SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 section 240.14a-11(c) or section 240.14a-12
COMMISSION FILE NO. 000-19577
Harmony Holdings, Inc.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] 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:
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
1) Amount Previously Paid.
2) Form, Schedule or Registration Statement No.
3) Filing Party.
4) Date Filed.
<PAGE>
HARMONY HOLDINGS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
December 17, 1997
The Annual Meeting of Stockholders of Harmony Holdings, Inc. (the
"Company") will be held at the Summit Hotel Bel Air, 11461 Sunset Blvd, Los
Angeles, California, on Tuesday, January 13,1998, at 2:30 p.m., P.S.T., for the
following purposes:
1. To elect four Directors to serve until the next Annual Meeting
of Stockholders and until their successors are duly elected
and qualified.
2. To ratify and approve the appointment of BDO Seidman LLP as
the Company's Independent Public Accountants.
3. To transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.
Stockholders of record at the close of business on December 15, 1997
(the "Record Date") are entitled to notice of, and to vote at, the Annual
Meeting or any adjournment thereof.
If you cannot attend the Annual Meeting in person, please date and
execute the accompanying Proxy and return it promptly to the Company. If you
attend the Annual Meeting, you may revoke your Proxy and vote in person if you
desire to do so, but attendance at the Annual Meeting does not of itself serve
to revoke your Proxy.
By Order of the Board of Directors:
Christopher T. Dahl
Chairman of the Board
<PAGE>
HARMONY HOLDINGS, INC.
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished to the holders of common stock, $.01
par value per share (the "Common Stock"), of Harmony Holdings, Inc. (the
"Company") in connection with the solicitation of Proxies by and on behalf of
the Board of Directors of the Company (sometimes referred to herein as the
"Board") for use at the Annual Meeting of Stockholders to be held on Tuesday
January 13 ,1998 (the "Annual Meeting"). A form of Proxy for use at the Annual
Meeting is also enclosed (the "Proxy"). Any such Proxy may be revoked by a
stockholder at any time before it is exercised by either giving written notice
of such revocation to Lance W. Riley, Esq., the Secretary of the Company or
submitting a later-dated Proxy to the Company prior to the Annual Meeting. A
stockholder attending the Annual Meeting may revoke his Proxy and vote in person
if he desires to do so, but attendance at the Annual Meeting will not of itself
revoke the Proxy.
The Company's corporate office is located at 1990 Westwood Boulevard,
#310, Los Angeles, California 90025. The Company's telephone number is (310)
446-7700.
Proxy materials are being mailed to stockholders by the management of
the Company on or about December 17, 1997. The solicitation of proxies on behalf
of the Company may be made by mail, telephone or telegram by the officers or
regular employees of the Company, who will receive no additional compensation
therefor. Arrangements will also be made with brokerage houses, custodians,
nominees and fiduciaries for the forwarding of proxy materials to the beneficial
owners of Common Stock held of record by such persons, and the Company will
reimburse such brokerage houses, custodians, nominees and fiduciaries for
reasonable out-of-pocket expenses incurred by them in connection therewith. The
entire expense of solicitation, including the cost of preparing, assembling and
mailing the proxy materials, will be borne by the Company.
The purposes of the Annual Meeting of Stockholders are (1) to elect a
Board of Directors to serve until the next Annual Meeting of Stockholders and
(2) to ratify and approve BDO Seidman, LLP, as the Company's independent public
accountants until the next annual meeting of stockholders. The Company is not
aware at this time of any other matters that will come before the Annual
Meeting. If any other matters properly come before the Annual Meeting, it is the
intention of the persons designated as proxies to vote in accordance with their
judgment on such matters. Shares represented by executed and unrevoked Proxies
will be voted in accordance with instructions contained therein or, in the
absence of such instructions, in accordance with the recommendations of the
Board of Directors.
