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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
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
Image Entertainment, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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IMAGE ENTERTAINMENT, INC.
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9333 Oso Avenue
Chatsworth, California 91311
NOTICE OF 1997 ANNUAL MEETING
TO BE HELD SEPTEMBER 5, 1997
Dear Shareholder:
The annual meeting of shareholders of Image Entertainment, Inc., a
California corporation will be held at The Chatsworth Hotel, located at 9777
Topanga Canyon Boulevard, Chatsworth, California, on Friday, September 5, 1997,
at 10:00 a.m. (local time), for the following purposes:
1. ELECTION OF DIRECTORS. To elect 4 directors to hold office until their
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respective successors are duly elected and qualified -- Ira S. Epstein,
Martin W. Greenwald, Russell Harris and Stuart Segall have been nominated
for election (Proposal 1).
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS. To ratify the
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appointment of KPMG Peat Marwick LLP as the Company's independent auditors
for the fiscal year ending March 31, 1998 (Proposal 2).
3. OTHER BUSINESS. To transact such other business as may properly come
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before the meeting and any adjournments thereof.
Enclosed with this Notice is a Proxy Statement which describes the
foregoing items of business and a Proxy.
The Board of Directors has fixed the close of business on July 8, 1997 as
the record date for determination of shareholders entitled to notice of and to
vote at the meeting.
By Order of the Board of Directors,
/s/ Cheryl Lee
CHERYL LEE
Corporate Secretary
Chatsworth, California
July 29, 1997
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER
OR NOT YOU PLAN TO ATTEND IN PERSON, YOU ARE URGED TO MARK, SIGN, DATE AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENVELOPE PROVIDED.
EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON AT THE MEETING.
PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK
OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE
RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
PROXY STATEMENT
_______________________
ANNUAL MEETING OF SHAREHOLDERS OF
IMAGE ENTERTAINMENT, INC.
_______________________
SEPTEMBER 5, 1997
Proxy Statements and Proxies are being furnished to the shareholders of
Image Entertainment, Inc., a California corporation (the "Company"), in
connection with the solicitation of proxies by the Company's board of directors
(the "Board") for use at the Company's annual meeting of shareholders and any
adjournments thereof (the "Annual Meeting"). It is anticipated that Proxy
Statements and Proxies will first be mailed to shareholders on or about July 29,
1997.
TIME, DATE AND PLACE OF THE ANNUAL MEETING.
The Annual Meeting will be held at The Chatsworth Hotel, located at 9777
Topanga Canyon Boulevard, Chatsworth, California, on Friday, September 5, 1997,
at 10:00 a.m. (local time).
RECORD DATE / SHAREHOLDERS ENTITLED TO VOTE.
Only shareholders of record at the close of business on July 8, 1997, the
record date (the "Record Date") fixed by the Board, are entitled to notice of
and to vote at the Annual Meeting. On that date, there were 13,474,708 shares of
the Company's common stock, no par value (the "Common Stock"), outstanding. No
shares of the Company's preferred stock, $1.00 par value, are outstanding.
SOLICITATION OF PROXIES
VOTING OF PROXIES.
A Proxy is enclosed for you to vote on Proposals 1 and 2. If the Proxy is
properly executed and returned prior to the Annual Meeting, the shares of Common
Stock it represents will be voted as you direct or, if you indicate no
direction, FOR the director nominees named in Proposal 1 and FOR Proposal 2.
In the event of cumulative voting for directors, the proxyholders appointed
by the Proxy (the "Proxyholders") will have discretionary authority to cumulate
votes among the director nominees with respect to which the Proxyholders'
authority to vote was not withheld. The Proxyholders will have discretionary
authority to vote on such business (other than Proposals 1 and 2) as may
properly come before the Annual Meeting (the Board does not currently know of
any such business).
REVOCABILITY OF PROXIES.
A shareholder may revoke a proxy at any time before it is voted at the
Annual Meeting by filing with the Secretary of the Company a written notice of
revocation or a duly executed proxy bearing a later date, or by voting in person
at the Annual Meeting.
1
VOTING IN PERSON BY BENEFICIAL OWNERS.
If your shares of Common Stock are held of record by a broker, bank or
other person, and you wish to attend the Annual Meeting and vote in person, you
must obtain from the broker, bank or other holder of record a proxy confirming
your beneficial ownership of the shares and bring it to the Annual Meeting.
COSTS OF THE SOLICITATION.
The Board is making this proxy solicitation, the costs of which (including
the reasonable charges and expenses of brokerage firms, banks and others for
forwarding proxy materials to beneficial owners of Common Stock) will be borne
by the Company. Proxies will be solicited through the mails, and may also be
solicited personally or telephonically by the Company's officers, other regular
employees and directors (without additional compensation).
VOTE REQUIRED FOR APPROVAL
Except with respect to cumulative voting for directors, each share of
Common Stock outstanding as of the Record Date is entitled to one vote on each
matter of business that may properly come before the Annual Meeting.
A majority of the shares of Common Stock outstanding on the Record Date,
represented in person or by proxy, will constitute a quorum at the Annual
Meeting. Assuming a quorum is present, the four nominees receiving the highest
number of votes will be elected as directors (Proposal 1). Votes against a
candidate have no legal effect. Assuming a quorum is present, the affirmative
vote of the holders of a majority of the shares of Common Stock represented in
person or by proxy and voting at the Annual Meeting (the shares affirmatively
voted must also constitute at least a majority of the required quorum) is
required to ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors (Proposal 2).
Abstentions will be treated as present and entitled to vote for purposes of
determining the presence of a quorum. Abstentions, however, will not constitute
a vote "for" or "against" any matter, and thus will be disregarded in the
calculation of a plurality or of votes cast on any matter submitted to the
shareholders for a vote.
