SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 TO
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN CONSENT STATEMENT
SCHEDULE 14A INFORMATION
CONSENT STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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[_] Filed by the Registrant
[x] Filed by a Party other than the Registrant
Check the appropriate box:
[x] Preliminary Consent Statement
[_] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Consent Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Harmony Holdings, Inc.
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(Name of Registrant as Specified in Its Charter)
The Laken Committee
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(Name of Person(s) Filing Consent 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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PRELIMINARY COPY SUBJECT TO COMPLETION
CONSENT SOLICITATION STATEMENT OF THE LAKEN COMMITTEE
To the Stockholders of Harmony Holdings, Inc.:
The time has come for the stockholders of Harmony Holdings,
Inc., a Delaware corporation (the "Company"), to take charge of the future of
their investments in the Company. Toward that end, a group of concerned
stockholders has formed The Laken Committee (the "Committee") in order to
solicit consents from the holders of common stock, par value $0.01 per share
(the "Common Stock"), of the Company to take the following actions without a
stockholders' meeting, as permitted by Delaware law:
1. Amend Sections 1, 2 and 12 of Article III of the By-Laws
of the Company to:
(a) set the number of directors that constitute the Board of
Directors of the Company (the "Board") at three;
(b) unambiguously provide that stockholders may remove any
or all directors, with or without cause, whether at an annual or special
meeting or by written consent;
(c) provide that vacancies created on the Board by the
removal of one or more directors be filled only by stockholder action; and
(d) repeal any and all By-Law provisions or amendments
thereto adopted after July 22, 1997 and prior to the effectiveness of the
Committee's proposed actions.
2. Remove all four of the present members of the Board and
any person or persons elected or appointed to the Board prior to the effective
date of the proposed actions set forth herein and any person or persons
designated by any such directors to fill any vacancy or newly created
directorship; and
3. Elect Glenn B. Laken, Steven B. Nagler and Donald Sliter,
as directors of the Company (collectively, the "Committee Nominees"), to serve
until their successors are elected and qualified.
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The effectiveness of each of the foregoing actions (the "Proposals")
is subject to, and conditioned upon, the adoption of each of the other
Proposals by the holders of record, as of the close of business on the Record
Date (as hereinafter defined), of a majority of the Shares then outstanding
(including the receipt of consents from such holders to the removal of each
member of the Company's Board and to the election of each Nominee). THE
COMMITTEE RECOMMENDS THAT YOU CONSENT TO EACH OF THE PROPOSALS.
TO CONSENT TO THE REMOVAL OF THE BOARD, THE ELECTION OF THE COMMITTEE
NOMINEES AND THE OTHER PROPOSALS YOU MUST MARK, SIGN, DATE, AND RETURN
PROMPTLY THE ENCLOSED BLUE CONSENT CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED.
THE FAILURE TO EXECUTE A CONSENT WILL HAVE THE SAME EFFECT AS WITHHOLDING A
CONSENT. SEE "THE CONSENT PROCEDURE SPECIAL INSTRUCTIONS."
This Consent Statement and the related Blue Consent Card are first
being sent or given on or about September________, 1997, to holders of record
of Common Stock on the Record Date as hereinafter defined.
Delaware law provides that if no record date has been fixed by the
board of directors, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior action
by the board of directors is required, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken
is delivered to the corporation by delivery to its registered office in
Delaware, its principal place of business or an officer or agent of the
corporation having custody of the books in which proceedings of meetings of
the stockholders are recorded. No prior action is required by the Board with
respect to the Proposals. Since the first date on which a signed written
consent setting forth the action proposed to be taken was delivered was
September ___, 1997, the Record Date will be September ___, 1997.
If your shares of Common Stock are held in the name of a brokerage
firm, bank nominee or other institution, only it can execute a BLUE consent
card with respect to your shares. Please return your executed BLUE consent
card in the postage-paid envelope provided by such firm, which will act as a
direction to such firm to execute a consent with respect to your shares
In addition, if you did not receive a return envelope or are
concerned that your consent is properly received and sent to the Company,
please contact the person responsible for your account and give instructions
for a Consent Card to be signed representing your shares.
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THE PROPOSED ACTIONS WILL BECOME EFFECTIVE AT THE TIME, NOT LATER
THAN NOVEMBER ___, 1997, THAT WRITTEN UNREVOKED CONSENTS OF THE HOLDERS OF A
MAJORITY OF THE SHARES OF COMMON STOCK OUTSTANDING AT THE CLOSE OF BUSINESS ON
THE RECORD DATE ARE DELIVERED TO THE COMPANY (THE "EFFECTIVE TIME").
If you have any questions about completing or signing the Consent
Card or require assistance, including assistance in assuring that any of your
shares held by brokers or other nominees are voted, please call Ronald
Schneider at The Financial Relations Board, Inc., the committee's consent
solicitation firm, at (212) 661 - 8030. Collect calls will be accepted.
REASONS FOR THE CONSENT SOLICITATION
The Committee is soliciting the consent of holders of the Common
Stock to actions that would result in the removal of all incumbent members of
the Board and their replacement with the Committee Nominees, who will devote
their energies to reorganizing and revitalizing the Company.
None of the members of the present board of directors were elected by
the stockholders of the Company nor were the stockholders of the Company
notified prior to the appointment of any of such directors. Further, such
directors do not represent a majority of the outstanding shares of the
Company. The present directors of the Company were appointed on July 22, 1997
in connection with the purchase by Children's Broadcasting Corporation, a
Minnesota corporation ("Children's"), of a block of shares of common stock of
the Company and the resignation of all of the then directors of the Company.
As disclosed in a Schedule 13D filed by Children's, first the Company's former
Chairman, Harvey Bibicoff ("Bibicoff") resigned as Chairman of the Board and
as a director of the Company. Then the two remaining members of the Board of
Directors of the Company, before resigning, elected Christopher T. Dahl, the
President, Chief Executive, Chairman of the Board and a director of
Children's, as a director of the Company and appointed him Chairman of the
Board of the Company. Immediatly thereafter, Mr. Dahl appointed two directors,
Richard W. Perkins, a director of Children's and a controlling person of one
of the private entities that financed Children's purchase of stock of the
Company, and William M. Toles, a stockholder of Children's and a lender to
Children's of a portion of the funds it used to purchase stock of the Company,
to fill the vacancies on the Board of Directors of the Company created by the
resignations. At substantially the same time, the new Board of Directors
created one new board position and appointed William E. Cameron to fill such
position. Accordingly, all of the newly appointed members of the Board of
Directors, except for William E. Cameron, are either directors or stockholders
of Children's. Under the Company's By-Laws, the members of the
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Board of Directors can fill vacancies on the Board of Directors, and can
increase the size of the board and fill newly created directorships.
The resignation of the Company's former directors and the appointment
of all new directors was effected in connection with to the Stock Purchase
Agreement (the "Stock Purchase Agreement"), dated July 21, 1997 among
Children's, Bibicoff, and the Company. Pursuant to such agreement, the now
former directors of the Corporation resigned and Children's purchased from
Bibicoff 600,000 shares of the Company's Common Stock and options to purchase
an additional 550,000 shares of Common Stock. Additionally, in connection with
the Stock Purchase Agreement, Children's entered in an agreement (the
"Unimedia Agreement") with Unimedia, S.A. ("Unimedia") pursuant to which
Children's agreed to purchase from Unimedia the 1,000,000 shares of the
Company's Common Stock owned by Unimedia and to settle the litigation in the
action entitled Unimedia S.A. V. Harmony Holdings, Inc. and Harvey Bibicoff
(Case No. 96-7109 JGD (RNBx) in the United States District Court for the
Central District of California. However, notwithstanding the terms of the
Unimedia Agreement, Children's assigned to the Company its obligation to
purchase 230,769 shares of the Company's Common Stock from Unimedia, thereby
releasing Children's from its obligation to purchase such stock. The Company
then repurchased such 230,769 shares from Unimedia for $600,000.
As reported in Children's Schedule 13D, Children's funds for the
transactions described above originated from multiple sources: (i) $2,400,000
pursuant to the Children's Amended and Restated Loan and Security Agreement
with Foothill Capital Corporation, (ii) $500,000 pursuant to a loan from
Pyramid Partners, L.P., an entity controlled by Richard W. Perkins, a director
of Children's (and a director of the Company), (iii) $500,000 pursuant to a
loan from Rodney P. Burwell, a director of Children's, (iv) $250,000 pursuant
to a loan from William M. Toles, a stockholder of Children's (and a director
of the Company), and (v) $110,000 of the working capital of Children's. The
10.0% percent one-year loans listed in items (ii) through (iv) above are
secured by 192,308 and 96,154 shares of the Company's Common Stock reported
herein, respectively. In addition to receiving promissory notes from
Children's, such lenders received five-year warrants to purchase 50,000,
50,000 and 25,000 shares of Children's Common Stock, respectively, at an
exercise price of $4.00 per share. Children's Board of Directors has approved
the related party transactions listed in items (ii) and (iii).
