LASER-PACIFIC MEDIA CORPORATION
809 N. Cahuenga Blvd.
Hollywood, California 90038
(323) 462-6266
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
June 28, 2000
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
the accompanying proxy by the Board of Directors of Laser-Pacific Media
Corporation, ("the Company"), a Delaware corporation. This proxy is for use at
the annual meeting of stockholders of the Company (the "Annual Meeting"). The
Annual Meeting is to be held at the Hollywood Roosevelt Hotel, 7000 Hollywood
Blvd., Hollywood, CA 90028 on June 28, 2000 at 3:00 p.m., and at any
adjournments thereof, for the purposes set forth in the attached Notice of
Annual Meeting of Stockholders.
All shares of common stock of the Company ("Common Stock") represented by a
properly completed proxy received in time for the Annual Meeting will be voted
by the proxy holders in accordance with the instructions contained therein. If
instructions are not given in the proxy, it will be voted "FOR" the election of
the directors nominated as set forth under "Election of Directors" below. With
respect to any other item of business that may come before the Annual Meeting,
the proxy holders will vote the proxy in accordance with their best judgment. At
the time of the mailing of this Proxy Statement, the Company was not aware of
any matters needing to be acted upon at the meeting except for those matters
discussed in this Proxy Statement.
Any stockholder who returns a proxy has the right to revoke it at any time
before it is exercised by attending the Annual Meeting and voting in person; or
by delivering a written statement to the Company, stating that the proxy is
revoked; or by executing and delivering to the Secretary of the Company a duly
executed proxy bearing a later date than the enclosed proxy.
This Proxy Statement, together with the accompanying proxy, is first being
mailed to the Company's stockholders, on or about May 30, 2000, to the Company's
stockholders of record at the close of business on May 19, 2000.
The Company's principal executive offices are located at 809 North Cahuenga
Boulevard, Hollywood, California 90038
SECURITIES
The Company has one class of stock outstanding, designated Common Stock,
with a par value of $.0001. Each share of Common Stock is entitled to one vote
on each matter to be voted on at the Annual Meeting. Only stockholders of record
as of the close of business on May 19, 2000 are entitled to notice of and to
vote at the Annual Meeting. As of the record date, May 19, 2000, there were
7,971,293 shares of Common stock outstanding.
A majority of the outstanding shares of Common Stock must be present in
person or by proxy at the Annual Meeting to constitute a quorum for the
transaction of business. Abstentions and other "non-votes" are counted as
present for establishing a quorum. A broker non-vote occurs on a proposal where
a broker is not permitted to vote on the matter absent instructions from the
beneficial owners of the shares and no instructions are given.
<PAGE>
ELECTION OF DIRECTORS
The Company is incorporated in the State of Delaware and neither the laws
of that state nor the Certificate of Incorporation of the Company requires
cumulative voting in the election of the Board of Directors. If a quorum is
present nominees receiving the highest number of affirmative votes cast, up to
the number of directors to be elected, will be elected as directors. Abstentions
and broker non-votes have no effect on the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES
NAMED. PROXIES RETURNED TO THE COMPANY WILL BE VOTED "FOR" THE NOMINEES NAMED
UNLESS OTHERWISE INSTRUCTED.
Nominees
Four directors are to be elected at the Annual Meeting, each to hold office
until the next annual meeting and until his respective successor is elected and
qualified. The Board of Directors has nominated for election as directors the
four persons named below. All of these nominees have consented to being named
herein and have indicated their intention to serve as directors of the Company,
if elected. If any of such nominees should be unable or should decline to serve,
the discretionary authority provided in the proxies received will be exercised
to vote for a substitute nominee or nominees of the Board of Directors, unless
otherwise instructed. Unless otherwise directed in the accompanying proxy, the
persons named therein will vote for the election of the four nominees listed
below. The Board of Directors has no reason to believe that any substitute
nominee will be required.
The following table sets forth certain information as of April 30, 2000,
with respect to the Board's nominees:
<TABLE>
<CAPTION>
Director
Name Age Since Position with Company
<S> <C> <C> <C>
James R. Parks 49 1990 Chairman of the Board and Chief Executive Officer
Emory M. Cohen 57 1990 President, Chief Operating Officer and Director
Thomas D. Gordon (1) 51 1999 Director
Craig Jacobson 47 1999 Director
(1) Member of the Audit Committee.