"Broker non-votes" (i.e., shares held by brokers or nominees as to which
instructions have not been received from the beneficial owners or persons
entitled to vote and as to which the broker has physically indicated on the
proxy that the broker or nominee does not have discretionary power to vote on a
particular matter) are counted as present and entitled to vote for purposes of
determining the presence of a quorum. However, for purposes of determining the
outcome of any matter as to which the broker has physically indicated on the
proxy that it does not have discretionary authority to vote, those shares will
be treated as not present and not entitled to vote with respect to that matter
(even though those shares are considered present for quorum purposes and may be
entitled to vote on other matters). Any unmarked proxies, including those
submitted by brokers or nominees, will be voted as indicated in the accompanying
proxy card.
2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the shares of
Common Stock beneficially owned or deemed to be beneficially owned as of July 1,
1997 by (i) each person known to the Company to be the beneficial owner of (or
deemed under Rule 13d-3 to be the beneficial owner of) more than 5% of the
Common Stock, (ii) each director of the Company, (iii) each executive officer
named in the Summary Compensation Table set forth in the Executive Compensation
section, and (iv) all directors and executive officers as a group:
COMMON STOCK PERCENT
NAME BENEFICIALLY OWNED/(1)//(2)/ OF CLASS/(3)/
- ---- ---------------------------- --------------
IMAGE INVESTORS CO. /(4)//(5)/................................ 5,551,319 38.96%
c/o Metromedia Company
One Meadowlands Plaza
East Rutherford, NJ 07073
JOHN W. KLUGE AND STUART SUBOTNICK/(4)//(5)/
c/o Metromedia Company
One Meadowlands Plaza
East Rutherford, NJ 07073
MARTIN W. GREENWALD /(6)/................................... 1,080,634 7.84%
STUART SEGALL /(6)/......................................... 965,961 7.12%
RUSSELL HARRIS /(5)//(7)/..................................... 180,045 1.33%
IRA S. EPSTEIN /(8)/........................................ 60,981 *
CHERYL LEE.................................................. 137,159 1.01%
JEFF FRAMER................................................. 83,400 *
DAVID BORSHELL.............................................. 110,840 *
ALL DIRECTORS & EXECUTIVE OFFICERS AS A GROUP (7 PERSONS)... 2,617,990 17.95%
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* Less than 1%.
(1) The number of shares beneficially owned includes shares of Common Stock in
which a person has sole or shared voting power and/or sole or shared
investment power. Except as noted below, each person named reportedly has
sole voting and investment powers with respect to the Common Stock
beneficially owned by such person, subject to applicable community property
and similar laws. On July 1, 1997, there were 13,474,708 shares of Common
Stock outstanding.
3
(2) The number of shares listed as beneficially owned by each named person (and
the group) includes shares of Common Stock underlying options, warrants and
rights exercisable as of or within 60 days after July 1, 1997, as follows:
Image Investors Co............................................ 773,019 /(4)//(5)/
John W. Kluge and Stuart Subotnick/(4)//(5)/
Mr. Greenwald................................................. 315,577
Mr. Segall.................................................... 85,577
Mr. Harris.................................................... 92,732 /(5)/
Mr. Epstein................................................... 57,981
Ms. Lee 137,159
Mr. Framer.................................................... 83,400
Mr. Borshell.................................................. 110,442
All directors & executive officers as a group (7 persons)..... 882,917
(3) Common stock not outstanding but which underlies options, warrants and
rights exercisable as of or within 60 days after July 1, 1997 is deemed to
be outstanding for the purpose of computing the percentage of the Common
Stock beneficially owned by each named person (and the group), but is not
deemed to be outstanding for any other person.
(4) All of the shares of Common Stock and a warrant to purchase 425,000 shares
are held of record by Image Investors Co. ("IIC"). The shares of Common
Stock listed in the table as beneficially owned by IIC may also be deemed
to be beneficially owned by John W. Kluge and Stuart Subotnick by virtue of
their being directors, executive officers and the sole shareholders of IIC.
Messrs. Kluge and Subotnick have shared voting and investment powers with
respect to such shares. Amendment No. 11 (dated December 30, 1992) to a
Schedule 13D, dated July 18, 1988, filed on behalf of IIC, John W. Kluge
and Stuart Subotnick, states that IIC, John W. Kluge and Stuart Subotnick
each "disclaims membership in a group, although a group might be deemed to
exist." There are demand and piggyback registration rights with respect to
3,718,169 shares of Common Stock beneficially owned by IIC (which includes
425,000 shares of Common Stock issuable upon exercise of a warrant but does
not include shares or rights acquired pursuant to the Stock Purchase
Agreement referenced in footnote 5 below).
(5) Under a stock purchase agreement, dated as of December 29, 1987, as amended
(the "Stock Purchase Agreement"), certain investors (including IIC and Mr.
Harris) acquired shares of Common Stock from the Company. The Schedule
13D, dated December 29, 1987, filed in connection with the initial
acquisition of shares under the Stock Purchase Agreement states that the
investors "disclaim status as a group." The Stock Purchase Agreement
provides that antidilution rights be granted in connection with certain
issuances of Common Stock. Antidilution rights to 348,019 shares
exercisable by IIC and 34,751 shares exercisable by Mr. Harris as of or
within 60 days after July 1, 1997 are included in the table. The
antidilution rights exercisable by IIC are included in the table as
beneficially owned by John W. Kluge and Stuart Subotnick by virtue of their
being directors, executive officers and sole shareholders of IIC. The
Stock Purchase Agreement also provides that investors collectively holding
a specified percentage of "Shares" (as defined in the Stock Purchase
Agreement) may cause the Company to register the Shares with the SEC.
