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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
FOUR MEDIA COMPANY
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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
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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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[_] 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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Notes:
FOUR MEDIA COMPANY
2813 WEST ALAMEDA AVENUE
BURBANK, CALIFORNIA 91505
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
January 14, 1999
-------------------
To the Stockholders of Four Media Company:
The Annual Meeting of Stockholders of Four Media Company (the "Company"),
will be held at the Burbank Hilton in Burbank, California 91505 on Thursday,
January 14, 1999 at 10:00 A.M. for the following purposes:
(1) To elect three directors to the Board of Directors for the Company to
serve for three years until the third subsequent Annual Meeting of Stockholders
and until their respective successors shall be elected and qualified;
(2) To consider and ratify the appointment of PricewaterhouseCoopers LLP as
independent certified public accountants for fiscal year 1999; and
(3) To consider and to transact such other business as may properly be
brought before the meeting.
The foregoing proposals are more fully described in the accompanying Proxy
Statement to which your attention is invited.
Only stockholders of record at the close of business on November 25, 1998
are entitled to notice of, and to vote at, this meeting and any continuation or
adjournments thereof. For ten days prior to the meeting, a complete list of
stockholders entitled to vote at the meeting will be available for examination
by any stockholder for any purpose germane to the meeting during ordinary
business hours at the principal executive offices of Four Media Company 2813
West Alameda Avenue, Burbank, California 91505.
/s/ Robert T. Walston
Robert T. Walston
Chairman and Chief Executive Officer
Burbank, California
November 30, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO SIGN
AND PROMPTLY MAIL THE ENCLOSED PROXY IN THE RETURN ENVELOPE SO THAT YOUR STOCK
MAY BE REPRESENTED AT THE MEETING.
FOUR MEDIA COMPANY
2813 WEST ALAMEDA AVENUE
BURBANK, CALIFORNIA 91505
(818) 840-7000
----------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held January 14, 1999
10:00 a.m.
Burbank Hilton
Burbank, California
----------------
The accompanying proxy is solicited by the Board of Directors of Four Media
Company, a Delaware corporation (the "Company"), for use at the Annual Meeting
of Stockholders to be held Thursday, January 14, 1999, or any adjournment
thereof, for the purposes set forth in the accompanying Notice of Annual
Meeting. The date of this Proxy Statement is November 30, 1998, the approximate
date on which this Proxy Statement and the accompanying form of proxy were first
sent or given to stockholders.
GENERAL INFORMATION
ANNUAL REPORT. The Annual Report on Form 10-K for the fiscal year ended
August 2, 1998, is enclosed with this Proxy Statement.
VOTING SECURITIES. Only stockholders of record as of the close of business
on November 25, 1998 will be entitled to vote at the meeting and any adjournment
thereof. As of that date, there were 10,363,256 shares of Common Stock of the
Company, par value $0.01 per share, issued and outstanding. In addition, there
were 150,000 shares of Series A Convertible Preferred Stock that are entitled to
1,500,000 votes. Stockholders may vote in person or by proxy. Each holder of
shares of Common Stock is entitled to one (1) vote for each share held on the
proposals presented in this Proxy Statement. The Company's Bylaws provide that
a majority of all of the shares of stock entitled to vote, whether present in
person or represented by proxy, shall constitute a quorum for the transaction of
business at the meeting.
SOLICITATION OF PROXIES. The cost of soliciting proxies will be borne by
the Company. In addition, the Company will solicit stockholders by mail through
its regular employees, and will request banks and brokers, and other custodians,
nominees and fiduciaries, to solicit their customers who have stock of the
Company registered in the names of such persons and will reimburse them for
their reasonable, out-of-pocket costs. The Company may use the services of its
officers, directors, and others to solicit proxies, personally or by telephone,
without additional compensation.
VOTING OF PROXIES. All valid proxies received prior to the meeting will be
voted. All shares represented by a proxy will be voted, and where a stockholder
specifies by means of the proxy a choice with respect to any matter to be acted
upon, the shares will be voted in accordance with the specification so made. If
no choice is indicated on the proxy, the shares will be voted in favor of the
proposal. A stockholder giving a proxy has the power to revoke his or her proxy,
at any time prior to the time it is voted, by delivery to the Secretary of the
Company of a written instrument revoking the proxy or a duly executed proxy with
a later date, or by attending the meeting and voting in person.
Page 2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The
following table contains information as of September 30, 1998 regarding the
ownership of the Common Stock of the Company by all persons who, to the
knowledge of the Company, were (i) the beneficial owners of 5% or more of the
outstanding shares of Common Stock of the Company, (ii) each director and
director nominee of the Company, (iii) the Chief Executive Officer and the four
other most highly compensated executive officers of the Company as of August 2,
1998 whose salary and bonus for the year ended August 2, 1998 exceeded $100,000
and (iv) all current executive officers and directors of the Company as a group.