</TABLE>
<PAGE>
BOARD OF DIRECTORS
Biographical Information on Current Directors
The following biographical information is furnished with respect to the
Company's directors:
James R. Parks has been Chairman of the Board and Chief Executive
Officer of the Company since March of 1994 and a director since the inception of
the Company in 1990. Since 1978, Mr. Parks has been a partner of Parks, Palmer,
Turner and Yemenedjian, certified public accountants. On January 1, 1999, Mr.
Parks also became Managing Director of Parks, Palmer Business Services, Inc. In
1995, a partnership in which Mr. Parks was an officer of the corporate general
partner and which held real property, filed for reorganization under Chapter 11.
In 1996, the reorganization was dismissed and the real property was sold.
Emory M. Cohen is the Company's President and Chief Operating Officer
and a director and has held such positions since the inception of the Company in
1990. Mr. Cohen received a motion picture Academy Award in 1978 for inventing a
system that applies electronic and videotape technology to motion picture
post-production sound recording, and an Emmy Award in 1989 in connection with
the Company's Electronic Laboratory(TM).
Thomas D. Gordon has served as a director of the Company since July
1999. Since 1994 Mr. Gordon has served as the Chief Executive Officer of the
Cedars-Sinai Medical Care Foundation, Cedars-Sinai Health System Medical Network
Services and Medical Group of Beverly Hills, Inc. From 1989 to 1994, Mr. Gordon
served as the Chief Executive Officer of the Medical Group of Beverly Hills. In
addition, Mr. Gordon serves as Assistant Clinical Professor for the Graduate
Program in Health Care Administration and Institute for Diversity Program at the
University of Southern California.
Craig Jacobson has served as a director of the Company since December
1999. Mr. Jacobson is a partner with the law firm Hansen, Jacobson, Teller,
Hoberman, Newman, Warren, Hertz and Goldring, LLP, which he helped to found in
1987. The firm specializes in entertainment law for the motion picture and
television industry.
Ronald Zimmerman has served as a director of the Company since October
1996. Mr. Zimmerman is a self-employed financial advisor and businessman. From
1986 to 1994, he served as Director, Senior Vice President and Chief Financial
Officer of the Todd-AO Corporation.
Committees
The Audit Committee is the only standing committee of the Board of
Directors. The Audit Committee did not have a formal meeting during 1999. In
February 2000, the Audit Committee met with the independent accountants to
discuss the year ended December 31, 1999. The principal duties of the Audit
Committee are to approve selection and engagement of independent auditors and
review with them the plan and scope of their audit for each year, the results of
such audit when completed and their fees for services performed. Mr. Zimmerman
and Mr. Gordon comprise the Audit Committee.
The Company's Stock Option Plan is administered by the Board of Directors.
Attendance and Compensation
During the year ended December 31, 1999, the Board of Directors met
three times. Each of the directors attended all of the meetings of the Board of
Directors. Directors who are not officers or employees of the Company receive
$1,000 per month. Ronald Zimmerman was granted options to purchase 10,000 shares
of Common Stock, and Thomas Gordon was granted options to purchase 20,000 shares
of Common Stock, each with an exercise price of $9.94, on December 22, 1999.
<PAGE>
EXECUTIVE OFFICERS
Officers are appointed by the Board of Directors of the Company.
Information with respect to Messrs. James R. Parks (Chairman of the Board and
Chief Executive Officer) and Emory M. Cohen (President and Chief Operating
Officer) is set forth on page three. Information with respect to Leon D.
Silverman, Robert McClain and Randolph D. Blim as of April 30, 2000 is set forth
below:
Name Age Position with Company
Leon D. Silverman 45 Executive Vice President
Randolph D. Blim 53 Senior Vice President
Robert McClain 52 Chief Financial Officer
Vice President and Secretary
Leon D. Silverman has served as Executive Vice President since the
inception of the Company in 1990. Mr. Silverman is a Founding Member of the
Technology Council of the Television and Motion Picture Industry and currently
serves as Executive Vice President of its Executive Committee. In addition, he
currently serves as President of the Southern California Chapter of the
International Teleproduction Society.