(6) Includes 1,030 shares of Common Stock held of record by Momandad, Inc., a
corporation of which Messrs. Greenwald and Segall are the sole
shareholders. With respect to such shares, Messrs. Greenwald and Segall
share voting and investment powers.
(7) Includes 87,313 shares of Common Stock held by Mr. Harris as trustee for a
family trust.
(8) Includes 2,000 shares of Common Stock held by Mr. Epstein's Keogh plan.
4
PROPOSAL 1
ELECTION OF DIRECTORS
NOMINEES.
The Bylaws provide for a Board consisting of a minimum of 4 and a maximum
of 7 members.
The name of each nominee for election to the Board, his principal
occupation, age, all positions and offices with the Company held by him and the
year he first became a director and additional biographical data is set forth
below. For information regarding each nominee's security ownership, see
"Security Ownership of Certain Beneficial Owners and Management."
MARTIN W. GREENWALD .................................................. Age: 55
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Chairman of the Board, Chief Executive Officer and President since April 1981,
and Treasurer since January 1988. Mr. Greenwald is a 1964 graduate of Fairleigh
Dickinson University. Since July 1990, Mr. Greenwald has been a board member of
the Permanent Charities Committee of the Entertainment Industries, an umbrella
organization which coordinates charitable contributions. Mr. Greenwald has been
the Chairperson of the Optical Videodisc Association (OVDA) (formerly the
Laserdisc Association of America) since 1995.
STUART SEGALL ........................................................ Age: 52
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Director and Vice President (not an executive officer) since April 1981. Mr.
Segall's principal occupation is that of principal of Stu Segall Productions, a
television and motion picture production company with offices in North
Hollywood, California and a full-service production facility in San Diego,
California. From 1984 to 1989, Mr. Segall was a supervising producer for Steven
J. Cannell Productions, Hollywood, California.
IRA S. EPSTEIN ....................................................... Age: 65
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Director since June 1990. Mr. Epstein is of counsel to the Beverly Hills law
firm of Weissman, Wolff, Bergman, Coleman & Silverman. Prior to that, Mr.
Epstein was the managing partner of Cooper, Epstein & Hurewitz, where he
practiced law from 1975 to 1993. Mr. Epstein has held officer and director
positions in numerous corporations.
RUSSELL HARRIS ....................................................... Age: 53
- --------------
Director since January 1991. Mr. Harris is a private investor and
telecommunications consultant. Mr. Harris is also a director of two non-public
entities. Mr. Harris was President and director of County Voice, a public
utility licensed to provide radio paging services in Southern California, from
November 1985 to January 1992. From 1983 to 1987, Mr. Harris held various
executive positions with Metromedia Telecommunications, Inc.
VOTE REQUIRED.
Four directors are to be elected at the Annual Meeting to hold office until
the Company's next annual meeting of shareholders and until their respective
successors have been elected and qualified. Proxies solicited by the Board will
be voted, unless authority to vote is withheld, for the nominees named above or,
if any of these nominees were unavailable to stand for election (an occurrence
not expected by the Board), such substitute nominee(s) as selected by the Board.
If any shareholder has given notice at the Annual Meeting, before the
voting for directors begins, of the shareholder's intention to cumulate votes,
then all shareholders may cumulate their votes, but only for nominees whose
names have been placed in nomination before the voting. Under cumulative
voting, each shareholder is entitled to the number of votes equal to the number
of directors to be elected multiplied by the number of shares of Common Stock
held by the shareholder. The shareholder may cast all those votes for a single
nominee or distribute them among as many nominees as the shareholder sees fit.
If voting for directors is noncumulative, each share of Common Stock will be
entitled to one vote for each of the nominees.
5
In the event of cumulative voting for directors, the Proxyholders will have
discretionary authority to cumulate votes among the nominees named above
(including any substitute nominees) with respect to shares for which the
Proxyholders' authority to vote was not withheld, so as to elect a maximum
number of such nominees.
Assuming a quorum is present, the nominees receiving the highest number of
votes will be elected as directors (votes against a candidate have no effect).
If voting for directors is noncumulative, the holders of a majority of the
shares of Common Stock voting could elect all the directors.
BOARD COMMITTEES AND MEETINGS.
The Board has standing audit and compensation committees, but no nominating
committee (the functions of a nominating committee are performed by the entire
Board). The audit committee is composed of Messrs. Epstein and Harris. The
audit committee's primary functions are to recommend to the Board the firm to be
retained by the Company as its independent auditors, to consult with the
auditors with regard to the plan of audit, the results of the audit and the
audit report, and to confer with the auditors with regard to the adequacy of
internal accounting controls. The audit committee met once during fiscal 1997.
The compensation committee is composed of Messrs. Epstein and Harris. The
compensation committee's primary functions are to review and approve salaries,
bonuses and other compensation payable to the Company's executive officers. The
compensation committee met four times during fiscal 1997.
The Board met six times during fiscal 1997. Each director attended all of
the meetings, except Mr. Segall who attended all but one of the meetings. The
Board administers the Company's 1994 Eligible Directors Stock Option Plan, and
the compensation committee administers the Company's 1989, 1990 and 1992 Stock
Option Plans, and other employee benefit plans of the Company.
COMPENSATION OF DIRECTORS.
Non-employee directors each receive a fee of $400 for each Board meeting
attended.