SHARES BENEFICIALLY
OWNED (1)
NAME OF BENEFICIAL OWNERS NUMBER PERCENT
--------- -------
Technical Services Partners, L.P. (2).......... 4,552,502 43.9
Robert T. Walston (3).......................... 1,432,875 13.8
Fleming US Discovery Fund III, L.P.
and Fleming US Discovery Offshore
Fund III, L.P. (10)............................ 1,500,000 14.5
John H. Donlon (4)............................. 148,384 1.4
Lawrence Chernoff.............................. 144,620 1.4
Gavin W. Schutz (5)............................ 121,406 1.2
Robert Bailey (6).............................. 121,406 1.2
James Conlon................................... -- --
Shimon Topor (2)(7)(9)......................... 4,552,502 43.9
Edward Kirtman (2)(7)(9)....................... 4,552,502 43.9
Paul Bricault (9).............................. -- --
William Amon (9)............................... -- --
Thomas Wertheimer (9).......................... -- --
All directors and executive officers as a
group (8 persons)(8)(9)....................... 5,088,318 49.1
- ---------------------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options held by that person that are
currently exercisable or exercisable within 60 days of September 30, 1998
at a price less than or equal to the market price are deemed outstanding.
Such shares, however, are not deemed outstanding for the purposes of
computing the percentage ownership of any other person. Except as indicated
in the footnotes to this table and pursuant to applicable community
property laws, each stockholder named in the table has sole voting and
investment power with respect to the shares set forth opposite such
stockholder's name.
(2) Technical Services Partners, L.P. ("TSP") is a limited partnership the
general partner of which is Technical Services Holdings Inc.
("Holdings"), a corporation, all of the voting capital stock of which is
owned by Steinhardt Partners, L.P. The non-voting capital stock of Holdings
is owned by Institutional Partners, L.P., S.P. International S.A., and
Steinhardt Overseas Fund, Ltd. The managing general partner of Steinhardt
Partners, L.P. is Michael Steinhardt. The principal business address of
Steinhardt Partners, L.P. and Messrs. Steinhardt, Topor and Kirtman is 650
Madison Avenue, New York, New York 10022.
(3) Mr. Walston's address is c/o Four Media Company, 2813 West Alameda Avenue,
Burbank, California 91505. As a result of his profit interest in TSP, Mr.
Walston beneficially owns 1,432,875 shares of the Company's Common Stock.
(4) Represents 148,384 shares issuable upon exercise of vested options.
(5) Represents 121,406 shares issuable upon exercise of vested options.
(6) Represents 121,406 shares issuable upon exercise of vested options.
(7) These shares are owned by TSP. Messrs. Topor and Kirtman are executive
officers of the general partner of TSP, and general partners of Steinhardt
Partners, L.P., the owner of all the voting capital stock of Holdings.
Neither Mr. Topor nor Mr. Kirtman own any shares of Common Stock directly,
but may be considered the beneficial owner of the securities listed above.
However, Messrs. Topor and Kirtman disclaim beneficial ownership of such
shares.
(8) Includes 391,196 shares issuable upon exercise of vested options.
(9) Excludes 100,000 shares of Common Stock issuable upon exercise of stock
options granted pursuant to the Director Plan to each of Messrs. Topor,
Kirtman, Bricault, Wertheimer and Amon.
Page 3
(10) Pursuant to joint statement on Schedule 13G filed by (i) Fleming US
Discovery III, L.P. ("US Fund"), (ii) Fleming US Discovery Offshore Fund
III, L.P., (iii) Fleming US Discovery Partners, L.P. ("Fleming Partners"),
the general partner of the US Fund and a general partner of the Offshore
Fund, (iv) Fleming US Discovery, LLC ("Discovery"), the general partner of
Fleming Partners, (v) Robert Fleming, Inc. ("RFI"), investment advisor to
the US Fund and Offshore Fund (collectively, the "Funds"), and (vi) Robert
Fleming Holdings, Ltd ("RFH"), the indirect parent of RFI. The principal
business address of the Fleming parties is 320 Park Avenue, New York, NY
10036.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires the Company officers
and directors, and persons who own more than ten percent of its common stock, to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission. Officers, directors and greater than ten percent
stockholders are required by regulation of the Commission to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on its review of forms furnished to the Company and written
representations from certain of the directors and officers that no form is
required to be filed, the Company believes that no director, officer or
beneficial owner of more than ten percent of its Common Stock failed to file on
a timely basis reports required pursuant to Section 16(a) of the Securities
Exchange Act with respect to the fiscal year ended August 2, 1998.
PROPOSAL 1
ELECTION OF DIRECTORS
Management's nominees for election to the Board of Directors at the Annual
Meeting of Stockholders to serve as Class II members are John H. Donlon, Gavin
W. Schutz and William Amon. If elected, each nominee will hold office for three
years until the third subsequent annual meeting of stockholders or until his
successor is elected and qualified unless he shall resign or his office becomes
vacant by death, removal, or other cause in accordance with the Bylaws of the
Company. If a quorum is present and voting, the nominees for director receiving
the highest number of votes will be elected as directors. Abstentions and shares
held by brokers that are present, but not voted because the brokers were
prohibited from exercising discretionary authority, i.e., "broker non-votes,"
----
will be counted as present in determining if a quorum is present.