The holders of a majority of the shares of Common Stock of the Company
present in person or by proxy and entitled to vote will constitute a quorum at
the Annual Meeting. The affirmative vote of the majority of shares present in
person or represented by proxy at the Annual Meeting and entitled to vote on the
subject matter will be the act of the stockholders, except with respect to the
election of directors as to which the four nominees receiving the highest number
of votes will be elected. Abstentions and broker non-votes (which occur if a
broker or other nominee does not have discretionary authority and has not
received voting instructions from the beneficial owners with respect to the
particular item) will be counted for the purposes of determining the presence or
absence of a quorum for the transaction of business. For the purposes of
determining whether the directors have been elected, abstentions and broker
non-votes will have no effect. As to all other matters that come before the
Annual Meeting, abstentions will have the effect of a negative vote and broker
non-votes are not taken into account and have no impact.
1
<PAGE>
At December 15, 1997, the record date for the Annual Meeting (the
"Record Date"), there were 6,487,429 shares of Common Stock outstanding. Each
share of Common Stock is entitled to one vote on all matters.
Proposals by Stockholders
Any proposals by stockholders of the Company intended to be presented
at the 1999 Annual Meeting of Stockholders must be received by the Company for
inclusion in the Company's Proxy Statement and form of Proxy by August 17, 1998.
1. Election Of Directors
Nominees for Director
At the Annual Meeting, four Directors are to be elected. The Bylaws of
the Company permit the Board to determine the number of Directors of the Company
and currently the authorized number of directors is four. Unless other
instructions are specified, the enclosed Proxy will be voted in favor of the
four current directors, as named below, to serve until the next annual meeting
of stockholders and until their successors shall have been duly elected and
qualified. In the event any of the nominees shall be unable to serve as a
Director, it is the intention of the persons designated as proxies to vote for
substitutes selected by the Board. The Board has no reason to believe that any
of the nominees named below will be unable to serve if elected.
<TABLE>
<CAPTION>
Name Age Position with the Company
<S> <C> <C>
Christopher T. Dahl 54 Chairman of the Board and Chief Executive
Officer
Richard W. Perkins 66 Director
William E. Cameron 52 Director
William M. Toles 50 Director
</TABLE>
The foregoing directors were elected on July 22, 1997 in connection
with the acquisition of 1,369,231 shares of Common Stock together
options to purchase an additional 550,000 shares of Common Stock by
Children=s Broadcasting Corporation.
2
<PAGE>
Directors and Executive Officers
The following table sets forth certain information with respect to each of the
current Directors and executive officers of the Company and the Company's
principal subsidiaries:
<TABLE>
<CAPTION>
Name Age Position with the Company
<S> <C> <C>
Christopher T. Dahl 54 Chairman of the Board and Chief Executive
Officer
Brian Rackohn 37 Chief Financial Officer
Stephen Oakes 42 President of Curious Pictures, Inc.
Elizabeth Silver 36 President of The End, Inc.
Rick Bieber 42 President of Harmony Pictures, Inc.
Richard W. Perkins 66 Director
William E. Cameron 52 Director
William M. Toles 50 Director
</TABLE>
Christopher T. Dahl has been President and Chairman of the Board of the
Company since July 22,1997. Effective November 3, 1997 he was appointed Chief
Executive Officer and resigned as President. Since its inception in February
1990, Mr. Dahl has been the President, Chief Executive Officer and Chairman of
the Board of Directors of Children=s Broadcasting Corporation (ACBC@), the
country=s premier radio network devoted to programming for children. He is also
Chairman and Chief Executive Officer of Community Airwaves Corporation, a
company that owns and operates radio stations in the Midwest and Hawaii.
Brian Rackohn has been the Chief Financial Officer of the Company
since March 1994 and Secretary from December 1, 1995 until July 22, 1997.
Previously, Mr. Rackohn served for five years as the General Manager and Chief
Financial Officer of Superior Stamp & Coin Co., Inc. of Beverly Hills,
California.
Stephen Oakes has been President of Curious Pictures Corporation since
January 1993. Prior to 1993, Mr. Oakes founded and operated Broadcast Arts in
1981, a company engaged in television commercial production. He has directed
over 270 mixed-media commercials, was creative director and producer for the
original season of "Pee-Wee's Playhouse" for CBS, and was designer, director or
producer of on-air graphics and program openings for networks and cable groups,
including CBS, MTV, HBO, Cinemax and Showtime.
Elizabeth Silver has been President of The End, Inc. since April 1993.
Ms. Silver founded The End, Inc. along with another individual in March 1991.