Since July 12, 1994, the Company has made automatic annual awards to non-
employee directors under the Company's 1994 Eligible Directors Stock Option
Plan, as amended (the "Directors Plan"). On July 12, 1994, July 12, 1995, July
12, 1996 and July 14, 1997 (the first business day following July 12, 1997),
Messrs. Epstein and Harris were each granted 15,000 options under the Directors
Plan at a per share exercise price of $7.25, $6.875, $5.8125 and $3.25,
respectively. The Directors Plan, which provides for automatic annual grants of
options "at market" to acquire the Company's Common Stock (the "Options") to
non-employee directors, was approved by the shareholders at the Company's 1995
Annual Meeting.
The Options granted pursuant to the Directors Plan will expire 10 years
after the date of grant, subject to earlier termination as described below. The
Options become exercisable in installments at the rate of 50% of the shares
initially subject to the Option on the date six months after the grant date, and
another 25% of such initial number of shares on the date 12 months and on the
date 18 months after the grant date.
If an optionee's services as a member of the Board of Directors terminate
by reason of death or disability, the director's Options become fully
exercisable and remain exercisable for one year thereafter or until the
expiration of their stated term, whichever occurs first, and then terminate. If
the director's services terminate for any other reason, the director's Options,
to the extent they are exercisable on such date, remain exercisable for six
months or until the expiration of their stated term, whichever occurs first, and
then terminate; the Options not exercisable at the time of termination of
service will terminate.
Upon the occurrence of certain events described in the Directors Plan (such
as a dissolution, liquidation or certain merger or asset transactions or changes
in control of the Company), each Option awarded under the Directors
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Plan will become immediately exercisable, provided that no Option will be
accelerated to a date which is less then six months after the date of grant of
the Option.
EXECUTIVE COMPENSATION
The following table sets forth certain annual and long-term compensation
for each of the last three fiscal years, paid to the Company's Chief Executive
Officer and each Executive Officer whose salary and bonus exceeded $100,000 in
the last fiscal year:
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
------------------------------------------ ------------
Other Securities All
Annual Underlying Other
Fiscal Salary Bonus Compensation Options Compensation
Name & Principal Position Year ($)/(1)/ ($)/(2)/ ($)/(3)/ (#) ($)
- ------------------------- ------ ---------- --------- ------------ ---------- ------------
Martin W. Greenwald, 1997 $ 263,187 $ 300 $ -- 150,000 $29,662/(4)/
President & CEO 1996 258,150 230,639 -- 0 4,793/(5)/
1995 239,061 200,126 -- 150,000 3,690/(6)/
Cheryl Lee, 1997 148,019 5,881 -- 0 3,042/(7)/
Chief Administrative 1996 140,969 57,983 -- 60,000 769/(7)/
Officer 1995 133,028 54,895 -- 25,000 - 0 -
Jeff Framer, 1997 125,173 5,881 -- 0 2,593/(7)/
Chief Financial 1996 119,202 57,983 -- 60,000 650/(7)/
Officer 1995 111,019 54,895 -- 25,000 - 0 -
David Borshell, 1997 119,731 5,881 -- 0 2,644/(7)/
Sr. VP, Sales, Marketing 1996 111,327 57,983 -- 75,000 622/(7)/
& Operations 1995 92,310 54,895 -- 25,000 - 0 -
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(1) The fiscal 1997, 1996 and 1995 salary figures for Mr. Greenwald include an
additional annual salary component characterized as an "unaccountable
personal expense allowance" in his employment agreement.
(2) The fiscal 1997, 1996 and 1995 bonus figures for all of the named executive
officers represent amounts awarded under a formal bonus plan set forth in
each such officer's employment agreement, plus a nominal holiday bonus.
(3) While all the executive officers enjoyed certain perquisites in fiscal
1997, 1996 and 1995, such perquisites did not exceed the lesser of $50,000
or 10% of any executive officer's fiscal year salary and bonus for each
such year.
(4) Includes $3,690 of term life insurance premium payments, $21,805 of
universal life insurance premium payments (which commenced in June 1996)
and $4,167 of Company contributions to a 401(k) plan.
(5) Includes $3,690 of term life insurance premium payments and $1,103 of
Company contributions to a 401(k) plan. Company contributions to the
401(k) plan commenced on January 1, 1996.
7
(6) Includes $3,690 of term life insurance premium payments.
(7) Entire amount consists of Company contributions to a 401(k) plan. Company
contributions to the 401(k) plan commenced on January 1, 1996.
The following table summarizes options granted in fiscal 1997 to the
executive officers named in the Summary Compensation Table:
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term/(1)/
-------------------------------------------------------------------- ------------------------------
Number of Percent of Total
Securities Options Granted
Underlying to Employees Exercise
Options in Fiscal Price Expiration
Name Granted (#)/(2)/ Year/(3)/ ($/Sh) Date 0% ($) 5% ($) 10% ($)
- ---------------- ------------------ ---------------- ------------ ---------- ------ -------- -------
Martin Greenwald 150,000/(4)/ 100% $6.750/(5)/ 10/09/06 $0 $209,100 $932,850
Cheryl Lee 0 -- -- -- -- -- --
Jeff Framer 0 -- -- -- -- -- --
David Borshell 0 -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
(1) The amounts are based upon the 0%, 5% and 10% annual rates of return
prescribed by the Securities and Exchange Commission and are not intended
to forecast future appreciation, if any, of the Company's Common Stock
price nor reflect actual gains, if any, realizable upon option exercise.
(2) In the event of a "Change of Control" (as defined in the Company's 1992
Stock Option Plan), the unvested portion of an option shall immediately
vest. Additionally, the committee administering the Plan may (subject to
Board approval) terminate the Plan and the options. If any termination
occurs, the committee shall give each optionee written notice of the
intention to terminate the Plan and the options, and shall permit the
exercise of the options for at least thirty days immediately preceding the
effective date of such termination. In the event an optionee's employment
with the Company ceases for any reason other than death or disability, the
options will terminate two weeks following the date employment ceases;
however, the committee, in its sole discretion, may extend the exercise
period from two weeks to three months. In the event of an optionee's death
or disability, the options may be exercised for one year thereafter.