It is intended that votes pursuant to the Proxies will be cast for the
named nominees. The persons named in the accompanying form of proxy will vote
the shares represented thereby for the named nominees. Management knows of no
reason why any of the named nominees should be unable or unwilling to serve.
However, if any named nominee(s) should for any reason be unable or unwilling to
serve, the Proxies will be voted for the election of such other person(s) for
the office of director as management may recommend in the place of such
nominee(s).
At the 1998 Annual Meeting of Stockholders, three (3) directors of the
Company are to be elected for the ensuing three years and until their successors
are elected and qualified. Proxies cannot be voted for a greater number of
persons than the number of nominees named. The nominees for election to the
office of director, and certain information with respect to their age and
background, are set forth below. Messrs. Donlon and Schutz were elected to
their present terms of office in August 1993. Mr. Amon was elected a Director
in December, 1997 to replace John H. Sabin who resigned in August 1997.
NOMINEE POSITIONS WITH THE COMPANY AGE DIRECTOR SINCE
- ------- -------------------------- --- --------------
John H. Donlon President 54 1993
Gavin W. Schutz Vice President and Chief Technology Officer 45 1993
William Amon Director 49 1997
John H. Donlon has served as President and a Director of the Company since
August 1993. Prior to joining the Company, Mr. Donlon was President and Chief
Executive Officer of Compact Video Group, Inc., a provider of post-production
services to the television industry, from 1984 to 1993. From 1981 to 1984, Mr.
Donlon was employed by Technicolor, Inc. as President of Technicolor's
videocassette subsidiary and from 1977 to 1981 as Vice
Page 4
President and Director of Technicolor's Laboratory Operations. Mr. Donlon
received a BA degree from the University of Florida.
Gavin W. Schutz has served as Vice President and Chief Technology Officer
of the Company since August 1993, and was elected a Director of the Company in
September 1996. Prior to joining the Company he was Director of Engineering of
Image Transform, Inc., a provider of feature mastering and standards conversion
services to the entertainment industry, from 1980 to 1993. Mr. Schutz is
responsible for the design of digital video standards converters, time and smear
correctors and video noise reduction using four field non-recursive digital
filtering algorithms. Mr. Schutz received a BS degree in Electronic Engineering
from the South Australia Institute of Technology.
William Amon is a Senior Tax Partner with Deloitte & Touche LLP's Los
Angeles practice and has served as a Director of the Company since December
1997. He is an adjunct professor of tax at the Golden Gate University Masters
of Tax Program and a frequent speaker on issues effecting corporate taxation and
merger and acquisition transactions. Mr. Amon received a BS degree with honors
and a law degree, with highest honors, from the University of Santa Clara. A
member of the California Bar Association, the American Bar Association, and the
American Institute of Certified Public Accountants, he is also a subcommittee
member of the American Bar Association tax committee for affiliated corporations
and a member of the Los Angeles International Tax Forum. He was recently
selected as one of North America's Top Tax Advisers for 1998/99 by the
International Tax Review.
The Board of Directors is divided into three classes. Class I, with terms
expiring in 1999, is comprised of Messrs. Robert T. Walston, Shimon Topor,
Edward Kirtman and Lawrence Chernoff. Class II, with the terms expiring in 1998,
is currently comprised of Messrs. John H. Donlon, Gavin W. Schutz and William
Amon. Class III, with terms expiring in 2000, is comprised of Messrs. Robert
Bailey, Paul Bricault and Thomas Wertheimer. There are no family relationships
among any of the executive officers or directors of the Company. Information
regarding Class I and Class III directors are shown below
CLASS I DIRECTORS
Robert T. Walston is the founder of the Company and has served as Chairman
and Chief Executive Officer since August 1993. From 1991 until he founded the
Company, Mr. Walston served as a Vice President and Director of Steinhardt
Group, Inc. where he directed the firm's sourcing and financial analysis of
acquisitions of middle market companies. From 1988 to 1991, Mr. Walston was a
Vice President of Dean Witter Reynolds, Inc. where he worked on merger and
acquisition assignments and debt and equity offerings. Mr. Walston received a
BBA from Baylor University and an MBA from the University of Texas at Austin.
Shimon Topor has served as a Director of the Company since August 1993. He
has been a general partner in all of the private investment partnerships
controlled by Michael H. Steinhardt since 1985. Prior to joining the Steinhardt
organization, he managed the international operations of Bank Hapoalim, served
as Chairman and Chief Executive Officer of Israel Continental Bank, and Senior
Vice President of the Ampal Corporation. Mr. Topor received a law degree from
Hebrew University Law School.