Previously, Ms. Silver headed several major production companies' music video
divisions. Ms. Silver has over a decade of musical film production and
programming experience.
Rick Bieber has served as President of Harmony Pictures, Inc., since
February 1997. From 1992 to 1997, Mr. Bieber served as President of Rick Bieber
Productions, located on the Twentieth Century Fox lot, during which time he
additionally acted as President of Fox West Pictures, a unit of Fox, Inc.,
assisting in the launch of Fox's weekly movie night.
3
<PAGE>
Richard W. Perkins has been a Director of the Company since July 22,
1997. For more than five years, Mr. Perkins has been President and Chief
Executive Officer of Perkins Capital Management, Inc., a registered investment
advisor. Mr. Perkins is a director of the following public companies: CBC;
Bio-Vascular, Inc.; CNS, Inc.; LifeCore Biomedical, Inc.; Nortech Systems, Inc.;
Eagle Pacific Industries, Inc.; Quantech LTD.; and Vital; Images, Inc. Mr.
Perkins is also a director of Community Airwaves Corporation.
William E. Cameron has been a Director of the Company since July 22,
1997. For over five years, Mr. Cameron has been head of International Business
Development for Universal Health Communications, the largest
medical/health/wellness video library in the world.
William M. Toles has been a Director of the Company since July 22,
1997. For more than five years, Mr. Toles has been the President and Chief
Executive Officer of Tol-O-Matic, Inc., a privately held manufacturer of motion
control products.
There are no arrangements or understandings known to the Company
between any of the Directors who are the nominees for Directors or executive
officers of the Company and its subsidiaries and any other person pursuant to
which any such person was elected as a Director or an executive officer, except
the employment agreements, the terms of which are described under "Executive
Compensation -Employment Agreements". There are no family relationships between
any Directors who are also the nominees for Directors or executive officers of
the Company.
The Board of Directors of the Company held a total of six meetings
during the fiscal year of the Company ended June 30, 1997. All of the Directors
attended all of the meetings.
The Company did have a standing audit committee consisting of the
independent or non-employee Directors, which committee was formed on December
11, 1995 and dissolved on July 22, 1997, when all of the then existing three
Directors resigned including the two independent Directors. The existing Board
of Directors that was established on July 22, 1997 formed an audit committee on
October 6,1997 comprised of Mr. Cameron and Mr. Toles neither of whom is
employed by the Company. The Board of Directors also formed a compensation
committee on October 6, 1997 comprised of Mr. Dahl and Mr. Perkins.
Directors of the Company are elected to an annual term that expires at
the Company's annual meeting of stockholders.
4
<PAGE>
EXECUTIVE COMPENSATION
Summary of Executive Officer Compensation. The following table sets
forth the total compensation paid or accrued by the Company to the Chief
Executive Officer and the other executive officer and presidents of the
Company's principal subsidiaries who served in such capacities during fiscal
1997 ("Named Executive Officers") whose aggregate cash compensation exceeded
$100,000 for all services rendered to the Company and its subsidiaries during
each of the last three fiscal years:
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Compensation
Awards
Fiscal Year Salary Bonus Other Annual Options/SARs
Name and Position Ended Amount Amount Compensation (Number)
<S> <C> <C> <C> <C> <C>
Harvey Bibicoff, Chief Executive Officer (1) 1997 247,200 -- -- 350,000
1996 165,000 -- -- --
1995 165,288 -- -- --
Brian Rackohn, Chief Financial Officer (2) 1997 133,900 -- -- 75,000
1996 114,900 -- -- 25,000
1995 101,923 -- -- 25,000
Rick Bieber, President of Harmony Pictures, Inc. 1997 135,417 50,000 -- 250,000
1996 -- -- -- --
1995 -- -- -- --
Steve Oakes, President of Curious Pictures Corp. 1997 466,669 -- -- --
1996 263,045 -- -- --
1995 316,258 -- -- --
Elizabeth Silver, President of The End, Inc. 1997 224,000 -- -- 75,000
1996 228,224 37,500 -- 75,000
1995 170,577 -- -- --
</TABLE>
(1) Effective November 3, 1997, Mr. Bibicoff resigned his duties as Chief
Executive Officer.
