LASER-PACIFIC MEDIA CORPORATION
809 N. Cahuenga Blvd.
Hollywood, California 90038
(323) 462-6266
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
July 16,1999
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 July 16, 1999 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, and
"FOR" the adoption of the amendment to the 1997 Stock Option Plan. 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 28, 1999, to the Company's
stockholders of record at the close of business on May 20, 1999.
The Company's principal executive offices are located at 809 North Cahuenga
Boulevard, Hollywood, California 90038
VOTING 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, except as described under
"Election of Directors," below. Only stockholders of record as of the close of
business on May 20, 1999 are entitled to notice of and to vote at the Annual
Meeting. As of the record date, May 20, 1999, there were 7,361,000 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.
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. However, under
certain circumstances, as set forth in Section 2115 of California Corporations
Code, stockholders may be entitled to cumulate their votes. The Board of
Directors has determined that stockholders may cumulate their votes with respect
to the election of directors for the Company if one or more stockholders gives
notice at the Annual Meeting, prior to voting, of an intention to cumulate votes
for a nominated director. A stockholder may cumulate votes by casting for the
election of one nominee a number of votes equal to the number of directors to be
elected multiplied by the number of votes to which his shares are entitled, or
by distributing his votes on the same principle among as many candidates as he
sees fit. If a proxy is marked "FOR" the election of directors, it may, at the
discretion of the proxy holders, be voted cumulatively in the election of
directors. If cumulative voting is utilized, the proxy holders intend to
distribute the votes represented by each proxy, unless such authority is
withheld, among the four nominees named, in such proportion as they see fit.
Nominees receiving the highest number of affirmative votes cast, up to the
number of directors to be elected, will be elected as directors. Abstentions
have no effect on the vote and brokers are permitted to vote your shares even if
the broker does not receive voting instructions from you.
Approval of Amendment to Option Plan
Approval requires the affirmative vote of a majority of the shares present
at the meeting in person or by proxy, and entitled to vote. Abstentions are
counted and have the effect of a vote "against". Without your voting
instructions, your broker may not vote your shares on this proposal card and a
broker non-vote will occur. Broker non-votes, however, are not considered shares
entitled to vote and therefore will not affect the Proposal's approval or
outcome.
PROPOSAL 1
ELECTION OF DIRECTORS
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, 1999,
with respect to the Board's nominees:
Director Name Age Since Position with Company
James R. Parks 48 1990 Chairman of the Board and Chief Executive Officer
Emory M. Cohen 56 1990 President, Chief Operating Officer and Director
Thomas D.Gordon 50 Nominee
Ronald Zimmerman (1) 59 1996 Director
(1) Member of the Audit Committee.
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.
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).
Cornelius P. McCarthy III has served as a director of the Company since
October 1996. Since December, 1996, Mr. McCarthy has been employed as an Senior
Vice President with Pennsylvania Merchant Group, Ltd. Mr. McCarthy has served in
similar capacities with Laidlaw and Company, November, 1993 to December, 1996.
Mr. McCarthy currently serves on the Boards of Directors for Bonded Motors, Inc.
and Phoenix International Life Sciences, Inc. Mr. McCarthy's employer,
Pennsylvania Merchant Group, Ltd. functions as a market-maker in Laser Pacific
Media Corp.'s common stock.
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.
Biographical Information on Nominee who is not a Current Director
Thomas D. Gordon has served since 1994 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.
No family relationships exist between any of the officers, directors or
nominees of the Company.
PROPOSAL II
APPROVAL OF AMENDMENT TO THE 1997 STOCK OPTION PLAN
The Company's Board of Directors (the "Board") and shareholders have
previously adopted and approved the Company's 1997 Stock Option Plan (the
"Option Plan"). The Option Plan as originally approved authorized the issuance
of up to 500,000 options. As a result of exercises, a total of 267,700 shares of
Common Stock remain reserved for issuance under the Option Plan of which 225,400
shares were subject to outstanding options as of April 30, 1999. Options with
respect to 94,400 shares of Common Stock were exercised in 1998 and with respect
to an additional 137,900 shares of Common Stock were exercised in 1999 through
April 30. In April 1999, the Board of Directors approved an amendment to the
Option Plan, subject to shareholder approval, to increase by 500,000 shares the
number of shares reserved for issuance thereunder to 767,700.