Edward Kirtman has served as a Director of the Company since August 1993.
He has been a general partner in all of the private investment partnerships
controlled by Michael H. Steinhardt since 1995. From 1986 to 1994 he served as
the Chief Financial Officer of the Steinhardt organization's real estate
investment corporations and partnerships. Prior to joining the Steinhardt
organization, Mr. Kirtman was an Assistant Vice President of Heller Financial,
Inc. Mr. Kirtman received a BBA from Baruch College.
Lawrence Chernoff is the founder of Encore and has served as its CEO since
starting the company in 1985. From 1975 to 1985 he was an award winning
commercial editor for FilmCore, Inc. His demonstrated excellence and success in
pioneering and continuing to innovate and lead the video post production
industry was recognized in 1997 when Ernst & Young named him their "Entrepreneur
of the Year". Mr. Chernoff is a graduate of the New York School of Visual Arts.
CLASS III DIRECTORS
Page 5
Robert Bailey has served as Vice President and Director of Marketing of the
Company since August 1996, and was elected a Director of the Company in
September 1996. From 1993 to 1996 he served as Vice President and Director of
Marketing for the Company's studio and television services divisions. Prior to
joining the Company he was a Vice President of Image Transform, Inc., from 1985
to 1993. From 1977 to 1985, he was creator/producer of "Hollywood Detective"
for the A&E Channel, Producer/Director of "Eye on L.A." for ABC and Producer
of "Remmington Steele" for MTM Productions. Mr. Bailey received a BA from the
University of Southern California.
Paul Bricault has served as a Director of the Company since February 1997.
Since 1994, he has served as an agent in corporate consulting on emerging
technologies for the William Morris Agency. From 1989 to 1994, he served as a
Senior Media Analyst for Paul Kagan Associates, where he was responsible for the
firm's coverage of worldwide film, television and new media markets. Mr.
Bricault currently teaches a course in new technologies and their impact on the
motion picture industry for the graduate program of the University of Southern
California's School of Cinema-Television. Mr. Bricault received a BA from the
University of Western Ontario and an MA in Communications Management from the
Annenberg School of Communication at the University of Southern California.
Thomas Wertheimer has served as a Director of the Company since February
1997. From 1964 to 1972, he worked for Capital Cities/ABC where he became Vice
President of Business Affairs. From 1972 to 1976 he was Vice President of
Business Affairs of Universal Television. From 1976 to 1991, he served as a
Director of MCA, Inc. ("MCA") and was a Member of MCA's three person Executive
Committee from 1977 to 1991. From 1983 to 1996, he served as Executive Vice
President of MCA, and from 1991 to 1996 he took on the additional positions of
Chairman of both the Television and Home Entertainment Groups. Since January
1996, Mr. Wertheimer has been consulting for MCA and serving as Chairman of the
Board of the KCRW Foundation, the UCLA Extension TV and Film Advisory Board, and
the Columbia Law School Board of Visitors. Mr. Wertheimer received a BA from
Princeton University and an LLB from Columbia Law School.
BOARD AND COMMITTEE MEETINGS
During the fiscal year ended August 2, 1998, the Board held two meetings
and took action by unanimous written consent twenty-two times. No director
serving on the Board in fiscal year 1998 attended fewer than 75% of such
meetings of the Board and the Committee on which he serves.
The Company's Compensation Committee reviews and approves the compensation
and benefits for the Company's executive officers, administers the Company's
stock option and other benefit plans and makes recommendations to the Board of
Directors regarding such matters. The Committee is currently composed of Messrs.
Topor, Bricault and Amon.
During the fiscal year ended August 2, 1998, the Compensation Committee
held no meetings and took action by unanimous written consent two times. For
additional information concerning the Compensation Committee, see "COMPENSATION
COMMITTEE REPORT".
The Company's Audit Committee recommends the selection of auditors for the
Company and reviews the results of the audits and other reports and services
provided by the Company's independent auditors. The Audit Committee is composed
of Messrs. Bricault and Topor. During the fiscal year ended August 2, 1998 the
audit committee held two telephonic meetings.
COMPENSATION OF DIRECTORS
The Company's non-employee directors are not paid a fee for attending board
or committee meetings; however, all directors are reimbursed for reasonable
expenses incurred in attending such meetings. The Company's Director Plan
provides for automatic stock option grants to non-employee directors.
The Director Plan provides for an automatic grant of an option to purchase
100,000 shares of Common Stock to each non-employee director upon his becoming a
non-employee director. One-quarter of the shares subject
Page 6
to the option will vest one year after the date of grant and each additional
one-quarter will vest at the end of each year thereafter, provided that the
optionee continues to serve as a director on such dates. The exercise price of
the option will be 100% of the fair market value per share of the Company's
Common Stock on the date of the grant of the option.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
CLASS II NOMINEES, I.E. JOHN H. DONLON, GAVIN W. SCHUTZ AND WILLIAM AMON.