According to Children's Schedule 13D, Children's beneficially owns
1,919,231 shares of common stock of the Company or 27.4% of the Company's
outstanding shares of common stock. These figures include options to acquire
550,000 shares of common stock of the Company that Children's purchased from
Bibicoff. The Committee has no information on the number of securities of the
Company, if any,
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held by the members of the Board of Directors of the Company in
their individual capacities.
The Committee believes that the present directors will favor the
interests of Children's over the interests of the majority of the stockholders
of the Company. The bases for the Committee's belief are (i) that Children's
arranged to have its President and Chief Executive Officer, one of its
directors and one of its stockholders appointed as members of the Board of
Directors of the Company, (the latter two whom are also financially interested
as lenders in Children's purchase of the stock of the Company) as replacements
of the former directors, (ii) Children's did not cause the Company to give the
stockholders any information about the change in control of the Board of
Directors prior to the transaction and (iii) Children's had on occasions prior
to the stock purchase transaction with Bibicoff and Unimedia, discussed
purchasing a controlling interest in or acquiring the Company with the
Company's then management. Children's interests in acquiring a controlling
interest in the Company was also communicated to a member of the Committee by
Mr. Dahl after the stock purchase transaction. In addition, Children's filings
with the Securities and Exchange Commission have disclosed that it has entered
into a transactions whereby it has agreed to sell substantially all of its
assets, which consist of radio stations or rights thereto, to a third party or
parties. Children's also indicated in a press release dated July 16, 1997 that
Children's had increased the amount of its credit facility with Foothill
Capital Corporation, Children's chief lender, "for working capital and to fund
potential acquisitions." Given the interests of Children's of potentially
acquiring a controlling interest in the Company, the Committee does not
believe that the present Board of Directors has the incentives to represent
the best interests of the majority of the stockholders of the Company. As an
acquiror, Children's would have an interest in buying the Company's stock as
cheaply as possible, while the other stockholders of the Company have an
interest in having the stock price of the Company be as high as possible.
In addition, the Laken Committee believes that one of the first
actions taken by the new Board, involving the assignment of an obligation of
Children's to the Company, is indicative of the willingness of the Board of
Directors to favor the interests of Children's. The new Board of Directors
approved the assignment by Children's to the Company of Children's obligation
to purchase $600,000 of the Company's stock from Unimedia. The Company is a
small company. As such, it is expensive for the Company to raise capital. In
addition, the Company does not have a large number of shares outstanding for a
publicly traded entity. The Committee believes that it is unusual for a
company of the Company's size to repurchase its own shares due to the
Company's relatively low level of cash flow and its relatively small number of
outstanding shares. Children's had entered into an agreement to purchase all
of the shares of the Company held by Unimedia S.A.; there was no added
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benefit to the Company to move the obligation to purchase a portion of those
shares from Children's to the Company. While the Company's repurchase of such
stock may have proportionately increased the percentage holdings of all
stockholders' of the Company, the transaction did not increase the level of
control of any stockholder over the Company; Children's had arranged to assume
control over the Board of Directors whether it purchased 1,000,000 shares of
stock from Unimedia or a smaller number of shares.
Further, Children's purchase of the Company's stock was financed
primarily through borrowing; Children's used only $110,000 of its working
capital to purchase the Company's stock. Yet the Company's Board of Directors
had the Company, which is a much smaller company than Children's, use $600,000
of the Company's cash (almost six times as much cash as Children's invested in
the transaction) to repurchase stock that Children's was already contractually
obligated to buy. While the repurchase of shares was not necessarily
detrimental to the stockholders on a balance sheet basis, such purchase did
not increase the Company's revenue producing assets and did decrease the
Company's cash available for future acquisitions, which, according to Mr.
Laken, forms part of the Company's strategic plans. For the foregoing reasons,
the Laken Committee believes that the use by the Company of $600,000 of its
cash to repurchase its stock was a waste of the Company's resources,
especially in a transaction that Children's was already contractually
committed to complete.
Children's could acquire a controlling interest in the Company by
merging with the Company or merging the Company into a subsidiary of
Children's, by purchasing substantially all of the assets of the Company, by
purchasing additional shares of the Company, or by purchasing shares of stock
from individual stockholders privately or publicly through a tender offer. If
the Company were to enter into a transaction with Children's, such as a merger
or the sale by the Company of substantially all of its assets to Children's,
the transaction would require approval of the Board of Directors of the
Company and an absolute majority of the stockholders of the Company. All of
the directors of the Company, except one, have direct ties to Children's and
financial interests in the stock of the Company held by Children's. In order
to assure an independent decision, the Board of Directors would have to
appoint a special committee to review the transaction. Since there is only one
possible disinterested director, the Board of Directors would have to create
and fill at least one additional board position with a disinterested director.
In addition, Children's could engage a financial advisor to evaluate the
fairness of any transaction between Children's and the Company.
Children's could further consolidate its control of the Company by
purchasing from the Company a substantial block of the Company's common stock
or a series of preferred stock authorized by the Board of Directors of the
Company pursuant to authority granted
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to the board of directors in the Company's certificate of incorporation. The
preferred shares could have rights and preferences designated by the board and
which rights and preferences could effectively prevent the Company from
engaging in a change of control transaction with a party other than
Children's. No stockholder consent would be needed for any such sale of shares
although it would be a transaction with an interested party. The board of
directors could have either an independent committee of the board or an
independent financial adviser pass on the financial fairness of such
transaction.
If Children's were to privately acquire additional shares of common
stock of the Company from existing stockholders, no approvals from the Board
of Directors or the stockholders of the Company would be necessary. If
Children's were to attempt to acquire additional shares of common stock of the
Company through a tender offer, Children's would have to submit informational
materials to all stockholders of the Company who would then have the
opportunity to evaluate Children's offer.
While the Committee Nominees would not necessarily reject a sale of
the Company, the Committee does not believe that the present directors, given
their positions with Children's, would be able to effectively negotiate a sale
of the Company or other transaction with Children's. Moreover, in a
transaction with Children's, the majority of the present members of the board
of directors would have interests that would create a conflict of interest in
any negotiations that they might have with respect to such transaction.
Although the Board of Directors could appoint a special committee of
disinterested directors or engage financial advisors to negotiate the
transaction, the Committee does not believe that any mechanism created by the
present board of directors could be free of the influence of Children's. In
any event, the members of the Board of Directors or members of the special
committee would not have been elected by the stockholders of the Company.
The Committee believes that many of you share our discontent and
concerns. In order to address those concerns, the Committee seeks your help to
remove the directors now in office and elect three new directors who, we
believe, will be responsive to stockholders and firmly committed to the goal
of increasing stockholder value.
Your consent is important. No matter how many or how few shares you own,
please help us to improve stockholder value by completing, signing, dating and
mailing the enclosed BLUE Consent Card promptly.
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BACKGROUND OF THE COMMITTEE'S NOMINEES
AND THEIR BUSINESS BACKGROUNDS
The Committee consists of Glenn B. Laken, Steven B. Nagler and Donald
Sliter, who are also the Committee's Nominee's for the Board of Directors of
the Company. Messrs. Laken, Nagler and Sliter beneficially own approximately
820,000 shares of Common Stock, including 420,000 shares of Common Stock and
200,000 options to purchase shares of Common Stock, 9,974 shares of Common
Stock and 192,292 shares of Common Stock, respectively, which represents in
the aggregate approximately 12.3% of the Company's Common Stock (assuming
exercise by Mr. Laken of the options he has to acquire 200,000 shares of the
Company's common stock).
Glenn B. Laken, age 43, has been a futures trader on and a member of
the Chicago Mercantile Exchange for over ten years. Since 1993, Mr. Laken has
been the President of Lake Futures, Ltd., an introducing broker located in
Chicago, Illinois, which is engaged in the business of advising pension fund
managers regarding investments in commodities and commodity futures contracts.
The clients of Lake Futures include the pension funds for two Fortune 100
companies and several managers of funds each with assets in excess of a
billion dollars. Since 1995, Mr. Laken has been the Executive Vice President
of D & G Futures, Inc., which is located in Chicago, Illinois. D & G Futures,
Inc. is a partner of First Options of Chicago, Inc. and is in the business of
financing and clearing transactions for futures traders. Mr. Laken also
engages in private investment activities.
Steven B. Nagler, age 53, has been an attorney engaged in the private
practice of law since 1969. From April 1992 through June 1997, Mr. Nagler was
Of Counsel to Siegel, Lynn & Capitel in Northbrook, Illinois and has been Of
Counsel to Siegel & Capitel, in Bannockburn, Illinois, since June 1997. Mr.
Nagler is also engaged in private investment activities.