(2) In connection with the issuance of 75,000 options exercisable at a price of
$1.50, 25,000 options were cancelled that had been issued at an exercise
price of $3.00 in fiscal 1996 and 25,000 options were cancelled that had
been issued at an exercise price of $3.30 in fiscal 1995.
5
<PAGE>
Stock Option Grants in Fiscal Year ended June 30, 1997. The following
table contains information concerning the grant of stock options under the stock
option plan which was adopted on August 7, 1991 and amended at the 1996 Annual
Meeting of Stockholders held in December 1995 (the "Stock Option Plan") to the
Named Executive Officers in the fiscal year ended June 30, 1997:
<TABLE>
<CAPTION>
Stock Option Grants in Fiscal Year ended June 30, 1997
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants for Option Term
% of Total
Options
Options Granted in Exercise Expiration
Name Granted Fiscal Year Price Date 5% (2) 10% (2)
---- ------- ----------- --------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Harvey Bibicoff 350,000 36% $1.50 10/01/01 $145,048 $320,518
Brian Rackohn 75,000(1) 8% 1.50 01/02/02 31,082 68,682
Rick Bieber 250,000 25% 1.60 10/16/02 117,915 262,886
Elizabeth Silver 75,000 8% 1.75 03/24/02 34,267 75,325
</TABLE>
(1) In connection with the issuance of 75,000 options, 25,000
options were cancelled that had been issued at an exercise
price of $3.00 in fiscal 1996 and 25,000 options were
cancelled that had been issued at an exercise price of $3.30
in fiscal 1995.
(2) Potential gains are net of exercise price, but before taxes
associated with exercise. The 5% and 10% assumed compounded
annual rates of stock price appreciation are mandated by rules
of the Securities and Exchange Commission. There can be no
assurance provided to any executive officer or any other
holder of the Company's securities that the actual stock price
appreciation over the ten-year option term will be at the
assumed 5% and 10% levels or at any other defined level.
Unless the market price of the Common Stock appreciates over
the option term, no value will be realized from the option
grants made to persons named in this table.
6
<PAGE>
Stock Option Exercises in Fiscal Year ended June 30, 1997 and Option
Values at June 30, 1997. The following table provides information on the Named
Executive Officers' unexercised options at June 30, 1997. None of the Named
Executive Officers exercised any options during the fiscal year ended June 30,
1997:
<TABLE>
<CAPTION>
Stock Option Values at June 30, 1997
For the year ended 6/30/97
Name Shares acquired Dollar value Number of Value of
from options Realized on unexercised In-the-Money
exercised exercise Options/SARs Options/SARs
at FY-End (#) at FY-End ($) (1)
------------------- ----------------- ----------------- ----------------- ------ ------------------- ------
<S> <C> <C> <C> <C> <C> <C>
Harvey Bibicoff 0 0 850,000 (e) 670,313 (e)
Brian Rackohn 0 0 50,000 (e) 40,625 (e)
25,000 (ue) 20,313 (ue)
Rick Bieber 0 0 50,000 (e) 35,625 (e)
200,000 (ue) 142,500 (ue)
Steve Oakes 0 0 100,000 (e) 0 (e)
Elizabeth Silver 0 0 150,000 (e) 92,969 (e)
</TABLE>
Exercisable (e)
Unexercisable (ue)
(1) Represents the closing price of the Common Stock on June
30, 1997 minus the exercise price of the options.
<TABLE>
<CAPTION>
Ten Year Stock Option Repricings
Name Date Number of Market Price of Exercise Price at New Length of
securities Stock at Time Time of Repricing Exercise Original
underlying of Time of or Amendment ($) Price ($) Option Term
Stock Options Repricing or Remaining at
Repriced or Amendment ($) Date of
Amended (#) Repricing or
Amendment
- --------------------- ------------ ----------------- ----------------- -------------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Brian Rackohn 01/02/97 25,000 1.25 3.30 1.50 2.1 years
Brian Rackohn 01/02/97 25,000 1.25 3.00 1.50 3.25years
</TABLE>
Compensation of Directors
No fees are paid to Directors of the Company who are also officers or
employees of the Company for their services as members of the Board. Harry
Shuster and Ivan Berkowitz both of whom resigned as Board of Director members on
July 22, 1997 had been issued five-year stock options to acquire 25,000 shares
at an exercise price of $2.00 during the fiscal year ended June 30, 1997 and
paid $250 per meeting for work on the audit committee. The Company reimbursed
all Directors for reasonable travel and lodging expenses incurred in attending
meetings of the Board.