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the compensation
during fiscal years ended August 2, 1998, August 3, 1997 and August 4, 1996 of
the Chief Executive Officer and the four other most highly compensated executive
officers of the Company as of August 2, 1998 whose salary and bonus for the year
ended August 2, 1998 exceeded $100,000.
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION
OTHER ANNUAL ALL OTHER AWARDS OPTION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION SHARES
---- ------ ------- ------------ ------------ ------
Robert T. Walston, ............................... 1998 $276,538(2) $ -- $(1) $-- $
Chairman and 1997 240,000 -- (1) --
Chief Executive Officer 1996 240,000 -- (1) --
John H. Donlon, .................................. 1998 253,493 -- (1) --
President 1997 253,493 -- (1) --
1996 253,493 -- (1) --
Gavin W. Schutz, ................................. 1998 175,000 -- (1) --
Vice President and 1997 175,000 40,000 (1) --
Chief Technology Officer 1996 175,000 -- (1) --
Robert Bailey, ................................... 1998 175,000 -- (1) --
Vice President and 1997 145,673 40,000 (1) --
Director of Marketing 1996 125,000 -- (1) --
James T. Conlon, ................................. 1998 150,000 -- (1) --
Vice President and 1997 145,073 -- (1) --
Director of International Operations 1996 125,000 40,000 (1) --
____________________________
(1) Total amount of personal benefits paid to this executive officer during the
fiscal year was less than the lessor of (i) $50,000 or (ii) 10% of such
executive officer's total reported salary and bonus.
(2) $16,538 of Mr. Walston's 1997 compensation was paid in 1998.
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements with Messrs. Walston,
Donlon, Schutz, Bailey and Conlon. Each of the employment agreements with
Messrs. Donlon, Bailey and Conlon is for a term extending through September
1999. The employment agreements with Messrs. Walston and Schutz each have a term
extending through April 2002. Messrs. Walston, Donlon, Schutz, Bailey and
Conlon are entitled to receive annual salaries of $260,000, $253,493, $175,000,
$175,000 and $150,000, respectively. In the event of termination without cause,
Messrs. Walston, Donlon, Schutz, Bailey and Conlon are entitled to receive the
full amount of compensation payable under the original terms of their respective
employment agreements for the remaining term of such agreements, and in the
event of disability, the full amount of compensation payable for the lesser of
six months or the remaining term of such agreements.
STOCK OPTIONS GRANTED IN FISCAL 1998
Page 7
During fiscal 1998, no options were granted to the persons named in the
Summary Compensation Table.
OPTION EXERCISES AND FISCAL 1998 YEAR-END VALUES
The following table provides the specified information concerning exercises
of options to purchase the Company's Common Stock in the fiscal year ended
August 2,1998 and unexercised options held as of August 2, 1998, by the persons
named in the Summary Compensation Table. A portion of the shares subject to
these options are not yet vested, and thus would be subject to repurchase by the
Company at a price equal to the option exercise price, if the corresponding
options were exercised before these shares had vested.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
SHARES NUMBER OF SECURITIES VALUE IN DOLLARS OF
ACQUIRED VALUE UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
-------- ----- OPTIONS AT 8/2/98 OPTIONS AT 8/2/98
NAME ON EXERCISE REALIZED/($)/ EXERCISABLE/(1)(2)/ UNEXERCISABLE/(3)/ EXERCISABLE/(2)/ UNEXERCISABLE/(4)/
---- ----------- ------------- ------------------- ------------------ ---------------- ------------------
Robert T. Walston -- -- -- -- $ -- $ --
John H. Donlon -- -- 148,384 29,677 1,080,977 216,197
--
Gavin W. Schutz -- -- 121,406 24,282 884,443 176,894
Robert Bailey -- -- 121,406 24,282 884,443 176,894
James T. Conlon -- -- 33,333 66,667 -- --
- ------------------
(1) Options granted in fiscal 1994 under the 1993 Stock Option Plan vest over a
six year period at a rate of 16.7% per year.
(2) Represents shares that are immediately exercisable and/or vested. Based on
the closing price of $7.625 as reported on the Nasdaq National Market, on
July 31, 1998, less the exercise price.
(3) Represents shares which are unvested and not immediately exercisable.
(4) Based on the closing price of $7.625 as reported on the Nasdaq National
Market, on July 31, 1998, less the exercise price.
COMPARATIVE STOCK PERFORMANCE
The chart below sets forth line graphs comparing the performance of the
Company's Common Stock as compared with two peer group indices for the period
from August 1, 1997 through August 1, 1998. The first peer group index consists
of the common stock of companies that Management believes most similar in their
operations to that of the Company. This peer group includes Panavision,
Rainmaker, Laser Pacific Media Corporation, The Todd-AO Corporation, VDI Media,
and Video Services Corporation. The second peer group index includes the broader
category of all publicly traded companies whose industry sector is defined or
listed as motion picture services and includes Activision, Cinar Films, Walt
Disney, Hollywood Entertainment, IMAX Corp., King World Productions, Kushner-
Locke, Media General, Playboy, Spelling Entertainment, Trimark, Unitel Video and
Viacom. The indices assume that the value of the investment in the Company's
Common Stock and each index was $100 on August 1, 1997 and that dividends were
reinvested.
