appointed to the additional
position of President. In order to involve other executives in the management of
the Company, Mr. Lu resigned in September 1991 as President and Chief operating
officer and Mr. Cheng was appointed to such positions. In May of 1995, Mr. Lu
assumed the position of President again due to the departure of Mr. Cheng from
the Company. Mr. Lu was President and Chief Executive Officer of the California
Subsidiary from 1985 to 1990. Mr. Lu received his B.S.I.E. degree form Chung
Yuen University Taiwan in 1969, his M.S.I.E. degree from the Illinois Institute
of Technology in 1972 and a Masters of Business Administration (M.B.A.) from
California State University in 1981.
Murray T. Scott (Class 2 Director) Mr. Scott was appointed as a director by
the Board of Directors in November 1993 when the Board was increased to seven
(7) members. Mr. Scott has been President and Chief Executive Officer of Gregg's
Furniture, a custom furniture building business in Victoria, Canada, since 1958.
His involvement with Gregg's Furniture today is currently in a consulting and
advisory capacity.
3
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are listed below,
followed by a brief description of their business experience during the past
five years.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- ----------------------------------
<S> <C> <C>
James K.T. Lu...................... 49 Chairman of The Board; Chief
Executive Officer; President;
Secretary and Director
Jeffrey I. Schillen................ 50 Executive Vice President Sales and
Marketing and Director
Murray T. Scott.................... 74 Director
</TABLE>
All directors hold office for terms of three (3) years and until the next
annal meeting of stockholders scheduled to vote on such class of Directors and
the election and qualification of their respective successors. Directors receive
no compensation for serving on the Board, except for reimbursement of reasonable
expenses incurred in attending meetings. Officers are elected annually by the
Board of Directors and, subject to existing employment agreements, serve at the
discretion of the Board.
Under the certificate of incorporation of the Company ('Certificate of
Incorporation'), the Board of Directors of the Company is divided into three (3)
classes, with each class to be elected by the shareholders every three years.
The Company's Board presently consists of three (3) directors: one (1) Class 1
director whose term expired in 1995 and two (2) Class 2 directors whose terms
expired in 1994.
BACKGROUND OF EXECUTIVE OFFICERS AND DIRECTORS
Jeffrey I. Schillen (Class 1 Director). Mr. Schillen is Executive Vice
President of Sales and Marketing of the Company and has been a Director of the
Company since inception in April of 1986. Prior to the Acquisition, Mr. Schillen
was the President and Treasurer of the Company since April 1986. From May 1984
to April 1986, Mr. Schillen was President and Chief Operating Officer of Music
Corner Inc., a retail record, tape and video chain which he co-founded. From
1974 to April 1984, Mr. Schillen founded and served as Vice President in charge
of purchasing, store openings and acquisitions of Platter Puss Records, Inc., a
retail record, tape and video chain.
James Lu (Class 2 Director). Mr. Lu has been a director of the Company and
Chairman of the Board of Directors since February 28, 1989. Mr. Lu was elected
as Chairman of the Board, Chief Executive Officer and Secretary of the Company
as of March 1, 1990. In July 1991, Mr. Lu was appointed to the additional
position of President. In order to involve other executives in the management of
the Company, Mr. Lu resigned in September 1991 as President and Chief Operating
Officer and Mr. Cheng was appointed to such positions. Mr. Lu was President and
Chief Executive Officer of the California Subsidiary from 1985 to 1990. In May
1995, Mr. Lu was appointed as President of the Company upon Mr. Cheng's
departure from the Company. Mr. Lu received his B.S.I.E. degree from Chung Yuen
University Taiwan in 1969, his M.S.I.E. degree from the Illinois Institute of
Technology in 1972 and a Masters of Business Administration (M.B.A.) from
California State University in 1981.
Murray T. Scott (Class 2 Director). Mr. Scott was appointed as a director
by the Board of Directors in November 1993 when the Board was increased to seven
(7) members. Mr. Scott has been the President and Chief Executive Officer of
Gregg's Furniture, a custom furniture building business in Victoria, Canada,
since 1958. His involvement with Gregg's Furniture today is currently in a
consulting and advisory capacity.
The Company has no standing audit, nominating or compensation committee, or
committees performing similar functions except with respect to the Company's
stock option plan. See 'RESTRICTED STOCK PLAN.' During the year ended March 31,
1996, the Company held two (2) Board meetings. No director attended less than
75% of such meetings. No director of the Company has resigned or declined to
stand for re-election due to a disagreement on any matter relating to the
Company's operations, policies or practices.