At the annual meeting, the shareholders are being requested to consider and
approve the proposed amendment to the Option Plan to increase the number of
shares of Common Stock reserved for issuance thereunder from 267,700 shares
currently to 767,700. This will increase the number of shares available for
grant under the Option Plan from 42,300 shares to 542,300. In all other
respects, the Options Plan will remain in full force and effect in the form
presented to the shareholders for approval in 1997. The Board of Directors
believes that the amendment will enable the Company to continue its policy of
widespread employee stock ownership as a means to motivate high levels of
performance and to recognize key employee accomplishments.
DESCRIPTION OF THE OPTION PLAN
The 1997 Stock Option Plan (the "Option Plan") was adopted by the Board of
Directors (the "Board") of the Company on April 2, 1997, and by the stockholders
at the following Annual Meeting. The purpose of the Option Plan is to provide
participating officers, other key employees, directors and consultants with
added incentives for high levels of performance and to encourage investment in
the Company's common stock by such persons, thereby increasing their personal
interest in the continued success and progress of the Company.
In general, options granted under the Option Plan are intended to be either
incentive stock options ("ISOs") qualifying for special tax treatment under the
Internal Revenue Code of 1986, as amended (the "Code"), or non-qualified stock
options ("NSOs") not entitled to any special tax treatment under the Code. The
Option Plan is attached hereto as Exhibit A. Some of the more important features
are summarized below, but the summary is qualified in its entirety by express
reference to the terms of the Option Plan attached hereto.
Shares Subject to Options; Changes in Corporate Structure: Subject to
adjustment as hereinafter provided, no more than 267,700 shares of the Company's
common stock may currently be issued pursuant to options granted under the
Option Plan (767,700 shares if the amendment is approved). Shares subject to
lapsed or terminated options will be available for future options. If any change
is made in the stock subject to the Option Plan (through merger, consolidation,
reorganization, stock split, combination of shares, exchange of shares or other
change in the corporate structure of the Company effected without the receipt of
consideration), such adjustment shall be made as to the maximum number and class
of shares subject to the Option Plan, and the number, class and option price of
shares subject to options granted under the Option Plan, as may be determined to
be appropriate by the Board or the Committee (as defined below). In the event of
a merger or consolidation in which the Company is not the surviving corporation,
or upon the sale of all or substantially all of the assets of the Company,
options outstanding at the time of such event shall become exercisable (unless
the Board or Committee determines to accelerate the exercise of such options)
for the same consideration that a Company stockholder becomes entitled to
receive (less the per share exercise price) pursuant to such corporate
reorganization or sale of assets.
Administration of Option Plan: The Option Plan is to be administered by the
Board, who may delegate administration to a committee composed solely of no
fewer than two (2) non-employee directors of the Company (the "Committee"). The
Board or Committee will designate the participants, the number of shares to be
optioned to them, the option price and the term of each option. Each ISO and NSO
granted pursuant to the Option Plan shall be authorized by action of the Board
or the Committee and shall be evidenced by a separate written agreement with
each participant.
Eligible Participants: Officers, other key employees, directors and
consultants of the Company will be eligible for options. Although it is not
possible at the present time to determine which individuals may be granted
options in the future under the Option Plan, it is expected that such
determination will be made primarily on the basis of an individual's present and
potential contribution to the management and development of the Company's
business, taking into consideration any previous option grants to such
individual. Only employees of the Company (including officers and directors who
are also employees) shall be eligible to receive ISOs. Directors and consultants
who are not full-time officers or employees will not be eligible to receive
ISOs, but may be granted NSOs. The Company currently has two (2) non-employee
directors and approximately 180 employees (including officers and directors).
Option Price: The price at which shares may be purchased upon exercise of
an option must be at least 100% (110% in the case of an ISO granted to "a more
than 10% stockholder") of the fair market value of the Company's common stock on
the date the option is granted.
Maximum Exercisable Amount: The aggregate fair market value (determined at
the time of grant) of the shares with respect to which ISOs are exercisable for
the first time by an employee during any calendar year (under all incentive
stock option plans of the Company) shall not exceed $100,000. No comparable
limit applies with respect to NSOs.