Randolph D. Blim has been the Senior Vice President of Engineering since
the inception of the Company in 1990. Mr. Blim was awarded an Emmy in 1989 for
Outstanding Achievement in Engineering Development in connection with the
Company's Electronic Laboratory(TM).
Robert McClain, Certified Public Accountant, became Chief Financial
Officer in November 1994. He was employed by Betson Pacific as Chief Financial
Officer and Director of Operations from 1992 through November 1994 when he left
to join the Company.
No family relationships exist between any of the officers or directors
of the Company.
<PAGE>
REPORT OF THE BOARD OF DIRECTORS ON
EXECUTIVE COMPENSATION
The Board of Directors is responsible for reviewing benefits and
compensation for all of the Company's officers. The Board's executive
compensation policies are designed to enhance the financial performance of the
Company and stockholder value.
The executive compensation program is viewed in total considering all
of the component parts: base salary, bonus and long-term incentive compensation
in the form of stock options. In evaluating the performance of and in setting
the salary and incentive compensation of the executive officers, the Board
considers, in the aggregate, the following factors: industry factors, taking
into account compensation paid by competitors and the amount required to be paid
by the Company to retain key employees; the progress made by the Company in the
growth of its business; the performance of the Company's stock; and the
Company's overall financial performance.
The Chief Executive Officer's salary was set at $208,000 annually in
March 1994, and was based on the criteria discussed in the preceding paragraph
and has not changed. Mr. Parks chose to forego the performance bonus he was
entitled to in 1999. Mr. Parks as a major stockholder of the corporation
believes that most of his compensation incentive is derived from increasing the
share value of the Company's stock which is directly related to the Company's
performance.
The Board of Directors awarded a performance bonus based on the
Company's superior operating performance in 1999 of $60,000 to Emory M. Cohen
and performance bonuses of $35,000 each to Randolph D. Blim, Leon D. Silverman,
and Robert McClain for the fiscal year ended December 31, 1999. Options to
purchase shares of the Company's Common Stock at $9.94 were granted to James R.
Parks, Emory M. Cohen, Leon D. Silverman, Randolph D. Blim, and Robert McClain
on December 22, 1999. The number of options granted is detailed on the schedule
on page 9 (nine) of this proxy statement.
Following is a summary of the current compensation of the Chief
Executive Officer of the Company and the four other most highly compensated
executive officers of the Company.
James R. Parks is currently employed by the Company at an annual salary
of $208,000. Mr. Parks is not employed pursuant to a written agreement, but
serves at the discretion of and on terms determined by the Board of
Directors. Mr. Parks provides services to the Company on an as-needed basis.
Emory M. Cohen has a five-year employment agreement with the Company,
entered into as of May 15, 1990, which has no termination date but is terminable
upon five years' written notice or upon 30 days notice for cause, as defined.
Under the terms of the agreement, Mr. Cohen is entitled to a minimum annual
salary of $350,000, subject to adjustment if the cost of living increases more
than 10 percent in any year, with a bonus in an amount to be determined by the
Board of Directors. In addition, he is entitled to other specified benefits such
as an automobile, reimbursement of expenses, and life, health, and disability
insurance benefits. Commencing on the effective date of a change of control of
the Company, if; either the Company terminates the executive's employment
contract, other than for specified reasons, or the executive elects to terminate
his employment within nine months of the change in control, then the executive
shall, on the date of either termination, receive a lump sum payment of three
times his annual compensation. In the event payments are required as a result of
a change of control, then no further compensation shall be payable to the
executive under this agreement.
Leon D. Silverman is currently employed by the Company at an annual
salary of $275,000, and is entitled to other specified benefits such as an
automobile allowance, reimbursement of expenses, and life, health, and
disability insurance benefits. Mr. Silverman has no written agreement with the
Company and serves at the discretion of the Board of Directors.
Randolph D. Blim is employed by the Company pursuant to an employment
agreement that expires on July 23, 2000. The agreement requires that the
executive be given 120 days written notice prior to the date of termination. If
a 120-day written notice is not given by either party, prior to the expiration
of the current agreement, and in all subsequent years, the agreement will be
renewed for one additional year. The agreement is terminable upon 30 days notice
for cause as defined in the agreement. Mr. Blim is currently entitled to an
annual salary of $213,000 with required yearly increases of 3% over the term of
the agreement, with an annual bonus in an amount to be determined by the Board
of Directors. He is also entitled to other specified benefits such as an
automobile allowance, reimbursement of expenses, and life, health, and
disability insurance benefits.