4
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------------- -------------------------- -------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARD OPTIONS/SARS PAYOUTS COMPENSATION
- --------------------------- ---- -------- ----- ------------ ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James Lu,
Chief Executive Officer.. 1995 $167,885 0 0 0 0 0 $ 37,290
1994 185,718 0 0 0 0 0 37,988
1993 166,000 0 0 0 0 0 42,495
Jeffrey I. Schillen,
Executive Vice
President................ 1995 $122,308 0 0 0 0 0 $ 19,631
1994 113,550 0 0 0 0 0 26,340
1993 106,500 0 0 0 0 0 28,219
</TABLE>
EMPLOYMENT AGREEMENTS
Mr. Lu entered into an employment agreement with the Company for a period
of ten (10) years commencing on January 1, 1991. Mr. Lu shall receive $150,000
per year, subject to annual adjustments. The Company also maintains two life
insurance policies on Mr. Lu, both of which total $1,500,000 and the $1,000,000
policy names the Company as beneficiary. Beginning June, 1992, the amount was
reduced to an aggregate of $1,000,000. The Company also pays Mr. Lu's medical
insurance premiums, and leasing and insurance payments for Mr. Lu's automobile,
aggregating $15,752.81 per annum.
The Company has an employment agreement with Jeffrey I. Schillen expiring
on December 31, 2000. Pursuant to the agreement, Mr. Schillen will receive an
annual salary of $90,000 subject to a consumer price index increase and a
discretionary bonus as determined by the Board of Directors which may not exceed
2% of the Company's annual pre-tax income from operations. In addition, the
Company maintains a $1,000,000 life insurance policy for the benefit of Mr.
Schillen's designated beneficiary.
None of the employment agreements which the Company have with any of the
executives, indicated above, provides for any specific compensation to such
individuals should their respective employment agreements be terminated prior to
expiration of the term of such agreements.
RESTRICTED STOCK PLAN
On May 25, 1989, the Company's directors and stockholders approved the
Company's 1989 restricted stock plan (the 'Restricted Plan') authorizing the
granting of shares of Common Stock. Pursuant to the Restricted Plan, up to
100,000 shares of Common Stock subject to certain restrictions, (the 'Restricted
Shares') could be granted to officers and other key employees of the Company
until May 2, 1994. The Board of Directors is responsible for determining the
individual who will be granted Restricted Shares, the consideration, if any, to
be paid by the grantee, and the terms and conditions of the Restricted Shares.
The terms and conditions of each grant of Restricted Shares need not be
identical to previous grants. No officer who serves as a director will
participate in the granting of Restricted Shares to himself.
On May 25,1989, the Board of Directors granted a total of 85,000 Restricted
Shares to certain officers of the Company. The foregoing Restricted Shares are
not transferable unless certain financial performance goals of the Company are
met. Such goals have been set based upon after-tax income of $350,000 for fiscal
1989; $600,000 for fiscal 1990 and $1,000,000 and for fiscal 1991. In the event
such income levels are not met in any year, one-third of each of the grantee's
Restricted Shares will be forfeited and returned to the Company. The Company did
not meet any of the financial performance goals. Accordingly, all of the
Restricted Shares have been forfeited as a result of the Company's failure to
meet the performance goals for fiscal 1989, 1990 and 1991, respectively.
STOCK OPTIONS
On October 12, 1988, the Company's directors and stockholders approved the
Company's 1988 Stock Option Plan (the 'Option Plan') authorizing the granting of
incentive options and non-qualified options. The incentive options are intended
to qualify under Section 422 of the Internal Revenue Code of 1986, as amended.
5
<PAGE>
Pursuant to the Option Plan, options to purchase up to 10,000 shares of Common
Stock may be granted to officers, directors and key employees of the Company.
The Stock Option Committee, consisting of Messrs. Lu and Schillen, is
responsible for determining the individuals who will be granted options, the
number of shares to be subject to each option, the option price per share, and
the exercise period of each option. The option price will not be less than the
fair market value of the company's Common Stock on the date the option is
granted. Options may be exercised by payment of Cash. No option will have a term
in excess of ten years.