Page 8
PERFORMANCE GRAPH APPEARS HERE
INDEXED PRICES
####
Date Four Media Index 1 Index 2
Company
8/1/97 100 100 100
8/4/97 105 99 100
8/5/97 96 99 99
8/6/97 105 100 101
8/7/97 104 103 95
8/8/97 98 104 95
8/11/97 96 104 96
8/12/97 96 105 95
8/13/97 93 105 95
8/14/97 95 103 96
8/15/97 93 105 96
8/18/97 95 104 96
8/19/97 100 103 99
8/20/97 107 103 100
8/21/97 105 105 100
8/22/97 105 103 101
8/25/97 100 102 101
8/26/97 107 102 101
8/27/97 113 100 99
8/28/97 105 102 98
8/29/97 114 103 99
9/1/97 114 103 99
9/2/97 111 105 101
9/3/97 111 106 99
9/4/97 104 106 98
9/5/97 111 108 96
9/8/97 104 107 96
9/9/97 104 112 96
9/10/97 104 112 97
9/11/97 96 112 98
9/12/97 95 111 101
9/15/97 95 115 103
9/16/97 91 117 102
9/17/97 95 119 100
9/18/97 104 120 101
9/19/97 107 122 102
9/22/97 104 121 102
9/23/97 102 121 99
9/24/97 105 123 99
9/25/97 113 119 101
9/26/97 114 121 103
9/29/97 114 122 102
9/30/97 114 123 103
10/1/97 114 122 103
10/2/97 116 119 105
10/3/97 107 121 106
10/6/97 102 127 107
10/7/97 116 125 107
10/8/97 118 128 107
10/9/97 119 125 105
10/10/97 113 124 104
10/13/97 120 125 105
10/14/97 114 124 104
10/15/97 128 127 106
10/16/97 125 124 104
10/17/97 129 122 103
10/20/97 130 122 105
10/21/97 138 124 103
10/22/97 145 121 105
10/23/97 132 120 101
10/24/97 129 121 102
10/27/97 121 116 98
10/28/97 132 113 98
10/29/97 136 115 98
10/30/97 136 111 99
10/31/97 127 115 102
11/3/97 134 115 102
11/4/97 130 114 102
11/5/97 125 113 101
11/6/97 129 111 101
11/7/97 116 109 99
11/10/97 127 106 100
11/11/97 121 105 101
11/12/97 118 105 98
11/13/97 125 106 98
11/14/97 121 110 97
11/17/97 120 108 98
11/18/97 120 108 97
11/19/97 125 105 96
11/20/97 116 108 97
11/21/97 116 108 99
11/24/97 107 109 97
11/25/97 104 108 97
11/26/97 107 107 96
11/27/97 107 107 96
11/28/97 111 108 96
12/1/97 107 111 96
12/2/97 105 108 99
12/3/97 114 106 97
12/4/97 118 107 97
12/5/97 121 106 97
12/8/97 116 106 96
12/9/97 127 102 94
12/10/97 123 102 94
12/11/97 121 99 93
12/12/97 112 99 92
12/15/97 123 99 91
12/16/97 118 100 91
12/17/97 125 100 92
12/18/97 121 99 91
12/19/97 116 97 92
12/22/97 121 96 93
12/23/97 115 94 92
12/24/97 118 93 93
12/25/97 118 93 93
12/26/97 118 96 93
12/29/97 123 96 96
12/30/97 129 95 97
12/31/97 129 95 95
1/1/98 129 95 95
1/2/98 129 95 97
1/5/98 132 93 95
1/6/98 130 96 96
1/7/98 125 97 94
1/8/98 127 98 94
1/9/98 118 97 91
1/12/98 121 96 92
1/13/98 125 96 92
1/14/98 129 96 93
1/15/98 127 95 91
1/16/98 127 94 92
1/19/98 127 94 92
1/20/98 125 98 89
1/21/98 127 98 89
1/22/98 126 100 89
1/23/98 132 100 87
1/26/98 125 102 87
1/27/98 127 102 85
1/28/98 125 108 87
1/29/98 116 108 86
1/30/98 120 105 85
2/2/98 127 107 89
2/3/98 123 106 89
2/4/98 125 104 86
2/5/98 123 105 88
2/6/98 121 105 88
2/9/98 117 104 88
2/10/98 118 105 85
2/11/98 118 105 85
2/12/98 114 108 85
2/13/98 111 107 85
2/16/98 111 107 85
2/17/98 111 110 87
2/18/98 118 109 87
2/19/98 116 107 87
2/20/98 118 108 88
2/23/98 121 111 88
2/24/98 123 108 87
2/25/98 121 109 90
2/26/98 121 110 90
2/27/98 121 109 91
3/2/98 117 107 92
3/3/98 116 108 94
3/4/98 111 107 92
3/5/98 104 107 91
3/6/98 113 107 91
3/9/98 113 107 91
3/10/98 111 106 93
3/11/98 102 104 91
3/12/98 107 105 93
3/13/98 105 106 95
3/16/98 108 107 98
3/17/98 127 108 98
3/18/98 127 108 100
3/19/98 127 109 103
3/20/98 131 112 103
3/23/98 134 110 104
3/24/98 127 111 104
3/25/98 134 109 101
3/26/98 130 111 103
3/27/98 134 114 101
3/30/98 130 113 101
3/31/98 134 113 104
4/1/98 127 115 102
4/2/98 135 117 102
4/3/98 129 118 100
4/6/98 143 116 99
4/7/98 139 118 100