Robert McClain is currently employed by the Company pursuant to an
employment agreement that expires July 31, 2002. The agreement requires that the
executive be given 120 days written notice prior to the date of termination. If
a 120-day written notice is not given by either party, prior to the expiration
of the current agreement, and in all subsequent years, the agreement will be
renewed for one additional year. The agreement is terminable upon 30 days notice
for cause as defined in the agreement. Mr. McClain is currently entitled to an
annual salary of $185,000 with an annual bonus in an amount to be determined by
the Board of Directors. He is also entitled to other specified benefits such as
an automobile allowance, reimbursement of expenses, and life, health, and
disability insurance benefits.
The SEC requires public companies to state their compensation policies
with respect to federal income tax laws that limit to $1,000,000 the
deductibility of compensation paid to the executive officers named in this proxy
statement. In light of the current level of compensation of the Company's named
executive officers, the Board of Directors of the Company has not adopted a
policy with respect to the deductibility limit, but will adopt such a policy
should it become relevant.
SUBMITTED BY THE BOARD OF DIRECTORS
OF LASER-PACIFIC MEDIA CORPORATION
/s/ James R. Parks
James R. Parks, Chairman
/s/ Emory M. Cohen
Emory M. Cohen
/s/ Thomas D. Gordon
Thomas D. Gordon
/s/ Craig A. Jacobson
Craig A. Jacobson
/s/ Ronald Zimmerman
Ronald Zimmerman
The Board of Directors does not have a compensation committee. During
fiscal year ended 1999, two members of the Board, each of whom participated in
decisions regarding executive officer compensation, were executive officers of
the Company, James R. Parks and Emory M. Cohen. There are no interlocks between
the Company and other entities involving the Company's executive officers and
Board members who serve as executive officers or Board members of such other
entities.
<PAGE>
SUMMARY COMPENSATION TABLE
The table below shows, for the years ended December 31, 1997, 1998 and
1999, the annual and long-term compensation that was paid or accrued for those
years to the Chief Executive Officer and the four most highly compensated
executive officers.
<TABLE>
<CAPTION>
Long Term Compensation
---------------------------------------
Annual Compensation Awards
Payouts
------------------------------------------------------------------------------
Other
Name Annual Restricted Securities
And Compen- Stock Underlying LTIP
Principal sation (1) Award(s) Options Payouts
Position Year Salary ($) Bonus ($) ($) ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
James R. Parks 1997 208,000 -0- -0- -0- 31,000 -0-
CEO 1998 208,000 25,000 -0- -0- -0- -0-
1999 208,000 -0- -0- -0- 10,000 -0-
Emory M. Cohen 1997 * 402,000 -0- 18,488 -0- 37,600 -0-
President and COO 1998 * 468,491 25,000 21,759 -0- -0- -0-
1999 350,000 60,000 (2) 31,427 -0- 85,000 -0-
Leon D. Silverman 1997 240,506 -0- 8,198 -0- 26,800 -0-
Executive Vice President 1998 266,731 25,000 8,223 -0- -0- -0-
1999 274,080 35,000 *(3) 46,439 -0- 50,000 -0-
Randolph D. Blim 1997 208,105 -0- 4,504 -0- 26,200 -0-
Senior Vice President 1998 * 281,883 25,000 4,504 -0- -0- -0-
1999 205,797 35,000 (4) 19,504 -0- 50,000 -0-
Robert McClain 1997 159,792 -0- 13,000 -0- 23,900 -0-
CFO, Vice President 1998 159,006 25,000 9,600 -0- -0- -0-
and Secretary 1999 172,773 35,000 (5) 17,918 -0- 50,000 -0-
*Payment of compensation includes payments deferred from prior periods.
(1) Other annual compensation includes the value of additional benefits and automobiles provided to the employee.
(2) Includes auto expense reimbursement of $12,000.
(3) Includes auto expense reimbursement of $35,035.
(4) Includes auto expense reimbursement of $15,000.
(5) Includes auto expense reimbursement of $16,800.