Donald Sliter, age 40, has been a member of the Chicago Mercantile
Exchange for approximately ten years. Mr. Sliter is President of D & G
Futures, Inc., which is located in Chicago, Illinois. D & G Futures is a
partner of First Options of Chicago, Inc. and is in the business of financing
and clearing transactions for futures traders. Mr. Sliter is also a private
investor.
Certain additional information regarding the Committee's members and
the Committee Nominees, including stock ownership information regarding the
members of the Committee and the Committee Nominees, is set forth in Appendix
I attached to this Consent Solicitation Statement.
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All information contained in this Consent Solicitation Statement
(including Appendices) concerning each member of the Committee and each
Committee Nominee has been provided to the Committee by that person.
THE COMMITTEE'S PROPOSALS
The Committee believes that a new Board must be elected in order to
further stockholder interests. To achieve that end, the Committee is
requesting stockholders to give their written consents to the following
actions:
1. BY-LAW AMENDMENTS.
The Committee is proposing amendments (the "By-Law Amendments") to
certain provisions of the Company's By-Laws. Our first proposal concerning the
By-Laws relates to the size of the Board, the removal of directors and the
filling of vacancies on the Board. The purpose and effect of each of the
Committee's proposed By-Law Amendments is to facilitate the proposed removal
and replacement of all incumbent directors, as discussed further below.
Article III, Section 1 of the By-Laws, as now in effect, provides
that the number of directors who constitute the whole Board is to be
determined by resolution of the Board, but may not be less than three. The
Committee believes that the number of directors constituting the entire Board
currently consists of four directors.
The Committee's proposed amendment to Article III, Section 1, if
adopted, will fix the number of directors at three, while maintaining the
authority of the Board to increase or decrease the number of directors. The
proposed amendment is designed to ensure that the Committee Nominees, if
elected, will maintain majority representation on the Board in order to carry
out their plan of seeking to maximize stockholder value.
Under the General Corporation Law of the State of Delaware (the
"DGCL"), directors of a corporation without a classified board and whose
certificate of incorporation does not otherwise provide may be removed with or
without cause by the holders of a majority of the outstanding shares entitled
to vote in the election of directors. The Company does not have a classified
board, and its Certificate of Incorporation makes no provision respecting the
removal of directors.
In addition, unless a Delaware corporation's certificate of
incorporation otherwise provides, the DGCL permits stockholders to take action
without a meeting and without prior notice if a consent or consents in
writing, setting forth the action so taken, are signed by the holders of
outstanding stock having not less than the
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minimum number of votes that would be necessary to take such action at a
meeting at which all shares entitled to vote on that action were present.
Under the applicable provision of the DGCL, stockholder action by written
consent is effective when written consents from the holders of record of the
minimum number of shares of stock necessary to authorize the action are
executed and delivered to the corporation within 60 days of the earliest dated
consent so delivered.
Since the DGCL provides that the directors of a corporation may be
removed without cause unless otherwise provided in the certificate of
incorporation, and because the Company's Certificate of Incorporation contains
no contrary provision, we believe that one of the fundamental corporate rights
of the Company's stockholders is to exercise complete and unfettered
discretion in choosing and changing the persons who manage its business and
affairs. Section 12 of Article III of the By-Laws provides that directors may
be removed with cause by the affirmative note of the holders of a majority of
the stock of the corporation entitled to vote at an election of directors. The
Committee believes, therefore, that the By-Laws (as well as applicable
provisions of the DGCL) permit the removal of directors without cause through
use of a written consent solicitation like the one in which the Committee
currently is engaged and do not limit the exercise of the removal power to
removal for cause only. In order to achieve certainty, however, the
Committee's Consent Card includes a proposal to amend Article III, Section 12
of the By-Laws to unambiguously provide that stockholders may remove any or
all directors with or without cause, whether at an annual or special meeting
or by written consent. The adoption of this amendment will facilitate the
removal of all of the incumbent members of the Board, as discussed below.
Section 2 of Article III of the By-Laws provides that vacancies
created by the death, resignation or removal of a director may be filled by
the majority vote of the remaining directors. This provision permits such
vacancies to be filled without any stockholder participation.
The Committee proposes to amend Article III, Section 2 of the By-Laws
to require that vacancies created by the removal of a director be filled only
by stockholder action. This proposed amendment is intended to prevent the
incumbent Board of Directors from filling any of the vacancies which would be
created upon the removal of any of its members.
The texts of Sections 1, 2 and 12 of Article III of the By-Laws, as
believed to be currently in effect, and as proposed to be amended, are set
forth in Appendix II attached to this Consent Solicitation Statement
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Additionally, the By-Law Amendments we are proposing also include the
repeal of each provision of the Company's By-Laws or any amendment thereto
adopted by the incumbent Board after July 22, 1997, and prior to the Effective
Time. The reason for this proposed repeal is to address the possibility that
the Board may have taken, and not yet publicly disclosed, actions that the
Committee might be opposed to or that the Board might take during the pendency
of this solicitation. The Committee, however, is not aware of the adoption by
the incumbent Board after July 22, 1997, of any provision of the Company's
By-Laws or any amendment thereto, and the Committee has no reason to believe
at this time that the incumbent Board has adopted any such provisions or
amendments that have not been disclosed. If the By-Law Amendments are adopted
and the Committee Nominees elected, the Board of Directors will consider all
of the By-Law Amendments adopted subsequent to July 22, 1997 and re-adopt any
By-Law Amendments the Board of Directors deems to be in the best interests of
the stockholders.
If the By-Law Amendments are adopted pursuant to this consent
solicitation, prompt notice, including a description of any repealed By-Law
provisions or amendments, must be given by the Company pursuant to Section
228(d) of the DGCL to stockholders who did not execute consents. Moreover, if
the By-Law Amendments are adopted pursuant to this consent solicitation, a
description of such repealed By-Law provisions or amendments will be included
in the report on Form 10-Q for the quarter in which the Effective Time occurs.
THE COMMITTEE RECOMMENDS THAT YOU EXECUTE THE ACCOMPANYING
BLUE CONSENT CARD FOR THE PROPOSED BY-LAW AMENDMENTS.
2. REMOVAL OF ALL INCUMBENT DIRECTORS.
Based on the Company's filings with the Commission, the individuals
who now sit on the Board are Christopher T. Dahl, William E. Cameron, Richard
W. Perkins and William M. Toles. The Committee believes that the incumbent
directors, because of the conflicts of interest arising out of the
relationships between the majority of the members of the Board of Directors
and Children's, will not maximize stockholder value and should be removed and
replaced with the Committee Nominees. A major focus of the Committee will be
to maximize stockholder value which the Committee intends to accomplish by
improving the relationships between the Company and the brokerage community
and Wall Street. The Committee has no definite plans with respect to the
future of the Company other than a general commitment to maximize stockholder
value. The Committee believes that the present acquisition strategy and
expansion plans under consideration by the present management to
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vertically integrate the Company are in the long term best interests of the
Company and plans to support the present executives of the Company in this
course of action.
ACCORDINGLY, THE COMMITTEE RECOMMENDS THAT YOU EXECUTE
THE ACCOMPANYING BLUE CONSENT CARD FOR REMOVAL OF ALL
OF THE PRESENT MEMBERS OF THE COMPANY'S BOARD AND ANY
PERSON ELECTED BY THE INCUMBENT DIRECTORS
(WHETHER BEFORE OR AFTER THE DATE OF THIS CONSENT SOLICITATION
STATEMENT) TO FILL ANY VACANCY OR NEWLY CREATED DIRECTORSHIP
3. PROPOSED ELECTION OF THE COMMITTEE NOMINEES.
If the proposed amendments to the By-Laws are adopted and the
Company's incumbent directors are removed, the entire Board will consist of
three directorships, all of which will be vacant. To fill those vacancies, the
Committee proposes the election of the Committee Nominees -- Glenn B. Laken,
Steven B. Nagler and Donald Sliter. Certain information concerning the
Committee's Nominees is set forth above under the caption "THE COMMITTEE AND
ITS NOMINEES" and in Appendix I attached to this Consent Solicitation
Statement. Each of the Committee Nominees has agreed to serve as a director of
the Company, if elected.
THE COMMITTEE RECOMMENDS THAT YOU EXECUTE THE
ACCOMPANYING BLUE CONSENT CARD FOR THE
ELECTION OF THE COMMITTEE NOMINEES TO THE BOARD
CONSENT PROCEDURE
Section 228 of the DGCL states that, unless otherwise provided in the
certificate of incorporation of a Delaware corporation, any action that is
required to be or may be taken at any annual or special meeting of
stockholders of that corporation may be taken without a meeting, without prior
notice and without a vote, if a consent or consents in writing, setting forth
the action so taken, are signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon
were present and voted, and those consents are delivered to the corporation by
delivery to its registered office in Delaware, its principal place of business
or an officer or agent of the corporation having custody of the books in which
proceedings of meetings of stockholders are recorded. The Company's
certificate of incorporation does not prohibit stockholder action by written
consent.