Term of Options: No option may be granted under the Option Plan after April
1, 2007. The term of ISOs and NSOs shall not exceed ten years (five years in the
case of an ISO granted to "a more than 10% stockholder"). Exercisable options
granted under the Option Plan generally terminate thirty (30) days after an ISO
optionee ceases to be employed by the Company or a NSO optionee ceases to be a
director, officer or employee of the Company. However, in the event of the death
or disability of an optionee, the period for exercise shall be extended for up
to one (1) year following such optionee's death or disability. Upon termination
of an optionee's employment or a non-employee's status as a director, all
options which are not exercisable as described below shall terminate.
Exercise of Options: Each option will be exercisable at such time or times
with respect to such number of shares as shall be fixed by the Board or
Committee. Options granted under the Option Plan may become exercisable in
cumulative increments ("vest") as determined by the Board or Committee. When
exercising options, optionees may pay the exercise price either in cash or, if
the option agreement so provides, in shares of the Company's common stock, by
surrender of options previously granted or any combination thereof. Shares of
the Company's common stock used to exercise an option will be valued at their
fair market value on the day the option is exercised. The difference between the
exercise price and fair market value of the stock subject to any surrendered
options on the day the option is exercised shall be equal to the option price of
the shares being purchased. The Board or Committee may also provide for "reload
options" pursuant to which an optionee who surrenders stock or options in
payment for shares of the Company's common stock will acquire new options, which
may be ISOs or NSOs, for the number of shares and options surrendered. Options
are not transferable by an optionee except by will, the laws of descent and
distribution or pursuant to a qualified domestic relations order. During an
optionee's lifetime, an ISO option is exercisable only by the optionee (or by a
holder acquiring the shares pursuant to a qualified domestic relations order).
Amendment of Plan: The Board may suspend, amend or terminate the Option
Plan, but may not, without the prior approval of the stockholders: (1) make any
material change in the eligible employees as defined in the Option Plan; (b)
increase the total number of shares or maximum term for which options may be
granted; or (c) change any provision of the Option Plan which would affect the
qualification of ISOs as "incentive stock options" under the Code. Thus, the
Board will have the power to alter the Option Plan in a number of ways, some of
which could be significant, without obtaining stockholder approval.
Federal Tax Consequences of Plan: The principal federal income tax
consequences of participation in the Option Plan, in general, are as follows:
A. ISOs
1. No income will be recognized by an optionee at the time of grant of an
ISO or upon its exercise for regular income tax purposes.
2. An optionee's basis for the stock acquired upon the exercise of an ISO
("ISO stock") will be equal to the price paid for the stock. See paragraph A.8
below for rules relating to the determination of basis when ISO stock is
acquired in exchange for previously owned shares.
3. The excess of the fair market value of the ISO stock over the exercise
price will be treated as an item of tax preference for purposes of computing the
alternative minimum tax in the year in which the option is exercised.
4. The holding period for the ISO stock will commence upon the date the ISO
is exercised.
5. Upon the sale of ISO stock by an optionee who has held such ISO stock
for at least (i) two years after the date on which the ISO was granted, and (ii)
one year after the date on which the ISO stock was transferred to the optionee
("Special Holding Period"), the selling optionee will recognize long-term
capital gain (or loss) in the amount by which the sales price exceeds (or is
less than) the adjusted basis of the ISO stock. Any resulting gain will not be
an item of tax preference; however, for purposes of determining alternative
minimum tax, the basis of ISO stock will include the amount treated as an item
of tax preference for the year in which the ISO was exercised. The foregoing
Special Holding Period requirement does not apply to the exercise of an ISO
after the death of an optionee by the optionee's estate or heirs.
6. Except in the case of a "Disqualifying Disposition, " as defined in
paragraph A.7, below, the Company receives no income tax deduction on the grant
or exercise of an ISO.
7. Any sale or other disposition of ISO stock prior to the satisfaction of
the Special Holding Period is generally a "Disqualifying Disposition." A
Disqualifying Disposition has the following income tax consequences to the
optionee and the Company in the year of such Disqualifying Disposition:
(a) Generally, the optionee will recognize compensation income in an amount
equal to the excess of the fair market value of the ISO stock on the exercise
date over the option price. If the Disqualifying Disposition is for a price
which is less than the fair market value of the ISO stock on the exercise date,
compensation income is reduced to the difference between the disposition price
and the option price. If the Disqualifying Disposition results in a loss, i.e.,
the amount received in the Disqualifying Disposition is less than the option
price, there is no compensation income.