</TABLE>
<PAGE>
STOCK OPTIONS
The Company's 1997 incentive stock option Securities plan, as amended,
provides for an aggregate of Underlying 1,000,000 shares that may be purchased
pursuant to Unexercised incentive or nonqualified stock options granted to
Options officers, directors or key employees at prices equal at to or greater
than the fair market value at the date Fiscal of grant. Options currently expire
no later than 10 Year-End years from the grant date and generally vest at the
date of grant. All options outstanding under the plan were fully vested at
December 31, 1999. Under a prior stock option plan, which has expired, 97,781
stock options remain outstanding and were exercisable at December 31, 1999.
At December 31, 1999, under all plans, options with respect to 488,181
shares of Common Stock were outstanding and exercisable and 219,200 shares
remained available for future grant.
No stock options were granted under the Stock Option Plan during the year
ended December 31, 1998.
Aggregated Option Exercises In Fiscal Year And Fiscal Year-End Option Values
The following table sets forth select information relating to stock options
exercised during 1999 and outstanding as of December 31, 1999, held by the Chief
Executive Officer and the four most highly compensated executive officers.
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised Options at In-The-Money Options
Fiscal Year-End at Fiscal Year-End (1)
---------------------- ------------------------
Shares
Acquired Exercisable / Exercisable /
Name on Exercise Value Realized Unexercisable Unexercisable
- ---- ----------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
James R. Parks 31,000 $ 250,868 10,000 / 0 $1,225 / 0
Emory M. Cohen 0 $ 0 154,231 / 0 $619,699 / 0
Leon D. Silverman 0 $ 0 72,594 / 0 $176,992 / 0
Randolph D. Blim 26,200 $194,011 63,556 / 0 $108,642 / 0
Robert McClain 0 $ 0 80,000 / 0 $293,000 / 0
</TABLE>
(1) These amounts represent the difference between the exercise price of
the in-the-money options and the market price of the Company's Common Stock on
December 31, 1999 (the last trading day of 1999). The closing price of the
Company's Common Stock on that day on the Nasdaq National Market was $10.63.
Options are in-the-money if the market value of the shares covered thereby is
greater than the option exercise price.
<PAGE>
Option Grants in Last Fiscal Year
The following table set forth certain information with respect to
options to purchase Common Stock granted during the year ended December 31, 1999
to each of the named executive officers.
<TABLE>
<CAPTION>
Individual Grants
- ----------------------------------------------------------------------------------------------------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise Grant Date
Options Employees in Price Per Expiration Present Value
Name Granted (#) Fiscal Year Share Date (1)
---- --------------- -------------- ----------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
James R. Parks 10,000 3.4% $9.94 12/22/09 $3,000
Emory M. Cohen 85,000 28.8% $9.94 12/22/09 $25,500
Leon D. Silverman 50,000 16.9% $9.94 12/22/09 $15,000
Randolph D. Blim 50,000 16.9% $9.94 12/22/09 $15,000
Robert McClain 50,000 16.9% $9.94 12/22/09 $15,000
</TABLE>
(1) Fair value of common stock options is estimated at the date of
grant using a Black-Scholes option pricing model with the following weighted
average assumptions:
1999
---------------
Expected life (in years) 10.00
Risk-free interest rate 6.25
Volatility .60
Dividend yield --
Fair value - grant date .30
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. Because the Company's options have characteristics significantly
different from those of trade options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in the opinion
of management, the existing models do not necessarily provide a reliable single
measure of the fair value of its options.
<PAGE>
STOCK PERFORMANCE TABLE AND GRAPH
The following Indexed Returns Performance Table and Graph compares the
Company's cumulative total stockholder return on its Common Stock for the period
from January 1, 1995 through December 31, 1999, with the cumulative return of
the Standard and Poor's 500 Stock Index and a peer group of companies, the
Standard and Poor's Entertainment Index, neither of which includes the Company.
The Performance Graph assumes $100 invested on January 1, 1995 in the Company's
Common Stock, the S&P Entertainment Index and the S&P 500 Index. The comparisons
in the graph are required by the Securities and Exchange Commission and are not
intended to forecast or be indicative of possible future performance of the
Company's Common Stock.