Subject to the other provisions of the Plan, the committee has
discretionary authority to amend or terminate the Plan and to do any other
act advisable to administer the Plan.
(3) Based on options granted to employees totaling 150,000 shares (Mr.
Greenwald was the only employee to receive options in fiscal 1997).
(4) The options were granted under the Company's 1992 Stock Option Plan and
vest in 30,000 share increments on each of October 10, 1996, 1997, 1998,
1999 and 2000.
(5) The fair market value of the Common Stock on the date of grant was $5.00
per share. The exercise price was $1.75 over the fair market value of the
Common Stock on the date of grant.
8
The following table summarizes options exercised in fiscal 1997 by the
executive officers named in the Summary Compensation Table and certain other
information regarding their outstanding options:
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION VALUES
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money
Options at FY-End (#) Options at FY-End ($)/(1)/
--------------------------- -------------------------------------
Shares Acquired Value Realized
Name on Exercise (#) ($) Exercisable Unexercisable Exercisable/(2)/ Unexercisable/(2)/
- ---------------- --------------- -------------- ----------- ------------- ---------------- ------------------
Martin Greenwald 140,122 $428,493 315,577 120,000 $ 0 $ 0
Cheryl Lee 0 0 132,159 25,000 0 0
Jeff Framer 0 0 78,400 25,000 0 0
David Borshell 0 0 104,192 31,250 0 0
- ----------------------------------------------------------------------------------------------------------------------------
(1) Based on the closing price on NASDAQ/NMS of the Common Stock on March 31,
1997 ($3.875).
(2) Market value of underlying securities at exercise or year-end, minus the
exercise price.
DESCRIPTION OF EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN
CONTROL ARRANGEMENTS.
The Company is currently a party to employment agreements with each of the
executive officers named in the Summary Compensation Table. The agreements were
entered into on July 1, 1994. Except for base salary, bonus compensation and
fringe benefits, all of the terms and conditions of the agreements are
identical.
The agreements originally provided for a term of two years. The agreements
were amended effective July 1, 1995, pursuant to which the term was extended to
June 30, 1998, with an automatic extension to June 30, 1999 unless a written
notice of non-renewal was given by June 30, 1997. No such notice of non-renewal
was given .
The agreements originally specified base salary amounts (and, for Mr.
Greenwald, an additional annual salary component characterized as an
"unaccountable personal expense allowance") for the first contract year only.
The agreements were amended effective July 1, 1995 to provide that on the
anniversary of each contract year commencing July 1, 1995 each executive would
receive a 5% increase to their then annual base salary (and, for Mr. Greenwald,
a 5% increase to his then annual unaccountable personal expense allowance);
except for Mr. Borshell, who received a 15.5% increase to his then base salary
for the period commencing on July 1, 1995 and ending on June 30, 1996, and a 5%
increase to his then annual base salary for each subsequent contract year. The
base salary amounts paid to the named executive officers pursuant to the
employment agreements (which, for Mr. Greenwald, include his annual
unaccountable personal expense allowance) are reflected in the Summary
Compensation Table, annualized on a fiscal year basis.
The agreements provide for the payment of cash bonuses to the executive
officers as incentive compensation provided certain performance targets are met.
The bonus amounts represent a percentage of the Company's fiscal pretax profits
and are based upon certain qualifying conditions, such as maximum total
expenses, minimum gross margin, maximum inventory levels, minimum return on
assets, minimum return on net revenue and minimum current ratio. The performance
criteria pursuant to which the bonuses are determined are applicable to all of
the executive officers and are subject to change from time to time at the
discretion of the compensation committee. Mr.
9
Greenwald's bonus percentage ranges between 2% and 4% provided pretax profits
are greater than a specified amount. The bonus percentage for the other
executive officers is 5/8%.
The agreements provide that stock option grants will be in such form and
amounts, and at such time or times, as the Board of Directors (or, if
applicable, the stock option plan administrators) shall determine.
The agreements provide for severance packages consisting of base salary and
insurance continuation for six months, and pro rata bonus compensation for the
longer of six months or that part of the fiscal year occurring prior to
expiration of the term. The agreements also provide for comparable benefits in
the event of an executive's death or permanent disability.
In the event of a "Change of Control" (as defined in the agreements), all
compensation, rights and benefits under the agreements will continue for the
longer of one year following the effective date of termination or through the
expiration of the remaining term of the agreements.
In the event of a termination for "Cause" (as defined in the agreements),
no severance, fringe benefits, compensation or other such rights, including any
pro rata portion of bonus otherwise due, is due or payable to any executive so
terminated.
Additionally, the executives are entitled to receive medical, life and
disability insurance, vacation and reimbursement for reasonable business
expenses. Mr. Greenwald's agreement further provides for the payment of
personal life and disability insurance premium payments and reimbursement for
medical expenses not covered by medical insurance of up to $30,000 per annum
(increased from $17,000 per annum pursuant to an amendment effective July 1,
1996), an additional annual salary component characterized as an "unaccountable
personal expense allowance" (as stated above), and use of a company car.