(b) In addition, the optionee will recognize capital gain income in an
amount equal to the excess of the cash and fair market value of the other
property received in the Disqualifying Disposition over the fair market value of
the ISO stock on the exercise date. The capital gain will be treated as
long-term capital gain if the ISO stock is held for more than one year prior to
the Disqualifying Disposition. In all other events, the capital gain will be
treated as short-term capital gain. If the selling optionee recognizes a loss
because the sale price is less than the adjusted basis in the stock, the
character of the loss will be long-term if the ISO stock is held for more than
one year after its acquisition. In all other events, such capital loss shall be
treated as short-term capital loss.
(c) The Company will deduct as compensation expense an amount equal to the
compensation income recognized by the optionee.
8. If the ISO stock is acquired in exchange for shares of the Company's
common stock previously acquired by an optionee, no income will be recognized by
the optionee at the time of the exchange, but the optionee will be treated as
having received two blocks of stock. To the extent that the total fair market
value of the ISO stock received exceeds the fair market value of the Company's
common stock surrendered (the shares constituting such excess fair market value
being herein referred to as "Spread Shares"), it is possible that the Internal
Revenue Service will contend that the price paid for the Spread Shares is zero,
that an optionee's basis in the Spread Shares is therefore zero, and that the
optionee's holding period in the Spread Shares commences on the date he
exercises the option. The remaining shares will have a basis equal to the basis
of the Company's common stock surrendered and a holding period which includes
the period the Company's common stock surrendered was held. No regulations have
been issued by the Treasury on this issue, and it may be reasonable for the
holder of the ISO stock to take the position that the basis of the Company's
common stock surrendered be allocated pro-rata to all of the ISO stock received
and that all shares have a "carryover" holding period, including the period the
Company's common stock surrendered was held. The surrender of old ISO stock in
exchange for a new ISO stock pursuant to the exercise of an ISO is not a
Disqualifying Disposition.
9. If the ISO stock is acquired for surrender of options held by the
optionee, the optionee will have compensation income equal to the difference
between the exercise price and the fair market value of the stock subject to the
surrendered options. The optionee is then treated as having acquired the ISO
stock for an equivalent amount of cash.
B. NSOs
1. No income will be recognized by an optionee at the time of grant of a
NSO.
2. At the time of exercise of a NSO, compensation income will be recognized
by the optionee in an amount equal to the excess of the fair market value of the
acquired stock ("NSO stock") on the exercise date over the option price.
3. If the disposition of the NSO stock is restricted by applicable
securities laws for a period of time, then no income will be recognized by such
optionee until the expiration of the time period of such restrictions. At that
time, the option holder will recognize gain in an amount equal to the excess of
the fair market value of the NSO stock on the date the restriction expires over
the option price. However, the option holder of the restricted stock may elect
to recognize ordinary income upon the exercise of the NSO (as described in
paragraph 2 above) rather than on the date the restriction expires.
4. The amount of income recognized by the optionee upon exercise of a NSO
will be deductible by the Company in the taxable year in which ordinary income
is recognized by the optionee.
5. An optionee's basis for the NSO stock will be the option price plus any
amount recognized as ordinary income by reason of the exercise of the NSO, or
upon expiration of the restriction under Section 16(b) of the Securities
Exchange Act of 1934 (the "1934 Act").
6. The holding period for the NSO stock will commence on the later of (i)
the day after the NSO stock is transferred to the optionee, or (ii) with respect
to an optionee whose shares are subject to a restriction under Section 16(b) of
the 1934 Act, the day after the date the restriction expires, unless the option
holder elects to recognize ordinary income upon exercise of the NSO, in which
event the holding period will commence on the day after the NSO stock is
transferred to the optionee.
7. Upon the sale of NSO stock, capital gain (or capital loss) will be
recognized by the optionee in the amount by which the sales price exceeds (or is
less than) the adjusted basis of the stock. The gain (or loss) will be long-term
or short-term capital gain (or loss), depending on the holding period for the
stock. NSO stock held for more than one year will give rise to long-term capital
gain (or loss).