Concurrently with his election as a Director and Chairman of the Board
of the Company on July 22, 1997, Christopher T. Dahl was appointed the Company's
President. Effective November 3, 1997, Mr. Dahl was appointed the Company's
Chief Executive Office and resigned as President. Mr. Dahl presently receives an
annual salary of $75,000 for his services.
7
<PAGE>
On August 1, 1997 the Company entered into an independent contractor
agreement with William Cameron, a Director of the Company. Under the agreement
Mr. Cameron will be providing non-exclusive services to the Company including,
without limitation, the initiation, promotion, development and maintenance of
business and investment contacts relating to increasing the Company's sales ,
marketing and investment opportunities. The contract is at will and compensation
under the contract is $3,000 for every month that it is in force.
Compensation Report
During the fiscal year ended June 30, 1997, the Company did not have a
Compensation Committee and therefore, the entire Board acted on the matters that
would have been acted on by Compensation Committee. The Compensation Report set
forth below described the compensation policies of the Board of Directors for
the fiscal year ended June 30, 1997 and reflects the salaries and bonuses paid
during that fiscal year. The current Board of Directors assumed their positions
in July 1997 and established a Compensation Committee in October 1997.
Accordingly, the policies described below may not reflect the policies of the
Compensation Committee or the current Board. The Compensation Report shall not
be deemed incorporated by reference by any general statement incorporating by
reference this proxy statement into any filing under the Securities Act 1933 or
the Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such act.
Overview and Philosophy
The Board establishes the general compensation policies of the Company,
determines the compensation levels for the Chief Executive Officer ("CEO") and
other senior Company officers, and administers and/or provides oversight on all
short-term (annual) incentive plans, all long-term incentive plans, including
the Stock Option Plan, and approves any grants of stock options, stock and/or
stock warrants to Company officers.
The Company applies a consistent philosophy to compensation for all
employees, including the officers. This philosophy is based upon the premise
that the achievements of the Company result from the coordinated efforts of all
individuals working toward common, defined objectives. The Company strives to
attain these objectives through teamwork that is focused upon meeting the
expectations of customers and stockholders.
Compensation Policy
The Company's compensation policy is to ensure that a substantial
portion of potential aggregate annual compensation be contingent upon the
performance of the Company. The goals of the compensation programs are to align
compensation with performance and to enable the Company to attract, retain and
reward personnel who contribute to the success of the Company. The Company's
compensation program for officers is based on the same guidelines that apply to
all Company employees.
The Company `s subsidiary officers have profit participation incentives
at the subsidiary level as well as equity participation in the Company.
The Company is committed to providing incentive opportunities that,
together with base salaries (where appropriate), provide for competitive and
equitable total cash compensation opportunities. Additionally, future base
salary increases or incentive pay opportunities are directly linked to the
achievement of key financial objectives.
The variable compensation plans focus respective employees on the
immediate objectives of the business and their job; encourage employees to work
together as a team to achieve Company success; and, recognize and reward the
sustained contribution of outstanding performers within the Company.
8
<PAGE>
Components of Compensation
The Company has compensation programs that include both cash and equity
components. The Board has established base salary, short and long-term incentive
compensation mix targets for each officer and for all employees, where
applicable, of the Company. The compensation mix targets define the desired
percentage for each component of total compensation.
With respect to cash compensation for officers, the Company sets base
salaries and target incentive opportunities for each officer by reviewing the
cash compensation provided to comparable positions and through assessing the
internal equity of cash compensation opportunities based on position
responsibilities, the performance of each incumbent, and overall levels of
contribution to the Company. When considering competitive pay practices, the
Board reviews compensation levels in both the entertainment industry and general
industry at firms comparable in size and revenue to the Company.
With regard to equity-based compensation for officers, the Company
considered and granted stock options for the reported year. Stock option grants
were based on relative position, responsibilities and/or historical and expected
contribution to the Company.