Outstanding employee stock options granted under the Company's 1992 Stock
Option Plan and individual option grants without reference to a plan include
provisions for acceleration of exercisability upon a change in control
substantially as summarized in footnote 2 to the Option Grants in Last Fiscal
Year Table. Options granted under the Company's 1990 Stock Option Plan include
provisions for acceleration of exercisability upon a change in control except in
the event the acquiring corporation (or a parent or subsidiary thereof) agrees
to (i) assume the Company's obligations under the plan and the options or (ii)
replace the options with new options having terms at least as favorable to the
optionee. Options granted under the Company's 1989 Restated Stock Option Plan do
not possess change in control features. Options granted in May 19, 1994 under
individual plans include provisions allowing the Board to terminate the plan and
the option term in the event of a change in control, whereupon the optionee may
exercise the options for at least sixty days following the effective date of
termination.
On May 21, 1997, the Board (Mr. Greenwald abstaining) awarded Mr. Greenwald
an $90,000 guaranteed, discretionary bonus for fiscal 1998 (the "Discretionary
Bonus"). The Discretionary Bonus is payable in biweekly installments commencing
June 19, 1997 and ending on March 26, 1998. The Discretionary Bonus will be
offset against the first $90,000 that Mr. Greenwald may earn for fiscal 1998
under the terms of his employment agreement.
10
STOCK PRICE PERFORMANCE GRAPH./*/
The graph below compares the cumulative total return of Company, the NASDAQ
U.S. Market Index and a Company-selected peer group (viz., Handleman Company, J2
Communications, LIVE Entertainment, Musicland Stores and Rentrak) for the 5-year
period ending March 31, 1997. The graph assumes an initial investment of $100 on
April 1, 1992 in the Company, the NASDAQ U.S. Market Index and the peer group.
The graph also assumes reinvestment of dividends, if any.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG IMAGE ENTERTAINMENT, NASDAQ U.S., AND PEER GROUP
PERFORMANCE GRAPH APPEARS HERE
Measurement Period IMAGE
(Fiscal Year Covered) ENTERTAINMENT NASDAQ U.S. PEER GROUP
- ------------------- ------------- ----------- ----------
Measurement Pt- 1992 $100.00 $100.00 $100.00
FYE 1993 $ 51.00 $115.00 $ 97.00
FYE 1994 $ 64.00 $124.00 $ 98.00
FYE 1995 $ 68.00 $138.00 $ 69.00
FYE 1996 $ 64.00 $187.00 $ 34.00
FYE 1997 $ 37.00 $208.00 $ 31.00
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION./**/
THE COMMITTEE. The Company's Compensation Committee was established in
1992 and is composed entirely of outside directors. The Committee reviews with
the full Board all aspects of the compensation packages for each executive
officer of the Company. The Committee, and from time to time the full Board,
approves such packages
- --------------------------------------------------------------------------------
/*/ This section of the Proxy Statement shall not be deemed to be incorporated
by reference by any general statement incorporating by reference this Proxy
Statement into any filings of the Company pursuant to the Securities Act of 1933
or the Securities Exchange Act of 1934, as amended, except to the extent the
Company specifically incorporates this section by reference therein, and shall
not be deemed soliciting material or otherwise deemed filed under either of such
Acts.
/**/ The Board Compensation Committee Report on Executive Compensation shall
not be deemed to be incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filings of the Company
pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934,
as amended, except to the extent the Company specifically incorporates this
section by reference therein, and shall not be deemed soliciting material or
otherwise deemed filed under either of such Acts.
11
and any amendments thereto. The Committee administers the Company's 1989, 1990
and 1992 Stock Option Plans, and other employee benefit plans of the Company.
The following report addresses the Committee's actions and decisions with
respect to compensation for the 1997 fiscal year.
COMPENSATION OBJECTIVES. The Committee's goal is to maximize shareholder
value over the long-term by attracting, retaining and motivating key executives.
The executive compensation packages contain three primary components: (i) base
salary, (ii) long-term incentive compensation in the form of stock options and
(iii) annual incentive bonuses based on the Company's performance. The Company
offers a contributory 401(k) plan and provides health, life and disability
insurance to all full-time employees. In addition, to the extent reasonably
practicable and to the extent it is within the Committee's control, the
Committee intends to limit executive compensation in ordinary circumstances to
that which is deducible by the Company under Section 162(m) of the Internal
Revenue Code of 1986.
BASE SALARY. Base salary was paid in accordance with each executive's
employment agreement, as last amended on July 1, 1995.
OPTION GRANTS. The Committee views the option grant portion of the
executive compensation packages as a special form of long-term incentive
compensation to be awarded on a limited and non-regular basis. Stock options
granted to executives are priced at or above the fair market value of the Common
Stock on the date of grant and are intended to give management a stake in the
Company's growth while aligning management interests with those of the Company's
shareholders. Awards of stock options are determined based on the Committee's
subjective determination of the amount of such awards necessary, as a supplement
to an executive's base salary and performance-based bonus, to retain and
motivate such executive.
BONUSES. Bonuses were awarded to the current executive officers based on a
formula plan pursuant to their July 1, 1994 employment agreements, as amended.
All of the executive officers were entitled to receive a specified percentage of
pretax profits (2% - 4% for Mr. Greenwald provided a minimum pre-tax profit
amount was achieved, and 5/8% for each of Ms. Lee, Mr. Framer and Mr. Borshell)
conditioned upon the achievement of specific performance criteria (such as
maximum total expenses, minimum gross margin, maximum inventory levels, minimum
return on assets, minimum return on net revenue and minimum current ratio). The
performance criteria are subject to change from time to time at the Committee's
discretion to adjust for changes in the Company's business, capitalization and
performance. The Committee has not disclosed the exact numbers specified in the
bonus plan components because such information is deemed to be confidential and
proprietary, the disclosure of which would be against the best interests of the
Company.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. In July 1996, the Committee
determined that Mr. Greenwald's base salary and unaccountable personal expense
allowance as provided in his employment agreement (including an increase based
on the same factors as the increases to the other executive officers' base
salaries), although supplemented by any bonus awarded to him in accordance with
the performance-based formula contained in his employment agreement, did not
provide appropriate cash compensation to Mr. Greenwald in light of the
compensation objectives, goals and criteria applied generally to executive
officers and summarized above. As a result, the Committee amended Mr.