- 14 -
Section 213(b) of the DGCL provides that if no record date has been
fixed by the board of directors, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting, when no
prior action by the board of directors is required, will be the first date on
which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the corporation by delivery to its registered office
in Delaware, its principal place of business or an officer or agent of the
corporation having custody of the books in which proceedings of meetings of
the stockholders are recorded. No prior action is required by the Company's
Board with respect to the Proposals. Since the first date on which a signed
written consent setting forth the actions proposed to be taken in the Proposal
was September ____, 1997, the Record Date will be September ____, 1997.
If the Proposals are adopted pursuant to this consent solicitation,
prompt notice must be given by the Company pursuant to Section 228(d) of the
DGCL to stockholders who have not executed consents.
EFFECTIVENESS AND REVOCATION OF CONSENTS
The Committee's proposals will become effective when properly
completed, unrevoked consents are signed by the holders of record as of the
Record Date of a majority of the outstanding shares of Common Stock then
outstanding and such consents are delivered to the Company, provided that the
requisite consents are so delivered within 60 days of the earliest dated
consent so delivered to the Company.
The Committee plans to present the results of a successful
solicitation with respect to the corporate actions proposed herein to the
Company as soon as possible.
An executed consent card may be revoked at any time before the action
authorized by the executed consent becomes effective by marking, dating,
signing and delivering a written revocation. A revocation may be in any
written form validly signed by the record holder as long as it clearly states
that the consent previously given is no longer effective. The delivery of a
subsequently dated Consent Card which is properly completed will constitute a
revocation of any earlier consent. The revocation may be delivered either to
the Committee, in care of Ronald Schneider, The Financial Relations Board,
Inc. at 675 Third Avenue, 8th Floor, New York, New York 10017 or to the
Company at 1900 Westwood Blvd., Suite 310, Los Angeles, California 90025-4674
(Attention: Corporate Secretary) or any other address provided by the Company.
Although a revocation is effective if delivered to the Company, the Committee
requests that either the original or photostatic copies of all revocations of
consents be mailed or delivered to the Committee as set forth above, so that
the Committee will be aware of all revocations and
- 15 -
can more accurately determine if and when the requisite consents to the
actions described herein have been received.
CONSENTS REQUIRED
The consent of the holders of shares representing a majority of the
votes of all shares of Common Stock outstanding as of the Record Date is
required to adopt and approve each of the Committee's proposals. According to
the information set forth in public filings made by the Company, there were
6,462,429 shares of Common Stock outstanding on the Record Date. Each share of
Common Stock entitles the Record-Date holder thereof to one vote on the
Committee's proposals. Accordingly, written consents by Record-Date holders of
approximately 3,231,250 shares of Common Stock will be required to adopt and
approve each of the Committee's proposals.
As of the Record Date, the Committee's members, the Committee
Nominees and their respective affiliates and associates beneficially owned an
aggregate of 806,686 shares of Common Stock, constituting approximately 12.5%
of the Common Stock believed to be outstanding as of the Record Date
(excluding 200,000 shares of the Company's Common Stock beneficially owned by
Glenn Laken pursuant to presently exercisable options), and expect to execute
(or cause to be executed) consents to all of the actions for which consents
are being solicited by the Committee with respect to all such shares. As a
result, in addition to the consents of the Committee's members and the
Committee Nominees, the unrevoked consents of other Record-Date holders owning
approximately 37.5% of the outstanding shares of Common Stock on the Record
Date are required to adopt the Proposals.
SOLICITATION OF CONSENTS
Consents will be solicited by mail, telephone, telegraph, telex,
facsimile transmission, electronic mail and in person. Solicitations of
consents will be made by all or some of the Committee's members and the
Committee Nominees and by employees of Glenn Laken's firm, Lake Futures Ltd.
In addition, the Committee has retained The Financial Relations
Board, Inc. ("FRB") to assist in the solicitation and has executed an
engagement letter with FRB providing for the payment of a non-refundable
retainer of $10,000 for services plus reimbursement of expenses, of which
$2,000 has been paid in advance. FRB 's services will be billed to the
Committee on the basis of time expended in providing such services at hourly
rates. The engagement letter provides FRB with indemnity from certain
liabilities, including liabilities arising under Federal securities laws.
- 16 -
Brokers, custodians, nominees and fiduciaries will be requested to
forward solicitation material to beneficial owners of the Common Stock. The
Committee will reimburse brokers, custodians, nominees and fiduciaries for
their reasonable expenses for sending soliciting materials to the beneficial
owners of the Company's Common Stock.
Subject to the following two paragraphs, the cost of solicitation
will be borne by Glenn Laken. Total expenditures for the solicitation,
including fees for attorneys, solicitors, advertising, printing,
transportation, litigation and other costs incidental to the solicitation are
estimated to be approximately $150,000. The total amount of such expenditures
made to date is estimated to be approximately $35,000, which amount includes
expenditures incurred to date for attorneys' fees.
The Committee will seek reimbursement of all of the costs of this
solicitation from the Company to the extent legally permissible. The Committee
does not intend that the question of the Company's reimbursement of
solicitation expenses will be submitted to a vote of stockholders unless such
submission is required by law.
SPECIAL INSTRUCTIONS
If you were a record holder as of the close of business on the Record
Date, you may elect to consent to, withhold consent to or abstain with respect
to each of the Committee's proposals by marking the "CONSENTS", "DOES NOT
CONSENT" or "ABSTAINS" box, as applicable, underneath each such proposal on
the accompanying BLUE Consent Card and returning it promptly in the enclosed
postage-paid envelope.
IF THE STOCKHOLDER WHO HAS EXECUTED AND RETURNED THE CONSENT CARD HAS
FAILED TO CHECK A BOX MARKED "CONSENTS", "DOES NOT CONSENT" OR "ABSTAINS" FOR
ANY OR ALL OF THE PROPOSALS, SUCH STOCKHOLDER WILL BE DEEMED TO HAVE CONSENTED
TO SUCH PROPOSAL OR PROPOSALS.
THE COMMITTEE RECOMMENDS THAT YOU CONSENT TO EACH OF THE PROPOSALS.
YOUR CONSENT IS IMPORTANT. PLEASE MARK, SIGN AND DATE THE ENCLOSED BLUE
CONSENT CARD AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE PROMPTLY.
FAILURE TO RETURN YOUR CONSENT WILL HAVE THE SAME EFFECT AS VOTING AGAINST THE
PROPOSALS.
If your shares are held in the name of a brokerage firm, bank nominee
or other institution, only it can execute a consent with respect to your
shares and only upon receipt of specific instructions from you. Please return
your executed BLUE consent
- 17 -
card in the postage-paid envelope provided by such firm. In addition, if you
did not receive a return envelope or are concerned that your consent card is
properly executed and timely lodged with the Company, you should contact the
person responsible for your account and give instructions for the BLUE Consent
Card to be signed representing your shares.
If you have any questions about completing or signing the Consent
Card or require assistance, including assistance in assuring that any of your
shares held by brokers or other nominees are voted, please call Ronald
Schneider at The Financial Relations Board at (212) 661-8030.
ADDITIONAL INFORMATION
Certain information regarding ownership of voting securities of the
Company by certain members of the Company's management and principal
stockholders other than the Committee is contained in Appendix III attached to
this Consent Solicitation Statement.
The information concerning the Company contained in this Consent
Solicitation Statement has been taken from or based upon publicly available
reports, proxy statements and other documents on file with the Commission and
other public sources. Such reports, proxy statements and other documents on
file with the Commission may be inspected without charge at public reference
facilities maintained by the Commission office at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and also should be available for inspection at the
regional offices of the Commission located in 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies may be obtained from the Commission on payment of the
Commission's prescribed rates through the Commission's Public Reference
Section by writing to its principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549.
Although the Committee does not have any knowledge that would
indicate that any statement contained herein based upon such reports, proxy
statements and other documents is untrue, the Committee does not take any
responsibility for the accuracy or completeness of the information contained
in such other documents, or for any failure by the Company or any of its
subsidiaries to disclose events that may affect the significance or accuracy
of any such information.
The Company's principal executive offices are at 1990 Westwood Blvd.,
Suite 310, Los Angeles, California 90025-4676, and its
- 18 -
telephone number at that address is (310) 446-7700.
YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND MAIL THE
ENCLOSED BLUE CONSENT CARD PROMPTLY IN THE POSTAGE-PAID ENVELOPE
PROVIDED.
Dated: September ___, 1997
THE LAKEN COMMITTEE
- 19 -
APPENDIX I
This Appendix I sets forth certain information regarding each
Committee member, each of whom is a nominee for Director.
A. The following table sets forth with respect to each such person
such person's (i) name and business address, (ii) present principal occupation
or employment and the name, principal business and address of any corporation
or other organization in which such employment is carried on.