Compensation of the Chief Executive Officer
Mr. Bibicoff was Chief Executive Officer of the Company from January
19, 1996 until November 3, 1997. Based on a thorough review, it was determined
that Mr. Bibicoff=s base salary was within a competitive range of pay, as
compared with companies of similar size and scope. In determining Mr. Bibicoff=s
compensation, the Board considered various factors particularly Mr. Bibicoff=s
guidance in the Company=s turnaround. See "Employment Agreements" herein.
The Board of Directors (at June 30, 1997):
Harvey Bibicoff
Ivan Berkowitz
Harry Shuster
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended June 30, 1997, the Company had no
Compensation Committee or other Board committee performing equivalent functions.
Mr. Bibicoff, the Company=s Chief Executive Officer until November 3, 1997,
served as a Director of the Company until July 22, 1997 and participated in
deliberations of the Board concerning the compensation of all executive officers
other than himself.
9
<PAGE>
Employment Agreements
On January 1, 1997, Brian Rackohn, Chief Financial Officer, of the
Company, entered into a two-year employment contract with the Company, which
contract expires on December 31, 1998. Under the contract, Mr. Rackohn is
entitled to a salary of $132,000 in year one and $141,000 in year two. He was
also granted five-year options to purchase 75,000 shares of the Company's Common
Stock at an exercise price of $1.50 per share. In addition 50,000 existing
five-year options previously granted to Mr. Rackohn, to purchase shares of the
Company's Common Stock were canceled. See "Executive Compensation" herein.
On May 2, 1994, Harvey Bibicoff, Chief Executive Officer entered into a
four-year employment contract with the Company, which was to expire on June 30,
1998. Under such agreement, Mr. Bibicoff earned an annual salary of $165,000 and
was granted five-year options to purchase 250,000 shares of the Company's Common
Stock at an exercise price of $2.50 per share. On October 1, 1996, Mr. Bibicoff
entered into an amendment to his May 1994, employment contract that provided for
a revised expiration date of August 19, 2000. Mr. Bibicoff then became entitled
to an annual salary of $265,000 per year and was granted additional five-year
options to purchase 350,000 shares of the Company's Common Stock at an exercise
price of $1.50 per share. On July 22, 1997, Mr. Bibicoff entered into an amended
and restated employment agreement, which expires on July 21, 1999. Mr. Bibicoff
continues to be entitled to a salary of $265,000 per year. However, the Company,
at the sole discretion of its Board, can terminate Mr. Bibicoff's obligations to
perform as the Company's Chief Executive Officer upon furnishing ten days
written notice. Commencing September 20, 1997, Mr. Bibicoff also obtained the
right to resign his obligations and authority as the Company's Chief Executive
Officer upon furnishing ten days written notice. Upon either event Mr. Bibicoff
would continue to receive all remunerations due him for the remaining term of
the agreement. On October 22, 1997, Mr. Bibicoff submitted to the Company the
ten days written notice to resign from his obligations and authority as the
Company's Chief Executive Officer.
10
<PAGE>
Comparison of Five Preceding Year Cumulative Stockholder Return
The following graph shows the cumulative return experienced by the
Company's stockholders during the period July 1, 1992 through June 30, 1997 as
compared with the NASDAQ Total Return Index (U.S.) And the NASDAQ Financial
Index. The graph assumes $100 on July 1, 1992 in the Company's Common Stock and
each of the indices. Total return calculations assume the reinvestment of all
dividends. The Company has never paid dividends.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
Fiscal Year End
----------------------------------------------------------------------------------------------------------
7/01/92 6/30/93 6/30/94 6/30/95 6/30/96 6/30/97
<S> <C> <C> <C> <C> <C> <C>
Harmony Holdings, Inc. 100 200 88 112 68 74
NASDAQ Total return Index (US) 100 126 127 170 218 265
NASDAQ Financial 100 131 148 169 220 322
--------------------------------- ----------- ------------ ----------- ----------- ----------- -----------
</TABLE>
11
<PAGE>
Security Ownership of Certain Beneficial Owners And Management
The following table sets forth the number of shares of Common Stock of
the Company beneficially owned as of December 9, 1997, by: (i) each person known
to the Company who beneficially owns more than five percent of the Company's
Common Stock; (ii) each Director and Named Executive Officer and (iii) all