<TABLE>
<CAPTION>
Indexed Returns
Base
Period
Company/Index Dec 94 Dec 95 Dec 96 Dec 97 Dec 98 Dec 99
- ----------------------------------------- ------------ ------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Laser-Pacific Media Corp. 100 100.00 83.33 24.93 320.80 1341.60
S&P 500 Index 100 137.58 169.17 225.60 290.08 351.12
S&P Entertainment-500 100 120.14 121.99 178.00 241.16 282.18
</TABLE>
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to those persons
known by the Company to own beneficially more than 5% of the Company's Common
Stock as of April 15, 2000. On April 15, 2000 there were 7,720,393 shares of the
Company's Common Stock outstanding. Except as otherwise noted, and subject to
applicable community property and similar laws, each person listed has sole
voting power (if applicable) and investment discretion with respect to the
securities shown as beneficially owned. All information with respect to
beneficial ownership is based on filings made by the respective beneficial
owners with the Securities and Exchange Commission or information provided to
the Company by such beneficial owners.
Name and Address Amount and Nature of Percent of
Of Beneficial Owner Beneficial Ownership(1) Class(1)
James R. Parks (2) 584,254 7.32%
1990 South Bundy Drive
Los Angeles, California 90025
McCrae Holdings Inc. 512,993 6.64%
C/O Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
(1) For purposes of calculating each person's percentage, shares that may be
acquired within 60 days upon exercise of warrants or stock options have
been treated as outstanding.
(2) Includes 164,590 shares of Common Stock held by partnerships in which Mr.
Parks is a partner, 250,000 shares issuable upon the exercise of
outstanding warrants held by partnerships in which Mr. Parks is a partner,
and 10,000 shares issuable upon the exercise of options held by Mr. Parks.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND DIRECTORS
The following table sets forth information with respect to the beneficial
ownership of the Company's common stock as of April 15, 2000 by each of the
Company's directors, the Company's chief executive officer and the four other
most highly compensated executive officers of the Company, and by all of the
Company's executive officers and directors as a group. On April 15, 2000 there
were 7,720,393 shares of the Company's Common Stock outstanding. Except as
otherwise noted, and subject to applicable community property and similar laws,
each person listed has sole voting power (if applicable) and investment
discretion with respect to the securities shown as beneficially owned. All
information with respect to beneficial ownership is based on filings made by the
respective beneficial owners with the Securities and Exchange Commission or
information provided to the Company by such beneficial owners.
Name and Address Amount and Nature of Percent of
Of Beneficial Owner Beneficial Ownership(1) Class(1)
James R. Parks (2) 584,254 7.32%
Emory M. Cohen (3) 291,797 3.74%
Leon D. Silverman (4) 146,254 1.88%
Randolph D. Blim (5) 100,616 1.29%
Robert McClain (6) 94,100 1.21%
Thomas Gordon (7) 20,000 *
Ronald Zimmerman (8) 10,000 *
All Directors and Executive 1,247,021 15.82%
Officers as a
Group (7 persons) (9)
* Less than one percent.
(1) For the purposes of calculating each person's percentage and that of all
officers and directors as a group, shares that may be acquired within 60
days upon the exercise of warrants, stock options have been treated as
outstanding.
(2) Includes 10,000 shares issuable upon exercise of stock options, and also
includes 164,590 shares of Common Stock held by partnerships in which Mr.
Parks is a partner and 250,000 shares issuable upon the exercise of
outstanding warrants held by partnerships in which Mr. Parks is a partner.
(3) Includes 85,000 shares issuable upon exercise of stock options.
(4) Includes 72,594 shares issuable upon exercise of stock options.
(5) Includes 63,556 shares issuable upon exercise of stock options.
(6) Includes 80,000 shares issuable upon exercise of stock options.
(7) Includes 20,000 shares issuable upon exercise of stock options.
(8) Includes 10,000 shares issuable upon exercise of stock options.
(9) Includes 341,150 shares issuable on exercise of stock options
and 250,000 shares issuable upon exercise of warrants.
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of Forms 3 and 4 and any amendments thereto
furnished to the Company pursuant to Rule 16a-3 (e) under the Securities
Exchange Act of 1934 (the "Exchange Act"), or representations that no Form 5s
were required, the Company believes that with respect to the year ended December
31, 1999, its officers, directors and beneficial owners of more than 10% of its
shares of Common Stock timely complied with all applicable Section 16 (a) filing
requirements under the Exchange Act.