Greenwald's employment agreement to increase the total amount of personal
insurance premiums and medical expenses not covered by insurance to be paid by
the Company from $17,000 per annum to $30,000 per annum. Throughout calendar
1996, the Company was actively pursuing its acquisition strategy. In
recognition of Mr. Greenwald's leadership of this effort, the Committee
determined on October 10, 1996 to grant him an option for 150,000 shares of
Common Stock, which award reflects the Committee's subjective determination of
the number of options necessary to meet the Committee's compensation goals and
objectives with respect to the stock option component of his compensation as
summarized above.
COMPENSATION COMMITTEE
Ira S. Epstein
Russell Harris
12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
John W. Kluge and Stuart Subotnick, who may be deemed to beneficially own
more than 5% of the Company's Common Stock as the sole shareholders of IIC, may
be deemed to have indirectly controlled Orion Pictures Corporation ("OPC") prior
to OPC's sale to Metro-Goldwyn-Mayer Inc. OPC's wholly-owned subsidiary Orion
Home Entertainment Corporation, dba Metromedia Entertainment Group Home Video
("Orion") has licensed laserdisc programming to the Company in the ordinary
course of the Company's business. The Company believes that the terms of
laserdisc license agreement with Orion are comparable to the terms of similar
agreements between the Company and unaffiliated parties. During the period
commencing on April 1, 1996 and ending on July 1, 1997, the Company paid Orion
royalties of approximately $560,000.
On April 15, 1997, the Company and Orion entered into another license
agreement pursuant to which the Company was granted exclusive rights to release
twelve Orion titles in the new digital video disc (DVD) format. The Company
believes that the terms of the DVD license agreement are comparable to the terms
of similar DVD license agreements between the Company and unaffiliated parties.
During the period commencing on April 1, 1996 and ending on July 1, 1997, the
Company paid Orion advance royalties of $150,000.
In June 1996, the Board approved that certain Stock Purchase Agreement,
dated as of June 27, 1996, by and between the Company and Martin Greenwald,
President and Chairman of the Board of Directors. of the Company. The stock
purchase agreement provided for the purchase of 138,000 shares of restricted
Common Stock held by Mr. Greenwald, at a purchase price of $5.8125 per share.
The $5.8125 per share purchase price was at the same discount to market as the
per share purchase price applicable under a Stock Purchase Agreement entered
into with Mr. Segall, a director of the Company, dated as of July 12, 1995. The
closing price of the Common Stock on June 27, 1996 was $6.125. Mr. Greenwald
acquired 56,151 of the 138,000 shares on December 12, 1994 upon the exercise of
an option dated December 31, 1984 granted to him under a Company stock option
plan. The exercise price of the option was $1.070 per share. Mr. Greenwald
acquired the 81,849 balance of the 138,000 shares on November 15, 1994 upon the
exercise of a non-compensatory warrant dated December 18, 1985. The exercise
price of the warrant was $0.594 per share.
Under a November 28, 1991 agreement with Buena Vista Home Video, the
Company has the exclusive right to replicate, market and distribute all Disney,
Touchstone, Buena Vista and Hollywood Pictures programming on laserdisc in the
United States and Canada and their respective territories. In connection with
the agreement, Buena Vista's parent company, Disney Enterprises, Inc. (formerly,
The Walt Disney Company) ("Disney"), was issued a warrant to purchase 1,671,760
shares of the Company's Common Stock at an exercise price of $6.00 per share. On
September 29, 1995, to reduce the potential dilution of the Company's
shareholders and as an inducement for the extension of the November 28, 1991
agreement, the Company granted cashless exercise rights based on average fair
market value at the date of exercise in connection with the warrant. On December
31, 1996, the warrant expired unexercised.
Under a July 1, 1992 agreement with Twentieth Century Fox Home
Entertainment (formerly called FoxVideo, Inc.), the Company has the exclusive
right to distribute all Fox programming on laserdisc in the United States and
Canada and their respective territories. In connection with the agreement, Fox's
parent company, Twentieth Century Fox Film Corporation ("Fox"), was issued a
warrant to purchase 1,671,760 shares of the Company's Common Stock at an
exercise price of $6.00 per share. On May 10, 1996, to reduce the potential
dilution of the Company's shareholders and as an inducement for the extension of
the July 1, 1992 agreement, the Company granted cashless exercise rights based
on average fair market value at the date of exercise in connection with the
warrant. On May 10, 1996, Fox exercised the warrant pursuant to the cashless
exercise right at an average market price of $6.9375, resulting in a net
issuance to Fox of 300,060 shares. The closing price on the date of exercise was
$7.3125.
13
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 Common Stock, to file with the Securities and Exchange Commission (the
"SEC") and the NASDAQ/NMS initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Executive
officers, directors and greater than 10% shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) reports they
file. Based solely upon review of the copies of Section 16(a) reports furnished
to the Company, or written representations from certain reporting persons that
no Forms 5 were required for those persons, the Company believes that, during
fiscal 1997 all Section 16(a) filing requirements applicable to its executive
officers, directors and greater than 10% shareholders were complied with.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board has unanimously appointed, and recommends that the shareholders
ratify the appointment of, KPMG Peat Marwick LLP, independent certified public
accounts and the Company's auditors since fiscal 1990, as auditors for fiscal
1998. Though shareholder ratification is not required by law or otherwise, the
Board is seeking ratification as a matter of good corporate practice. If the
appointment is not ratified, the Board will reconsider the appointment.