4/8/98 145 118 100
4/9/98 148 120 100
4/10/98 148 120 100
4/13/98 150 118 100
4/14/98 139 118 103
4/15/98 139 124 102
4/16/98 143 120 101
4/17/98 143 125 101
4/20/98 136 123 101
4/21/98 132 124 99
4/22/98 139 124 99
4/23/98 146 125 101
4/24/98 140 124 102
4/27/98 141 122 105
4/28/98 142 121 107
4/29/98 138 124 108
4/30/98 143 125 112
5/1/98 143 121 110
5/4/98 143 122 109
5/5/98 146 120 108
5/6/98 150 121 106
5/7/98 145 120 105
5/8/98 142 123 106
5/11/98 141 125 106
5/12/98 131 125 105
5/13/98 132 128 106
5/14/98 125 129 105
5/15/98 125 128 104
5/18/98 123 126 103
5/19/98 129 124 100
5/20/98 123 126 106
5/21/98 123 124 104
5/22/98 123 128 103
5/25/98 123 128 103
5/26/98 116 126 102
5/27/98 113 122 103
5/28/98 116 121 101
5/29/98 116 123 101
6/1/98 109 123 101
6/2/98 104 119 102
6/3/98 102 119 102
6/4/98 109 121 103
6/5/98 111 120 106
6/8/98 114 119 107
6/9/98 109 117 110
6/10/98 106 116 109
6/11/98 102 107 107
6/12/98 104 108 107
6/15/98 105 108 106
6/16/98 109 108 108
6/17/98 109 107 109
6/18/98 109 109 107
6/19/98 108 110 106
6/22/98 113 110 105
6/23/98 111 107 108
6/24/98 107 109 108
6/25/98 107 104 109
6/26/98 107 100 109
6/29/98 111 104 107
6/30/98 125 103 106
7/1/98 123 103 106
7/2/98 121 103 105
7/3/98 121 103 105
7/6/98 120 102 106
7/7/98 123 102 109
7/8/98 116 103 110
7/9/98 120 104 110
7/10/98 129 100 108
7/13/98 123 96 106
7/14/98 118 96 107
7/15/98 111 97 108
7/16/98 116 99 106
7/17/98 114 101 108
7/20/98 114 102 110
7/21/98 116 102 109
7/22/98 114 104 106
7/23/98 113 103 105
7/24/98 114 103 107
7/27/98 109 103 105
7/28/98 118 100 103
7/29/98 118 100 103
7/30/98 113 99 101
7/31/98 109 97 98
- -----------------
1 Peer Group Index 1 includes: Panavision, Rainmaker, Laser Pacific Media
Corporation, The Todd-AO Corporation, VDI Media and Video Services
Corporation.
2 Peer Group Index 2 includes: Activision, Cinar Films, Walt Disney, Hollywood
Entertainment, IMAX Corp., King World Productions, Kushner-Locke, Media
General, Playboy, Spelling Entertainment, Trimark, Unitel Video and Viacom.
The stock price performance depicted in the above graph is not necessarily
indicative of future price performance. The performance graph will not be deemed
to be incorporated by reference by any general statement incorporating this
Proxy Statement into any filing by the Company under the Securities Act of 1933
or under the Securities Exchange Act of 1934, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed soliciting material or be deemed filed under such Act.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation. Such report will not be deemed to be
incorporated by reference in any general statement incorporating this Proxy
Statement into any filing by the Company under the Securities Act of 1933 or
under the Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed soliciting material or be deemed filed under such Act.
The Compensation Committee was formed to review and approve the compensation
and benefits of the Company's executive officers, administer the Company's stock
option and other benefit plans and make recommendations to the Board of
Directors regarding such matters.
The Compensation Committee has not yet adopted an overall executive
compensation policy, nor has it made compensation decisions with respect to the
executive officers. The salaries of the executive officers are set by their
respective employment agreements. There have been no bonuses or stock options
granted to executive officers since the establishment of the Compensation
Committee.