CERTAIN TRANSACTIONS
James R. Parks, Chairman of the Board and Chief Executive Officer of the
Company, is partner of Parks, Palmer, Turner & Yemenidjian (PPTY), an accounting
firm. On January 1, 1999, Mr. Parks also became Managing Director of Parks,
Palmer Business Services, Inc., which provides tax accounting and management
consulting services to the Company. Parks, Palmer Business Services, Inc.'s
billings for the year ended December 31, 1999 were approximately $55,000.
In July 1997, the Company issued $1,000,000 of short-term Installment
(Fixed Rate) Line of Credit Notes, Series 1997 to 35 Lake Avenue, a California
limited partnership. James R. Parks, the Company's, Chief Executive Officer, is
a partner in 35 Lake Avenue. The principal balance of the Notes bore interest at
the rate of fourteen percent (14%) per annum. The accrued interest on the
outstanding principal was payable on September 30, 1997, December 31, 1997,
January 30, 1998, February 28, 1998 and March 30, 1998. The Company granted 35
Lake Avenue warrants to purchase 250,000 shares of the Company's common stock at
the exercise price of $1.00 per share. In January 1998, 35 Lake Avenue agreed to
amend the terms of the short-term Installment Line of Credit Notes extending the
due date from March 30, 1998 until November 30, 1998. In consideration for the
extension of the principal payments the expiration date of the warrants was
extended for two additional years. On May 15, 1998, the outstanding principal
balance on the notes was paid in full.
RELATIONSHIP WITH INDEPENDENT AUDITORS
KPMG LLP has been the Company's independent auditors since the
Company's inception. Audit services performed by KPMG LLP in the fiscal year
ended December 31, 1999, included the examination of, and reporting on, the
annual consolidated financial statements of the Company, periodic discussions
with management concerning accounting and reporting matters, and assistance and
consultation in connection with filings with the Securities and Exchange
Commission. The Board of Directors has retained KPMG LLP as the Company's
independent accountants for the fiscal year ended December 31, 2000. A
representative of KPMG LLP is expected to be present at the meeting. The
representative will have the opportunity to make a statement and is expected to
be available to respond to appropriate questions.
<PAGE>
STOCKHOLDER PROPOSALS
Any proposal of a stockholder intended to be presented at the Company's
2001 Annual Meeting of Stockholders must be received by the Company at its
principal executive offices for inclusion in the proxy statement and proxy card
for that meeting pursuant to Rule 14a-8, under the Securities Exchange Act of
1934, as amended, no later than January 31, 2001. Under Rule 14a-4 promulgated
under the Securities Exchange Act of 1934, as amended, the Company may exercise
discretionary voting authority at the 2001 Annual Meeting of Stockholders under
proxies it solicits to vote on a proposal made by a stockholder that the
stockholder does not seek to include in the Company's proxy statement pursuant
to Rule 14a-8, unless the Company is notified about the proposal no later than
April 17, 2001, and the stockholder satisfies the other requirements of Rule
14a-4(c).
PROXY SOLICITATION
The solicitation of proxies will be by mail. Certain officers, executives
and regular employees of the Company (without additional compensation) may
solicit proxies by telephone, telegraph, mail or personal interviews, and
arrangements will be made with banks, brokerage firms and others to forward
proxy materials to all holders of shares of Common Stock. The total cost of such
solicitation will be borne by the Company and will include reimbursement to
banks, brokerage firms and others for their reasonable expenses in forwarding
this Proxy Statement and the accompanying materials regarding the Annual Meeting
to stockholders.
OTHER MATTERS
The only business that the Board of Directors intends to act upon at the
Annual Meeting consists of the matters set forth in this proxy statement, and
the Board of Directors knows of no other matters that will be acted on by any
person or group. However, if any other matter properly comes before the Annual
Meeting, the proxy holders will vote the proxies thereon in accordance with
their best judgment.
ANNUAL REPORT TO STOCKHOLDERS
The Company's 1999 Report on Form 10-K, which comprises the Annual Report
to Shareholders, is being mailed to the stockholders along with this Proxy
Statement. The Annual Report is not to be considered part of the soliciting
material.
By Order of the Board of Directors
Hollywood, California /s/ Robert McClain
April 28, 2000 Robert McClain, Secretary