8. If NSO stock is acquired in exchange for shares of the Company's common
stock previously acquired by an optionee, the optionee will be treated as having
received two blocks of stock. To the extent that the total fair market value of
the NSO stock received exceeds the fair market value of the Company's common
stock surrendered (a number of shares having a fair market value equal to the
excess being referred to as the "Spread Shares"), an optionee must include in
gross income the fair market value of the Spread Shares as compensation income.
The optionee's basis in the Spread Shares will be equal to the amount included
in gross income and the holding period will commence on the day after the NSO
stock is transferred to the optionee. The optionee will recognize no gain or
loss with respect to the remaining shares which will have a basis equal to the
basis of the Company's common stock surrendered and a holding period which
includes the period the Company's common stock surrendered was held.
9. If NSO stock is acquired for surrender of options held by the optionee,
the optionee will have compensation income equal to the difference between the
exercise price and the fair market value of the stock subject to the surrendered
options. The optionee is then treated as having acquired the NSO stock for an
equivalent amount of cash.
C. Withholding Taxes
To the extent that any amount recognized by an optionee upon exercise of an
option or upon a Disqualifying Disposition is subject to withholding for income
and employment tax purposes, the Company may require the optionee to pay, in
addition to the amount required to exercise the option, the appropriate amount
of withholding, or the Company may withhold such amount from the optionee's
other compensation.
[For a description of prior option plans of the Company, see "Executive
Compensation - Stock Option Plans"]
Stockholders are requested in this Proposal 2 to approve the amending of
the Option Plan. The affirmative vote by the holders of at least a majority of
the shares of the Company's common stock present in person or represented by
proxy at the 1997 Annual Meeting and entitled to vote on the proposal is
required for approval of the Option Plan. Unless instructed otherwise, it is the
intention of the persons named in the accompanying form of proxy to vote shares
represented by properly executed proxies "FOR" approval of amendment to the
Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL II
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 four. Information with respect to Leon D.
Silverman, Robert McClain and Randolph D. Blim is set forth below:
Name Age Position with Company
Leon D. Silverman 44 Executive Vice President
Randolph D. Blim 52 Senior Vice President
Robert McClain 51 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 Executive Vice President and a member of the Board of
Directors 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.
BOARD OF DIRECTORS
Committees
The Audit Committee is the only standing committee of the Board of
Directors. The Audit Committee did not have a formal meeting during 1998. In
March 1998, one member of the Audit Committee met with the independent
accountants to discuss the results of the audit for the year ended December 31,
1997. 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. McCarthy, the Company's
outside directors, 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, 1998, the
Board of Directors of the Company met five 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 and
Cornelius McCarthy were each granted options to purchase 30,000 shares of Common
Stock, with an exercise price of $0.22, on December 12, 1997.
Delinquent Filings
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, 1998, 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.
REPORT OF THE BOARD OF DIRECTORS ON
EXECUTIVE COMPENSATION
Under rules adopted by the Securities and Exchange Commission (the "SEC"),
the Company is required to provide certain data and information relating to the
compensation and benefits provided to the Company's chief executive officer, and
the four other most highly compensated executive officers of the Company at the
end of 1998; a report furnished by the Company's Board of Directors regarding
executive compensation; and certain information regarding the performance of the
Company's Common Stock.
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 Board of Directors awarded performance bonuses of $25,000 each for the
fiscal year ended December 31, 1998 to James R. Parks, Emory M. Cohen, Randolph
D. Blim, Leon D. Silverman, and Robert McClain.
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
REPORT OF THE BOARD OF DIRECTORS ON
EXECUTIVE COMPENSATION (cont.)
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 $207,000 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 at an annual salary of
$165,000 and is entitled to specified benefits such as an automobile allowance,
reimbursement of expenses, and life, health, and disability insurance benefits.
Mr. McClain is employed under a letter of agreement with the Company and serves
at the discretion of the Board of Directors
The SEC requires public companies to state their compensation policies with
respect to federal income tax laws that limit to $1,000,000 the deductibility of
compensation paid to the executive officers named in this proxy statement. In
light of the current level of compensation of the Company's named executive
officers, the Board of Directors of the Company has not adopted a policy with
respect to the deductibility limit, but will adopt such a policy should it
become relevant.