executive officers and Directors of the Company as a group. Except as otherwise
noted, the person named has sole voting and dispositive power over the total
number of shares beneficially owned:
<TABLE>
<CAPTION>
Amount and
Name and Nature of Percentage
Address of Beneficial of Outstanding
Beneficial Owner (1) Ownership (2) Common Stock
<S> <C> <C>
Children's Broadcasting Corporation 2,938,731 (2)(4) 40.7%
Harvey Bibicoff 600,000 (2) 9.6%
Christopher T. Dahl 10,000 *
Richard W. Perkins 200,000 3.1%
William E. Cameron 0 *
William M. Toles 0 *
Brian Rackohn 50,000 (3) *
Rick Bieber 50,000 (5) *
Steve Oakes 100,000 (5) 1.5%
Elizabeth Silver 314,040 (6) 4.6%
All officers and Directors as a group
(9 persons) 1,324,040 (2)(3)(5)(6) 17.2%
</TABLE>
--------------------
* Percentage omitted because it is less than 1%
(1) The business address of Messrs. Bibicoff and Rackohn and all officers
and directors of the Company is 1990 Westwood Boulevard, Suite 310, Los
Angeles, California 90025. The address of Children's Broadcasting
Corporation ("CBC") is 724 First Street North, 4th floor, Minneapolis,
Minnesota 55401.
(2) Includes 300,000 immediately exercisable options held by Mr.Bibicoff
and 750,000 immediately exercisable options held by CBC.
(3) Consists of 50,000 immediately exercisable options held by Mr. Rackohn.
(4) Based solely on information contained in schedule 13D as filed with the
Securities and Exchange Commission, CBC has entered into an agreement
with Glenn B. Laken, whereby Mr. Laken can require CBC to purchase
225,000 shares of the Company's stock he controls on or after January
31, 1998, and CBC has the right to purchase such shares on or before
February 15, 1998, all subject to various conditions set forth in such
agreement.
(5) Consists of immediately exercisable options.
(6) Includes 300,000 immediately exercisable options held by Ms. Silver.
12
<PAGE>
Certain Transactions
As of September 30, 1997, the Company was owed $208,889 pursuant to a
note receivable from Harvey Bibicoff, the Company's Chief Executive Officer
until November 3, 1997, in connection with Mr. Bibicoff's purchase of stock
options from a former officer of the Company in 1996. The note was originally
issued for $260,000, is due May 31, 1998 and accrues interest at the prime rate
plus 1 1/2 %.
The Company has entered into an agreement with Bibicoff & Associates,
Inc. whereby such corporation provides investor relation services to the Company
through September 30, 2000, for a flat rate of $75,000 that was paid upon
execution of the agreement. The Company's Chief Executive Officer until November
3, 1997, Harvey Bibicoff, is also the President of Bibicoff & Associates, Inc.
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 executive officers and Directors, and persons who beneficially own
more than 10% of the Company's Common Stock, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Executive
officers, Directors and beneficial owners of more than 10% of the Company's
Common Stock are required by the Commission's regulations to furnish the Company
with copies of all Section 16(a) forms that they file. Based solely on a review
of the copies of such forms furnished to the Company, or written representations
that no reports on Form 5 were required, the Company believes that for the
period from July 1, 1996 through June 30, 1997, all of its executive officers,
Directors and beneficial owners of more than 10% of the Company's Common Stock
complied with Section 16(a) filing requirements applicable to them.
2. Ratification of Independent Public Accountants
BDO Seidman, LLP served as the Company's independent public accountants
for its fiscal year ended June 30, 1997 and is expected to continue for the
current fiscal year, subject to ratification by the stockholders. Management
expects that a representative of BDO Seidman, LLP will be present at the Annual
Meeting to make a statement if he or she desires to do so and to be available to
answer appropriate questions posed by stockholders.
Stockholder ratification of the selection of BDO Seidman, LLP as the
Company's independent public accountants is not required by the Company's Bylaws
or otherwise. However, the Board is submitting the selection of BDO Seidman, LLP
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the selection, the Board will reconsider whether
or not to retain that firm. Even if the selection is ratified, the Board in its
discretion may direct the appointment of a different independent accounting firm
at any time during the year if it determines that such a change would be in the
best interests of the Company and its stockholders.