Page 9
It is anticipated that the Compensation Committee will generally adhere to
compensation policies which reflect the belief that (i) the Company must attract
and retain individuals with outstanding ability and motivate and reward such
individuals for sustained performance; (ii) a substantial portion of an
executive's compensation should be at risk based upon the executive's
performance and that of the Company; and (iii) within these parameters, levels
of compensation should generally be in line with that offered by comparable
companies.
The Compensation Committee's goal with respect to incentive compensation will
be to focus executive behavior on the fulfillment of annual and long-term
business objectives, and to create a sense of ownership in the Company that
causes executive decisions to be aligned with the best interests of the
Company's stockholders. The Compensation Committee expects to develop programs
designed to meet such goals.
It is anticipated that the Company's long-term incentive compensation will be
provided by grants of stock options under the Company's 1997 Stock Plan. The
Compensation Committee will assess various factors when considering option
grants under the 1997 Stock Plan. Such factors will include prevailing norms for
the ratio of options outstanding to total shares outstanding; the relative
influence each executive officer will have on building stockholder value over
the long term; and the amount, vesting and expiration date of each executive
officer's outstanding options.
WILLIAM AMON
PAUL BRICAULT
SHIMON TOPOR
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has appointed PricewaterhouseCoopers
LLP to serve as independent accountants to audit the financial statements of the
Company for the fiscal year ending August 1, 1999. PricewaterhouseCoopers LLP
has acted in such capacity since its appointment for fiscal 1994. A
representative of PricewaterhouseCoopers LLP will be present at the annual
meeting, will be given the opportunity to make a statement if the representative
desires and will be available to respond to appropriate questions.
In the event that ratification by the stockholders of the appointment of
PricewaterhouseCoopers LLP as the Company's independent accountants is not
obtained, the Board of Directors will reconsider said appointment.
The affirmative vote of a majority of the shares present or represented by
proxy and entitled to vote at the Annual Meeting of Stockholders, at which a
quorum representing a majority of all outstanding shares of Common Stock of the
Company is present and voting, either in person or by proxy, is required for
approval of this proposal. Abstentions and broker non-votes will each be counted
as present for purposes of determining the presence of a quorum. Abstentions
will have the same effect as a negative vote on this proposal. Broker non-votes
will have no effect on the outcome of the vote on this proposal.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" RATIFICATION OF
PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE
FISCAL YEAR ENDING AUGUST 1, 1999.
OTHER MATTERS
The solicitation of proxies is made on behalf of the Board of Directors of
the Company and the cost thereof will be borne by the Company. In addition to
soliciting proxies by mail, directors, officers and employees of the Company,
without receiving additional compensation therefor, may solicit proxies by
telephone, telegram, in person or by other means. Arrangements also will be made
with brokerage firms and other custodians, nominees and fiduciaries to forward
proxy soliciting material to the beneficial owners of Common Stock held of
record by such
Page 10
persons and the Company will reimburse such brokerage firms, custodians,
nominees and fiduciaries for reasonable out-of-pocket expenses incurred by them
in connection therewith.
STOCKHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING
Proposals of stockholders intended to be presented at the next annual meeting
of stockholders of the Company (i) must be received by the Company at its
offices at 2813 West Alameda Avenue, Burbank, California 91505 no later than
August 1, 1999, and (ii) must satisfy the conditions established by the
Securities and Exchange Commission for stockholder proposals to be included in
the Company's Proxy Statement for that meeting.
By Order of the Board of Directors
/s/ Robert T. Walston
Robert T. Walston
November 30, 1998 Chairman
FORM 10-K
The Company's Annual Report on Form 10-K for the fiscal year ended August 2,
1998, including the financial statements and schedules thereto, accompanies this
Proxy Statement.
Page 11
PROXY FOUR MEDIA COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AND MAY BE REVOKED PRIOR TO ITS EXERCISE
The undersigned hereby appoints Robert T. Walston and John H. Donlon proxies
with power to act without the other and with power of substitution, and hereby
authorizes them to represent and vote all the share of stock of Four Media
Company standing in the name of the undersigned with all powers which the
undersigned would possess if present at the Annual Meeting of Stockholders of
the Company to be held January 14, 1999, or any adjournment or postponement
thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2.
Unless contrary instructions are given below, this Proxy shall be voted
according to the recommendations of the Board of Directors.
WITHHELD
PROPOSAL 1: ELECTION OF DIRECTORS FOR FOR ALL
John H. Donlon [_] [_]
Gavin W. Schutz
William Amon
WITHHELD FOR (Write that nominee's name)___________________
PROPOSAL 2: APPOINTMENT OF INDEPENDENT ACCOUNTANTS
FOR AGAINST ABSTAIN
[_] [_] [_]
I PLAN TO ATTEND THE MEETING [_]
Dated: ______________________________
_____________________________________
Signature
Note: Please sign as name appears
hereon. Joint Owners must each sign.
When signing as attorney-in fact,
executor, administrator, trustee or
guardian, please give full title as
such.