SUBMITTED BY THE BOARD OF DIRECTORS
OF LASER-PACIFIC MEDIA CORPORATION
/S/ James R. Parks
James R. Parks, Chairman
/S/ Emory M. Cohen
Emory M. Cohen
/S/ Ronald Zimmerman
Ronald Zimmerman
/S/ Cornelius P McCarthy III
Cornelius P. McCarthy III
SUMMARY COMPENSATION TABLE
The table below shows, for the years ended December 31, 1996, 1997 and
1998, the annual and long-term compensation that was paid or accrued for those
years to the Chief Executive Officer and the four most highly compensated
executive officers.
Long Term Compensation
----------------------------------------
----------------------------------------
Annual Compensation Awards Payouts
------------------------------------------------------------------------------
Other
Name Annual Restricted Securities
And Compen- Stock Underlying LTIP
Principal Sation (1) Award(s) Options Payouts
Position Year Salary ($) Bonus ($) ($) ($) (#) ($)
James R. Parks 1996 208,000 -0- -0- -0- -0- -0-
CEO 1997 208,000 -0- -0- -0- 31,000 -0-
1998 208,000 25,000 -0- -0- -0- -0-
Emory M. 1996 * 410,002 -0- 17,394 -0- -0- -0-
Cohen
President 1997 * 402,000 -0- 18,488 -0- 37,600 -0-
1998 * 468,491 25,000 21,759 -0- -0- -0-
Leon D. 1996 * 244,373 -0- 9,868 -0- -0- -0-
Silverman
Vice President 1997 240,506 -0- 8,198 -0- 26,800 -0-
1998 266,731 25,000 8,223 -0- -0- -0-
Randolph D. 1996 * 244,462 -0- 4,753 -0- -0- -0-
Blim
Vice President 1997 208,105 -0- 4,504 -0- 26,200 -0-
1998 * 281,883 25,000 4,504 -0- -0- -0-
Robert McClain 1996 153,464 -0- 13,349 -0- -0- -0-
Vice President, CFO 1997 159,792 -0- 13,000 -0- 23,900 -0-
1998 159,006 25,000 9,600 -0- -0- -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.
The following Annual Return Percentage table compares the Company's annual
total shareholder return on its Common Stock for the period from January 1, 1994
through December 31, 1998, with the annual return of the Standard and Poor's 500
Stock Index, and the Standard and Poor's Entertainment Index, a peer group of
companies, neither of which include the Company.
Annual Return Percentage
Company/Index Dec 94 Dec 95 Dec 96 Dec 97 Dec 98
- ----------------------------------------------------- ----------- ---------- --------- ---------- ----------
Laser-Pacific Media Corp. 33.45 0.00 -16.67 -70.08 1186.63
S&P Entertainment-500 1.32 37.58 22.96 33.36 28.58
S&P 500 Index -4.62 20.14 1.53 45.91 35.48
The following Indexed Returns Performance Table compares the Company's
cumulative total shareholder return on its Common Stock for the period from
January 1, 1994 through December 31, 1998, 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 include the Company. The
Performance Graph assumes $100 invested on January 1, 1993 in the Company's
Common Stock, the S&P Entertainment Index and the S&P 500 Index.
Indexed Returns
Base
Period
Company/Index Dec 93 Dec 94 Dec 95 Dec 96 Dec 97 Dec 98
- ---------------------------------------- ------------ ----------- ------------ ------------ ----------- ------------
Laser-Pacific Media Corp. 100 133.45 133.45 111.21 33.27 428.11
S&P Entertainment-500 100 101.32 139.40 171.40 228.59 293.91
S&P 500 Index 100 95.38 114.59 116.35 169.77 230.01
Stock Option Plans
The Company's 1997 Stock Option Plan originally provided for grants of an
aggregate of 500,000 of either incentive or nonqualified stock options to
officers, directors and key employees at prices equal to or greater than the
fair market value of the underlying Common Stock at the date of grant. Options
currently expire no later than 10 years from the grant date and are generally
fully vested at the date of grant. All options outstanding under the Option Plan
were exercisable at December 31, 1998. Under a prior stock option plan, which
has expired, 97,781 stock options remain outstanding and were exercisable at
December 31, 1998.