NAME AND BUSINESS ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT
Glenn Laken President of Lake Futures,
30 South Wacker Drive Ltd. which is engaged in
Suite 1606 business in the futures
Chicago, Illinois 60606 industry as an introducing
broker and adviser to pension
fund managers, including
pension managers for two
Fortune 100 companies and
several billion dollar funds.
Executive Vice President of
D&G Futures, Inc., a partner
of First Options of Chicago,
Inc., engaged in the business
of financing and clearing
transactions for futures
traders.
Steven B. Nagler Of counsel, Siegel & Capitel,
2275 Half Day Road, suite 320 Ltd., which is a law firm
Bannockburn, Illinois 60015 engaged in the practice of
law.
Donald Sliter Executive Vice President of D
30 South Wacker Drive & G Futures, Inc., a partner
Suite 1606 of First Options of Chicago
Chicago, Illinois 60606 Inc., engaged in the business
of financing and clearing
transactions for futures
traders.
B. The following table and the notes thereto set forth the aggregate
number of Shares of Common Stock beneficially owned, directly or indirectly,
as of the date of this Consent Solicitation Statement by each of the
Committee's members, who are the Committee's nominees for directors, and their
respective "associates," individually and as a group. Unless otherwise
indicated, each person has sole voting and investment power with respect to
the shares of Common Stock listed.
- 20 -
Percentage of
Issued and
Shares of Outstanding
Name Common Stock (1) Common Stock (1)
- ---- ---------------- ----------------
Glenn Laken 620,000 (2)(3) 9.30%
Steven B. Nagler 9,974 (3) .15%
Donald Sliter 192,292 3.00%
All Committee Members
(and Nominees) as a 822,266 (1, 2, 3) 12.30%
group (3 persons)
(1) For purposes of this table, the number of shares which a
person or group of persons is deemed to "beneficially own"
includes any shares that such person has the right to
acquire within 60 days. For purposes of computing the
percentage of outstanding shares held by each person or
group of persons named above on a given date, any security
that such person or persons has the right to acquire within
60 days is deemed to be outstanding, but is not deemed to be
outstanding for the purpose of computing the percentage
ownership of any other person. In addition, such
securities have been excluded in the computation for the
group. Such computations are based on information
concerning the number of Shares of Stock issued and
outstanding as of May 7, 1997, as reported by the Company in
the Form 10-Q dated May 7, 1997 ("May 7 10-Q") and
information regarding the repurchase of shares by the
Company on July 25, 1997 as reported by the Company in the
Form 8-K dated July 30, 1997 (the "8-K").
(2) Includes 200,000 currently exercisable options to purchase
shares of Common Stock of the Company, at a price of $1.50
per share, held by Mr. Laken.
(3) Glenn B. Laken, Steven B. Nagler and Donald Sliter are part
of a group of persons that beneficially own in the aggregate
1,006,686 shares of Common Stock of the Company, including
Mr. Laken's 200,000 options to purchase shares of Common
Stock of the Company. The members of the group have agreed
to vote their shares of Common Stock at Mr. Laken's
direction.
C. Except as otherwise described herein, no member of the Committee,
Committee Nominee or "associate" of any of the foregoing owns securities of
the Company of record but not beneficially.
- 21 -
D. Except as described in this Appendix or elsewhere in
the Consent Solicitation Statement,
(1) except Messrs. Laken's, Nagler's and Sliter's
disclosures regarding their participation in a group that
beneficially owns 1,006,686 shares of Common Stock of the Company and
Mr. Laken's Schedule 13D, none of the members of the Committee or the
Committee Nominees is, or was within the past year, a party to any
contract, arrangement or understanding with any person with respect
to any securities of the Company, including, but not limited to joint
ventures, loan or option arrangements, puts or calls, guarantees
against loss or guarantees of profit, division of losses or profits,
or the giving or withholding of proxies;
(2) none of the members of the Committee, the Committee
Nominees or any of their respective associates has had any
transaction, or series of similar transactions, since July 1, 1996,
or any currently proposed transaction, or series of similar
transactions, to which the Company or any of its subsidiaries was or
is to be a party, in which the amount involved exceeds $60,000 and in
which any such participant had, or will have, a direct or indirect
material interest;
(3) none of the members of the Committee, the Committee
Nominees or any of their respective associates has been indebted to
the registrant or its subsidiaries at any time since July 1, 1996, in
an amount in excess of $60,000;
(4) none of the members of the Committee, the Committee
Nominee's or any of their respective associates, has, since July 1,
1996, except as otherwise disclosed herein,
(i) owned, of record or beneficially in excess of
ten percent equity interest in, any business or
professional entity that has made during the
Company's last full fiscal year, or proposes to
make during the Company's current fiscal year,
payments to the Company or its subsidiaries for
property or services in excess of five percent
of the Company's consolidated gross revenues for
its last full fiscal year, or any such other
entity's consolidated gross revenues for its
last full fiscal year;
(ii) owned, or owns of record or beneficially in
excess of ten percent equity interest in or is
an executive officer of, any business or
professional entity to which the Company or its
- 22 -
subsidiaries has made during the Company's last
full fiscal year, or proposes to make during the
Company's current fiscal year, payments for
property or services in excess of five percent
of (a) the Company's consolidated gross revenues
for its last full fiscal year, or (b) any such
other entity's consolidated gross revenues for
its last full fiscal year;
(iii) owned, or owns of record or beneficially in
excess of ten percent equity interest in or is
an executive officer of, any business or
professional entity to which the Company or its
subsidiaries was indebted at the end of the
Company's last full fiscal year in an aggregate
amount in excess of five percent of the
Company's total consolidated assets at the end
of such fiscal year;
(iv) been a member of, or of counsel to, a law firm
that the Company has retained or proposes to
retain during the current fiscal year;
(v) been a partner or executive officer of any
investment banking firm that has performed
services for the Company or that the Company
proposes to have perform services during the
current year; or
(vi) had any other relationships that are
substantially similar in nature and scope to
those relationships listed in paragraphs 4(i)
through (v) above.
(5) none of the members of the Committee, the Committee
Nominees, or any of their respective associates has any arrangement
or understanding with any person (i) with respect to any future
employment by the Company or its affiliates; or (ii) with respect to
any future transactions to which the Company or any of its affiliates
will or may be a party;
(6) no person who is a party to an arrangement or
understanding pursuant to which a Committee Nominee is proposed to be
elected, has any substantial interest, direct or indirect, by
security holdings or otherwise, in any matter to be acted upon by the
stockholders of the Company;
(7) there are no material proceedings to which any member of
the Committee, Committee Nominee or any associate of any such
Committee Nominee, is a party adverse to the
- 23 -
Company or any of its subsidiaries or has a material
interest adverse to the Company or any of its subsidiaries;
and
(8) no Committee Nominee has been party to any of the
following events that occurred during the past five years and that
are material to an evaluation of the ability or integrity of any
person nominated to become a director of the Company:
(a) a petition under the Federal bankruptcy laws
or any state insolvency law was filed by or against, or a
receiver, fiscal agent or similar officer was appointed by a
court for the business or property of such person, or any
partnership in which he was a general partner at or within
two years before the time of such filing, or any corporation
or business association of which he was an executive officer
at or within two years before the time of such filing;
(b) such person was convicted in a criminal
proceeding or is a named subject of a pending criminal
proceeding (excluding traffic violations and other minor
offenses);
(c) such person was the subject of any order,
judgment, or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining him from, or otherwise limiting,
the following activities:
i) acting as a futures commission
merchant, introducing broker,
commodity trading advisor, commodity
pool operator, floor broker, leverage
transaction merchant, any other person
regulated by the Commodity Futures
Trading Commission, or an associated
person of any of the foregoing, or as
an investment advisor, underwriter,
broker or dealer in securities, or as
an affiliated person, director or
employee of any investment company,
bank, savings and loan association or
insurance company, or engaging in or
continuing any conduct or practice in
connection with such activity;
- 24 -
ii) engaging in any type of business
practice; or
iii) engaging in any activity in connection
with the purchase or sale of any
security or commodity or in connection
with any violation of Federal or State
securities laws or Federal commodities
laws;
(d) such person was the subject of any order,
judgment or decree, not subsequently reversed,
suspended or vacated, of any Federal or State
authority barring, suspending or otherwise
limiting for more than 60 days the right of such
person to engage in any activity described in
paragraph D.(8)(c)(i) of this Appendix, or to be
associated with persons engaged in any such
activity;
(e) such person was found by a court of competent
jurisdiction in a civil action or by the
Commission to have violated any Federal or State
securities law, and the judgment in such civil
action or finding by the Commission has not been
subsequently reversed, suspended, or vacated; or
(f) such person was found by a court of competent
jurisdiction in a civil action or by the
Commodity Futures Trading Commission to have
violated any Federal commodities law, and the
judgment in such civil action or finding by the
Commodity Futures Trading Commission has not
been subsequently reversed, suspended or
vacated.
E. Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who beneficially own more than
10% of a registered class of the Company's equity securities, to file reports
of ownership of the Company's securities and changes in such ownership with
the SEC. Officers, directors and 10% stockholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
None of the Committee Nominees failed to timely file a Form 3, 4 or 5
or amendments thereto during the Company's last fiscal year (July 1, 1996
through June 30, 1997). On August 23, 1997,
- 25 -
Glenn Laken filed a Form 3 on behalf of Glenn Laken, Donald Sliter, Steven B.
Nagler, Robert Totten, Randall Berman and Lane Laken, M.D. with respect to an
event that occurred on August 6, 1997. The Form 3 should have been filed by
August 16, 1997.
F. Compensation Paid to Committee Members. Except for the grant of
the Options to Glenn Laken described below, neither the Company nor any of its
subsidiaries paid, set aside or accrued any salary or other remuneration or
bonus, or any amount pursuant to a profit-sharing, pension, retirement,
deferred compensation or other similar plan, during its last fiscal year, or
during its current fiscal year, to or for any of the Committee Members.
Options. On February 13, 1997, in consideration for Glenn Laken's
consulting services rendered to the Company, the Company granted Mr. Laken
options (the "Options") to purchase up to 200,000 shares of the Company's
common stock ("Option Shares"). The Options are exercisable until 2000 at a
price of $1.50 per share, the closing price of the Company's common stock on
the date of grant.
Compensation The following table summarizes the total consulting fees
received by Glenn Laken during the 1997 fiscal year. None of Glenn Laken, or
Steven Nagler or Donald Sliter, the other Committee Members, have ever
received any compensation from the Company except as set forth below.
Summary Compensation Table for the Company
Name/principal Annual Compensation Long Term
Position Year Salary Compensation Options
- -------- ---- ------ --------------------
Glenn Laken(1) 1997 - 200,000
Consultant
The following tables set forth information with respect to Mr. Laken
concerning exercise of options of stock of the Company during the current and
the last fiscal year and unexercised options on stock of the Company held
currently and held as of the end of the last fiscal year.
- 26 -
Option/SAR Grants by the Company for the Fiscal Year ended June 30, 1997:
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SAR's Employees in or Base Expiration
Name Granted (#) Fiscal Year ($/SH) Date
Glenn Laken(2) 200,000 Unknown $1.50 2/13/00
Aggregated Option/SAR on the Company
Exercises for the Year Ended June 30, 1997
and Option/SAR Values on the Company as of June 30, 1997:
Value of
Shares Number of Securities Unexercised
Acquired Underlying Unexercised In-the-Money
on Value Options/SARs Options/SARs
Exercise Realized at 6/30/97 at 6/30/97
Name (#) ($) Exercisable Exercisable/Unexercisable
Glenn Laken 0 0 200,000 [$162,500]
- --------------
(1) Represents the Options issued to Glenn Laken on or about February 13,
1997.
(2) As of the date of this Consent Solicitation, Mr. Laken holds 200,000
Options exercisable at $1.50 per share, approximately [$0.59] per
share below market value as of the date of this Consent Solicitation.
For purposes of the foregoing, the term "associate" has the meaning
set forth in Rule 14a-1 promulgated pursuant to the Securities and Exchange
Act of 1934.
F. Set forth below are the shares of common stock of the Company that
were purchased and sold within the past two years by each Committee member.
- 27 -
HARMONY HOLDINGS
================================================================================
TYPE OF NO. OF
NAME TRADE DATE TRANSACTION SHARES
================================================================================
Glenn Bradley 7/31/97 Bought 5,000
Laken
- --------------------------------------------------------------------------------
7/30/97 Bought 5,000
- --------------------------------------------------------------------------------
7/29/97 Bought 5,000
- --------------------------------------------------------------------------------
7/28/97 Bought 5,000
- --------------------------------------------------------------------------------
07/23/97 Bought 5,200
- --------------------------------------------------------------------------------
Bought 5,000
- --------------------------------------------------------------------------------
07/22/97 Bought 5,000
- --------------------------------------------------------------------------------
Bought 2,000
- --------------------------------------------------------------------------------
Bought 5,000
- --------------------------------------------------------------------------------
07/15/97 Bought 2,500
- --------------------------------------------------------------------------------
07/14/97 Bought 1,000
- --------------------------------------------------------------------------------
07/11/97 Bought 500
- --------------------------------------------------------------------------------
Bought 2,000
- --------------------------------------------------------------------------------
Bought 100
- --------------------------------------------------------------------------------
07/10/97 Bought 2,500
- --------------------------------------------------------------------------------
Bought 200
- --------------------------------------------------------------------------------
Bought 2,000
- --------------------------------------------------------------------------------
07/07/97 Bought 200
- --------------------------------------------------------------------------------
Bought 1,000
- --------------------------------------------------------------------------------
07/03/97 Bought 200
- --------------------------------------------------------------------------------
07/02/97 Bought 2,000
- --------------------------------------------------------------------------------
Bought 2,500
- --------------------------------------------------------------------------------
Bought 200
- --------------------------------------------------------------------------------
Bought 200
- --------------------------------------------------------------------------------
06/30/97 Bought 200
- --------------------------------------------------------------------------------
06/27/97 Bought 500
- --------------------------------------------------------------------------------
- 28 -
- --------------------------------------------------------------------------------
Bought 2,000
- --------------------------------------------------------------------------------
Bought 2,000
- --------------------------------------------------------------------------------
Bought 2,000
- --------------------------------------------------------------------------------
Bought 3,000
- --------------------------------------------------------------------------------
06/26/97 Bought 2,400
- --------------------------------------------------------------------------------
06/25/97 Bought 3,000
- --------------------------------------------------------------------------------
Bought 2,500
- --------------------------------------------------------------------------------
06/20/97 Bought 5,000
- --------------------------------------------------------------------------------
Bought 100
- --------------------------------------------------------------------------------
06/17/97 Bought 2,000
- --------------------------------------------------------------------------------
Bought 500
- --------------------------------------------------------------------------------
06/16/97 Bought 10,000
- --------------------------------------------------------------------------------
06/06/97 Bought 500
- --------------------------------------------------------------------------------
Bought 2,500
- --------------------------------------------------------------------------------
Bought 1,000
- --------------------------------------------------------------------------------
05/16/97 Bought 200
- --------------------------------------------------------------------------------
05/12/97 Bought 5,000
- --------------------------------------------------------------------------------
05/06/97 Bought 200
- --------------------------------------------------------------------------------
05/02/97 Bought 2,500
- --------------------------------------------------------------------------------
Bought 2,500
- --------------------------------------------------------------------------------
04/30/97 Bought 2,000
- --------------------------------------------------------------------------------
Bought 2,500
- --------------------------------------------------------------------------------
04/29/97 Bought 5,000
- --------------------------------------------------------------------------------
03/27/97 Bought 12,000
- --------------------------------------------------------------------------------
Bought 200
- --------------------------------------------------------------------------------
03/21/97 Bought 2,500
- --------------------------------------------------------------------------------
Bought 2,500
- --------------------------------------------------------------------------------
Bought 1,000
- --------------------------------------------------------------------------------
02/05/97 Bought 100
- --------------------------------------------------------------------------------
- 29 -
- --------------------------------------------------------------------------------
02/04/97 Bought 5,000
- --------------------------------------------------------------------------------
Bought 400
- --------------------------------------------------------------------------------
01/31/97 Bought 1,000
- --------------------------------------------------------------------------------
01/30/97 Bought 5,000
- --------------------------------------------------------------------------------
01/29/97 Bought 5,000
- --------------------------------------------------------------------------------
01/24/97 Bought 5,000
- --------------------------------------------------------------------------------
Bought 5,000
- --------------------------------------------------------------------------------
12/20/96 Bought 2,500
- --------------------------------------------------------------------------------
12/04/96 Bought 1,000
- --------------------------------------------------------------------------------
11/20/96 Bought 2,500
- --------------------------------------------------------------------------------
11/01/96 Bought 2,500
- --------------------------------------------------------------------------------
10/22/96 Bought 5,000
- --------------------------------------------------------------------------------
10/21/96 Bought 5,000
- --------------------------------------------------------------------------------
10/17/96 Bought 3,000
- --------------------------------------------------------------------------------
09/27/96 Bought 100
- --------------------------------------------------------------------------------
09/18/96 Sold 1,000
- --------------------------------------------------------------------------------
09/16/96 Bought 100
- --------------------------------------------------------------------------------
09/13/96 Bought 100
- --------------------------------------------------------------------------------
09/09/96 Sold 2,000
- --------------------------------------------------------------------------------
08/12/96 Bought 2,000
- --------------------------------------------------------------------------------
Bought 1,300
- --------------------------------------------------------------------------------
Bought 1,500
- --------------------------------------------------------------------------------