As to any stockholder who owns 10% or more of the Company's Common Stock,
the option price per share of an incentive option will be no less than 110% of
the fair market value of the Company's Common Stock on the date the incentive
options are granted and such options shall not have a term in excess of five
years. No stock options have been granted to date.
2. RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon appointment by the Board of Directors of the Company, Moore Stephens,
P.C., independent certified public accountants ('Moore Stephens'), audited and
reported on the consolidated financial statements of the Company for its fiscal
year ended March 31,1995. The Board of Directors recommends ratification of
Moore Stephens as the auditors. A representative of Moore Stephens is expected
to be present at the annual Meeting.
Unless otherwise directed by the stockholder giving the proxy, the proxy
will be voted 'FOR' the ratification of the selection by the Board of Directors
of Moore Stephens as the Company's independent certified public accounts for
Fiscal 1996.
3. INCREASE AUTHORIZED COMMON STOCK OF THE COMPANY
The Board of Directors has voted to increase the authorized shares of
Common Stock from 15,000,000 shares to 100,000,000 shares, subject to the
approval of the majority of the stockholders of the Company. The board of
Directors believes that this increase is desirable for a number of reasons,
including but not limited to facilitating the Company's ability to effect growth
through future acquisitions and future financing.
To effect this increase in the authorized Common Stock of the Company,
shareholder approval is sought to amend the Company's Certificate of
Incorporation relating to the authorized capital stock with the following:
The Corporation shall be authorized to issue the following shares:
<TABLE>
<CAPTION>
NO. OF
CLASS SHARES PAR VALUE
- -------------------------------------------------- ------ ------------
<S> <C> <C>
Common............................................ 100,000,000 None
Preferred......................................... 5,000,000 None
</TABLE>
There are no present plans, understandings, arrangements or discussions for
the issuance of the additional shares of Common Sock or Preferred Stock that
would be authorized by the amendment.
The Board of Directors recommends that stockholders vote 'FOR' the
foregoing amendment to the Company's Certificate of incorporation to increase
the number of authorized shares of Common Stock from 15,000,000 to 100,000,000.
MISCELLANEOUS
REVOCATION OF PROXIES
If the Annual Meeting is adjourned, for whatever reason, the Three
Shareholders Matters shall be considered and voted upon by shareholders at the
subsequent 'adjourned or postponed meeting,' if any.
You may revoke your proxy at any time prior to its exercise by attending
the Annual Meeting and voting in person, although attendance at the Annual
Meeting will not in and of itself constitute revocation of a proxy, by giving
notice of revocation of your proxy at the Annual Meeting, or by delivering a
written notice of revocation or a duly executed proxy relating to the matters to
be considered at the Annual Meeting and bearing a later date to
6
<PAGE>
the Secretary of the Company at 16818 Marquardt Avenue, Cerritos, CA 90703.
Unless revoked in the manner set forth above, proxies on the form enclosed will
be voted at the Annual Meeting in accordance with your instructions.
ADDITIONAL AVAILABLE INFORMATION
The Company is subject to the informational filing requirement of the
Securities and Exchange Act of 1934, as amended (the 'Exchange Act'), and in
accordance therewith, the Company files periodic reports, proxy statements and
other information with the Commission under the Exchange Act relating to its
business, financial condition and other matters. The Company is required to
disclose in such proxy statements certain information as of particular dates,
concerning the Company's directors and officers, their remuneration, options
granted to them, the principal holders of the Company's Securities and any
material interests of such persons in transactions with the Company. Such
reports, proxy statements and other information may be inspected at the
Commission's office at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies
may be obtained on payment of the Commission's customary fees by writing to its
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549.
OTHER MATTERS
The Board of Directors of the Company does not intend to bring any other
matters before the Annual Meeting and does not know of any other matter that may
be brought before the Annual Meeting.
STOCKHOLDER PROPOSALS FOR THE 1997 ANNUAL MEETING
The date by which stockholder proposals for inclusion in the proxy
materials relating to the next Annual Meeting of Stockholders must be received
by the Company at its principal executive offices, Attention: James T.K. Lu,
Chairman of the Board, 16818 Marquardt Avenue, Cerritos, CA 90703, by December
1, 1996.
By Order of the Board of Directors of
DIAMOND ENTERTAINMENT CORPORATION
JAMES LU,
Chairman of the Board/Chief
Executive Officer/President and
Secretary
7