At December 31, 1998, under all plans, options with respect to 461,381
shares of Common Stock were outstanding and exercisable and 42,300 shares
remained available for future grant. See "Approval of Amendment to the 1997
Stock Option Plan" above.
No stock options were granted under the Options Plan during the year ended
December 31, 1998.
The following table sets forth select information relating to stock options
exercised during 1998 and outstanding as of December 31, 1998, held by the Chief
Executive Officer and the four most highly compensated executive officers.
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options
Options at FY-End at FY-End
Name Shares Value realized Exercisable / Exercisable /
acquired on Unexercisable Unexercisable
exercise
James R. Parks 0 $ 0.00 31,000 / 0 $67,766.00 / 0
Emory M. Cohen 0 $ 0.00 69,231 / 0 $82,193.60 / 0
Leon D. Silverman 26,800 $35,979.00 22,594 / 0 $0.00 / 0
Randolph D. Blim 0 $0.00 39,576 / 0 $57,273.20 / 0
Robert McClain 23,900 $12,667.00 30,000 / 0 $57,180.00 / 0
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 30, 1999. 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.
Name and Address Amount and Nature of Percent of
Of Beneficial Owner Beneficial Ownership(1) Class(1)
James R. Parks (2) 766,403 10.03%
1990 South Bundy Drive
Los Angeles, California 90025
McCrae Holdings Inc. 512,993 6.97%
C/O Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
304 E. 45th Associates 500,000 6.79%
C/O Williams Real Estate Company, Inc.
530 5th Avenue
New York, New York 10036
(1) For purposes of calculating each person's percentage, shares which may
be acquired within 60 days upon exercise of warrants or stock options have been
treated as outstanding. .
(2) Includes 344,590 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 31,000 shares
issuable upon the exercise of options held by Mr. Parks.
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 30, 1999 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. 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.
Name and Address Amount and Nature of Percent of
Of Beneficial Owner Beneficial Ownership(1) Class(1)
James R. Parks (2) 766,403 10.03%
Emory M. Cohen (3) 214,882 2.89%
Leon D. Silverman (4) 118,254 1.60%
Robert McClain (5) 81,900 1.11%
Randolph D. Blim (6) 50,616 *
Cornelius McCarthy 30,000 *
Ronald Zimmerman (5) 30,000 *
All Directors and Officers as a Group 1,292,055 16.49%
(7 persons) (7)
* 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 which may be acquired within 60
days upon the exercise of warrants, stock options have been treated as
outstanding.
(2) Includes 31,000 shares issuable upon exercise of stock options, and
also includes 344,590 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 69,231 shares issuable upon exercise of stock options.
(4) Includes 22,594 shares issuable upon exercise of stock options.
(5) Includes 30,000 shares issuable upon exercise of stock options.
(6) Includes 39,756 shares issuable upon exercise of stock options.
(7) Includes 222,581 shares issuable on exercise of stock options and
250,000 shares issuable upon exercise of warrants.
CERTAIN TRANSACTIONS
James R. Parks, Chairman of the Board and Chief Executive Officer of the
Company, is a member of Parks, Palmer, Turner & Yemenidjian (PPTY), an
accounting firm, which provides tax accounting and management consulting
services to the Company. PPTY's billings for the year ended December 31, 1998
were approximately $61,000.
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 Peat Marwick LLP has been the Company's independent auditors since the
Company's inception. Audit services performed by KPMG Peat Marwick LLP in the
fiscal year ended December 31, 1998, included the examination of, and reporting
on, the annual 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, 1999. 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.
STOCKHOLDER PROPOSALS
Stockholders are advised that any stockholder proposal that is intended to
be presented at the annual meeting of stockholders to be held in 2000 must be
received by the Company at its principal executive offices no later than January
29, 2000.
If you intend to present a proposal at our 2000 annual meeting and do not
request timely inclusion of the proposal in our proxy statement, then we must
receive notice of such proposal no later than April 19, 2000. If we do not
receive notice by that date, no discussion of your proposal is required to be
included in our 2000 proxy statement and we may use our discretionary authority
to vote on the proposal if you do present it at our annual meeting.
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 1998 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
May 28, 1999 Robert McClain, Secretary