Bought 1,200
- --------------------------------------------------------------------------------
08/09/96 Bought 10,000
- --------------------------------------------------------------------------------
Bought 3,000
- --------------------------------------------------------------------------------
Bought 2,000
- --------------------------------------------------------------------------------
07/30/96 Bought 2,300
- --------------------------------------------------------------------------------
07/29/96 Bought 5,000
- --------------------------------------------------------------------------------
07/26/96 Bought 2,500
- 30 -
- --------------------------------------------------------------------------------
Bought 2,000
- --------------------------------------------------------------------------------
07/24/96 Sold 9,900
- --------------------------------------------------------------------------------
07/22/96 Bought 10,000
- --------------------------------------------------------------------------------
07/19/96 Bought 5,000
- --------------------------------------------------------------------------------
Bought 10,000
- --------------------------------------------------------------------------------
Bought 5,000
- --------------------------------------------------------------------------------
Bought 2,500
- --------------------------------------------------------------------------------
Bought 500
- --------------------------------------------------------------------------------
07/18/96 Bought 2,400
- --------------------------------------------------------------------------------
Bought 2,600
- --------------------------------------------------------------------------------
Bought 2,400
- --------------------------------------------------------------------------------
Bought 5,000
- --------------------------------------------------------------------------------
07/17/96 Bought 5,000
- --------------------------------------------------------------------------------
07/16/97 Sold 9,000
- --------------------------------------------------------------------------------
Bought 5,000
- --------------------------------------------------------------------------------
Sold 400
- --------------------------------------------------------------------------------
Sold 200
- --------------------------------------------------------------------------------
07/03/96 Bought 5,000
- --------------------------------------------------------------------------------
Bought 4,000
- --------------------------------------------------------------------------------
07/01/96 Bought 1,000
- --------------------------------------------------------------------------------
06/14/96 Bought 5,000
- --------------------------------------------------------------------------------
04/22/96 Sold 1,000
- --------------------------------------------------------------------------------
04/10/96 Bought 1,000
- --------------------------------------------------------------------------------
Bought 1,000
- --------------------------------------------------------------------------------
03/27/96 Bought 2,500
- --------------------------------------------------------------------------------
Bought 2,500
- --------------------------------------------------------------------------------
03/21/96 Bought 900
- --------------------------------------------------------------------------------
Bought 2,300
Bought 1,800
- 31 -
- --------------------------------------------------------------------------------
03/14/96 Bought 5,000
- --------------------------------------------------------------------------------
Donald Sliter 08/04/97 Sold 4,760
- --------------------------------------------------------------------------------
08/01/97 Sold 25,000
- --------------------------------------------------------------------------------
07/29/97 Bought 3,000
- --------------------------------------------------------------------------------
07/25/97 Bought 6,200
- --------------------------------------------------------------------------------
07/23/97 Bought 10,000
- --------------------------------------------------------------------------------
Bought 4,850
- --------------------------------------------------------------------------------
07/22/97 Bought 5,180
- --------------------------------------------------------------------------------
07/18/97 Bought 3,000
- --------------------------------------------------------------------------------
07/16/97 Bought 3,820
- --------------------------------------------------------------------------------
Bought 5,000
- --------------------------------------------------------------------------------
07/15/97 Bought 7,000
- --------------------------------------------------------------------------------
07/14/97 Bought 3,150
- --------------------------------------------------------------------------------
06/23/97 Sold 712
- --------------------------------------------------------------------------------
06/20/97 Sold 250
- --------------------------------------------------------------------------------
06/16/97 Bought 712
- --------------------------------------------------------------------------------
Bought 5,155
- --------------------------------------------------------------------------------
06/13/97 Bought 20,000
- --------------------------------------------------------------------------------
05/12/97 Bought 8,000
- --------------------------------------------------------------------------------
Bought 3,442
- --------------------------------------------------------------------------------
05/09/97 Bought 4,000
- --------------------------------------------------------------------------------
Bought 6,000
- --------------------------------------------------------------------------------
05/08/97 Bought 5,600
- --------------------------------------------------------------------------------
Bought 7,500
- -------------------------------------------------------------------------------
04/10/97 Bought 9,115
- --------------------------------------------------------------------------------
03/03/97 Bought 5,600
- --------------------------------------------------------------------------------
02/26/97 Sold 5,700
- --------------------------------------------------------------------------------
02/04/97 Bought 5,000
- --------------------------------------------------------------------------------
10/29/96 Bought 6,000
- 32 -
- --------------------------------------------------------------------------------
10/23/96 Sold 70
- --------------------------------------------------------------------------------
10/10/96 Bought 7,800
- --------------------------------------------------------------------------------
10/09/96 Bought 10,700
- --------------------------------------------------------------------------------
10/08/96 Bought 10,300
- --------------------------------------------------------------------------------
10/04/96 Bought 32,000
- --------------------------------------------------------------------------------
Steven B. 06/19/97 Bought 2,500
Nagler
- --------------------------------------------------------------------------------
Bought 2,500
- --------------------------------------------------------------------------------
05/14/96 Bought 1,000
- --------------------------------------------------------------------------------
09/26/95 Bought 1,500
- --------------------------------------------------------------------------------
08/08/95 Sold 2,000
- --------------------------------------------------------------------------------
05/01/95 Bought 2,000
================================================================================
- 33 -
APPENDIX II
This Appendix sets forth the text, in relevant part, of the By-Laws
which are proposed by the Committee to be amended, as the Company indicated
such By-Laws were in effect on August 5, 1997 and as they will appear after
adoption of the Committee's proposed By-Law Amendments. With respect to
Sections 2 and 12, language proposed to be deleted is marked in brackets and
language proposed to be added is capitalized. The Committee is not aware of
any amendments to the By-Laws since July 22, 1997. To the extent any such
By-Law amendments have been adopted subsequently, such intervening amendments
shall be repealed by the adoption of the following amendments if inconsistent
therewith.
Old Section 1
Section 1. Number of Directors; Terms. The initial number of
Directors of the corporation shall be three (3). The number of directors which
shall thereafter constitute the whole Board of Directors shall be determined
from time to time by resolution of the Board of Directors. Directors shall be
elected annually by the stockholders except that each of the initial Directors
shall be elected by the incorporator of the corporation and shall hold office
until his successor is duly elected and qualified or until he sooner dies,
resigns, is removed or becomes disqualified.
New Section 1
Section 1. Number of Directors; Terms. The number of Directors of the
corporation which shall constitute the whole Board of Directors shall be THREE
(3) unless and until changed from time to time by resolution of the Board of
Directors. Directors shall be elected annually by the stockholders except as
provided in Section 2 of this Article III and shall hold office until his
successor is duly elected and qualified or until he sooner dies, resigns, is
removed or becomes disqualified.
Section 2. Vacancies. Subject to the provisions of the certificate of
incorporation, vacancies in the Board of Directors OTHER THAN VACANCIES
CREATED BY THE REMOVAL OF DIRECTORS BY THE STOCKHOLDERS may be filled by a
majority of the Directors then in office, though less than a quorum, or by a
sole remaining Director, and any Director so chosen shall hold office for the
remainder of the full term of the Director whose place he has been elected to
fill or of the class for which he has been designated and until his successor
is duly elected and shall qualify. If there are no Directors in office, then
an election of Directors may be held in the manner provided by statute.
- 34 -
Further subject to the provisions of the certificate of
incorporation, a vacancy or vacancies in the Board of Directors shall be
deemed to exist in case of the death, resignation or removal of any Director,
or if the stockholders fail at any annual or special meeting of stockholders
at which any Director or Directors are required to be elected to elect the
full authorized number of Directors to be voted for at that meeting, or if
there are newly created Directorships resulting from any increase in the
authorized numbers of Directors.
A VACANCY OR VACANCIES CREATED BY THE REMOVAL OF ONE OR MORE
DIRECTORS MAY ONLY BE FILLED BY ACTION OF THE HOLDERS OF SHARES REPRESENTING A
MAJORITY OF THE SHARES OF THE CORPORATION'S COMMON STOCK THEN OUTSTANDING AND
ENTITLED TO VOTE AND SUCH ACTION MAY BE TAKEN AT THE SAME ANNUAL OR SPECIAL
MEETING, OR BY MEANS OF THE SAME WRITTEN CONSENT OR CONSENTS, OF STOCKHOLDERS
AT OR BY WHICH SUCH DIRECTOR OR DIRECTORS WERE REMOVED OR MAY BE TAKEN AT A
DIFFERENT MEETING OR BY A SEPARATE WRITTEN CONSENT OR CONSENTS.
Section 12. Removal of Directors. Subject to the provisions of the
certificate of incorporation and except as may otherwise be provided by the
General Corporation Law, the entire Board of Directors or one or more
Directors may be removed from office WITH OR WITHOUT cause by the affirmative
vote of the holders of a majority of the stock of the corporation entitled to
vote at an election of Directors AT ANY ANNUAL MEETING OR SPECIAL MEETING OF
STOCKHOLDERS DULY CALLED FOR THE PURPOSE OF THE REMOVAL OF SUCH DIRECTOR OR
DIRECTORS OR BY ACTION OF THE STOCKHOLDERS BY WRITTEN CONSENT.