Representatives of KPMG Peat Marwick LLP will be present at the Annual Meeting,
will have the opportunity to make statements if they so desire, and will be
available to respond to appropriate questions.
VOTE REQUIRED.
Assuming a quorum is present, the affirmative vote of the holders of a
majority of the Common Stock represented (in person or by proxy) and voting at
the Annual Meeting (the shares affirmatively voting must also constitute at
least a majority of a quorum) is required to ratify the appointment of KPMG Peat
Marwick LLP as the Company's independent auditors.
SHAREHOLDER PROPOSALS
To be considered for inclusion in the Company's proxy solicitation
materials for the 1998 Annual Shareholders' Meeting, a shareholder proposal must
be received by the Company's Secretary at the principal executive offices of the
Company no later than March 31, 1998.
In addition, Article III, Section 4, of the Company's Bylaws provide as
follows:
Section 4. Nomination for Director. Nominations for election of members
--------- -----------------------
of the Board of Directors may be made by the Board of Directors or by any
shareholder of any outstanding class of voting stock of the Company
entitled to vote for the election of directors. Notice of intention to
make any nominations, other than by the Board of Directors, shall be made
in writing and shall be received by the President of the Company no more
than 60 days prior to any meeting of shareholders called for the election
of directors, and no more than 10 days after the date the notice of such
meeting is sent to shareholders pursuant to Section 4 of Article II of
these bylaws; provided, however, that if only 10 days' notice of the
meeting is given to shareholders, such notice of intention to nominate
shall be received by the President of the Company not later than the time
fixed in the notice of the meeting for the opening of the meeting. Such
notification shall contain the following information to the extent known to
the notifying shareholder: (a) the name and address of each proposed
nominee; (b) the principal occupation of each proposed nominee; (c) the
number of shares of voting stock of the Company owned by each proposed
nominee; (d) the name and residence address of the notifying shareholder;
and (e) the number of shares of voting stock of the Company owned by the
14
notifying shareholder. Nominations not made in accordance herewith shall
be disregarded by the then chairman of the meeting, and the inspectors of
election shall then disregard all votes cast for each nominee.
ANNUAL REPORT TO SHAREHOLDERS FORM 10-K
The Company's Annual Report to Shareholders (i.e., the Company's Form 10-K
for the fiscal year ended March 31, 1997) accompanies this Proxy Statement but
does not constitute proxy soliciting material. Exhibits to the Annual
Report/Form 10-K are available upon payment of a reasonable fee. Please direct
requests, in writing, to Cheryl Lee, Esq., Secretary, Image Entertainment, Inc.,
9333 Oso Avenue, Chatsworth, California 91311.
OTHER BUSINESS
The Proxyholders will have discretionary authority to vote on such business
(other than Proposals 1 and 2) as may properly come before the Annual Meeting
(the Board does not know of any such business as of this date) and all matters
incident to the conduct of the Meeting.
By Order of the Board of Directors,
IMAGE ENTERTAINMENT, INC.
CHERYL LEE
Corporate Secretary
Chatsworth, California
July 29, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, WE URGE YOU TO PROMPTLY
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE
PROVIDED. THANK YOU.
15
IMAGE ENTERTAINMENT, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE 1997 ANNUAL MEETING OF
SHAREHOLDERS
SEPTEMBER 5, 1997
The undersigned appoints Ira S. Epstein, Martin W. Greenwald, Russell Harris
and Stuart Segall, and each of them, proxies (each with full power of
substitution) to represent the undersigned at the Image Entertainment, Inc.
1997 Annual Meeting of Shareholders to be held on September 5, 1997 and any
adjournments thereof and to vote the shares of the Company's common stock held
of record by the undersigned on July 8, 1997 as directed below.
1. Election of Directors (Proposal 1).
[_] FOR all nominees listed below (except as indicated to the contrary
below).
[_] WITHHOLD AUTHORITY to vote for all nominees listed below.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(S)
STRIKE A LINE THROUGH THE NAME OF THE NOMINEE(S) IN THE FOLLOWING LIST:
IRA S. EPSTEIN . MARTIN W. GREENWALD . RUSSELL HARRIS . STUART SEGALL
2. Ratification of the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for the fiscal year ending March 31, 1998 (Proposal 2).
[_] FOR [_] AGAINST [_] ABSTAIN
3. The proxies are authorized to vote in their discretion upon such other
business as may properly come before the Annual Meeting and any matters
incident to the conduct of the Meeting.
PLEASE SIGN ON REVERSE SIDE
The shares represented by this Proxy will be voted as directed above. If no
direction is indicated, the shares represented by this Proxy will be voted FOR
the director nominees named in Proposal 1 and FOR Proposal 2 and will be voted
in the discretion of the proxies on such other business as may properly come
before the Annual Meeting. The undersigned acknowledges receipt of the Notice
of Annual Meeting of Shareholders and the Proxy Statement dated July 29, 1997.
Dated: _____________________________________
Signed: ____________________________________
Signed: ____________________________________
Please date this Proxy and sign exactly as
your name appears hereon. If shares are
jointly held, this Proxy should be signed
by each joint owner. Executors,
administrators, guardians or others signing
in a fiduciary capacity should state their
full titles. A Proxy executed by a
corporation should be signed in its name by
its president or other authorized officer.
A Proxy executed by a partnership should be
signed in its name by an authorized person.
PLEASE PROMPTLY COMPLETE, DATE AND SIGN
THIS PROXY AND RETURN IT IN THE ENVELOPE
PROVIDED.