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Other Matters
As of the date of this Proxy Statement, the Board of Directors of the
Company does not know of any business which will be presented for consideration
at the Annual Meeting other than that specified herein and in the Notice of
Annual Meeting of Stockholders, but if other matters are presented, it is the
intention of the persons designated as proxies to vote in accordance with their
judgment on such matters. A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR
THE FISCAL YEAR ENDED JUNE 30, 1997, INCLUDING THE FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES THERETO, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, WILL BE FURNISHED WITHOUT CHARGE TO ANY STOCKHOLDER OF THE COMPANY
WHOSE PROXY IS SOLICITED BY THE FOREGOING PROXY STATEMENT, UPON THE WRITTEN
REQUEST OF ANY SUCH PERSON ADDRESSED TO TERRI MACINNIS, DIRECTOR OF INVESTOR
RELATIONS, HARMONY HOLDINGS, INC., 1990 WESTWOOD BOULEVARD, #310, LOS ANGELES,
CALIFORNIA 90025. SUCH A REQUEST FROM A BENEFICIAL OWNER OF THE COMPANY'S COMMON
STOCK MUST CONTAIN A GOOD-FAITH REPRESENTATION BY SUCH PERSON THAT, AS OF
DECEMBER 15, 1997, HE WAS A BENEFICIAL OWNER OF THE COMPANY'S COMMON STOCK.
Please SIGN, DATE and RETURN the enclosed Proxy promptly.
By Order of the Board of Directors:
Christopher T. Dahl
Chairman of the Board
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PROXY
HARMONY HOLDINGS, INC.
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF HARMONY
HOLDINGS, INC.
The undersigned Stockholder of Harmony Holdings, Inc., a Delaware
corporation, hereby appoints Christopher T. Dahl and Lance W. Riley, Esq., and
each of them, the true and lawful attorneys-in-fact and proxies of the
undersigned, each having full power of substitution to vote all shares of
capital stock which the undersigned is entitled to vote at the Annual Meeting of
Stockholders of Harmony Holdings, Inc., to be held at the Summit Hotel Bel Air,
11461 Sunset Blvd., Los Angeles, CA 90049 on January 13, 1997 at 2:30 p.m. or at
any adjournments thereof, on all matters set forth in the Notice of Annual
Meeting and Proxy Statement dated December 17, 1997 (a copy of which has been
received by the undersigned) as follows:
1. ELECTION OF DIRECTORS:
Nominees: CHRISTOPHER T. DAHL, RICHARD W. PERKINS, WILLIAM E.
CAMERON, WILLIAM M. TOLES
[ ] FOR ALL NOMINEES (EXCEPT AS MARKED TO THE CONTRARY BELOW)
[ ] WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES
(INSTRUCTION: To withhold consent to the election of any individual nominee(s)
write the name of such nominee(s)on the line below.)
- --------------------------------------------------------------------------------
2. RATIFY AND APPROVE THE APPOINTMENT OF BDO SEIDMAN LLP AS THE
COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. In their discretion on any matter of matters which may properly come
before said meeting or any adjournments thereof.
(Continued on reverse side)
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The majority of the attorneys-in-fact and proxies hereby appointed who shall be
present and act at the foregoing meeting (or if only one shall be present and
act at said meeting, then that one) shall and may exercise the powers conferred
on all of the said attorneys-in-fact and proxies hereunder.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFIC INDICATIONS ON
THE REVERSE SIDE. IN THE ABSENCE OF SUCH INDICATIONS, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF DIRECTORS AND FOR THE RATIFICATION AND APPROVAL OF BDO
SEIDMAN LLP AS THE COMPANY=S INDEPENDENT PUBLIC ACCOUNTANT.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and the related Proxy Statement each dated December 17,
1997.
Date ___________________________, 1997
------------------------------------
Signature (Title, if any)
-------------------------------------
Signature if held jointly
Please date and sign above exactly as your name or names appear hereon. If more
than one name appears, all should sign. Joint owners shall each sign personally.
Corporation proxies should be signed in full corporate name by an authorized
officer and attested. Persons signing in a fiduciary capacity should indicate
their full titles in such capacity.
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