- 35 -
APPENDIX III
PRINCIPAL STOCKHOLDERS OF THE COMPANY AND
STOCK HOLDINGS OF MANAGEMENT
Schedule 14A adopted by the Commission under the Exchange Act
requires the Committee to disclose, to the extent known to the Committee,
certain information regarding ownership of voting securities of the Company.
The information set forth in this Appendix is provided in response to that
requirement. Except with respect to information concerning the Committee and
its members, all information contained in the following tables (including the
footnotes) has been taken from or is based upon the Company's Amendment No. 5
to Form S-1 dated February 28, 1997 and other information contained in other
filings by the Company with the Commission.
The following table sets forth the number of shares of Common Stock
of the Company beneficially owned as of December 31, 1996, by: (i) each person
who beneficially owns more than five percent of the Company's Common Stock;
(ii) each Director and Named Executive Officer of the Company as that term is
defined by Rule 402(a)(3); and (iii) all executive officers and Directors of
the Company as a group. Changes to the December 31, 1996 information that are
known to the Committee are disclosed in the footnotes. Except as noted, each
person named as sole voting and dispositive power over the total number of
shares beneficially owned:
Amount and
Name and Nature of Percentage
Address of Beneficial of Outstanding
Beneficial Owner (1)(2) Ownership (3) Common Stock
- ----------------------- ------------- ------------
Harvey Bibicoff 1,285,000 (4) 19.2%
Brian Rackohn 50,000 (5) 0.0%
Ivan Berkowitz 25,000 0.0%
Harry Shuster 25,000 0.0%
Unimedia 1,000,000 (6) 15.0%
All officers and Directors
as a group (6 persons)(7) 1,385,000 (3) 21.4%
- -----------------
(1) The address of all executive officers and Directors is 1990 Westwood
Boulevard, Suite 310, Los Angeles, California 90025.
(2) Subsequent to December 31, 1996, (i) Glenn Laken disclosed beneficial
ownership of 620,000 shares of the Common Stock of the Company,
including 200,000 currently exercisable options to purchase shares of
Common Stock (or 9.3% of the
- 36 -
outstanding shares of Common Stock of the Company), and the existence
of a group pursuant to which Mr. Laken could be deemed to
beneficially own 1,006,686 shares of Common Stock of the Company,
including the 200,000 currently exercisable options to purchase share
of Common Stock of the Company (or 15.1% of the outstanding shares of
Common Stock of the Company) and (ii) Children's filed a Schedule 13D
dated July 31, 1997 disclosing beneficial ownership of 1,991,231
shares of Common Stock of the Company, including 550,000 currently
exercisable options to purchase shares of Common Stock of the Company
(or 27.4% of the outstanding shares of Common Stock of the Company).
(3) Except as noted below, beneficial owners of Common Stock possess sole
voting and investment power with respect to the shares listed
opposite their names.
(4) On July 22, 1997, Harvey Bibicoff sold 1,150,000 shares of Common
Stock of the Company to Children's, including 550,000 currently
exercisable options to purchase shares of Common Stock of the
Company.
(5) Consists of immediately exercisable options. Does not include options
to purchase Common Stock that are not immediately exercisable held by
the following persons: Mr. Rackohn - 25,000.
(6) The Company repurchased 230,769 of the shares held by Unimedia on or
about July 25, 1997 and Children's purchased the remaining 769,231
shares held by Unimedia on or about July 25, 1997.
(7) On July 22, 1997, Harvey Bibicoff, Ivan Berkowitz and Harry
Shuster resigned as members of the Board of Directors of the
Company and the following persons were appointed as members
of the Board of Directors of the Company: Christopher T.
Dahl, William E. Cameron, Richard W. Perkins and William
Toles. The Committee does not have any information
regarding the holdings of securities of the Company of
Messrs. Dahl, Cameron, Perkins or Toles.
- 37 -
CHANGE IN CONTROL OF THE COMPANY
The following transactions were reported by the Company in the Form
8-K dated July 30, 1997 and in a Schedule 13D filed by Children's dated July
21, 1997.
On July 22, 1997, Christopher T. Dahl was appointed to the Board of
Directors and named chairman. Mr. Dahl then appointed the following new
directors: Richard W. Perkins and William Toles. Thereafter, the Board created
a new board position and appointed William E. Cameron as a director. Messrs.
Dahl, Cameron, Perkins and Toles now constitute the entire board of directors.
On July 21, 1997, the Company, Harvey Bibicoff ("Bibicoff") and the
Company entered into an agreement (the "Bibicoff Stock Purchase Agreement")
whereby Bibicoff agreed to sell, and Children's Broadcasting Corporation
agreed to buy, 600,000 shares of Common Stock of the Company (the "Bibicoff
Shares"), together with options to purchase 550,000 shares of Common Stock of
the Company (the "Options") at an exercise price of $1.50 per share, for
$1,760,000. In addition to such cash consideration, Children's issued 60,000
shares of its Common Stock, par value $.02 per share, to Bibicoff. Such shares
had a fair market value of $247,500 based upon the last reported sale price
for such stock on July 22, 1997.
On July 21, 1997, Children's and Unimedia a privately held societe
anonyme organized and existing under the laws of France, entered into an
agreement (the "Unimedia Stock Purchase Agreement") whereby Unimedia agreed to
sell, and Children's agreed to buy, 1,000,000 shares of Common Stock of the
Company (the "Unimedia Shares") and Unimedia agreed to dismiss the litigation
entitled UNIMEDIA S.A. V. HARMONY HOLDINGS, INC. AND HARVEY BIBICOFF, case no.
CV 96-7109 JGD (RNBx), pending in the United States District Court for the
Central District of California, for $2,600,000. As part of the transaction
Unimedia dismissed the lawsuit filed on October 9, 1996 against the Company
and its Chairman of the Board in the United States District Court for the
Central District of California with prejudice.
Children's assigned its right to buy 230,769 of the Unimedia Shares
to the Company reducing the purchase price for Children's stock purchase to
$2,000,000. On July 25, 1997, the Company repurchased the 230,279 shares from
Unimedia for $600,000 in cash, thereby reducing the number of issued and
outstanding shares of Common Stock of the Company. Children's purchased
769,721 shares of Common Stock of the Company from Unimedia on the same day.
- 38 -
The closing on the purchase of the Bibicoff Shares and the Options
occurred on July 22, 1997. The closing on the purchase of the Unimedia Shares
occurred on July 25, 1997.
Funds for the transactions described above originated from multiple
sources: (i) $2,400,000 pursuant to the Children's Broadcasting Corporation's
Amended and Restated Loan and Security Agreement with Foothill Capital
Corporation, (ii) $500,000 pursuant to a loan from Pyramid Partners, L.P., an
entity controlled by Richard W. Perkins, a director of Children's, and a
director of the Company, (iii) $500,000 pursuant to a loan from Rodney P.
Burwell, a director of Children's, (iv) $250,000 pursuant to a loan from
William M. Toles, a stockholder of Children's, and a director of the Company,
and (v) $110,000 of the working capital of Children's. The 10.0% percent
one-year loans listed in items (ii) through (iv) above are secured by 192,308
and 96,154 shares of the Company's Common Stock reported herein, respectively.
In addition to receiving promissory notes from Children's, such lenders
received five-year warrants to purchase 50,000, 50,000 and 25,000 shares of
Children's Common Stock, respectively, at an exercise price of $4.00 per
share. Children's Board of Directors has approved the related party
transactions listed in items (ii) and (iii).
Except as otherwise described above and elsewhere herein, none of the
members of the Committee knows of any arrangement, the operation of which may
at a subsequent date result in a change of control of the Company, or of any
other change of control of the Company that has occurred since July 1, 1996.
- 39 -
[BACK COVER OF SOLICITATION STATEMENT]
IMPORTANT
1. If your shares are held in the name of a brokerage firm, bank nominee
or other institution, only it can execute a consent with respect to your
shares and only upon receipt of your specific instructions. Please return your
executed BLUE consent card in the postage paid envelope provided by such firm.
In addition, if you did not receive an envelope or are concerned that your
consent card be properly and timely received by the Company, you should
contact the person responsible for your account and give instructions for a
BLUE Consent Card to be signed representing your shares.
2. If hold a physical share certificate and your shares are held in
your own name, please sign, date and mail the enclosed BLUE Consent Card to
our solicitation agent, The Financial Relations Board, 675 Third Avenue, 8th
Floor, New York, New York 10017, in the postage-paid envelope provided.
If you have any questions or require any assistance in executing your
consent, please call:
Ronald Schneider
The Financial Relations Board
675 Third Avenue
8th Floor
New York, New York 10017
(212) 661- 8030
- 40 -
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
99.1 Letter to Stockholders
99.2 Form of Consent Card
- 41 -